Paraguay WT/TPR/S/146 
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IV. TRADE POLICIES BY SECTOR 
(1) OVERVIEW  
1. Agriculture has reinforced its position as one of Paraguay's key economic sectors, notably by 
extending the area under cultivation.  There is a wi de variety of types of production, ranging from 
small family farms up to medium-s ized and large export-oriented ope rations.  Exports of agricultural 
products have risen and account for some 84 per cent of  total exports (Table AI.1);   they consist of a 
small number of goods, especially soya beans and other related products.  Up to March 2005, an 
export tax was imposed on some agricultural products  (see Chapter III).  Government intervention in 
this sector includes public loan schemes. 
2. Paraguay's manufacturing sector is small and th e major industries engage directly in the 
processing of agricultural products or in textiles, clothing, beverages and tobacco.  Overall, value 
added in the manufacturing sector has declined, partly  because the sector has only to a limited extent 
taken advantage of the opportunities afforded by  the establishment of MERCOSUR.  Paraguay has 
several schemes providing government aid for manuf acturing, in particular, a special programme for 
the automotive industry. 
3. A State-owned petroleum company has a de facto monopoly of imports of crude petroleum.  
Partly in order to protect the domestic sugar industry , petrol of up to 95 octane must contain ethanol 
and petrol importers must mix their product with ethanol in Paraguay. 
4. Paraguay has abundant hydroelectric energy resources;  the largest hydroelectric power 
station in the world is on the border between Pa raguay and Brazil and it has allowed Paraguay to 
become one of the world's leading exporters of electr icity.  Electricity costs in Paraguay appear to be 
relatively low for the region, but not in global terms.   The domestic electricity market is dominated by 
a State-owned company.  Since 1995, there have be en plans to restructure the electricity sector. 
5. The services sector accounts for approximately  55 per cent of Paraguay's GDP and provides 
some 40 per cent of total employment.  Para guay made few commitments under the General 
Agreement on Trade in Services (GATS) and these are confined to some financial and tourism 
services.  Paraguay did not take part in the negotiations subsequent to the Uruguay Round on 
telecommunications or financial services. 
6. Development of Paraguay's basic telecommunica tions subsector has fallen behind and mobile 
telephony has moved in to fill the gap.  The teleco mmunications law lays down the principle of free 
access to all telecommunications services, with a small number of specific exceptions.  Nevertheless, 
the State-owned operator enjoys a de facto monopoly of basic telephony.  In 2000, the Government 
started to privatize the operator, but the process came to a halt, partly owing to a lack of confidence on 
the part of the public but also to concerns regard ing the constitutionality of the bidding process.  The 
authorities are currently reviewing thei r policy objectives in this subsector. 
7. The banking subsector appears to be highly concen trated and restrictions on the availability of 
loans and the high rates of interest seem to be ha mpering growth in other sectors.  During the period 
under review, there was a crisis in the banking sub sector, although in early 2005 it appeared to have 
been overcome.  The Central Bank had to take ov er the debts of several banks involved.  Banking 
legislation draws no distinction be tween domestic and foreign capital.  In the insurance subsector, 
branches of foreign companies are authorized to operate in the same way as companies domiciled in 
Paraguay.  In early 2005, Congress was consideri ng a draft law regulating the operation of public 
banks. WT/TPR/S/146 Trade Policy Review 
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8. International trade-related transport costs in Pa raguay are some of the highest in the western 
hemisphere, largely owing to Para guay's situation as a landlocked count ry.  Under Paraguayan law, all 
maritime and river transport of imports and exports  is reserved for Paraguayan-registered vessels.  
This restriction is eased for cargo transport to an d from LAIA member countries provided there is the 
capacity, and has been eliminated fo r river transport in vessels registered in the countries party to the 
Hidrovía (Paraguay-Paraná River Waterway) Treat y.  Cabotage river transport is reserved for 
Paraguayan-registered vessels, and cabotage air ser vices are restricted to companies domiciled in 
Paraguay.  The private sector may build and mana ge river ports in order to provide commercial 
services, but airports providing similar services must be managed by a government body. 
9. The tourism subsector is the second largest fo reign currency earner in Paraguay, while soya 
bean exports occupy first place.  Tourist arrivals fell sharply after 1997, but star ted to recover in 2003;  
the majority of tourists are from Argentina and Brazil. 
(2) AGRICULTURE , LIVESTOCK AND FORESTRY  
(i) Features 
10. Over the past decade, agricultu re has become a key sector in Paraguay's economy, particularly 
in terms of exports.  Agricultural trade accounted for some 11 per cent of GDP in 1993, 17 per cent in 
1998 and 21 per cent in 2003.1  The Paraguay River divides the country into two distinct geographic 
zones:  the western region or Chaco, which occ upies 61 per cent of western Paraguay, has broad 
flatlands and xerophytic woodland.  The eastern re gion, which has large areas suitable for subtropical 
agriculture, has seen rapid growth in the produc tion of soya beans and in fattening livestock. 
11. The trend in land use in eastern Paraguay has been affected by the expansion of human 
settlements and of the agricultural limits, initially at  the expense of lands wh ere there were natural 
pastures and subsequently to the detriment of woodl ands (Table IV.1).  This process intensified 
particularly during the 1960s and 1990s.  The Government estimates that Paraguay has 
40,675,200 hectares, broken down as follows:  (i ) the eastern region, where 97 per cent of the 
population lives, covers 15,863,328 hectares, of which 15 per cent are under cultivation, 47 per cent 
are occupied by livestock, 22 per cent are woodland and 16 per cent are used for other purposes;   and 
(ii) the western region covers 24,811,872 hectares,  of which 2 per cent are cultivated and 35 per cent 
are cattle ranches, with 64 per cen t consisting of xerophytic woodland.2 
12. Various factors have contributed to the signifi cant loss of forests, for example, agriculture, 
population pressure on access to and use of land, land ownership problems and a legal framework that 
viewed forests as unproductive land and land cleared of trees as productive land. 
                                                      
1 World Bank (2003c):  Comtrade database of the United Nations Statistics Division (exports/imports/GDP). 
2 SEAM/PAR98/G32 National Strategy;  Action Plan for the Conservation of Biodiversity in Paraguay, 
November 2003, p. 22. There is no single methodology used to quantify land use in Paraguay. The MAG 
publishes censuses and agricultural surveys and the SE AM carries out studies using various parameters and 
timescales on the basis of maps and satellite images. Paraguay WT/TPR/S/146 
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Table IV.1 
Trends in land use by subsector, 1998/99 to 2002/03 
   Variation  
Subsectors (in hectares)  1998/99  2002/03  Absolute (hectares) Relative (%)  
Area cultivated 2,509,81 5 3,117,252 607,437 24.2 
Fallow or uncultivated as a result 
of over-farminga  600,000 300,000 -300,000 -50.0 
Forestsb  2,637,218 2,250,000 -387,218 -14.7 
Land for livestock usec 25,682,973 23,197,493 -2,485,480 -9.7 
Other landd 9,245,194 11,810,455 -2,565,261 27.7 
Total 40,675,200 40,675,200   
a Estimates of the Agricultural Census and Statistical  Department on the basis of the 1991 National Census. 
b Only includes woodland in agricultural and livestock farms. c Total area of livestock farms, includi ng grasslands (natural and cultivated).  
d Land occupied by towns and cities, mountains, ranges, hills, la kes, rivers, estuaries, military settlements, national parks, forest 
reserves, other protected areas and unused land. 
Source : Agricultural Census and Statistical  Department.  Estimates of seconda ry sources subject to variation. 
13. According to official data, 27 per cent of the economically active population (EAP) works in 
the agricultural sector.  Despite agriculture's dynami sm, the sector is affected by problems of income 
distribution and poverty, access to land use and rural migration to cities.3 The EAP working in 
agriculture decreased from almost 50 per cent in 1972 to 27 per cent in 2002.  Despite this decrease, 
the EAP working in agriculture h as increased in absolute terms.  Moreover, as a number of services 
activities are related to agriculture, the latter contin ues to play an important role as far as jobs are 
concerned. 
14. Over the past decade, fluctuations in intern ational agricultural prices (soya beans, timber, 
cotton) and changing climate conditions have led to instability in the sector and in the rest of the 
economy.  Their impact is even greater in Paragua y because of the small size of its economy and the 
low level of diversification of its export offer.   In addition, during the period 1995-2002, the 
agricultural sector suffered the impact of banking cr ises, droughts and monetary devaluation in Brazil 
and Argentina (Paraguay's major agricultural trading pa rtners).  Despite this situation, the agricultural 
sector has continued to grow, largely as a result of  the production and export of soya beans and meat. 
15. Paraguay's major crops are soya beans, cassava, sugar cane, maize, wheat and cotton 
(Table IV.2).  The majority of processed goods pro duced consist of soya bean by-products.  The 
south, east and north-east subregions in the eastern part of Paraguay are the most dynamic agricultural 
areas as these are where the production of so ya beans and cereals is concentrated. 
16. The agricultural sector in Para guay comprises two types of produc tion.  The first consists of 
small producers (less than 20 hectares), who follow  traditional methods to produce crops for home 
consumption and/or one or more cash crops such  as cotton, sugar cane, sesame, tomatoes, peppers, 
groundnuts, physic nuts, tobacco, fruit and vegetables.4 The second is industrial farming, which uses 
medium or high level technology mainly to produce soya beans and cereals. 
                                                      
3 World Bank (2003a). 
4 World Bank (2003a). WT/TPR/S/146 Trade Policy Review 
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Table IV.2 
Production of commodities, 1993-2003 
(Tonnes) 
       Average annual growth Variation 
 1998  1999  2000  2001  2002  2003  1993-98 1998-2003 1993-2003  
Soya beans 2,855,742 3,053,005 2,980,060 3,511,050 3,300,000 4,204,865 9.7% 8.0% 134% 
Yucca 
(Cassava) 3,300,000 3,694,400 2,719,410 3,568,010 4,008,171 4,668,804 4.4% 7.2% 76% 
Sugar cane 2,800,000 2,872,271 2,244,900 2,396,180 2,976,290 3,260,475 -0.1% 3.1% 16% 
Maize 873,904 817,233 647,270 947,167 931,722 1,055,536 14.8% 3.8% 140% 
Wheat 180,088 231,119 220,055 532,156 536,754 360,000 -13.7% 14.9% -4% 
Oranges 208,009 230,632 201,799 209,247 207,155 207,155 3.1% -0.1% 16% 
Unginned 
cotton  222,000 202,283 246,594 294,444 123,667 172,760 -12.0% -4.9% -59% 
Source : Ministry of Agriculture and Livestock, Agricultural  Census and Sta tistical Department.  October, 2004.  
17. In terms of agricultural trade, exports are limited to a few products (12 products 
corresponding to three chains of production and representing on average 70 per cent of the value of 
exports between 1993 and 2003) (Tab le AIV.1), mainly unprocessed products.  The high cost of 
transport (the highest among countries in the region) is cited as a factor c onstraining growth and the 
competitiveness of processed products.  It has been estimated5 that the fact that Paraguay does not 
have a coastline implies an additional cost of be tween US$30-40 per tonne for export of soya beans.6 
Despite this disadvantage, some agri-industrial exports derived from soya beans have increased 
significantly in recent years, which implies that ther e is considerable export potential in this sector.7 
18. Exports therefore consist of raw materials a nd products derived from soya beans, maize, 
cotton (not carded or combed) and bovine meat .  Between 1993 and 2003, agricultural exports 
increased by 83 per cent, notably as a result of exports of soya bean products.  Exports of tobacco products rose rapidly between 1993 and 2003 and, to gether with wheat, sugar and sesame, accounted 
for a small but growing percentage of agricultural exports. 
19. The MERCOSUR countries are th e main destination for Paraguay's agricultural exports 
(Table AIV.2).  Nevertheless, many of these expor ts are re-exported to other countries because there 
are no ports where goods can be exported directly.  Because of re-exports, there are wide differences 
between the statistics on exports and imports of agricultural products originating in Paraguay. 
20. In 2003, Brazil took 38 per cent of Paraguay's ag ricultural exports, which was a decrease in 
comparison with the average of 45 per cent over the period 1993-1998.  Uruguay's importance as an importer grew and it took 23 per cen t of Paraguay's agricultural exports in 2003, with an average 
figure of 15 per cent for the period 1998-2003.  Argentina took an average of 5 per cent of agricultural 
exports over the same period.  In 2003, MERCO SUR countries therefore imported 64 per cent of 
Paraguay's agricultural exports.  Some of the princi pal factors explaining this concentration are the 
                                                     
 
5 CAPECO (undated). 
6 It has been stated (WTO Committee on Agriculture , 3-4 December 2001) that developing countries 
without a coastline utilized (1994) 17.7 per cent of expor t earnings for transport services and insurance whereas 
for developing countries as a whole th e percentage was 8.7 per cent. Freigh t costs accounted for some 4 per cent 
of c.i.f. import value in developed economies, 7.2 per cent in developing countries, and 14.7 per cent in 
landlocked developing countries. 
7 World Bank (2003a). Paraguay WT/TPR/S/146 
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MERCOSUR tariff preferences, the size of th e Brazilian market and re-exports through 
MERCOSUR.8 
21. In 2003, the Cayman Islands were the third s ource of imports of Paraguayan agricultural 
products, principally soya beans, owing to thei r role as a reshipment port.  Some exporters, 
particularly companies that have distribution cen tres, declare the reshipment port as the port of 
destination and then add the final destination at  the distribution and reshipment point, otherwise 
cargo, especially that from landlocked countries, tak es longer to ship.  The main destinations for 
Paraguay's soya beans, after they have been thr ough the reshipment ports, are the Andean community, 
the Middle East and the European Union.9 
22. Among Paraguay's other agricultural exports, only exports of meat to Chile, Brazil and Russia 
(as of 2004), cotton fibre to Brazil, sugar to th e United States and sesame to Japan are of any 
importance in addition to the soya bean subsector. 
23. Paraguay's agricultural imports consist of onl y a few products (Table AIV.3).  There was 
strong growth in imports during the period 1993- 1997, but a decline between 1998 and 2003 as a 
result of the economic downturn, especially in the case of non-essential goods, which played an 
important role as re-exports outside formal channels in trade with Br azil and Argentina.  This activity 
has also declined following th e harmonization of MERCOSUR tari ffs and more stringent border 
controls. 
24. Within MERCOSUR, the institution responsible  for agriculture is Sub-Working Group 
(SGT) 8 – Agriculture, which has standing and ad hoc working groups that include plant health, 
animal health and seed commissions.  Another regional body is the Southern Agricultural Council 
(CAS), which acts as a forum for ministers of agriculture from MERCOSUR, Bolivia and Chile 
(although it is not a formal MERCOSUR body).  The CAS has technical support bodies such as the Standing Veterinary Committee (CVP), the Southe rn Cone Plant Health Committee (COSAVE), the 
Agricultural Policies Coordination Network (RED PA) and the Informal Group of Agricultural 
Negotiators (Gina-sur).  One of the key objectives of the CAS is to eradicate foot-and-mouth disease 
in the region by 2007. 
(ii) Policy objectives in the sector 
25. The Ministry of Agriculture and Livestock (M AG) is responsible for Paraguay's agricultural 
and forestry policy.  Within th e MAG, the Special Commission on International Trade and Integration 
has been given the task of participating in agri cultural negotiations under ag reements and it reports 
directly to the Minister's Office in the MAG. 
26. The overall regulatory framework comprises laws
10, the majority of which deal with the 
institutional structure determined for the agricultura l sector.  The most recent legislation includes 
three laws11 on the institutional reorganization of the agricultural public sector. 
                                                      
8 Bouzas (2002). 
9 Archer Daniels Midland (ADM), the largest soya bean exporter in Paraguay, transports soya beans to 
facilities in the Netherlands and Germany through reshipme nt points in the Cayman Islands. Paraguayan sources 
thus reflect exports to the Cayman Islands whereas Euro pean Union sources show the flows as imports coming 
from Paraguay. 
10 The following are the most important laws:  Law No. 81/92 (basic and operational structure of the 
MAG);  Law No. 123/91 (regulations on plant health protection);  Law No. 385/94 (seeds and protection of WT/TPR/S/146 Trade Policy Review 
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27. As regards policies in this sector, there appear s to be little government intervention, as can be 
seen from the green box notification made to the WTO by Paraguay (see Table AII.1).  State aid covers the supply of extension and research ser vices, animal and plant health and food aid 
programmes to assist small producers in emergency situations or in cases of extreme poverty.  
Paraguay has notified the WTO that it does not give export subsidies for agricultural products 
(see Chapter III (3)(iv)(d)).  The authorities have stat ed that there are no price-fixing mechanisms for 
agricultural products
12 and that reference prices are used for information purposes under special 
conditions.13 
28. Paraguay only imposes import tariffs on produc ts from outside the zone, whereas products 
from MERCOSUR countries enter at a rate of zero.14  Paraguay does not impose tariff quotas, special 
safeguards or countervailing measures on e xports subsidized by other countries. 
29. The MAG is implementing the 2004-2008 Agricultu ral and Rural Development Plan, and is 
responsible for drawing up and putting into effec t:  (i) the National Plan to Revive Family-based 
Agriculture for 2003-2008;   and (ii) nine pr ogrammes to promote exports, industrialization and 
domestic consumption of cotton, sesame, ka'a he'e15, fruit/vegetables, cassava, physic nuts and sugar 
cane, milk and sericulture.  The MAG was also re sponsible for drawing up the National Agricultural 
Sector Development Programme, which calls for the organization of cooperative associations of 
agricultural producers.  Law No. 2.157/03 was en acted to regulate the operation of the National 
Cooperative Institute.16 
30. The MAG's development and transfer of technol ogy activities include research and testing of 
rice, sugar cane, maize, soya beans, wheat and cott on.  Other research activities relate to beekeeping, 
breeding of poultry, swine, sheep and goats, pastures  and fodder, bovine cattle for meat and milk.  In 
addition, it conducts activities related to food secur ity, competitiveness, growing of fruit and oilseeds 
and soil management and rehabilitation. 
31. The main programme currently implemented with  a view to improving methods of cultivation 
covers the use, conservation and re habilitation of soil including direct sowing, rotation of crops, green 
mulches and the use of agrochemicals.  According to the authorities, some 80 per cent of the area 
under soya beans is cultivated using these methods.  Crop rotation and green mulches are increasingly 
being introduced by small producers. 
32. As regards seeds, the MAG applies Law No. 385/ 94 (on seeds and the protection of cultivars) 
and Resolution No. 290/2000 (regulations on the production and marketing of certified and/or 
inspected seeds), which seek to ensure proper dist ribution, marketing and quality control of seeds, 
guarantee their identity and quality and protect the rights of breeders of new varieties. 
                                                                                                                                                                     
cultivars);  Law No. 494/21 (animal health policy);  Law No. 422/73 (National Forest Service);  Law 
No. 1.356/88 (fees for providing services). 
11 Law No. 2.157/03 (National Cooperative Institute);   Law No. 2.426/04 (National Animal Quality and 
Health Service);   Law No. 2.459/04 (Na tional Plant and Seed Quality and Health). 
12 Article 107 of the current Cons titution guarantees competition in markets and does not allow the 
creation of monopolies or artificia l increases or decreases in prices that hinder free competition. 
13 In February 2005, the Government and representativ es of the cotton sector reached an agreement on a 
basic reference price for the raw cotton crop during the 2005 harvest. The Government undertakes no 
commitment to pay the reference price, which is purely for information purposes. 
14 As explained below, sugar constitutes an exception. 
15 "Ka'a he'e" (or "stevia") is a plant used for sweetening beverages and foods and its natural sugar 
(steviosidosis) is sweeter than the synthetic products so ld on the market such as sugar substitutes (sucrose). 
16 Law No. 438/94, on cooperative associations, also regulates these bodies. The principle of cooperation 
can be found in Article 113 "Promotion of coop erative associations" in the 1992 Constitution. Paraguay WT/TPR/S/146 
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33. Concerning land grants and expropriation, si nce the mid-1980s, no more State-owned land 
has been available for settlement.  Under the Paraguayan Constitution17, large estates not being used 
are to be expropriated for the purpose of agrarian  reform.  Expropriations are determined on a case-
by-case basis. 
34. The taxes affecting the agricultural sector are the following:  (i) the Rural Property Tax, 
representing between 0.5 to 1 per cent of the land's fiscal value;   and (ii) the IMAGRO, based on the presumed amount of income, although  owners of less than 20 hectares are exempt.  As of 2005, the 
IMAGRO will be replaced (Law  No. 2.421/04) by the Income Tax on Agricultural Activities.
18  Up to 
August 2004, there was a tax on the domestic marketi ng of cattle (1 per cent of the value of the live 
animal), but this was abolished when the Income Ta x on Agricultural Activities came into effect.  In 
the regulations on "transfer bills" ( guías de traslado ) for the movement and marketing of cattle, 
however, there is still a 1 per cent tax as an advance on income tax.19 
(iii) Trade measures and other policy instruments 
35. In 2004, Paraguay's nominal average rate of  tariff protection for agricultural goods (ISIC 
definition) was 7.1 per cent, which is below the aver age of 8.9 per cent for all products.  Nevertheless, 
tariff protection for agricultural goods defined unde r the WTO Agreement on Agriculture is above the 
overall average (see Chapter III (2)).  In accordan ce with its Uruguay Roun d commitments, Paraguay 
converted its non-tariff restrictions into  tariffs on bovine meat, sugar and wheat, inter alia .20 
36. As shown in Table AIV.4, in 2004, Paragua y's average MFN tariff protection ranged from 
4 to 10 per cent on soya bean products, cereals a nd cotton, 12 per cent on bovine meat products and 
30 per cent on unrefined sugar.  In 2003, for the six groups of products that constituted the major 
imports (around 50 per cent of all agricultural impor ts), the simple tariff average was 18 per cent. 
37. Regarding the tariff protection affecting Para guay's agricultural goods in foreign markets, 
Table AIV.5 shows tariff treatment in the United Stat es.  In 2002, a zero MFN rate applied to 42 per 
cent of agricultural imports from Paraguay and the zero rate under the GSP to 37 per cent, so 79 per 
cent of Paraguay's agricultural exports  entered the market free of duty.21  In 2002, the EU imported 
over 86 per cent of agricultural goods from Paraguay at  an MFN rate of zero.  The remaining 14 per 
cent were at reduced preferential tariff rates under the GSP. 
38. The authorities have indicated that, as a net e xporter of agricultural products, Paraguay faces 
various restrictions in foreign markets, including  tariff measures (peaks, tariff escalation and seasonal 
tariffs) and non-tariff measures (quotas, licensing, technical regulations, sanitary and phytosanitary 
                                                      
17 Title II, Chapter IX, Section II. 
18 The calculation is based on the agricultural area in use (AAU), the soil's natural productivity 
coefficient (COPNAS) and exploitation of at least 30 per cent of the AAU depending on the size. The following are taken into account in defi ning the size:  large properties are those with an AAU exceeding 300 hectares in 
the eastern region and 1,500 hectares in  the western region, to which a tax of 10 per cent of net income applies. 
In the case of medium-sized propertie s, the taxable income is calculated on the basis of the COPNAS for each 
district or region, on which a tax of 2.5 per cent of the taxable income is imposed. Properties where the AAU 
does not exceed 20 hectares in the eastern region an d 100 hectares in the western region are exempt. 
19 Law No. 2.421/04, Article 37 (Advance payments) provides the following:  " The amounts paid by 
cattle owners at the time of issue of transfer bills shall be considered advances on the payment of Income Tax on 
Agricultural Activities, with the exception of those covered by Law No. 808/96" (Eradication of foot-and-mouth 
disease) . 
20 WTO Paraguay TPR 1997. 
21 A large share of United States agricultural imports  from Paraguay also comprised cigarettes and two 
tariff lines for sugar with GSP preferences. WT/TPR/S/146 Trade Policy Review 
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restrictions, special safeguards), as well as productio n and export subsidies.  Moreover, some foreign 
markets have concerns regarding the limited capacity of  Paraguay's official plant health and veterinary 
services to meet health and quality certifica tion requirements properly and efficiently.22 
39. Under the agreement negotiated between ME RCOSUR and Peru, Paraguay and Uruguay are 
excluded from the special agricultural safeguard me chanism that applies to 129 agricultural items.23  
Nevertheless, the price bands applie d by Peru to 34 agricultural pr oducts are still in force and seven 
sugar subheadings have been excluded fr om the trade liberalization programme. 
40. Trade in agricultural commodities is exempt from VAT (Chapter III (2)(v)).  In May 1996, 
the IMF suggested that Paraguayan authorities extend VAT to all agricultural products. 
41. The Government mainly intervenes in th e agricultural sector by granting loans24 and technical 
assistance.  Article 115 of the Constitution (Bases for Agrarian Reform and Rural Development) 
provides that agrarian reform and rural developmen t shall be subject to certain conditions including 
"the granting of agricultural loans at low cost and without intermediaries".25  A number of public 
bodies have been set up for this purpose, for ex ample, the National Development Bank (BNF), the 
Agricultural Equipment Credit Bank (CAH), the Livest ock Fund (FG) and the Farmers' Development 
Fund (FDC).  The authorities have pointed out that official support for this sector in the form of loans 
is modest both in terms of coverage  and in the amount of the loans granted.  With the exception of 
cotton, soya beans, sugar cane, maize, rice and wh eat, few government loans are available for other 
subsectors.  In Paraguay, there are no State-ow ned enterprises involved in the purchase, sale or 
marketing of agricultural products. 
42. Regarding the Livestock Fund, the Government pointed out that during the first quarter of 
2004 a large number of loans were pending and this is the result of livestock production cycles, which 
mean that loans are mainly granted during the last qu arter of the year.  At the end of 2004, the default 
rate was 18.2 per cent.  The unfavourable conditions prior to 2004 (drought, outbreaks of foot-and- mouth disease, closure of international markets) had an effect on repayment but as of 2004 the sector 
started to recover and there was an impr ovement in the loan repayment situation.
26  At the end of 
2004, 81.1 per cent of loans had been repaid.27  As part of the reform of the public banking sector, the 
Government has stated that it is considering ch anging the Livestock Fund into a specialized semi-
public bank. 
43. In 2003, the Farmers' Development Fund gran ted loans amounting to G/ 19,285 million to 
41 financial institutions (IFIs), whic h went to 5,199 producers.  In 2004, technical assistance to IFIs 
increased to G/ 40,144 million.  At 31 December  2004, loans amounting to G/ 33,032 million had 
been granted to 45 IFIs, benefiting 3,584 producers.   In 2003, the FDC's rate of default was 17 per 
cent, compared with 20 per cent at 30 November 2004. 
                                                      
22 Bouzas et al. (2002). 
23 The agricultural safeguards apply only between Peru and Argentina and Brazil. 
24 The Government stated that, at the beginning of 2004, G/ 23,891.4 million were available for 
investment, to which were added a further G/ 14,049.3 million, giving a total of G/ 38,030.8 million. At the end 
of 2004, 100 per cent of this had been used up and unsatisfied demand amounting to G/ 5 billion would have to 
be covered in 2005.  
25 Agrarian reform is also covered in Article 115,  "Objectives of Agrarian Reform" and Article 116, 
"Unproductive Estates". 
26 The forecast for the livestock s ector for 2005 shows favourable conditions as a result of an 
improvement in the health situation and the opening up of new markets (67 international markets in 2005). 
27 Report on Government administration over 500 days, 2004. The Livestock Fund was given a 58.8 per 
cent increase in the amount available for investment, but this was all used up in 2004 and unsatisfied demand will have to be dealt with in 2005. Paraguay WT/TPR/S/146 
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44. Law No. 1.418 of 15 April 1999 wrote off outstanding debts with the BNF, the CAH and the 
FDC by small agricultural producers28 and authorized the institutions  to renegotiate production loans 
on special terms.  The Law exempts borrowers fro m paying their financial commitments of up to 
G/ 6 million in initial capital plus interest for any type of loan granted up to 1 October 1998, provided 
that the original capital did not exceed G/ 15 million.   The State takes over payment of the balances 
under this exemption and re funds the amount to loan institutions in the form of national treasury 
bonds. 
(iv) Key subsectors 
(a) Cotton 
45. Cotton production plays an important social and economic role in Paraguay and is one of the 
main crops in rural communities.  Some 58 per cen t of cotton-producing farms cover an area of less 
than 10 hectares.29  In 1997, 18 to 20 per cent of the ru ral population depended on cotton production 
on small family farms.  Traditional methods of cultivation are used involving manual technology and 
animal traction.  Average yields, at 1,200 kg/ha, are generally low taking into account the genetic 
potential of the varieties grown and the yields obt ained at the experimental level.  Table AIV.6 
represents an estimate as there are no offi cial statistics on mechanized production.30 
46. Since the beginning of 1990, cotton production has suffered the impact of adverse climate 
conditions, low prices and disease.  Between 1990 and 1994, the volume and value of exports fell by 
60 and 56 per cent respectively.  Production c ontinued to decline over the period 1997-2003 as a 
result of continued low prices and the refocusing of  production on crops such as rice, beans, maize 
and sesame.  The decline in area under cultivation and yields was more marked for cotton than for any 
other commodity during the period 1998-2003 (Table AIV.6).  Starting with the 2003-2004 agricultural season, however, higher prices for cotton fibre and production supp ort measures led to an 
increase of 51 per cent in raw cotton production in June 2004. 
47. The average value of cotton exports came second to exports of soya beans over the period 
1993-2003 and was the fourth largest export in valu e terms in 2003.  Brazil was the largest importer 
of Paraguayan cotton between 1993 and 2003 and on average took over 70 per cent of exports.  
Nevertheless Brazil's share of total exports has fa llen.  Other alternative markets are Argentina, 
Venezuela, Chile, India and Chinese Taipei (Table AIV.6). 
48. The Government participates in this subsect or through crop diversification programmes
31 and, 
since 1997, through other measures such as loans, debt forgiveness32 and free distribution of seeds to 
small producers.33  In 1999, debts contracted up to that da te by small farmers were written off because 
of unfavourable climate conditions.  The implementati on of such policies has been limited because of 
the resulting decapitalization, which restricts other types of aid.  The 2004/5-2008/9 National Cotton 
                                                      
28 The Government indicates that in 2001 it transferred G/ 2,900,000,000 to the FDC and there is a 
balance of G/ 1,536,311,793 in State bonds. The CAH wrote off debts (capital and interest) amounting to 
G/ 148,228,918,127. 
29 Third Report on Government Administration, 2004. 
30 It is estimated that production using agricultural m achinery, including harvestin g machinery, is almost 
exclusively confined to seed enterprises and does not exceed 10 per cent of the area under cultivation. 
31 Another programme consists of duty-free entry (temporary admission regime) for processing, which 
allows certain goods (not only cotton) to enter free of duty for re-export. In the case of cotton, this programme 
has been applied only sporadically and has been limited to cotton fibre. 
32 Debt cancellation was implemented in 1999 for the benefit of small farmers. 
33 Law No. 997, 3 December 1996;   CA H Resolution No. 3,  3 January 1997. WT/TPR/S/146 Trade Policy Review 
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Programme gives the general outline for prioritiz ing and implementing competitiveness in this 
subsector.34 
49. Among the promotion activities carried out by the MAG in 2003 were, for example, training 
in standardization of raw cotton and in post-harvest  handling;   advice on verifying the movement of 
bags of cottonseed;  implementation of the pr oposal on eliminating and/or using remaining 
cottonseeds35;   and experimental testing of insecticide residues in soil.36 
(b) Soya beans 
50. Soya beans are Paraguay's main export crop and in 2003 Paraguay was the world's fifth 
largest producer with an output of over 4.5 million tonnes.37  The adverse climate conditions up to the 
end of 2004 and in early 2005 had an impact on th e area under cultivation and the expected yield per 
hectare, which may mean that the harvest remains at levels similar to those in previous years.38  It is 
estimated that soya beans accounted  for close to 38 per cent of th e agricultural sector's GDP in 2003.39  
The private sector's objective is still to increase production and international market share using 
technology to provide various qualities.40 
51. The area under soya bean cultivation increased to a greater extent (152 per cent) than any 
other heading during the period 1993-2003 and, ev en though yields per surface unit have fallen 
slightly, production has increased more rapidly than in any other agricultural subsector, with an 
average annual growth rate exceeding 9 per cent ov er the period 1993-2003 (Table AIV.7).  Data on 
production of processed products also show rapid growth in soya bean products. 
52. In terms of exports, in 2003 Paraguay was the wo rld's fourth largest exporter of soya beans, 
with 3.1 million tonnes.  Soya beans are exported no t only in the form of beans, but also as oil and 
flour.  Some 60 per cent of total production is exporte d in the form of beans, 34 per cent as flour or 
oil, and the remaining 6 per cent of the i ndustrial product is fo r domestic consumption.41  I t  i s  
estimated that Paraguay exports around 23 per cent of its potential oil production.  During the 2003-
2004 season, soya bean exports were subj ect to an export tax (Chapter III (3)). 
53. As already indicated, Brazil and European countri es were the largest markets for soya beans, 
particularly during the period 1998-2003 (Table AIV. 7).  In 2003, Brazil imported 39 per cent of soya 
beans, 41 per cent of soya bean cake and 2 per cen t of soya bean oil produced in Paraguay.  The 
Andean region is the main destination for Paraguay' s exports of oil and flour as a whole, especially 
Venezuela.  Outside the western hemisphere, Asian countries are important markets and are 
increasing their share. 
(c) Sugar cane 
54. Growth in sugar cane production has recovered,  exceeding 3 per cent between 1998 and 2003 
(Table AIV.8).  As stated in the last Review of Paraguay's trade policy in 1997, sugar has been 
                                                      
34 The Programme is only for guidance with the objective of enhancing competitiveness in the sector. 
35 MAG Resolution 439/03, Environmental licence SEAM 236-04. 
36 There have been discussions with the FAO on technical and financial support for dealing with 
agrochemical residues. 
37 Statistics of the Paraguayan Chamber of  Cereal and Oilseed Exporters (CAPECO). 
38 CAPECO estimated (February 2005) that the 2004 harvest would be 4,968,685 tonnes. 
39 IICA (2004). 
40 CAPECO (undated). 
41 CAPECO (undated). Paraguay WT/TPR/S/146 
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excluded from intra-MERCOSUR tr ade liberalization and also constitutes an exception to 
MERCOSUR's common external tariff.  Consequently , sugar is subject to the highest MFN tariff 
imposed by Paraguay amounting to 30 per cent.  The State fuel plant takes part of the domestic sugar 
cane harvest (see Chapter IV (4) below). 
55. Since 1995, sugar exports to the United States have been subject to tariff quotas.  This regime 
allows sugar to be exported to the United States at  prices that are considerably higher than those on 
global markets.  The annual quota is some 8,500 tonnes42 and is shared among exporters according to 
each one's percentage of Paraguayan production.  Over the period 1993-2003, the United States 
imported 70 per cent of Paraguay's unrefined sugar e xports in value terms, and the value of these 
exports increased by around 20 per cent.  The EU  imports less Paraguayan sugar and its value has 
decreased sharply (Table AIV.8).  Paraguay is th e major exporter of organic sugar to the United 
States.  According to the Paraguayan Sugar Centre , 30 per cent of total sugar production was organic 
in 2003/2004. 
(d) Other crops 
56. In recent years, maize has played an important  role in Paraguay's agricultural production and 
exports.  Production has increased as a result of planting maize in the context of crop rotation with 
soya beans as the main crop and also throu gh the use of high-yield commercial hybrids, 
mechanization and chemical inputs.  Traditiona l small producers, using basic technology, have 
recently devoted more resources to producing maize because of problems encountered in the cotton 
subsector.  Between 1993 and 2003, therefore, the area under cultivation increased by 49 per cent and 
yields per surface unit rose by 33 per cent, one of the best results for commo dities (Table AIV.9).  
The average annual increase in maize production w as therefore some 15 per cent between 1993 and 
1997.  Brazil imported an average of 81.5 per cen t of Paraguayan maize exports during the period 
1993-2003 (Table AIV.9). 
57. In the south-east, wheat is grown as a winter crop in rotation with soya beans.  Improvements 
in production technology and an increase in the area under cultivation have led to increased volumes 
of production and exports.  Wheat therefore became Paraguay's eighth largest agricultural export in 
2003 (Table AIV.10).  Brazil takes almost all Paragua y's wheat exports with an average of 95 per cent 
since 1993. 
58. The authorities have stated that two loan progr ammes apply to the cultivation of wheat.  One 
line is specifically for wheat and is open in the winter from April to December each year.43  The other 
line will open in 2005 in the form of a loan progr amme for development that includes wheat and soya 
beans. 
59. As regards the production of sunflower, exports  are modest and have declined since the 
1997/1998 harvest, when they reached a peak of 35,982 tonnes.  The 2002/2003 harvest recorded 
exports of 5,796 tonnes, much less than exports in 1997/1998 but still twice the volume during the 
two previous seasons, when they amounted to 2,505 tonnes annually.44 
60. Production of cassava (yucca) rose by over 3 per cent between 1998 and 2003 (Table AIV.10) 
and cassava was Paraguay's eleventh largest agricu ltural export in 2003.  Brazil imported 86 per cent 
of these exports over the period 1998-2003.  Concer ning sesame, the area under cultivation, yields per 
hectare, production and exports although modest have been increasing rapidly (Table AIV.10). 
                                                      
42 The minimum amount in the tariff quota for Paraguay is 7,250 tonnes. 
43 The authorities have stated that this line of credit existed prior to the 1990s. 
44 CAPECO (undated). WT/TPR/S/146 Trade Policy Review 
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(e) Livestock 
61. The main heading in this subsector is bovine cattle, which comprised some 9,500,000 head in 
2004.  Meat is produced both for domestic consumpt ion and for export and accounted for an average 
of 8.5 per cent of GDP between 1991 and 2001.  The total amount of bovine meat in cold store for 
export was 337,832 head in 2003. 
62. Meat exports suffered the impact of trade r estrictions following outbreaks of foot-and-mouth 
disease in 2002 (October) and 2003 (July) and problems caused by the lack of capacity to impose hygiene measures in the industry. 
63. During the period 1998-2003, the major importers  of Paraguay's bovine meat products were, 
in order of importance, Chile, Brazil, the European Union and Russia.  Over this period, Chile took 
72 per cent of Paraguayan exports of boneless fresh or refrigerated meat (Table AIV.11).  In 2001, 
Chile imported some US$45 million of bovine meat from Paraguay, imposing an MFN tariff of 9 per 
cent.
45  Under the Chile-MERCOSUR Economic Complementarity Agreement, Chile has 
implemented a ten-year tariff reduction program me for bovine meat from Paraguay and since 1997 
has given a 75 per cent preferential discount on th e MFN tariff applicable to 3,500 tonnes of 
fresh/refrigerated bovine meat and 3,500 tonnes of  frozen bovine meat.  In 2003, Saudi Arabia, 
Angola and Israel became importers of boneless fro zen meat.  Other important products in this 
subsector such as live bovine animals and fresh or chilled beef with bone were virtually all exported 
to Brazil. 
64. At the end of 1998, meat exports to the United St ates were suspended becau se of the failure to 
implement special hygiene and health measures, in cluding the Hazard Analysis Critical Control Point 
(HACCP) and problems related to the control of foot -and-mouth disease.  Exports to Chile and the EU 
have also been suspended on a number of occasions recently.46  In August 2002, the EU gave 
Paraguay a meat quota of 1,000 tonnes (Hilton quota), but exports under this quota were suspended in 
February 2003 as a result of problems relating to the health control of foot-and-mouth disease. 
65. The authorities have stated that combating foot -and-mouth disease is a national priority.  The 
objective of regaining status as a country free of foot-and-mouth disease with vaccination was granted 
by the OIE on 19 January 2005.  Reopening of the Eu ropean market is subject to verification of 
compliance with the requirements laid down in a techni cal audit carried out by the EU.  In July 2004, 
Chile once again opened up its market to meat imports from Paraguay. 
(f) Forestry 
66. In 2001, the forestry subsector accounted for a pproximately 2.7 per cent of GDP.  The policy 
instrument for this subsector is Forestry Law No. 422 of 23 November 197347.  Forests are mainly 
exploited to provide roundwood and firewood for th e domestic market.  Approximately three quarters 
of production is for agricultural and industrial use, including the production of charcoal. 
67. Timber constitutes the second largest group of expor ts after agricultural products.  Production 
mainly consists of sawn wood, laminated wood, fi rewood, charcoal and poles, with some production 
                                                      
45 According to Government figures for 2001, Paraguay exported to Chile meat and offal amounting to 
US$51,000,281 and by-products of an imal origin amounting to US$789,507,  making a total of US$51,789,789. 
46 Economic Research Service, USDA, av ailable on-line at:  www.ers.usda.gov   
47 FAO (2004). Paraguay WT/TPR/S/146 
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of plywood, flooring, furniture and parts thereof.48  Exports reached a maximum level of some 
US$100 million in 1997, but declined by 3.2 pe r cent between 1998 and 2003 (Table AIV.12). 
68. Exports of indigenous timber  (excluding coniferous wood) comprised over half the total 
exports of timber in 2003 and around 38 per cent on  average during the period 1993-2003.  In 2003, 
the most important markets for these products we re Hong Kong, China, Chinese Taipei, Italy and 
Argentina. 
69. As already mentioned, the amount of native woodland cover in eastern Paraguay has fallen 
drastically.  In 1994, the export of all unpr ocessed species was banned (roundwood, trunks and 
beams) (see  Chapter III (3)(iii)).  Nevertheless, illegal felling and burning of woodland and the illegal 
export of roundwood to Brazil have continued.  As stated in the Review of Paraguay's trade policy in 
1997, the World Bank has estimated that if the ra te of deforestation remains unchanged, primary 
forest cover in eastern Paraguay will disappear by 2018.49  Data published by the SEAM ("National 
Strategy for the Conservation of Biodiversity in  Paraguay 2004-2009") in 2002 show that there is 
22 per cent of native woodland in the eastern region a nd a rate of change (deforestation) of 2.8 per 
cent over the period 1992-1997.50 
70. Law No. 2.524 of 13 December 2004 banned the tr ansformation or conversion of areas with 
woodland cover in the eastern region for the purpose of agriculture or human settlement for an initial 
period of two years.  According to the authoriti es, however, Law No. 422/73 still allows exploitation. 
71. The forestry policy came into effect in 1975 under Decree No. 11.681 implementing Law 
No. 422/73 on the management and exploitation of na tive and planted forests.  The Decree requires 
owners of over 20 hectares to leave 25 per cent as native forest reserves.  Through the National Forest 
Service, the MAG is responsible for approving pl ans for managing forests and soil use, including 
forestation and reforestation by the private sect or.  Law No. 536 of 16 January 1995 provides 
incentives (financial support and exemption from certain  taxes) for investment  in forestation or 
reforestation.  During the period 1997-2004,  a total of G/ 39.8 billion was disbursed for 
reforestation.51 
72. Since 1995, planting and reforestation have been  boosted through subsidies (see Chapter III 
(4)).  The support consists of covering 75 per cent of  the cost of planting (once only) in priority areas 
as well as maintenance costs (for three years), for which the National Forest Service determines the 
costs annually.  Since 1994, it has been prohibite d to set up and operate processing industries for 
roundwood (sawmills) within 20 kilometres of the bor der with Brazil in order to prevent smuggling of 
unprocessed roundwood, logs, trunks and beams (L aw No. 515/94).  Subsequently, a transitional 
period of five years was allowed for the relocation of existing processing plants. 
                                                      
48 FAO (2004).  
49 World Bank (1995). 
50 The authorities have pointed out that discrepancies in the data on the extent of forest cover in the 
eastern region are the result of different methods of measurement used (scales, mapping, satellite imaging). 
Forests have been exploited at differe nt times and using different methods of  felling, which have diminished the 
stock of timber. Some estimates suggest that th e area of high-density woodland could be around 
700,000 hectares. There are differences regarding the remaining, non-continuous and highly-fragmented 
woodland ranging from 1,300,000 hectares to 2,900,000 hectares (MFN-FAO 2002;  WWF;  Agricultural 
Census;  SFN-JICA 1999;  Forestry Round-table). 
51 MAG – General Department of Administration and Finance. WT/TPR/S/146 Trade Policy Review 
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(3) MANUFACTURING SECTOR  
73. The manufacturing sector in Paraguay is rela tively small and contributed an average of 
17.3 per cent of Paraguay's GDP between 1977 and 2002, th e last year for which data are available.  
This figure shows a slight decline in comparison with the 17.7 per cent recorded during the period 
1991-1996.  As can be seen from Table IV.3, the major manufacturing activities in terms of 
generating value added have been meat production,  textiles and clothing, and the beverages and 
tobacco industry.  Growth in the manufacturing s ector is affected by the performance of a few 
products and sectors, especially the agri-food sector (see also section (2) above). 
74. Small enterprises focusing on the domestic mark et predominate in the manufacturing sector.  
Of the 3,745 firms surveyed in the 2002 industr ial survey, around 75 per cent had 10 or fewer 
employees and only 6 per cent had more than 50.  Am ong the latter, around two thirds stated that they 
have no foreign capital participation and only 10 per cent have participation of over 50 per cent.52  
Table IV.3 
Value added in manufactures, 1991-2002 
(Average for the period) 
Percentage of the manu- 
facturing sector Annual average rate of 
growth Percentage of value 
of production Activity  CNPPa 
1991-96 1997-02 1991-96 1997-02 1991-96 1997-02 
        
Meat production 6 15.7 15.2 2.2 -1.5 25.3 23.3 
Oil production 7 4.1 2.7 11.7 1.2 16.9 7.4 
Dairy production 8 1.3 1.1 1.2 -1.4 16.0 12.5 
Milling and breadmaking 9 3.7 4.0 -0.3 -1.6 19.5 18.2 
Sugar 10 1.2 1.3 -3.4 1.5 15.3 16.0 
Other foods 11 1.8 2.1 -1.2 1.1 14.9 16.2 
Beverages and tobacco 12 9.3 12.5 4.4 2.4 28.7 26.7 
Textiles and clothing 13 16. 3 14.6 0.5 0. 3 31.7 32.5 
Leather and footwear 14 3.9 3.9 1.7 -0.5 35.4 30.5 
Timber industries 15 6.0 5.9 4.4 -4.6 29.7 31.9 
Paper and paper products 16 3.5 4.5 7.6 0.7 33.7 28.4 
Petroleum refining 17 6.6 6.8 0.2 -4.6 46.4 48.4 
Chemicals 18 3.7 4.0 4.7 -0.4 18.3 19.9 
Manufacture of non-metallic products  19 9.9 7.2 4.2 -4.3 47.2 43.9 
Manufacture of base metals 20 3.4 3.6 6.8 -4.0 36.1 36.9 
Manufacture of machinery and 
equipment 21 3.3 3.8 2.2 -0.2 25.2 21.6 
Other manufactured products 22 6.2 6.7 2.4 -0.3 43.9 36.1 
        
Manufacturing sector 6-22 100.0 100.0 2.7 -1.0 28.5 25.6 
a Paraguayan National Classification of Products.  
Source : WTO Secretariat calcul ations based on the BCP, "National Accounts of Paraguay, 1991-2002". 
75. During a large part of the period under review, performance in the manufacturing sector 
followed the same sluggish trend as that in the ec onomy as a whole (see Chapter I).  Value added in 
the sector fell to a real annual rate of 1 per cent between 1997 and 2002.  On the other hand, the 
manufacturing sector managed to achieve a real ra te of 2.7 per cent over the period 1991-1996 even 
though, as mentioned in the Secretariat's report for the Review of Paraguay's trade policy in 1997, its 
growth was less than in the economy as a whole.  Over the period 1997-2002, the highest rate of 
expansion (2.4 per cent) was in the beverages a nd tobacco industry, whereas the majority of other 
                                                      
52 DGEEC (2003). Paraguay WT/TPR/S/146 
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manufacturing industries experienced a downturn, esp ecially the timber industry, petroleum refining, 
manufacture of non-metallic products and manufacture of base metals (Table IV.3). 
76. The decline in value added in the manufacturing sector was accompanied by growth in the 
value of production, which in real terms grew at  an average annual rate of 1 per cent between 1977 
and 2002.  As a result, on average, value added as a proportion of the value of production in the sector 
fell from just over 28 per cent during the period 1991-1996 to close to 26 per cent during the period 1997-2002 (Table IV.3).  The decline in value a dded in the manufacturing sector was thus caused by 
wage reductions and lower profits for the firms, or a combination of the two, and not by reduced sales.  
The data available appear to indicate that wage reductions and/or lower pr ofits were particularly 
marked in the leather and footwear, paper and paper products industries, but above all in the 
manufacture of oils.  In the latter industry, valu e added as a proportion of value of production fell 
from 16.9 per cent over the period 1991-1996 to 7.4 per cent from 1997-2002, possibly as a result of the increase in exports of the raw material for ma nufacturing oils, especially soya beans, and the 
ensuing rise in the cost of inputs for oil producers. 
77. In Paraguay, as is generally the case, value adde d in relation to value of production is much 
lower in the manufacturing sector than in other act ivities:  over the period 1997-2002, the ratio was 
less than half for manufactures compared with the primary sector (65.6 per cent) or services (58.9 per 
cent).
53  Taking into account the number of jobs gene rated in each sector (see Chapter I (2)(i)), the 
value added per worker is also probably less in the manufacturing sector than in the primary or services sectors.  This would suggest that each job created in the manufacturing sector generates less 
growth in GDP than jobs in other sectors, especially the primary sector, which is dominated by 
agriculture in Paraguay. 
78. International trade in manufactures is highly im portant for Paraguay's economy, both in terms 
of the importance of exports of goods processed  from agricultural products and the marked 
dependence on imported products in order to meet do mestic demand for products such as machinery, 
chemicals and refined petroleum products.  Although it is difficult to analyse the relationship between 
the manufacturing sector and international trade because of problems relating to trade statistics (see 
Chapter I (3)), the data available show that the ma nufacturing sector continued to increase the value of 
its exports between 1997 and 2002, even though th e average annual rate of 0.8 per cent was much 
lower than the rate of 14.3 per cent achieved duri ng the period 1991-1996.  Exports were dominated 
by three industries, firstly, the manufacture of  oils, followed by the timber and meat production 
industries (Table AIV.13). 
79. In addition, even though they remain important, exports of timber products fell and that could 
be a source of concern in view of the large share of domestic production export ed (around 34 per cent, 
Table AIV.13).  Exports also represent a la rge proportion of domestic production in the oil 
production, leather and footwear industries and, to a lesser extent, in chemicals and the manufacture 
of base metals.  The authorities have pointed out that the relatively small share of exports by the 
Paraguayan oil production industry coul d be explained by the tariff es calation imposed by some trade 
partners;  for example, the simple average tari ff applied by all countries on soya beans is around 
4.9 per cent, whereas the equivalent tariff for crude  soya bean oil is 12.2 per cent (Table AIV.4). 
80. In relation to the modest increase in exports of manufactures, Argentina, Brazil and Uruguay, 
as a group, have become an essential market for Paraguay's manufacturing sector (as explained in 
section (2) above, some of the trade in agri-indus trial products may consis t of re-exports).  The 
implementation of MERCOSUR appears initially to have had a positive impact, although this 
                                                     
 
53 WTO Secretariat calculations, based on the BCP , "National Accounts of Paraguay 1991-2002". WT/TPR/S/146 Trade Policy Review 
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subsequently changed to some extent:  while MERCOSUR's share of Paraguay's total exports of 
manufactures increased from an average of 43 per cent during the period 1991-1994 to 60 per cent 
between 1995 and 1998, it fell to 47 per cent during the period 1999-2002 (Table AIV.13). 
81. Consequently, the data available intimate that, with few exceptions (for example, leather and 
footwear), Paraguay's manufacturing sector has been  able to take advantage of the opportunities 
afforded by MERCOSUR only to a limited extent.  The specialization and growth required to supply 
the large markets in the MERCOSUR countries do not appear to have been achieved, mainly because 
of the low level of investment, the macroeconomic in stability in the region, th e limited infrastructure, 
and a general framework that is not particularly favourable to growth in production.  In such a 
situation, the sector's modernization and conversio n have been less rapid or widespread than the 
authorities had hoped.54 
82. After having increased by an average of some  16 per cent over the period 1991-1996, the 
value of imports of manufactures into Paraguay decreased to an annual average of 14 per cent 
between 1997 and 2002.  Reflecting to a large exte nt the scope of the economic stagnation during the 
latter period, imports by the manufacturing industry decreased in almost all instances (Table AIV.14). 
83. Imports play a decisive role in the dom estic market for manufactures, accounting for 
approximately half of the value of domestic production during the period 1997-2002 (Table AIV.14);  
this was also the figure recorded between 1991 and 1996.  Between 1997 a nd 2002, imports largely 
exceeded the value of domestic production of machin ery and equipment.  The value of imports also 
exceeded the value of domestic production in the case of petroleum refining and chemicals, whereas 
the ratio between the value of imports and domestic  production was some 50 per cent in the beverages 
and tobacco industry and 40 per cent for paper and paper products. 
84. The average MFN tariff in the manufacturing sector  is 9 per cent (based on the ISIC), slightly 
above the overall average of 8.9 per cent (Table III. 2).  Five manufacturing industries are protected by 
MFN tariffs that are substantially higher than th e overall average:  sugar, beverages and tobacco, 
textiles and clothing and, to a lesser extent, dair y products, leather and footwear (Table AIV.15).  
There is marked tariff escalation in the majority of manufacturing industries (Chart III.2). 
85. The MFN tariff appears to have had only a limite d effect on the entry of imports into the 
Paraguayan market for manufactures.  As indicated a bove, the available data show that, although they 
benefit from tariff protection that is higher than th e mean, the average value of imports of beverages 
and tobacco corresponded to 50 per cent of the valu e of domestic production from 1997 to 2002.  This 
was partly because of the volume of imports that were totally or partly exempt from MFN tariffs 
under preferential trade agreements, especially MERCOSUR (Chapter II (4)). 
86. The MFN tariff protection scheme does not appear  either to have boosted the generation of 
value added in Paraguay's manufacturing sector, as can be seen from the negative correlation between 
the average MFN tariff by industry and the corresponding value added as a proportion of value of 
production (Tables AIV.15 and IV.3).  This situation can be explained to a large extent by looking at 
the assessment made by the authorities during the prev ious Review of Paraguay's trade policy to the 
effect that adapting to MERCOSUR's duty-free regime could have a negative impact on the manufacturing sector.
55  Other contributing factors are the significant role played by smuggling and 
under-invoicing (Chapter I (2)(v)) and trends in exchange rates (Chapter I (2)(iv)). 
                                                      
54 WTO (1997), Chapter IV (4). 
55 WTO (1997), Chapter IV (4). Paraguay WT/TPR/S/146 
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87. Regarding MERCOSUR's impact on developmen t of the manufacturing sector, it should be 
noted that the average share of MERCOSUR products in the total volume of imports of manufactures 
increased from some 35 per cent during the pe riod 1991-1994 to 46 per cent from 1995 to 1998 and 
close to 51 per cent during the period 1999-2002.  This trend can be found in almost all manufacturing 
activities (Table AIV.14).  Between 1999 and 2 002, imports of manufactures from MERCOSUR 
played an important role in almost all market segments, even though the exceptions include the 
important segment manufacturing machinery and equipment. 
88. The combination of limited growth in exports  of Paraguayan manufactures to the rest of 
MERCOSUR and strong growth in imports from the sa me market can be explained partly by the 
substantial differences that exis t between Paraguay and its MERCOSUR partners as regards levels of 
development in their manufacturing sectors, as well as the differences in the programmes provided by 
each partner to its producers giving support in addition to tariffs.  For example, the Secretariat's report 
during the last review of a member of MERCOSUR, namely Brazil, stated that Brazil's manufacturing sector was highly diversified and ha d been one of the most dynamic activities in the economy, having 
benefited from support under an industrial polic y that laid emphasis on expanding exports and 
providing substantial support programmes.
56 
89. One aspect that needs further analysis is th e impact which the application of a common 
external tariff may have had on Paraguay's manufact uring sector.  The tariff is designed to promote 
manufacturing, but its impact on Paraguay may have been distorted because, in comparison with other 
members of MERCOSUR, Paraguay would appear to have less manufacturing potential.  The cost to 
Paraguay's manufacturing sector of any such distortion w ould need to be more than offset by gains in 
efficiency resulting from better allocation of resour ces within an integrated regional market, but this 
would mean eliminating the various shortcomings that MERCOSUR still has as a customs union and, to an even greater extent, as a common market (Chapter II (4)(ii)(a)). 
90. The manufacturing sector in Paraguay benef its from a number of government support 
programmes, including tax exemptions under Law No. 60, loans for investment granted by the 
Industrial Development Fund, while there are specia l incentives for investme nt in the automobile 
industry (Chapter III (4)(iii)).  The manufacturing s ector can take advantage of tax concessions to 
promote exports (Chapter III (3)(iv)), as well as  restrictions on the export of raw materials 
(Chapter III (3)(ii) and (iii)).  There is also an industrial policy component in government bidding procedures when they are used to give preference to Paraguayan suppliers (Chapter III (4)(v)).  There 
have not been any studies on the advantages of the support programmes available to the 
manufacturing sector for the Paraguayan economy as a whole, but these could cause significant distortions because of the narrow goals they pursue, their fiscal cost and the additional burden for the 
government administration. 
(4) 
ENERGY SECTOR  
91. Paraguay has abundant reserves of energy in the form of hydraulic power.  This makes it one 
of the major producers of electricity per capita in the world and a large exporter of electricity.  Nevertheless, in 2003, consumption of electricity  accounted for barely 11 per cent of domestic energy 
consumption.  Firewood and charcoal are the most wide ly used (56 per cent of the total) together with 
petroleum by-products (32 per cent).
57  According to data furnished by the authorities, in 2003 the 
electricity coverage index rose to 83 per cent (some 4.7 million inhabitants) with an average increase 
of 2.4 per cent over the previous five years.  Pa raguay produces no petroleum or natural gas.  In 2002, 
                                                      
56 WTO (2004), Chapter IV (5). 
57 Data provided by the Energy Resources Department, Office of the Under-Secretary for Mines and 
Energy. WT/TPR/S/146 Trade Policy Review 
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fuel imports accounted for around 17 per cent of total imports.  The energy sector represents 5.7 per 
cent of GDP and 1 per cent of the total number of jobs (Chapter I (2)(i)).58 
92. The Office of the Under-Secretary for Mines and Energy, which is part of the Ministry of 
Public Works and Communication, is responsible for drawing up policies on the use and management 
of energy resources.59  The energy sector is dominated by two State-owned companies, Petróleos 
Paraguayos  (PETROPAR) and the Administración Nacional de Electricidad  (ANDE).  Although the 
hydrocarbons subsector has been subject to re forms aimed at increasing the share of private 
investment, the electricity subsector re mains a public service operated by the ANDE. 
(i) Hydrocarbons and other fuels 
93. Paraguay depends on imports to meet all domestic demand for hydrocarbons.  It neither 
produces nor consumes natural gas.  In March 2004, how ever, the existence of a natural gas deposit in 
Paraguay with "vast potential for exploitation" was confirmed.60  According to the Ministry of Public 
Works and Communication, private investors have also shown growing interest in exploration 
following the discovery of productive fields in neighbouring countries.61 
94. The State-owned company Petróleos Paraguayos  (PETROPAR) has a de facto monopoly of 
imports of crude petroleum;  import of hydrocarbons  in general has been liberalized.  At the end of 
2004, private companies could import other fuels directly or through distributors authorized by the Ministry of Industry and Trade.
62  The authorization is given automatically to companies that meet the 
requirements laid down in Decree No. 10.911 of 25 October 2000. 
95. PETROPAR refines imported petroleum at its re finery in Villa Elisa, which has nominal 
capacity of 7,500 barrels/day for the production of fuel  oil, gas oil, kerosene, virgin naphtha and LPG.  
It also operates a plant that produces alcohol fr om sugar cane with an average capacity of 
150,000 litres/day, and imports refined produc ts.  PETROPAR markets its products through 
distributors, which sell them to the final consumer .  PETROPAR's share of the domestic market for 
petrol and liquefied petroleum gas has been declin ing since 2000.  The authorities have indicated that 
the company's performance has been  affected by an onerous regulatory framework that is sometimes 
not compatible with the oil business, fixed price c ontrols based on political criteria and the charges 
imposed by the Government.63  PETROPAR has had to face serious cash flow problems and at the 
end of 2003 these prevented the enterprise from meeting some of its tax obligations.64 
96. The only fuel whose final consumer price is c ontrolled by the Government is gas oil (diesel 
fuel);  all types of naphtha were liberali zed under Decree No. 10.183/00.  Even though the 
Government increased its price in early 2004, PETROPAR still loses US$0.05 on each litre of gas oil 
imported and sold to distributors.65  The authorities have pointed out that PETROPAR receives no 
Government subsidies. 
97. The Government's programme for 2003-2008 stat es that it is necessary for PETROPAR to 
enter the market selling fuel to final consumers so as to "boost competition in the sector and ensure 
                                                      
58 The figures cited include health services. 
59 Law No. 167/93, 25 May 1993. 
60 MOPC (2004). 
61 MOPC (2004). 
62 Article 35, Decree No. 10.911. 
63 Petróleos Paraguayos (2004). 
64 IMF (2004b). 
65 PETROPAR (2004). Paraguay WT/TPR/S/146 
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that the oligopolies dominated by distributors do not prejudice consumers".  The privatization of 
PETROPAR is not envisaged (Chapter III (4)(iv)).  The amendments to the Hydrocarbons Law (Law 
No. 779/95 of 12 December 1995) introduced in 1995 ar e intended to increase private investment in 
the hydrocarbons subsector.66  In particular, the Law allows pub lic and private national and foreign 
companies to conduct hydrocarbons prospection,  exploration and exploitation activities under 
concessions granted by the State.67  In order to obtain a permit or concession, foreign companies must 
be domiciled in Paraguay.  Concession agreements between the State and private companies must be authorized by the National Congress.  The Law allows any disputes related to such agreements to be 
brought before international arbitration.
68  By mid-2004, four private companies, including one 
foreign company, were prospec ting for hydrocarbons in Paraguay.69 
98. Exploitation is subject to income tax, roya lties and taxes paid in proportion to the area 
exploited.  Any concessionaire expl oiting hydrocarbons must sell to the State (at market prices) a 
specified volume of production, determined each year by the Ministry of Public Works and 
Communication and the Ministry of Industry and Trade.70  The rest of the output may be refined, 
stored, transported or exported.  Re fining and storing of fuel must be authorized by the Ministry of 
Industry and Trade.  Authorizations are given auto matically to companies that meet the requirements 
laid down in Decree No. 10.911/00. 
99. According to Decree No. 2.162 of 15 March 1999 and Decree No. 2.266 of 26 March 1999, 
petrol of up to 95 octane marketed in Paraguay ma y contain up to 20 per cent of undenatured ethanol;  
the MIC resolution lays down a limit of 18 ± 0.5 per cent undenatured ethanol.71  Distributors are 
responsible for meeting this requirement.  Decree No. 2.162/99 states that one of the objectives of the 
policy on mixing ethanol and petrol is to implement measures that help to protect the environment and 
public health by reducing the emission of gases and other substances harm ful to health and to 
encourage production of traditional agricultural pr oducts of economic and social importance in 
Paraguay such as sugar cane. 
100. Distributors marketing petrol must mix it with undenatured ethanol in Paraguay.72  A prior  
non-automatic licence issued by the Ministry of Industry and Trade is required for the import of 
undenatured ethanol.  Import licences are granted only for products under ta riff heading 2207.1000, 
namely undenatured ethyl alcohol of an alcoholic st rength by volume of 80 per cent volume or higher, 
only undenatured ethanol (not less than 99.5o  GL) intended to be mixed with petrol.  Before a licence 
can be granted, there must also be "reliable proof of supply shortages in the country"73 and import 
must be deemed to be of "national interest".74  Distillation, storage, distribution and marketing of fuel 
alcohol are regulated by Decree No. 10.911/00. 
101. In 2001, the Government decided to set up the Commission for the Coordination and 
Promotion of Natural Gas and Related Investments (COMIGAS).75  COMIGAS is entrusted with 
studying, developing and promoting opportunities for regional energy integration as regards the 
production, transport and use of natural gas.  The r esults of the Commission's work led to approval of 
                                                      
66 WTO (1997), page 74. 
67 Article 3, Law No. 779/95. 
68 Article 5, Law No. 779/95. 
69 The Economist Intelligence Unit (2004). 
70 Article 32, Law No. 779/95. 
71 Resolution No. 704, 30 September 2004, implementing Decree No. 2.162, 15 March 1999. 
72 Article 4 of Resolution No. 153, 19 March 1999. 
73 Article 1 of Resolution No. 154, 19 March 1999. 
74 Article 1 of Resolution No. 154, 19 March 1999. 
75 Decrees Nos. 11.884, 12.108 and 12.820 of 2001. WT/TPR/S/146 Trade Policy Review 
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Law No. 1.948, "Transport of natural gas by pi peline" of 22 July 2002, which seeks to promote 
private investment in the subsector.  In order to achieve this, the Law liberalized the import and export 
of natural gas and laid down regulations on the granting of concessions to private firms for the 
transport of natural gas by pipeline.  Both do mestic and foreign firms may apply for concessions 
under the Law, but foreign firms must be domiciled in Paraguay. 
102. Both the creation of COMIGAS and the adoption of Law No. 1.948/02 form part of a policy 
that seeks to encourage the construction of a gas pipeline from Bolivia to Brazil going through 
Paraguay.  It is estimated that the gas pipeline will cost some US$920 million.  It is not envisaged that 
the State will have any financial participation in the project. 
103. At the XXXVth Meeting of Ministers of the Latin American Energy Organization, held in 
Venezuela in October 2004, the President of PETR OPAR announced that Paraguay intended to sign 
an agreement with Venezuela under which it would obtain fuel in accordan ce with the terms laid 
down in the Caracas Agreement on Energy Cooperation.76 
(ii) Electricity 
104. Paraguay's installed capacity is 8,116.1 MW.  In 2003, gross electricity generation amounted 
to 51,659 GWh, of which 86 per cent came from the Itaipú hydroelectric power station on the border 
with Brazil.77  Itaipú is the largest such project in the wo rld.  Its installed capacity is expected to 
increase from 12,600 MW to 14,000 MW by the end of 2005 when two new generators come on-line.  
Some 12 per cent of electricity comes from the Yacy retá hydroelectric power station on the Argentine 
border and the remainder from the Acaray hydroel ectric power station and various small thermal 
stations.  Paraguay is one of the largest exporters of electricity in the world.  In 2002, it exported 
around 41,770 GWh, a figure that represents some 87 pe r cent of gross electricity generated that year.  
Royalties, compensation bonuses and other items relate d to the sale of electricity generated in the 
Itaipú and Yacyretá power stations accounted for one fifth of the State's total earnings between 1997 
and 2002 (Chapter I (2)(iii)). 
105. In Paraguay, the ANDE has been given a monopoly of the supply (generation, transmission, 
distribution and marketing) to the public of electric power and light throughout the Republic.78  Law 
No. 966/64 provides that existing concessions for th e supply of electric power services given to 
individuals or other entities will be r espected until their legal expiry date. 
106. The ANDE owns 50 per cent of the capital of the binational entities which operate the Itaipú 
and Yacyretá power stations (the remaining capita l belongs to Brazil and Argentina respectively).  
The ANDE also transmits and distributes electricity almost all over Paraguay.  There are two private 
companies (the Compañía de Luz y Fuerza de Villarrica  and the Asociación de Colonias Menonitas ) 
which sell energy in their respective markets.  Th e prices applied by these companies are subject to 
the ANDE's tariff rates and their impact on the domestic electricity market is marginal. 
107. Law No. 966 gives the ANDE authority to regu late aspects related to the generation, 
transmission and distribution of electricity.79  It also lays down the principles for setting electricity 
rates for final consumers without defining the separate cost of generating, transmitting and 
                                                      
76 CadenaGlobal  (2004). 
77 For the purposes of installed capacity and drawing up the National Energy Balance, only 50 per cent of 
the capacity and the electricity generate d by the Itaipú and Yacyretá hydroelectric power stations are taken into 
account. The other 50 per cent belongs to Argentina and Brazil respectively. 
78 Article 64 of Law No. 966/64, 12 August 1964. 
79 Article 5, Law No. 966. Paraguay WT/TPR/S/146 
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distributing electricity.  The ANDE must fix its rat es in such a way as to cover "all operating costs and 
earn a reasonable return on the investment made in supplying electricity so as to ensure that the company has the necessary resources to pay off its debts and expand its services as required".
80  In 
particular, the rates must ensure that ANDE's ne t income amounts to between 8 and 10 per cent of the 
value of its tangible and intangible assets plus its wo rking capital.  After they have been approved by 
the ANDE's Governing Board, electricity rates are subject to approval by the "Economic Team" (see Chapter II (2)(i)), which must ensure that they co mply with the legal provisions on fixing rates. 
108. In 2003, the mean domestic rate imposed by ANDE was G. 317.04/kWh, corresponding to 
US$0.0493.  The rates per kWh for various type s of consumers were the following:  G/ 348.43 
(residential);  G/ 353.11 (commercial);  G/ 219.98 (industrial);  and G/ 299.95 (general)
81, for 
customers that use electric power to  supply installations in places not covered by the other groups of 
consumers (i.e. residential, commercial, industrial  or governmental).  Although there is no energy 
market for independent customers nor a comp etitive wholesale market, Decree No. 2.109 of 
24 January 1994 allows the ANDE to give certain large consumers special rates, including the metal 
and electrochemical industries. 
109. The average rates applied by the ANDE since 1994 have been below the marginal long-term 
cost.  Between 1994 and 2003, the rates covered be tween 40 and 70 per cent of this marginal cost.82  
For example, in 2003 an average rate of around US$0 .07/kWh would have been needed to cover the 
long-term marginal cost.  This means that the abunda nce of hydroelectric resources has not sufficed to 
give Paraguay access to energy at very low cost beca use of the significant impact that capital costs 
have on the cost of production in the Itaipú and Yacy retá power stations, which are the main sources 
of energy in Paraguay. 
110. Half of the installed capacity in both the It aipú and Yacyretá power stations belongs to 
Paraguay.  According to the Itaipú Treaty, the two parties undertake to acquire the total power installed (either together or separately)
83, and they may do this throu gh Paraguayan or Brazilian firms 
or entities;  when one party decides not to use part  of the agreed power (or the corresponding energy), 
within the limits set, it may authorize Itaipú to cede the part that becomes available to the other entity 
either in the form of power or energy.  The Yacyretá Treaty contains a similar provision.84 
111. The Itaipú Treaty provides that the cost of el ectricity services provided by the hydroelectric 
power station must cover the following elements, inter alia :  annual profits of 12 per cent on the 
capital participation by the ANDE and ELETROBRAS (the  Brazilian operator);  financial charges and 
amortization of loans granted for Itaipú;  royalties;   administrative and inspection costs paid by Itaipú 
to the ANDE and ELETROBRAS;  and operating costs.85  Nevertheless, Itaipú has accumulated debts 
amounting to US$17 billion (the majority of them with Brazil), partly as a result of the sale of electricity at rates that do not cover capital costs.  According to the President of Paraguay's Government programme for 2003-2008, Brazil has ha d more access than Paraguay to "subsidized 
electricity".
86  It therefore considers that the ANDE s hould receive the same volume of subsidized 
                                                      
80 Article 85, Law No. 966. 
81 ANDE (2004). 
82 ANDE (2004), page 15. 
83 Article XIII, Itaipú Treaty, 26 April 1973. 
84 Article 13, Yacyretá Treaty, 27 March 1974. 
85 Annex C, Itaipú Treaty, 26 April 1973. 
86 Government programme for 2003-2008. Availa ble on-line at:  http ://www.presidencia.gov.py WT/TPR/S/146 Trade Policy Review 
Page 110 
 
 
electricity as Brazil was given.  In November 2004,  the Paraguayan and Brazilian authorities met to 
discuss alternatives designed to reduce the pa yment of interest to Brazil by Itaipú.87 
112. Since the latest machinery installed came into  operation, the Yacyretá hydroelectric power 
station has generated around 60 per cent of its proj ected capacity, the level in the Paraná River 
reservoir being lower than originally planned.  Between the end of 2003 and August 200 4, Paraguay 
and Argentina concluded several instruments thro ugh which the Yacyretá Termination Plan was 
approved, defining the work required to raise the level of the reservoir.  The total amount of investment needed for this purpose is some US$650 million.  Since it was set up in 1973, the Yacyretá 
Binational Entity has accumulated debts amounting to  US$10.9 billion, mainly loans granted by the 
Government of Argentina (US$9, 859 million) and multilateral credit organizations.  The Paraguayan 
authorities have indicated that the debt is the resu lt of events such as delays in completing works and 
changes in the cost of the electricity service en visaged in the Treaty, with a fixed rate of 
US$30/MWh, below the amount needed to cover the debts. 
113. The electricity policy is to maintain the elect ricity service "as a public service provided by the 
ANDE" and to ensure that "generation for domes tic consumption, transmission and distribution 
[remain] solely in the hands of the ANDE, togeth er with the fulfilment of responsibilities and foreign 
trade in electricity".
88  It is not planned to privatize the ANDE  (Chapter III (4)(iv)).  The electricity 
policy envisages future private investment in ther mal power stations operating with gas imported from 
Bolivia in order to export electricity to Brazil.89  Restructuring of the electricity subsector has been 
under consideration since 1995.  Be tween 1998 and 2001, several prelimin ary draft laws on reform of 
the subsector were prepared but none of them we re adopted.  In early 2005, the National Congress 
was considering a draft law, supplementing Law No . 966/64, which envisages independent production 
of electric power, including cogeneration or self-generation of electricity. 
(5) SERVICES 
(i) Overview 
114. The services sector's share of the gross domes tic product (GDP) during the period 1998-2003 
remained stable at around 55 per cent, amounting to G/ 21.1 trillion in 2003 (US$3.3 billion at the 
average rate of exchange).90 The financial and trade subsectors are the largest in terms of value added 
(an average of 25 per cent of GDP, see Table I.1).  Nevertheless, these were also the subsectors which experienced the greatest decline from 1997 to 2003 (a n annual average of 3.1 per cent).  In 2003, the 
financial and trade subsectors made the greatest contri bution to real growth in the services sector with 
0.5 per cent.  In real terms, the sector declined  slightly during the period 1997-2003 (0.3 per cent 
annually on average). 
115. Employment in the services sector (including electricity and water) remained essentially 
unchanged between 1997 and 2003, generating an aver age of 39 per cent of total jobs during the 
period
91, most of which were in finance and trade.92 
                                                      
87 Última Hora, "Paraguay and Brazil renegotiate the Itaipú debt with Eletrobras", 25 November 2004, 
available on-line at:  http://www.ultimahora.com/template.asp?notic=41070 
88 Government programme for 2003-2008. Availa ble on-line at:  http ://www.presidencia.gov.py 
89 Government programme for 2003-2008. Availa ble on-line at:  http ://www.presidencia.gov.py 
90 Central Bank of Paraguay (2004b). 
91 Information provided by the BCP and available on-line at:  http://www.bcp.gov.py 
92 Information provided by the BCP and available on-line at:  http://www.bcp.gov.py Paraguay WT/TPR/S/146 
 Page 111 
 
 
116. During the Uruguay Round, Paraguay accepted few commitments, limited to financial 
services and tourism (see Table IV.4).  It undertook to allow commercial presence for specialists or 
senior personnel (financial services and tourist guides) or personnel providing training services 
(hotels, restaurants and travel agencies).  Th e specific commitments provide access to markets and 
national treatment for commercial presence in Paraguay in sectors that appear in the new schedule of 
commitments with the exception of travel agency services. 
117. Paraguay did not take part in any of the ne gotiations on services subsequent to the Uruguay 
Round, but at the end of 2004 it presented a services offer in the context of the Doha Development 
Round. 
118. Paraguay did not specify any list of MFN exemptions under Article II of the GATS. 
Table IV.4 
Summary of specific commitments under the GATS 
   Market access National treatment 
 Modes of supply:          
  Cross-border supply 1    1    
  Consumption abroad  2    2   
  Commercial presence   3    3  
  Presence of natural persons    4    4 
Horizontal limitationsa − − − − − − − − 
Commitments (■ full;   ◨partial;   □ no commitment;   - does not appear in the Schedule) 
Commitments on specific sectors         
1. Business services − − − − − − − − 
2. Communications services − − − − − − − − 
3. Construction services  − − − − − − − − 
4. Distribution services  − − − − − − − − 
5. Education services − − − − − − − − 
6. Environmental servicesb − − − − − − − − 
7. Financial services         
       A.  Insurance   
                  (Excluding reinsurance and retrocession) □ □ ■ ◨ □ □ ■ ◨ 
                  Reinsurance and retrocession ■ ■ ■ ◨ ■ ■ ■ ◨ 
        B.  Banking    
                  Acceptance of deposits and other repayable funds from 
                  the public  □ □ ■ ◨ □ □ ■ ◨ 
                  Lending of all types, including consumer credits, 
                  mortgage credit, etc. □ □ ■ ◨ □ □ ■ ◨ 
                  Other services auxiliary to financial intermediation ■ ■ ■ ◨ ■ ■ ■ ◨ 
8. Social and health services − − − − − − − − 
9. Tourism services and travel-related services          
       A.  Hotels and restaurants ■ ■ ■ ◨ ■ ■ ■ ◨ 
       B.  Travel agencies and tour operators' services ■ ■ ◨ ◨ ■ ■ □ ◨ 
       C.  Tourist guide services ■ ■ ■ ◨ ■ ■ ■ ◨ 
Table IV.4 (cont'd) WT/TPR/S/146 Trade Policy Review 
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   Market access National treatment 
 Modes of supply:          
  Cross-border supply 1    1    
  Consumption abroad  2    2   
  Commercial presence   3    3  
  Presence of natural persons    4    4 
10. Recreational and sporting services − − − − − − − − 
11. Transport services − − − − − − − − 
12. Other services − − − − − − − − 
a The sole authentic source of information on these commitments is Paraguay's Schedule of Specific Commitments, contained in 
document GATS/SC/68. 
b Only applicable to services included in Paraguay's Schedule of Specific Commitments. 
Source : WTO Secretariat. 
 
119. The objective of the Montevideo Protocol , adopted by MERCOSUR's Common Market 
Council in 1997, is to promote free trade in services among member countries.93  The Protocol 
includes four modes of supply and lays down the bases for negotiations on national treatment, 
disclosure of confidential information, transpar ency of the regulatory framework, notifications, 
protecting competition and exemptions.  The authorities indicated that, in early 2005, the Protocol was 
being considered by Congress.  Paraguay has not signed any other agreements on trade in services. 
(ii) Telecommunications 
(a) Features 
120. The telecommunications subsector accounted fo r 3.9 per cent of GDP in 2002, a slight 
increase on its 1997 level.94  In 2003, the subsector employed 13,588 workers, corresponding to an 
average increase of 4.1 per cent annually in comparison with 1997.95  Paraguay had approximately 
273,000 fixed lines in operation in 2003 and 2,000 pub lic pay phones.  In 2002, investment and gross 
earnings in the subsector were US $81.5 and US$308.6 million respectively.96 
121. The level of development in the fixed telephone market infrastructure in Paraguay continues 
to be low.  In 2003, the telephone line density was still one of the lowest on the American continent, 
having remained at essentially the same level as in 1997, even though ther e have been slight 
improvements in recent years.  Consumers had to  wait a long time for a line as demand remained 
unsatisfied in some areas, reaching a maximum of  200,000 lines (in early 2002), with a connection 
cost of around US$125 in 2003 (Table IV.5). 
                                                      
93 MERCOSUR (2004). 
94 BCP (2004a). 
95 Information provided by the BCP and available on-line at:  http://www.bcp.gov.py 
96 BuddeComm (2004). Paraguay WT/TPR/S/146 
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Table IV.5 
Selected teleco mmunication indicators, 1997-2003 
 1997 1998 1999 2000 2001 2002 2003 
Main telephone lines per 100 inh. 4.3 5.0 5.0 5.0 5.1 4.7 4.6 
Mobile telephone subscribers per 100 inh. 1.6 4.4 8.1 14.9 20.4 28.8 29.9 
Total subscribersa ('000) 302.2 492.3 703.7 1,103.7 1,438.8 1,940.2 2,043.6 
Cost of connecting a residential telephone line 
(US $) 916.0 731.7 561.1 502.0 341.0 136.3 125.0 
Percentage of digital main lines 87.4 88.0 89.6 89.1 87.9 97.0 99.0 
Public pay phones 1,468 1,300 1,933 4,666 8,049 9,000 11,000 
Cost of a three-minute local call (US $) 0.1 0.1 0.1 0.1 0.1 0.014 0.014 
Cable television subscribers 50,000 80,600 95,400 .. 120,000 .. .. 
Telecommunications earnings (US$ millions) 205.3 225.7 332.6 324.3 308.6 134.5 141.6 
Estimated number of Internet users .. 10,000 20,000 ,, 60,000 100,000 120,000 
Computers connected to the Internet 298 1,147 1,160 1,296 2,704 4,351 9,243 
.. Not available. 
a Main telephone lines plus mobile telephone subscribers. 
Source:  ITU (2004), Telecommunication indicators .  Data available on-line at:  http://www.itu.net, and information 
provided by the authorities.  
122. Mobile phones to a large extent met the unsatis fied demand and the market grew significantly 
from 1997 onwards.  As a result, in 2003, there were  30 subscribers per 100 inhabitants in Paraguay, 
the highest density among MERCOSUR members.97  In March 2004, there were four suppliers of 
mobile telephone services operating in Paraguay (Tel ecel, Núcleo, Hola Paraguay/Vox and Hutchison 
Telecommunications Paraguay) serving a ma rket of over 1.5 million subscribers.98  Two further 
companies with licences had not yet started ope rating by October 2004.  The companies operating 
provide services largely in rural and urban areas no t covered by the Paraguayan Communications 
Company (COPACO).  The latter is licensed to supply various value added services. 
123. Up to December 2003, mobile telephone compan ies paid a fee to COPACO corresponding to 
14 per cent of the amount fixed as the cost of access to  the mobile network in order to use the fixed 
telephony network.99  At January 2005, there was a charge  for connecting to the mobile network 
through the fixed network paid in full to the mobile network;  at the same time, there is a charge for 
connecting to the fixed network, which is paid in full by the mobile networks to the fixed network.100  
124. In 2000, the Paraguayan Government launche d a new privatization process for what was 
formerly the National Telecommunications Author ity (renamed COPACO in  2001), which had been 
suspended by Congress in 2002 (see also Chapters II (3 ) and III (4)(iv)).  The criteria for taking part 
in the bidding for COPACO required that the prospe ctive bidders should contro l net assets equivalent 
to US$100 million.  The volume of capital in banks operating in Paraguay and the statutory limit on 
the amount of loans (20 per cent of the capital) made  it impossible to obtain security or a loan from 
banks operating in Paraguay for the amount requi red for the bidding process.  Consequently, the 
criteria for bidding might have violated the pr ovisions of Article 111 of the Constitution, which 
guarantees the workers a preferential right to buy out a company to be privatized.  During this 
process, the National Telecommunications Aut hority was valued by the World Bank at 
                                                      
97 ITU (2004), Telecommunication indicators . Available on-line at:  http://www.itu.net 
98 BuddeComm (2004) and information provided by the authorities. 
99 CONATEL Resolution No. 209, 23 June 1999. 
100 CONATEL Resolution No. 496, 30 April 2004. WT/TPR/S/146 Trade Policy Review 
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US$229 million.101  Law No. 1.932 of 5 June 2002 suspended indefinitely the effects of Law 
No. 1.615 and thus put an end to the privatiza tion of COPACO, citing probl ems of public confidence 
in the process. 
125. In general, COPACO is perceived to be an in efficient company (as in 1997), with a low level 
of investment and poor profitabilit y from its basic telephony operations.102  The authorities stated that, 
despite this perception, COPACO was never in defi cit and the results of its operations were always 
satisfactory from an economic point of view.  In  2003, COPACO drew up a development plan that 
envisaged investment of US$250 to 300 million and in cluded the city of Filadelfia in the digital 
network as well as the digitization of telephone excha nges in 65 provincial cities.  At October 2004, 
there was foreign participation in the offer of telecommunications services in almost all 
telecommunications markets with the exception of basic telephony.103 
(b) Regulatory framework 
126. Paraguay's Constitution guarant ees free access to the electro magnetic spectrum, without 
restrictions other than those imposed by the in ternational regulations and technical standards 
(Article 30).  In particular, since the end of 199 5 the objectives of the policy have been to make 
telecommunications services available in those areas that are "the most isolated" from Paraguay's 
urban centres, guarantee equality of opportunity in a ccess to use of the radioelectric spectrum, ensure 
the development, control and regulation of telecommunications, promote the emission and 
propagation of electromagnetic communication signals and comply with the technical specifications 
for the installation, operation and expl oitation of telecommunications services.104 
127. The Ministry of Public Works and Communicati on (MOPC) is responsible for framing public 
policy on the telecommunications subsector.105  The authorities have pointed out that a series of basic 
technical plans, implementation of which bega n in 1996 make up the National Telecommunications 
Plan, which was still being formulated at the end of 2004.  These basic technical plans lay down 
objectives for regulating the subsector.  The author ities hope that all the components of the National 
Telecommunications Plan will be prepar ed and put into effect during 2005. 
128. The National Telecommunications Commissi on (CONATEL), an autonomous body within 
the MOPC, is responsible, inter alia , for administering the spectrum, drawing up and approving 
technical regulations, overseeing the granting of concessions, licences and authorizations for supplying services, proposing tariff regimes to  the Executive, advising the Executive on 
telecommunications, supervising the introduction of new technologies, approving the equipment used, 
regulating the interconnection of networks and preventing anti-comp etitive or discriminatory conduct 
in the subsector.  The CONATEL body responsible  for taking decisions is the Governing Board, 
which comprises five members appointed by the Ex ecutive.  By means of an Executive Decree, the 
President of the Republic may dismiss any member of CONATEL for duly substantiated serious misconduct, subject to administrative proceedings (Law No. 642/95, Article 12). 
129. The organization of the subsector is covered by Law No. 642 of 29 December 1995 
(Telecommunications Law, LTC), which is implemented through Decree No. 14.135 of 15 July 1996, 
                                                     
 
101 Various bidders submitted bids, including Telefónica de España, Brasil Telecom  and Telecom 
Argentina .  
102 BuddeComm (2004), The Economist Intelligence Unit (2004), and the World Bank (1999). 
103 CONATEL (2004), information availabl e on-line at:  http://www.conatel.gov.py 
104 Law No. 642, Article 4, and CONATEL (2004). Information available on-line at:  
http://www.conatel.gov.py 
105 Law No. 167, 27 March 1991. Paraguay WT/TPR/S/146 
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as amended by Decrees No. 15.963 of 31 December  1996 and No. 10.022 of 16 August 2000.  The 
former amended the provisions on payment for the ri ght to provide services while the latter modified 
some regulatory aspects concerning applications, renewal and approval fo r permits to provide 
telecommunications services.  The LTC lays down ge neral guidelines with regard to hiring tariffs and 
interconnection.  It also provides for free access  to all telecommunications markets, with the 
exception of those reserved for the State (radioelectri c services for meteorology, air, river, maritime 
and space navigation, radio astronom y, and emergency and safety).  The LTC allows the Executive to 
reserve any telecommunications service for the State for reasons of public interest (Article 60).  The following are the value added services defined in the LTC:  facsimile, videotex, teletext, remote 
control, telecommand, telealarm, storage and re transmission of data, teleprocessing and mobile 
telephony. 
130. Pursuant to the LTC, telecommunications ser vices in Paraguay can be offered under three 
types of permit:  concessions, licences or authoriza tions.  Concessions are granted for basic services, 
defined as local fixed telephony, trunk and interna tional services.  At October 2004, COPACO had a 
de facto monopoly of local fixed telephony services and trunk and international services.  
Broadcasting and value added services are provided under a licensing regime and the other services 
(for example, amateur radio, local and emergency broadcasting services) require an authorization.  Concessions, licences and authorizations may be rene wed in accordance with the provisions set out in 
the respective instruments and may not be assigned without the authorization of CONATEL. 
131. Concessions granted under a written contract a pproved by the National Congress are for a 
maximum term of 20 years and are subject to pub lic bidding procedures or applications.  The 
authorities explained that, at January 2005, ther e were no explicit criteria determining when a 
concession is granted through a public bidding procedure or at the request of an applicant.  At 
October 2004, COPACO held the only concession granted for the supply of basic services. 
132. Licences and authorizations are granted by CONATEL.  Licences for broadcasting services 
are issued for a maximum term of 10 years, rene wable once only for a further ten-year period;  
licences for other services, including mobile telep hony, are granted for a maximum period of five 
years, renewable at the request of the interested party.
106  Authorizations are issued for a maximum of 
five years.107  In order to obtain a licence, the appli cant must possess the necess ary technical capacity 
and be economically solvent and may not have any partner or associated le gal person who has been 
penalized by annulment of a licence within the previous two years. 
133. Foreign companies providing telecommunications services in Paraguay must be domiciled in 
Paraguay or appoint a legal representativ e domiciled in Paraguay (Article 64). 
134. The LTC guarantees interconnection among public  telecommunications service networks on 
the basis of principles of neutrality, non-discr imination and equality of access.  Interconnection 
contracts are negotiated between the interested part ies, and where they fail to reach agreement the 
matter is settled by CONATEL.  In terconnection contracts must take into account the cost of the 
service and a "reasonable margin of profit".108  Interconnection charges are calculated according to a 
long-term incremental cost methodology, which defin es incremental costs as th e average of the cost 
related to changes in production and is calculate d "where all production factors have variable 
                                                      
106 Law No. 642, Article 73. Decree No. 14.135, Artic le 89, and Decree No. 9.892, Article 199. 
107 Law No. 642, Article 73. 
108 Decree No. 14.135, Article 139. WT/TPR/S/146 Trade Policy Review 
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costs".109 Resolution No. 496 of 30 April 2004 lays down maximum charges for interconnection to 
basic service networks at the national level,  mobile telephony networ ks and PCS networks. 
135. Providers of telecommunications services hol ding concessions, licences or authorizations 
granted following an application by the parties are subject to a single payment for each period of the 
contract amounting to between 1 and 5 per cent of the investment planned when commencing 
operations.110  In cases where they are gran ted through a public bidding procedure, the amount paid 
for the concession, licence or authorization is dete rmined in the terms and conditions of the bid.  
Holders of licences and authorizations must pay an  annual fee for using the radioelectric spectrum 
(with some exceptions):  the amount is determined by CONATEL and depends, inter alia , on demand 
for the service and the minimum wage at the time of determining the fee.111  All the fees mentioned 
above are administered by CONATEL and form part of its resources. 
136. The LTC grants CONATEL the right to fix the ta riff regime.  Tariff ceilings are determined 
for public services and other telecommunications services provided in markets that are not 
"sufficiently competitive" (Article 95).  For pub lic services, for example, fixed telephony services, 
(which include local, trunk and international calls ) the maximum price app lies, and CONATEL fixes 
it for each type of service.  The maximum price for local telephony services for COPACO is G/ 120 
per minute.  These maximum prices are determined in  the concession contract and are reviewed every 
five years.112 
137. For other telecommunications services, for example, mobile telephony, the system used for 
the purposes of control is "reasonableness" under wh ich there are no price controls except when 
CONATEL considers that the services are having a harmful effect on competition, in which case it 
has the right to intervene to re medy the situation.  For cellula r telephony, the General Tariff 
Regulations (RGT), approved under Decree No. 16. 761 of 26 March 2002, abolished the tariff 
ceilings.  The authorities have pointed out that, in early 2005, the prices for these services were below 
the maximum values in effect up until 2002 because of  the competition and the freeing of tariffs under 
the RGT. 
138. In the case of fixed telephony services, CONAT EL may determine tariffs and differential 
rates with temporary reductions in geographical areas where there are no efficient public telecommunications services, for reasons of public in terest or to encourage or promote services at the 
regional level.  The determination of these tariffs may involve subsidization.
113 
139. CONATEL administers a universal services fund set up under the LTC in order to develop 
public telecommunications services.  The fund's objectiv es are:  to promote the expansion of public 
services in rural areas and places of public and soci al interest by financing and developing access to 
public telecommunications services and by maximizi ng the economic benefits of telecommunications 
services by providing other services.114  Forty per cent of the fund's resources are derived from 40 per 
cent of the receipts from operating fees, which ar e mandatory, and from voluntary contributions by 
Paraguayan or foreign na tural or legal persons.115  Universal services are provided through a licensing 
regime under which licences are gr anted following a bidding procedure for a renewable period of five 
years.  The major part of the fund's resources has been used to grant financial support for the 
                                                      
109 Resolution No. 871, 17 July 2002, Articles 5 and 7. 
110 Decree No. 10.002, Article 1, which amends, inter alia , Articles 121 and 122 of Decree No. 14.135. 
111 Resolution No. 856, 1 December 2000. 
112 Decree No. 16.761, 26 March 2002. 
113 Decree No. 16.761, Article 14. 
114 Resolution No. 795, 17 June 2002. 
115 Resolution No. 034, 7 January 2002, Annex, Article 6. Paraguay WT/TPR/S/146 
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development of a public telephone  network throughout Paraguay.116  The universal services fund's 
annual resources are US$1 million and it has disbursed US$16 million of assistance since 1997. 
140. Paraguay has made no telecommunica tions commitments under the GATS. 
(iii) Financial services 
141. In terms of share of GDP (without including i ndirect taxes), financial intermediation services 
(banking and insurance) accounted for 2.8 per cen t in 2003, lower than the 4.6 per cent in 1997.117  In 
real terms, the value added of the financial inte rmediation subsector fell by an annual average of 
8.1 per cent during the period 1997-2003, dropping to G/ 933 billion in 2003. 
142. In October 2004, the financial services sub sector comprised 14 commercial banks, one 
development bank, 13 financial companies, 503 coop erative associations, 36 insurance companies, 
and 30 businesses in the form of brokers, trusts, sav ings and loan associati ons and general deposit 
warehouses.  The financial subsector provide d 0.82 per cent of total jobs in 2003. 
(a) Banking services 
Market structure 
143. In October 2004, assets and deposits in banks am ounted to G/ 13,330 and G/ 11,192 billion 
respectively (US$2,197 and US$1,849 million respec tively at the exchange rate prevailing in 
July 2004).118  In 2002, a study noted that the banking services market was highly concentrated.119  
The authorities have pointed out that this is b ecause some financial institutions withdrew from the 
market, mainly those with Paraguayan capital,  following the banking crises from 1995 to 1997. 
144. The banking classification used in Paraguay is based on the origin of the bank's capital.  
Direct foreign subsidiaries are fully foreign-ow ned (Citibank, N.A., Llo yds TSB Bank, ABN Amro 
Bank, Banco do Brasil, Banco de la Nación Argentina  and Chinatrust Commercial Bank).  Branches 
with majority foreign participation are institutions  in which the majority of the capital is foreign-
owned ( Interbanco S.A., Banco Sudameris S AECA, BBVA Argentaria Paraguaya S.A.  and Banco 
Integración S.A .).  Banks with local majority particip ation are called majority locally-owned ( Banco 
Regional S.A., Banco Amambay S.A.  and Banco Continental SAECA ), and the public bank is classified 
as State-owned ( Banco Nacional de Fomento , BNF). 
145. In terms of assets, in October 2004 the largest  bank was ABN Amro (with 14.8 per cent of the 
total), followed by Interbanco S.A. (13.9 per cen t of the total) and BBVA (13.8 per cent of the 
total).120  In August 2004, subsidiaries and branches cont rolled 76.6 per cent of th e market's assets and 
77.8 per cent of deposits. 
146. The BNF is an economic development bank set up in 1961 and is wholly State-controlled.  In 
August 2004, it controlled 9.4 per cent of the system 's assets and had the most extensive network of 
branches throughout Paraguay.  Using resources fr om the Industrial Development Fund, the BNF 
finances 70 per cent of a project through short- and long-term loans (up to 48 months and 10 years for paying off a loan respectively), taking into account the production schedules and the income 
                                                     
 
116 CONATEL (2004). Information availabl e on-line at:  http://www.conatel.gov.py 
117 BCP (2004a). 
118 Superintendency of Banks (2004). 
119 Insfrán Pelozo (2003). 
120 Superintendency of Banks (2004). WT/TPR/S/146 Trade Policy Review 
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generated by the project.121  The authorities have pointed out that  the loans granted by the BNF are at 
market interest rates.  In August 2004, the BNF's loan portfolio focused essentially on wholesale trade 
(33 per cent), agriculture (29 per cent) and industry (15 per cent).122  In 2003, the authorities imposed 
limits on the loans granted by the BNF in order to adap t its portfolio to the refo rm of public first-tier 
banks.  In August 2004, loans written off by the BN F amounted to 57.6 per cent of its total portfolio 
in Guaraníes and 96.1 per cent in foreign currency. 
147. In 2003, cooperative associations had a high le vel of liquidity and controlled around 20 per  
cent of financial assets in Paraguay.  They provide  services such as micro-loans and financing.  The 
25 largest cooperatives control some 80 per cent of a ll the financial assets of cooperative associations.  
In 2003, their assets had more than doubled since 1998 and amounted to US$82 million, with loans 
totalling US$100 million. 
148. Finance companies are another important part  of the Paraguayan banking subsector.  At 
August 2004, they had G/ 1,272.8 billion in  assets and G/ 948.2 billion in deposits.123  At that time, 
there was a high level of concentration and the four largest finance companies controlled 60 per cent of assets and 65 per cent of deposits. 
149. Since 1997, the financial subsector has continued to suffer from the effects of the 1995 
financial crisis.
124  During the period 1995-1998, 50 per cent of banks and finance companies were 
subjected to controls and the number of financial entities was considerably reduced.125  These 
upheavals led to a readjustment of the market and a high level of concentration. 
150. During the period under review, the BCP took over the debts which the finance companies 
audited (including those that went bankrupt) had with depositors.  In 2003, the Deposit Guarantee 
Fund (FGD) was set up, financed through contribu tions from finance companies and the BCP (see 
below).  The first deposits with the fund were ma de by private financial entities in October 2004. 
151. The finance system went through a crisis in 2002 and this led to a temporary fall in banking 
deposits.  The financial situation has improved and the authorities have pointed out that loans in 
Guaraníes started to recover in mid-2004. 
152. The Ministry of Finance (MH), together w ith the BCP, signed an agreement with the 
Association of Paraguayan Banks to increase the loan portfolios for the production sector by a total of 
G/ 600 billion.126  Likewise, the MH and the BCP signed an agreement with the Association of 
Finance Companies to authorize lin es of credit for G/ 300 billion at a reduced interest rate of 15 per 
cent annually. 
Regulatory framework 
153. The BCP is responsible for determining policy fo r the financial intermediation subsector.  The 
Superintendency of Banks (SB) supervises all th e regulatory aspects of the subsector (with the 
exception of cooperative associations) and is part  of the BCP.  The activities of cooperative 
                                                      
121 Decree Law No. 281, 14 March 19 61 (Basic Statute of the BNF) and BNF, information available to 
the public on-line at:  http://www.bnf.gov.py 
122 Superintendency of Banks (2004). 
123 Superintendency of Banks (2004). 
124 WTO (1997). 
125 Insfrán Pelozo (2003). 
126 Presidential Report to the Congress of the Nation, July 2004.  Available on-line at:  
http://www.presidencia.gov.py Paraguay WT/TPR/S/146 
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associations providing financial intermediation services are overseen by the National Cooperative 
Institute (INCOOP) and, in early 2005, they were  not subject to the provisions of Law No. 861 of 
24 June 1996 (see below).127 
154. The financial subsector is structured acco rding to Law No. 861/96, which lays down the 
guidelines for the organization and establishment of financial entities, protection of the financial 
system and procedures for ending operations within  the system.  Law No. 861/96 incorporates the 
Basel Provisions on the supervision of banks and capital requirements. 
155. The organization and commencement of opera tions by all firms providing financial 
intermediation services must be approved by the BCP  Board of Directors, subject to a favourable 
opinion on the part of the SB.128  Firms that form part of the financial system are set up as public 
limited companies, except in the case of those set up under a special law or subsidiaries of foreign 
banks (Article 10).  Financial in stitutions must be founded on forei gn or Paraguayan owned capital.  
The Law does not impose any criteria regarding nationa lity of the members of the board of directors 
or the shareholders of financial institutions operating in Paraguay.  After an application to commence 
operations has been submitted to the BCP, the latter h as three months in which to take a decision;  if 
the application is rejected, the applicant ma y present another application after two years. 
156. Law No. 861/96 provides that the requirements a pplicable to banks and finance companies 
(see below) before commencing operations are dete rmined by the BCP (Article 13).  They must 
include the following:  draft articles of incorpora tion, a programme of activities to be conducted, an 
internal system of control and auditing and a repor t to shareholders of the public limited company 
regarding participation in the registered capital a nd the moral and economic solvency of the members 
of the board of directors and administrative bodies. 
157. It prescribes that, in order to be able to administer assets, act as securities brokers or general 
deposit warehouses, a separate financial institution mu st be set up, defined as a subsidiary under Law 
No. 861/96 (Article 18).  These firms must also be set up as public limited companies and their activities must be approved by the BCP subject to  a favourable opinion by the SB (Article 18). 
158. Law No. 861/96 places limits on the control of shares by individuals.  No finance company 
may hand over more than 20 per cent of its net asset s to one shareholder.  Any person owning shares 
in a bank that allow it to gain decisive control ove r the bank's social determination may not own more 
than 20 per cent of the shares of another bank, finan ce or loan company.  No bank may allow a natural 
or legal person to own more than 20 per cent of its  tangible assets in loans an d contingent instruments, 
in the case of persons resident in Paraguay, or 5 per cent in the case of persons resident outside 
Paraguay.  The SB may, however, increase these limits to 30 and 20 per cent r espectively if it can be 
shown that the operation is guaranteed.  No bank may allow more than 30 per cent of its net assets to 
be owned by another bank or finance company in the form of loans or deposits, together with 
securities, bonds and other guarantees.  Banks may not give security or guarantees or any backing for 
the obligations of third parties for an und efined or indeterminate amount or time. 
159. The minimum paid-up capital to be maintained  is adjusted annually according to the 
consumer price index and in October 2004 it was established by the SB as follows:  banks 
(G/ 19,242 million), finance compan ies (financial institutions propos ing various services, including 
savings and loans, buying and selling of precious meta ls and financial leasing, inter alia ) 
(G/ 9,621 million), building societies (G / 9,621 million), general deposit warehouses 
                                                     
 
127 The National Cooperative Institute, set up under Law No. 438 of 21 October 1994, oversees the 
activities of cooperative associations in general. 
128 Resolution of the Banking Superintendency, No. 4, Act No. 87, 17 November 2003. WT/TPR/S/146 Trade Policy Review 
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(G/ 1,925 million), foreign exchange bureaux (G/ 1,782 million) and trusts (G/ 9,621 million).129  
Companies with foreign capital must maintain the minimum capital required of companies with 
Paraguayan capital and it must be paid up be fore commencing operations in Paraguay (Law 
No. 861/96, Article 11). 
160. Law No. 861/96 provides that foreign investment in financial institutions is subject to the 
same treatment as investment of Paraguayan capital (Article 7).  In addition, the Law prescribes that public banks may not receive preferential treatment from the BCP. 
161. All financial institutions must maintain a legal re serve equivalent to 100 per cent of their total 
paid-up capital (Article 27).  The reserve is bu ilt up through annual allocati ons of 20 per cent of net 
profits and is used to cover any potential operating losses. 
162. Pursuant to Law No. 2.334, financial institutions  that fail to meet certain criteria must put 
forward a plan to regularize or close the firm.  Th e procedure for closing companies laid down in the 
Law is based on a system of transfer of active and passive portfolios, which is intended to ensure the 
rapid and efficient closure of a firm. 
163. Law No. 861/96 set up a Risk Register as part of th e SB in order to evaluate risk information 
on clients.  All financial institutions are obliged to disclose the necessary in formation to the SB in 
order to keep the Register up to date. 
164. In addition, in order to protect the financial system, Law No. 2.334 established the FGD.  This 
Fund is used to guarantee savers' deposits in financ ial institutions that have been liquidated.  The 
guarantee is for a maximum of 75 minimum wages per person.  The FGD is administered by the BCP 
and has the following resources:  US$50 million contributed by the State (which may be totally or 
partially in the form of bonds), quarterly manda tory contributions by financial intermediation 
companies in proportion to the average balance of  their deposits, and additional State bonds where 
necessary.  Contributions to the Fund by priv ate financial entities amounted to approximately 
US$2 million in November 2004. 
165. Paraguay has legislation to combat money laun dering.  Law No. 1.015 of 3 December 1996, 
implemented by BCP Resolution No. 2 of 2 May 1997, lays down the general provisions against 
money laundering.  It set up the Secretariat for the Prevention of Money or Asset Laundering, whose 
functions are regulated by Decree No. 16.570 of 18 March 1997.  The Secretariat compiles and analyses information concerning possible money launde ring, keeps statistics and investigates possible 
instances of money laundering. 
166. At the beginning of 2005, Congress was consideri ng a draft law to regulate the functioning of 
public banks.  This draft envisages the creation of a financial agency to act as a second-tier bank and 
the dissolution of several public credit agencies. 
167. Paraguay undertook specific commitments on the financial subsector under the GATS.  These 
allow commercial presence for savings and loan banks.  The commitments also guarantee modes of 
supply 1, 2 and 3 for financial consultancy services,  loan intermediation, foreign exchange and the 
packaging of bank notes and coins.  In the latter case , the presence of natural persons is restricted to 
specialists. 
                                                     
 
129 Resolution of the Superintendency of Banks, SG No. 003, 5 January 2004. Paraguay WT/TPR/S/146 
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(b) Insurance and securities 
Market structure 
168. The insurance subsector's contribution to GDP in 2003 and 2004 was 0.98 and 0.96 per cent 
respectively.130  Direct premiums collected during the period 1997-2002 increased by an annual 
average of 7.7 per cent, reaching G/ 371,653 mi llion (US$56.7 million at the current rate of 
exchange).131 
169. As regards the breakdown in the total value of  premiums in 2003 (for life and other types of 
insurance), life insurance premiums accounted for 6 per cent while premiums for all other contracts 
represented 94 per cent, and this ratio continued in  2004.  During the period 1997-2002, the value of 
capital insured and reinsured increased substan tially, especially in 2000 (57 and 151 per cent 
respectively).132  Direct premiums per capita amounted to US$9.6 and US$11.5 in 2003 and 2004 
respectively. 
170. In early 2005, 36 companies provided insu rance services in Paraguay and 32 offered 
reinsurance services from outside Paraguay.  None of the reinsurance companies is domiciled in 
Paraguay.  The average assets of insura nce firms in 2003 and 2004 were US$994,168 and 
US$1,125,115 respectively.133  In June 2003, the largest insu rance companies in terms of net 
premiums (both those withheld and ceded) were Ma pfre Paraguay S.A. (12 per cent), La Consolidada 
S.A. (11 per cent) and Real Paraguaya (11 per cent).134 
Regulatory framework 
171. The Superintendency of Insurance (SS) reports  to the BCP's Board of Directors but is 
autonomous.  It is responsible for framing policy fo r the insurance and reinsurance subsector as well 
as for supervising, regulating and ensuring complian ce with all the legal provisions affecting the 
subsector.  In particular, the SS classifies compan ies according to their margins of solvency and 
intervenes in those companies in wh ich serious irregularities have been detected irrespective of their 
financial situation.  There is a Consultative Insura nce Council, composed of members of associations 
of insurance companies, loss adju sters and insurance brokers, who give the SS their opinion on draft 
laws, accounting system standards and ge neral issues relating to the subsector. 
172. The subsector is organized on the basis of Law No. 827 of 12 Februa ry 1996, which lays 
down the general statutes governing the subsector , the responsibilities and obligations of the SS, 
procedures for adjusting claims, and divides insu rance into two types (life insurance and asset 
insurance).  Resolution No. 17 of 1 July 1996 defi nes the margins of solvency and the guarantee fund 
for the subsector.  At the end of 2004, all insu rance companies in Paraguay provided asset insurance, 
but only two offered life insurance.135 
173. Law No. 827/96 defines the requirements for obtaining an authorization to commence 
supplying insurance services as follows:  (i) the comp any providing insurance services must be legally 
established;  (ii) it must be exclusively devoted to providing insurance;  (iii) it must maintain the 
minimum capital required (see below);  (iv) the pers ons in charge and those legally responsible must 
                                                      
130 Information provided by the authorities. 
131 Information provided by the authorities. 
132 Superintendency of Insurance (2004). 
133 Information provided by the authorities. 
134 Paraguayan Association of Insurance Companies (2003). 
135 Information provided by the authorities. WT/TPR/S/146 Trade Policy Review 
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not have been legally disqualified;  (v) the insuran ce plans must meet the technical requirements;  and 
(vi) in the case of foreign companies, the balances for the previous five years must show margins of 
solvency at least equal to those require d of Paraguayan companies (Article 8). 
174. Any firm seeking to offer insurance in Para guay must be set up as a public limited company 
or be a subsidiary of a foreign company.  Law No. 827/96 specifies that subsidiaries of foreign 
companies are authorized to opera te under the same conditions as public limited companies set up in 
Paraguay (Article 6).  Insurance companies may pr ovide only insurance services, which include the 
issue of securities and guaranteeing bonds  to third parties (Article 8). 
175. Minimum capital of US$500,000 is required in order to engage in the insurance business in 
Paraguay.  Law No. 827/96 does not lay down any requirements as to the nationality of the members 
of the board of directors of the insurance company. 
176. All insurance companies must keep a guarantee fu nd equivalent to 30 per cent of their own 
uncommitted assets.  Even though Law No. 827/96 provides that insurance companies should preferably invest their capital and reserves in Paraguay  (Article 22), the author ities have indicated that 
this provision is not regulated and does not apply in practice. 
177. Law No. 827/96 allows the establishment of re insurance companies in Paraguay for the two 
types of insurance defined in the Law.  It states th at reinsurance of risks on the basis of premiums may 
be carried out in Paraguay only by enterprises au thorized by the SS unless otherwise provided in 
international agreements and trea ties (Article 125).  Reinsurance co mpanies established in Paraguay 
must constitute and maintain assets of not less than  US$2.5 million for each of the branches in which 
they operate.  They must also be registered with  the SS.  For foreign reinsurers, registration requires 
an official certificate of operations from the coun try in which the headquarters are located and annual 
balances and reports for the previous three years,  duly authenticated in the country of origin.
136 
178. Paraguay undertook commitments on insura nce and reinsurance under the GATS (see 
Table IV.4).  These allow the presence of insuran ce and reinsurance specialists and the commercial 
presence of insurance and reinsurance companies (see above).  Paraguay's commitments under the 
GATS guarantee national treatment and market access for modes of supply 1, 2 and 3 for reinsurance 
services. 
179. Law No. 1.284 of 29 July 1998 organizes and regulates the operation of the securities market 
in Paraguay.  It prescribes the general provisions on the activities of the stock market;  it also defines 
the functions of the National Securities Commissi on, which is responsible for supervising and 
regulating the market's activities.  Public offer of  foreign securities is allowed and must have prior 
approval by the Commission.  Approval is subject to reciprocal treatment in the foreign country in 
relation to national securities or is given where, in th e opinion of the Commission, it is in the interests 
of Paraguay.  The issue of foreign securities in Paraguay by companies issuing securities in 
MERCOSUR countries or countries associated with MERCOSUR is governed by the guidelines laid 
down in the Colonia Protocol. 
180. Law No. 2.421 of 11 June 2004 exempts from payment of the IRACIS income earned from 
interest or profits in the form of capital gain s obtained from the sale of bonds or debt instruments 
issued by the State or municipalities on the stock exchange.  This Law also provides that interest, 
commission or profits obtained from investment, deposits or placing capital in finance companies 
covered by Law No. 861/96 are also temporar ily exempt from income tax (Article 15). 
                                                      
136 Resolution No. 112, 9 September 1996. Paraguay WT/TPR/S/146 
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(iv) River transport 
(a) Features  
181. In real terms, activities and supply of services in the river transport subsector (cabotage and 
merchant marine, not including port activities) amounted to 0.3 per cent of the GDP in 2003, having 
remained at the same level throughout the period 1997-2003.137  Over the same period, river transport, 
measured in real terms, increased its share of the overall transport sector slightly, reaching 9.5 per cent in 2003.  The subsector employed approximately 1,400 people in 2003. 
182. Paraguay has ports and wharfs on the Paraguay River (31) and the Paraná River (51), of 
which Asunción, Petropar/Villa Elisa, San Antoni o/Villeta and Concepción on the Paraguay River 
and Encarnación, Paloma/Triunfo, Tres Fronteras and Don Joaquín/Paredón, on th e Paraná River have 
the largest flow of commercial traffic.  The majo rity of domestic river traffic in the public ports, 
controlled by the National Shipping and Ports Author ity (ANNP), is in Asunción.  Traffic in the 
private ports (not including the PAKSA port) w as 1.8 million tonnes in 2002 and 2.9 million tonnes in 
2003.  During the period 2002-2004, river traffic amounted to 3.2, 4.4 and 5.9 million tonnes respectively.
138 
183. In 2003 the Paraguayan fleet registered with  the General Merchant Marine Directorate 
(DGMM) consisted of 1,189 vessels, 52.4 per cent of which were lighters.139  During the same year, 
1,021 vessels were registered with the DGMM for in ternational transport of goods, with bulk carriers 
being the most numerous and carrying the highest tonnage.140  The State-owned enterprise Flota 
Mercante del Estado S.A . (FLOMERES) was privatized in 1996. 
184. According to the United Nations Conference on Trade and Development, the cost of 
transporting goods per tonne (freight and insurance) to and from Paraguay is high in comparison with 
other countries in the Americas.141  This is because Paraguay, as a landlocked country, uses ports in 
Argentina, Brazil and Uruguay to ship its exports and imports, which are tran sported along the Paraná 
or Paraguay Rivers in smaller ve ssels (mostly convoys of lighters)  to and from Paraguayan ports.  
Paraguay has free ports and in-bon d warehouses in various maritime ports in the region for the 
purpose of receiving, storing, handling and tranship ping goods.  These are in Argentina (Buenos Aires 
and Rosario), Brazil (Paranaguá, Santos and Rio Gr ande do Sul), Chile (Antofagasta and Iquique);  
and Uruguay (Montevideo and Nueva Palmira).  In early 2005, Paraguay was negotiating the use of 
the port of Ilo with Peru.142 
(b) Regulatory framework 
185. In November 2004, Government policy objectives for this subsector were to improve the 
capacity and security of the control and use of port facilities, promote the expansion of the lighter fleet and lower the cost of river transport.
143 
186. The agency responsible for regulating the sub sector is the DGMM, which is part of the 
Ministry of Public Works and Communications  (MOPC) and was set up under Law No. 429 of 
                                                      
137 DINATRAN (2004). 
138 Information provided by the authorities. 
139 Information provided by the authorities. 
140 DINATRAN (2004). 
141 UNCTAD (several years). 
142 WTO document G/C/W/237, 24 October 2000 and information provided by the authorities. 
143 Government programme for 2003-2008. Availa ble on-line at:  http ://www.presidencia.gov.py WT/TPR/S/146 Trade Policy Review 
Page 124 
 
 
15 June 1957.  The DGMM is respons ible for supervising and coordina ting all activities relating to the 
national merchant marine and associated industri es and for giving the Executive technical advice on 
river and maritime transport policies, in particul ar, proposing legislation, making the administrative 
regime more flexible and promoting the general devel opment of the subsector.  It also keeps a register 
of national and foreign vessels operating in Paragu ay, establishes the labour regulations for those 
working on the vessels and keeps a register of all professionals engaged in merchant marine activities 
in Paraguay.  The DGMM is also the body that hears appeals against sanctions imposed by the 
General Port Inspectorate when they involve cessation of activities for over six months. 
187. Activities in the subsector are organized in acco rdance with a number of treaties, agreements, 
conventions and laws.  These are the following:   Law No. 476 of 15 October 1957 (River and 
Maritime Navigation Code, CNFM), implemente d by Decree No. 6.984 of 30 September 1959 and 
amended by Law No. 205 of 28 August 1959 and Law No. 1.448 of 13 July 1999;  Law No. 295 of 24 November 1971 (Law on the Reservation of Ca rgoes), implemented by Decree No. 27.371 of 
19 August 1981 and Law No. 928/27 (Harbour Regul ations), supplemented by Law No. 1.158 of 
14 November 1985.  The CNFM lays down the rul es and regulations for the Paraguayan merchant 
marine while Law No. 295 reserves part of the goods transported by river and by sea to vessels flying 
the Paraguayan flag. 
188. The CNFM classifies vessels into Paraguayan and foreign vessels (Article 7).  In order to be 
considered Paraguayan, vessels must comply with the re gulations in force, the ship's master or owners 
must be Paraguayan, as must a minimum number of the crew specified by the DGMM (Article 10);  
the authorities have stated that, pursuant to Decr ee No. 2.785/59, two thirds of the crew must be 
Paraguayan nationals.  Foreign vessels that wish to be  registered in Paraguay must be certified by an 
international ship classification company to ensure  that the safety requirements for operating have 
been met. 
189. The ship's master and owners, as well as two thir ds of the crew, in the Paraguayan merchant 
marine must be Paraguayan citizens (e ither by birth or naturalized).  Ratings need not be Paraguayan.  
Foreigners working in the merchant marine may have their professional qualifications endorsed in 
accordance with the provisions cont ained in international treaties, reciprocity or Law No. 1.158/95. 
190. Foreign vessels must take on a pilot of Pa raguayan nationality when entering Paraguayan 
waters and when entering or leaving a port.  Para guayan legislation reserves all maritime and river 
transport of imports and exports to Paraguayan-re gistered vessels.  If the cargo is coming from or 
going to LAIA member countries, provided that the capacity exists, the requirement for maritime 
transport is up to 50 per cent and for river transpor t at least 50 per cent.  While not abolishing the 
restrictions on volumes of imports and exports tran sported by sea, the Hydrovía Treaty did remove the 
restrictions in respect of river transport by v essels registered in the Treaty's member countries 
(Bolivia, Brazil, Paraguay and Uruguay) (Law No . 269 of 13 December 1993, Article II).  The cargo 
restrictions concerning river transport under the Hidrovía Treaty laid down in the original legislation 
remain in force for vessels registered in countries th at are not party to the Hidrovía Treaty.  Paraguay 
does not engage in maritime transport so, in practice, these restrictions do not apply.
144  T h e  
authorities have pointed out that this provision is  observed through export and import certificates and, 
in 2005, the SOFIA System in the General Custom s Directorate and the Simplified Export Programme 
in the Ministry of Industry and Trade were to be li nked.  Cabotage traffic is restricted to Paraguayan-
registered vessels. 
                                                      
144 Law No. 295/71 and Decree No. 27.371/81. Paraguay WT/TPR/S/146 
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191. Any vessel used for international maritime or ri ver transport must be registered with the 
DGMM.  The cost of registration varies accordi ng to the vessel's tonnage and ranges from 0.5 to 
2 minimum daily wages.145  Vessels carrying imports or exports subject to the cargo restrictions must 
pay an annual certification fee, which also varies according to the tonnage and ranges from 0.5 to 
2 minimum daily wages.146 
192. Decree No. 7.692 of 23 February 2000 incorpor ated a river transport subsector into the 
investment incentives regime established by Law No. 60 (see Chapter III (4)(iii)). 
193. In the International Maritime Organization,  Paraguay has signed the 1948 IMO Convention, 
the SOLAS Convention (Safety of Life at Sea) of 1974 and the SOLAS Protocol of 1988.147  These 
Conventions have been ratified and incorporated into Paraguay's domestic le gislation.  Paraguay has 
also signed the Inter-American Convention on Facilita tion of International Wa terborne Transportation 
(Convention of Mar del Plata) of 7 June 1963, whic h has likewise been incorporated into domestic 
legislation.148 
194. Law No. 269 of 13 December 1993 ratified th e Agreement on the Paraguay-Paraná River 
Waterway, including the six additional protocols.  The objective of this agreement is to facilitate 
commercial river navigation and transport along the Pa raná-Paraguay Waterway (Hidrovía) and to lay 
down provisions applicable to navigation, trade and transport of goods and passengers including use 
of the Waterway.  Paraguay has also signed bila teral agreements with Argentina, namely, the 
Navigation Treaty (incorporated into Paraguaya n legislation under Law No. 1.202/67) and the 
Convention on Cross-Border River Transport of Passengers, Vehicles and Cargo of 31 July 1972 
(incorporated under Law No. 368/72), as well as the Convention of 25 October 1996 on avoiding 
double taxation relating to internationa l air, river and land transport, which has been incorporated into 
domestic legislation under Law No. 1.105 of 14 August 1997.149  There are no bilateral agreements on 
river transport between Paraguay and Brazil other than the Hidrovía Treaty. 
(c) Ports and auxiliary services 
195. All State ports are managed and operated by  the National Shipping and Ports Authority 
(ANNP), established by Law No. 1.066 of 23 August 1965, and the Ministry of Public Works and 
Communications is responsible for relations with the Executive.  The ANNP is also responsible for 
keeping the rivers navigable.  In orde r to meet its objectives, the ANNP may, inter alia , plan, design, 
expand and build ports, exploit the port services under its responsibility, conduct technical studies into 
navigability conditions in rivers and collect the revenue from fees paid for use of ports.  The DGMM 
is responsible for compliance with dock labour regulations.150 
                                                      
145 Law No. 160, 20 May 1993.  The minimum wage specified in Law No. 160/93 means the wage paid 
for various unspecified activities in Asunción. In Se ptember 2004, the minimum wage in Paraguay was 
approximately US$200.  
146 The minimum wage specified in Law No. 160/93 means the wage paid for various unspecified 
activities in Asunción. In September 2004, the minimu m wage in Paraguay was approximately US$200. The 
minimum daily wage corresponds to the minimum wage divided by 30. 
147 IMO (2004), information on the status of conventions by country. Available on-line at:  
http://www.imo.org 
148 Information provided by the FTAA and ava ilable on-line at:  http://www.ftaa-alca-org and 
information provided by the authorities. 
149 Information available on-line at:  http://www.fta a-alca-org and Law No. 1.105, 14 August 1997. 
150 Decree No. 19.260/61. WT/TPR/S/146 Trade Policy Review 
Page 126 
 
 
196. The authorities have indicated that, in February 2005, there was no private or foreign 
participation in State-owned port operations, ev en though there are agreements and strategic 
associations for this purpose. 
197. Decree No. 16.217 of 23 January 2002 sets th e rates imposed by the ANNP for various 
services in State-owned ports.  The maximum char ge for using a wharf is G/1,000 and the maximum 
cost of towing is G/ 450,000.  There are also a dditional costs for the use of public ports depending on 
the type of goods:  0.65 per cent of the taxable customs value for some goods and 0.90 per cent for 
others, with some taxes reaching 1.75 per cent.  Exports pay 0.325 per cent of the taxable customs 
value on an ad valorem basis for products exported through these ports.  The authorities have stated 
that all ports in Paraguay impose charges for storag e, in the form of a percentage of the taxable 
customs value of the goods, and storage is charged according to the length of time the goods remain in 
the port area.  At the beginning of 2005, the ANNP  was preparing a draft to amend, update and 
modernize its charges, which should be approved during the first half of 2005. 
198. Law No. 419 of 1 September 1994 established a regime for the building and operation of 
private ports on navigable rivers.  Decree No. 14.402 of 23 August 2001 gave the DGMM 
responsibility for implementing Law No. 419 and estab lished the Port Department for that purpose, 
under the DGMM.  Authorizations to build and op erate private ports are given only to companies 
registered in Paraguay, in accordance with the procedures laid down for each company (see 
Chapter III (4)(i)).  All investment in building priv ate ports is eligible for the benefits under Law 
No. 117 of 7 January 1992, which provides that both Paraguayan and foreign investors have the same 
rights, guarantees and obligations.  The management  of each port has the authority to fix fees and 
charges for use of its facilities, which are coll ected and paid in accordance with the banking 
regulations in force (Law No. 419, Article 8). 
(v) Air transport 
(a) Features  
199. In real terms, air transport's contribution to GDP decreased slightly during the period 
1997-2003, reaching a figure of 0.2 per cent in 2003.151  Air transport's share of the total value of 
transport services measured in real terms fell by an annual average of 4 per cent and amounted to 
6.1 per cent in 2003. 
200. Total passenger movement in the two most importa nt airports in Paraguay (Silvio Pettirossi in 
Asunción and Guaraní in Ciudad del Este) fell sharply by an annual average of 6.5 per cent during the 
period 1997-2003.152  The largest reduction in passenger movement was for passengers of 
international flights to Guaraní airport.  The av erage number of passengers on international flights 
was 81 per cent of the total number of passengers during this period.  From 1997 to 2003, the total 
number of flights to Paraguay's two main airports fell by an annual average of 6.7 per cent to arrive at 
a total of 28,113 in 2003. 
201. Paraguay has four international airports (in As unción, Ciudad del Este, Mariscal Estigarribia 
and Pedro Juan Caballero), as well as nine airfields  throughout Paraguay.  The Itaipú and Yacyretá 
Binational enterprises (see section (5) above) operate pr ivate airfields with limited public use.  In 
November 2004, four airlines had regular interna tional flights to Paraguay, none of which were 
Paraguayan-owned. 
                                                      
151 DINATRAN (2004). 
152 DINATRAN (2004). Paraguay WT/TPR/S/146 
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(b) Regulatory framework 
202. In November 2004, the public policy objective fo r the subsector was to lower the cost of air 
transport.153 
203. Public policy in the air transport subsector is formulated by the National Civil Aviation 
Department (DINAC), established by Decree-Law No. 25 of 1990 approved (with amendments) by 
Law No. 73 of 8 November 1990, as amended by Law No. 2.199 of 8 September 2003.  DINAC is an 
autonomous body and is also respons ible for regulating the subsector.  Its objective is to oversee all 
the regulatory aspects of the subsector;  in particul ar, to review and propose policies for the subsector, 
to manage and maintain air transit services (including the air safety systems) and to coordinate 
national and international plans with other State agencies.  DINAC has the following components:  
(i) the President of DINAC, who is the highest au thority and is appointed by the Executive, which 
also has the power to dismiss him;  and (ii) th e services directorates, including the Directorate of 
Aviation, the Directorate of Airports, and the Directorate of Meteorology and Hydrology. 
204. The air transport subsector is organized on th e basis of Law No. 1.860 of 7 January 2002 
(Aviation Code, CA), supplemented by regulations concerning, inter alia , air navigation, licences for 
aviation personnel, investigation and prevention of  accidents, technical regulations, issuing of 
certificates to operate services (DINAC Manual 600, approved by DINAC Resolution No. 860 of 13 December 2004).  The CA also governs the opera tion of DINAC.  Aircraft that are listed and 
registered in the National Aviation Register (RAN) are of Paraguayan nationality.  All aircraft must 
be listed in the RAN, which requires certification that the president, genera l manager and two thirds 
of the board of directors of the company owning the aircraft are Paraguayan nationals (DINAC 600, 
Article 5.1.6).  Licences and approval certificates issued to Paraguayan personnel and licences issued 
outside Paraguay and previously endorsed by DINAC must be registered in the Administrative Aviation Register (RAA).  Failing any agreements re garding the procedures, endorsement is subject to 
the same conditions applied to Paraguayan licences abroad. 
205. Operation of international air transport services must be authorized by  the Executive, while 
within Paraguay services only require authorizatio n by DINAC (Article 113).  The procedure for 
obtaining authorization from the Executive is set out in the DINAC 600 manual.  All applications must meet the legal, economic and technical requirements. 
206. Cabotage services are restricted to aircraft listed and registered in the RAN or foreign aircraft 
leased by Paraguayan enterprises.
154  The operation of cabotage services is carried out by Paraguayan 
natural persons or legal pers ons established in Paraguay. 
207. All goods imported and delivered to DINAC which are collected before storage pay a fixed 
fee amounting to 1 per cent of the taxable value indicated on the customs document.155  Goods kept in 
storage pay a fee according to the time they re main in the warehouse (1 per cent of the taxable 
customs value for the first 10 days, 2 per cent for the next 12 days, 3 per cent for the following 
30 days and 4 per cent for each additional period of 30 days), plus an additional US$1 per cubic metre 
or fraction thereof occupied. 
208. All goods exported and stored pay to DINAC 50 per cent of the rate applicable to import 
cargoes and 80 per cent of the rate for special storage.   All export cargoes directly transported onto the 
aircraft pay a fee equivalent to 0.5 per cent of the taxable value shown on the final customs clearance 
                                                      
153 Government programme for 2003-2008. Availa ble on-line at:  http ://www.presidencia.gov.py 
154 Law No. 1.860, Articles 15, 26, 129 and 130. 
155 Decree No. 14.299, 8 August 2001, Article 21. WT/TPR/S/146 Trade Policy Review 
Page 128 
 
 
or record.  If the customs technical units do not de termine the taxable value of the export shipments, 
the latter are subject to payment of US$0.2 for each gross kg of freight to be loaded.  The authorities 
have indicated that if the freight is defined as sp ecial cargo, the cost is US$0.4 per gross kg of cargo 
to be shipped. 
209. Paraguay is party to several international ag reements and conventions on air transport 
services.  Law No. 9 of 22 July 1948 ratified the 1944 Chicago Convention, as well as all its annexes.
156  Law No. 1.114 of 8 September 1997 ratified the Agreement on Subregional Air Services 
(Fortaleza Agreement) among member countries of th e MERCOSUR, Bolivia and Chile.  Its goal is to 
open up new scheduled subregional air services on routes other than those existing in 1996 in order to 
promote the development of new markets. 
210. Paraguay has signed 18 bilateral agreements on air transport with:  Argentina, Belgium, 
Bolivia, Brazil, Chile, Chinese Taipei, Costa Rica , Ecuador, Germany, Mexico, Netherlands, Peru, 
Senegal, Spain, Switzerland, the United States, Uruguay and Venezuela.  It has also signed four 
treaties on double taxation, with Germany (enacted  in 1984), Belgium (enacted in 1987), Chile 
(adopted in 1993) and Uruguay (enacted in 1991). 
(c) Airports and auxiliary services 
211. The CA divides airfields into public and privat e airports, the former being intended for "use 
by any aircraft authorized to fly" and the latte r "for private use by natural or legal persons" 
(Article 68).  The authorities have stated that the former are used for passenger transport, whereas the 
latter are used for agricultural, livestock, and industrial activities. 
212. Law No. 73 provides that public airports, airfiel ds, heliports and hydropor ts in Paraguay shall 
be managed by DINAC.  The latter manages the four  international airports and the main domestic 
airports.157  The building and operation of airfields is subject to DINAC's provisions.158  The 
provisions laid down in international agreements a pply to the building and operation of airports as 
there is no relevant domestic legislation.  In ear ly 2005, regulations based on Annex 14 to the ICAO 
Convention were being drawn up. 
213. Decree No. 10.131 of 23 August 2000 authorizes the establishment and operation of duty-free 
shops in Paraguay's international airports.  They may be managed by any natural or legal persons 
subject to twice-yearly payment to the Ministry of Finance of 5 per cent of the value of gross sales.  
There are no provisions regulating the supply of other services in airports. 
214. Decree No. 14.229 of 8 August 2001, as amende d by Decree No. 17.735 of 3 July 2002, lays 
down the charges for aviation services and the fees to be  paid to DINAC in airports and airfields.  The 
charges and fees laid down in Law No. 14.229  form part of the resources of DINAC. 
(vi) Land transport 
215. In real terms, the contribution of the tran sport sector to the GDP remained basically 
unchanged during the period 1997-2003 at an averag e level of 2.9 per cent.  The share of land 
transport in the total real value of transport servi ces was the largest with an average of 83 per cent 
during the period 1997-2003.  Paraguay's highway ne twork is composed of 15,097 kilometres, of 
                                                      
156 Information provided by DINAC and ava ilable on-line at:  h ttp://www.dinac.gov.py 
157 Information provided by DINAC and ava ilable on-line at:  h ttp://www.dinac.gov.py 
158 Law No. 73. Paraguay WT/TPR/S/146 
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which 23.5 per cent is paved.159  In 2003, the majority of interna tional freight controlled at land border 
posts left Paraguay through Ci udad del Este (66 per cent).160 
216. The Directorate of National Transport (DINATRAN) is a decentralized body with its own 
legal status established under La w No. 1.590 of 16 September 2000.  It formulates and implements 
public policy for the subsector.  The DINATRAN Council,  which is its highest authority, is composed 
of representatives of regional governments, the cen tral Government in Asunción, entrepreneurs and 
employees in the subsector, a representative of the Ministry of Justice and Labour, and the National 
Director of Transport, who is appointed by the Executive.  DINATRAN communicates with the 
Executive through the Ministry of Public Work s and Communications (MOPC) (Law No. 1.590, 
Article 12). 
217. DINATRAN has regulated several aspects relating to land transport services such as fines, 
loads and tariffs.  Paraguay has signed the Interna tional Land Transport Convention with Argentina, 
Bolivia, Brazil, Chile, Peru and Uruguay.161 
(vii) Tourism 
218. In terms of share of GDP, the contribution of the tourism sector, which essentially includes 
restaurants and accommodation, fell from 1.3 per cent in 1997 to 1.1 per cent in 2003.162  During the 
period 1997-2003, earnings from tourism decreased by  an annual average of 11 per cent and in 2003 
amounted to US$63.6 million.  Over the same peri od, tourism generated US$588.3 million in foreign 
currency, which in 2003 corresponded to approximat ely 20 per cent of total exports of goods and 
services.163 
219. Tourist arrivals in Paraguay experienced a ma rked decline between 1997 and 2003 (an annual 
average of 32.1 per cent), amounting to 268,175 in 2003, when there was a slight recovery.164  The 
number of day visitors (persons who do not sp end the night in Paraguay and remain less than 
24 hours) also decreased significantly and steadily  throughout the period 1997-2003 by an annual 
average of 21 per cent, giving a total of 2.6 milli on in 2003.  From January to October 2004, 64.2 per 
cent of all tourists (excluding day visitors) came  from Argentina, 16.1 per cent from Brazil, while 
those from Europe and North America amounted to 6 and 4.7 per cent respectively.165 
220. The public policy objectives in this subsector ar e the following:  to encourage collaboration 
with businesses, chambers of commerce and other organizations in the services sector, to promote tourist services, to draw up a new classification of existing services, and to quantify services.
166  The 
Government of Paraguay is also seeking to attract private sector investment in the subsector in order 
to boost its development.167 
221. The National Tourism Secretariat (SENATUR), established by Law No. 1.388 of 
30 December 1998 and regulated by Decree No. 8.327 of 14 April 2000, formulates public policy for the subsector.  The authorities have indicated that , early in 2005, a draft law extending SENATUR's 
                                                     
 
159 DINATRAN (2004). 
160 DINATRAN (2004). 
161 Law No. 1.128, 22 April 1997. 
162 Information provided by SENATUR. 
163 Information provided by the authorities and the Economic Report, July 2004. 
164 Information provided by SENATUR. 
165 Information provided by the authorities. 
166 Information provided by SENATUR. 
167 Government programme for 2003-2008. Availa ble on-line at:  http ://www.presidencia.gov.py WT/TPR/S/146 Trade Policy Review 
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functions under Law No. 1.388 was under considerati on.  SENATUR is also responsible for drawing 
up regulations for the subsector and for implementing public policy.168  It keeps a register of tourism 
businesses for companies that reserve and sell tickets , hotels, guest houses, inns and companies which 
organize travel and/or excursions.  List ing in the register is free of charge. 
222. Resolution No. 126 of 11 December 2003 covers  the operation of tourism companies.  It 
divides tourist services into two types:  those provid ed by travel and tourist agencies (direct contact 
with consumers) and wholesale tour operators.  Bo th types of operator must be registered with 
SENATUR.  No business with operations in the banki ng, financial or cooperative sector may provide 
tourism services.169 
223. Persons operating travel and tourist agencies must be authorized by SENATUR.  Branches of 
foreign travel and tourist agencies and wholesale t our operators wishing to become established in 
Paraguay must be registered as wholesale tour operators with SENATUR.170 
224. The authorities have indicated that, in early 2005, legislation to regulate the tariff regime for 
the subsector was being prepared and would be implemented through SENATUR.  At that time, 
Resolution No. 126 only specified the tariff ceiling below which suppliers of services could fix a 
profit margin of up to 10 per cent above the rates fi xed by travel and tourist agencies (which are 
commissioned by SENATUR) if the tariffs were "net prices" (Article 30). 
225. Investment in tourist hotels and hostels is covered by the provisions of Law No. 60 of 
26 March 1991 (see Chapter III (4)(iii)).  The authorities have indicated that there are no other legal provisions promoting investment in this subsector. 
226. Law No. 125 of 9 January 1992 replaced the special import regime for goods sold in the 
border cities of Ciudad del Este, Pedro Juan Caballe ro and Encarnación, which was superseded by a 
regime based on reductions in the taxable b ases for the value-added tax on each product (see 
Chapter III (2)(v)).
171 
227. Paraguay is a member of the World Tourism Organi zation.  It is a signatory to the Agreement 
for the Promotion of Tourism in South America signed on 4 May 1992 by the MERCOSUR countries 
and Bolivia, Colombia, Chile, Ecuador, Peru and Venezuela.172  This Agreement lays down the bases 
for policy coordination by the signatory countries in order to promote South America as a tourist destination.  Law No. 341 of 23 May 1994 ratifies the Agreement for the Promotion of Tourism in 
                                                     
 
168 Decree No. 8.327. 
169 Resolution No. 126, Article 41. 
170 Resolution No. 126, Article 16. 
171 Decree No. 1.836, 4 January 1994 was repealed by Decree No. 7.303 of 13 January 1995. Article 2 of 
Decree No. 2.718, 17 March 1994 was repealed by Decree No. 15.199, 21 October 1996.  The latter Article 
extends the number of products covered in Decree No. 1.836.  Decree No. 15.199/96 was amended by Decree 
No. 16.067, 20 January 1997 and Decree No. 10.624, 25 September 2000. 
172 Information provided by the FTAA and ava ilable on-line at:  http://www.ftaa-alca-org Paraguay WT/TPR/S/146 
 Page 131 
 
 
South America, as well as the Tourism Cooperati on Agreement between Paraguay and Argentina, 
concluded on 12 August 1991.  The latter Agreem ent sets out the general principles for cooperation 
between the two countries and provides for reciprocal treatment in the tourism subsector. 
228. Paraguay undertook tourism commitments under th e GATS.  These allow modes of supply 1, 
2 and 3, without limitations on market access or MFN treatment for hotels and restaurants and for 
tourist guide services.  The presence of natural persons , in both cases, is limited to specialists.  Modes 
of supply 1 and 2 are also guaranteed for travel and tourist agencies without limitations on market 
access or MFN treatment.  Mode of supply 3, in this case, only allows market access for tourist operators dealing with travellers from abroad and no commitment on MFN treatment has been bound.  
The physical presence of persons in the travel and t ourism subsector is limited solely to specialists. 
 Paraguay WT/TPR/S/146 
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Page 136 
 
 
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entre MIC, Hacienda y BID:   Euclides Acevedo firma acuerdo para Ventanilla Única del Exportador" 
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