HomeReportsBureau of Economic and Business Affairs2020 Investment Climate Statements…Paraguay

# 					2020 Investment Climate Statements: Paraguay			

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													EXECUTIVE SUMMARY											

                -  EXECUTIVE SUMMARY 
                -  1. Openness To, and Restrictions Upon, Foreign Investment   
                -  2. Bilateral Investment and Taxations Treaties   
                -  3. Legal Regime   
                -  4. Industrial Policies   
                -  5. Protection of Property Rights   
                -  6. Financial Sector   
                -  7. State-Owned Enterprises   
                -  8. Responsible Business Conduct   
                -  9. Corruption   
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for More Information   

## EXECUTIVE SUMMARY

Paraguay has a small but growing open economy, which for the past decade averaged 4 percent Gross Domestic Product (GDP) growth per year, and has the potential for continued growth over the next decade. Major drivers of economic growth in Paraguay are the agriculture, retail, and construction sectors. The Paraguayan government encourages private foreign investment. Paraguayan law grants investors tax breaks, permits full repatriation of capital and profits, supports *maquila* operations (special benefits for investors in manufacturing of exports), and guarantees national treatment for foreign investors. Standard & Poor’s, Fitch, and Moody’s all have upgraded Paraguay’s credit ratings over the past several years. In December 2019, Fitch maintained Paraguay’s credit rating at BB+ with a stable outlook.

Paraguay scores at the mid-range or lower in most competitiveness indicators. Judicial insecurity hinders the investment climate, and trademark infringement and counterfeiting are major concerns. Since President Mario Abdo Benitez took office, his government passed several new laws to combat money laundering. Previously, the government has taken measures to improve the investment climate, including the passage of laws addressing competition, public sector payroll disclosures, and access to information. A number of U.S. companies, however, continue to have issues working with government offices to solve investment disputes, including the government’s unwillingness to pay debts incurred under the previous administration and even some current debts.

Paraguay’s export and investment promotion bureau, REDIEX, prepares comprehensive information about business opportunities in Paraguay.

							1. Openness To, and Restrictions Upon, Foreign Investment					

**Policies Towards Foreign Direct Investment**

The Paraguayan government publicly encourages private foreign investment, but U.S. companies often struggle with practices that inhibit or slow their activities. Paraguay guarantees equal treatment of foreign investors and permits full repatriation of capital and profits. Paraguay has historically maintained the lowest tax burden in the Latin American region, with a 10 percent corporate tax rate and a 10 percent value added tax (VAT) on most goods and services. Despite these policies, U.S. companies continue to have difficulty with investments in Paraguay, including seemingly frivolous legal entanglements taking multiple years to resolve, non-payment and delayed payments from Paraguayan government customers, and opaque permitting processes that slow project execution.

REDIEX provides useful information for foreign investors, including business opportunities in Paraguay, registration requirements, laws, rules, and procedures.

**Limits on Foreign Control and Right to Private Ownership and Establishment**

Foreign and domestic private entities may establish and own business enterprises. Foreign businesses are not legally required to be associated with Paraguayan nationals for investment purposes, though this is strongly recommended, on an unofficial basis, by national authorities.

There is no restriction on repatriation of capital and profits. Private entities may freely establish, acquire, and dispose of business interests.

Under the Investment Incentive Law (60/90) and the maquila program, the government has an approval mechanism for foreign investments that seeks to estimate the proposed investment’s economic impact in areas including employment, incorporation of new technologies, and economic diversification.

Other Investment Policy Reviews

The WTO conducted an Investment Policy Review in 2017. Please see following website: https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=240507,87161,40418,27051&CurrentCatalogueIdIndex=0&FullTextHash=&HasEnglishRecord=True&HasFrenchRecord=False&HasSpanishRecord=False

https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=240507,87161,40418,27051&CurrentCatalogueIdIndex=0&FullTextHash=&HasEnglishRecord=True&HasFrenchRecord=False&HasSpanishRecord=False

**Business Facilitation**

Paraguay has responded to complaints about its traditionally onerous business registration process — previously requiring new businesses to register with a host of government entities one-by-one — by creating a portal in 2007 that provides one-stop service. The *Sistema**Unificado**de Apertura y**Cierre**de**Empresas* – SUACE (www.suace.gov.py) — is the government’s single window for registering a company.  The process takes about 35 days.

On January 8, 2020, President Abdo Benitez signed law 6480 to facilitate the creation of SMEs. A new registration process allows individuals to complete the required forms online and at no cost . The approval process will take between 24 and 72 hours. This new registration process is expected to be operational by mid-2020.

**Outward Investment**

There are no restrictions to Paraguayans investing abroad. The Paraguayan government does not incentivize or promote outward investment.

							2. Bilateral Investment and Taxations Treaties					

Paraguay has bilateral investment agreements or treaties with the following countries: Austria; Belgium; Bolivia; Chile; Costa Rica; Cuba, Czech Republic, El Salvador; France; Germany; Hungary; Italy, Korea; Luxembourg; the Netherlands; Peru; Portugal, Romania; South Africa; Spain; Switzerland; Taiwan; the United Kingdom; and Venezuela.

Paraguay is a founding member of the Mercosur common market, formed in 1991. Mercosur has investment protocols for internal and external investment. Mercosur’s full members are Argentina, Brazil, Paraguay, and Uruguay. Venezuela’s membership was suspended in 2016. Bolivia is an associate member, having signed an accession agreement in 2012 that has been ratified by all members except Brazil. Mercosur has investment agreements with Bolivia, Canada, Chile, Colombia, Ecuador, Egypt, India, Israel, Mexico, Palestine, Peru, and the Southern African Customs Union (SACU). Mercosur and the European Union reached a free trade agreement June 28, 2019, but the final text is pending ratification by Mercosur and EU member parliaments before entry into force. Mercosur also reached a free trade agreement August 23, 2019 with the European Free Trade Association, but this agreement also needs parliamentary approval by all parties involved.

The United States and Paraguay do not have a Bilateral Investment Treaty, a Free Trade Agreement, or a Bilateral Taxation Treaty. The two countries signed a Trade and Investment Framework Agreement in January 2017 that was officially ratified and entered into effect in December 2017.

							3. Legal Regime					

**Transparency of the Regulatory System**

Proposed Paraguayan laws and regulations, including those pertaining to investment, are usually available in draft form for public comment after introduction into senate and lower house committees. In most instances, there are public hearings where members of the general public or interested parties can provide comments.

Regulatory agencies’ supervisory functions over telecommunications, energy, potable water, and the environment are inefficient and opaque. Politically motivated changes in the leadership of regulating agencies negatively impact firms and investors. Although investors may appeal to the Comptroller General’s Office in the event of administrative irregularities, corruption has historically been common in this and other institutions, as time-consuming processes provide opportunities for front-line civil servants to seek bribes to accelerate the paperwork.

While regulatory processes are managed by governmental organizations, the Investment Incentive Law (60/90) establishes an Investment Council that includes the participation of two private sector representatives.

****International Regulatory Considerations****

Paraguay is a founding member of the Mercosur common market, formed in 1991. As Mercosur’s purpose is to promote free trade and fluid movement of goods, people, and currency, each country member is expected to adjust their regulations based on multilateral treaties, protocols, and agreements.

Paraguay is a member of the WTO and notifies the WTO Committee on Technical Barriers to Trade of all draft technical regulations.

**Legal System and Judicial Independence**

Paraguay has a Civil Law legal system based on the Napoleonic Code. A new Criminal Code went into effect in 1998, with a corresponding Code of Criminal Procedure following in 2000. A defendant has the right to a public and oral trial. A three-judge panel acts as a jury. Judges render decisions on the basis of (in order of precedence) the Constitution, international agreements, the codes, decree law, analogies with existing law, and general principles of the law.

Private entities may file appeals to government regulations they assess to be contrary to the constitution or Paraguayan law. The Supreme Court is responsible for answering these appeals.

There are frequent media reports of political interference with judicial decision making. Judicial corruption also remains a concern, including reports of judges investing in plaintiffs’ claims in return for a percentage of monetary payouts.

Paraguay has a specialized court for civil and commercial judicial matters.

**Laws and Regulations on Foreign Direct Investment**

The Investment Incentive Law (60/90) passed in 1990 permits full repatriation of capital and profits. No restrictions exist in Paraguay on the conversion or transfer of foreign currency, apart from bank reporting requirements for transactions in excess of USD 10,000. This law also grants investors a number of tax breaks, including exemptions from corporate income tax and value-added tax.

The 1991 Investment Law (117/91) guarantees equal treatment of foreign investors and the right to real property. It also regulates joint ventures (JVs), recognizing JVs established through formal legal contracts between interested parties. This law allows international arbitration for the resolution of disputes between foreign investors and the Government of Paraguay.

In December 2015, former President Cartes signed an Investment Guarantee Law (5542/15) to promote investment in capital-intensive industries. Implementing regulations were published in 2016. The law protects the remittance of capital and profits, provides assurances against administrative and judicial practices that might be considered discriminatory, and permits tax incentives for up to 20 years. There is no minimum investment amount, but projects must be authorized by a joint resolution by the Ministry of Finance and Ministry of Industry and Commerce.

In 2013 the Paraguayan Congress passed a law to promote public-private partnerships (PPP) in public infrastructure and allow for private sector entities to participate in the provision of basic services such as water and sanitation. The government signed implementing regulations for the PPP law in 2014. As a result, the Executive Branch can now enter into agreements directly with the private sector without the need for congressional approval. In 2015, the Government of Paraguay implemented its first contract under the new law. In 2016, it awarded its second PPP to a consortium of Spanish, Portuguese, and local companies to expand and maintain two of the country’s federal highways. Paraguay’s bid for an airport expansion PPP in Asuncion in 2016, was officially cancelled in October 2018 due to concerns over the contracting process. No other PPPs have been awarded since. Large infrastructure projects are usually open to foreign investors.

The Paraguay government seeks increased investment in the *maquila* sector, and Paraguayan law grants investors a number of incentives. The *maquila* program entitles a company to foreign investment participation of up to 100 percent and to special tax and customs treatment. In addition to tax exemptions, inputs are allowed to enter Paraguay tax free, and up to 10 percent of production is allowed for local consumption after paying import taxes and duties. There are few restrictions on the type of product that can be produced under the *maquila* system and operations are not restricted geographically. Ordinarily, all *maquila*products are exported.

Paraguay took steps in 2019 to demonstrate increased transparency in its financial system with the aim of attracting additional foreign investment. In December 2019, President Abdo Benitez signed into law the last of a series of twelve anti-money laundering laws at the recommendation of the Financial Action Task Force against Money Laundering in Latin America (GAFILAT). The laws comply with international standards and facilitate the fight against money laundering, terrorist financing, and the proliferation of weapons of mass destruction. More information on the anti-money laundering laws and regulations can be found here: http://www.seprelad.gov.py/disposiciones-legales-i68

http://www.seprelad.gov.py/disposiciones-legales-i68

Paraguay’s budget and information on debt obligations were widely and easily accessible to the general public, including online.  The published budget was adequately detailed and considered generally reliable.  Revised estimates were made public in end-of-year and in-year execution reports. Paraguay’s Comptroller’s Office selected sections of the government’s accounts for audit according to a risk assessment because it lacks sufficient resources to audit the entire executed budget annually.

REDIEX provides a website to facilitate access to relevant legislation, laws, and regulations for investors: http://www.bit.do/REDIEX19

**Competition and Anti-Trust Laws**

Paraguay passed a Competition Law in 2013, which entered into force in April 2014. Law 4956/13 explicitly prohibits anti-competitive acts and created the National Competition Commission (CONACOM) as the government’s enforcement arm.

**Expropriation and Compensation**

Private property has historically been respected in Paraguay as a fundamental right. Expropriations must be sanctioned by a law authorizing the specific expropriation. There have been reports of expropriations of land without prompt and fair compensation.

****Dispute Settlement****

***ICSID Convention and New York Convention***

Paraguay is a member of the International Center for the Settlement of Investment Disputes (ICSID). Paraguay is a contracting state to the New York Convention. Under the 1958 New York Convention, Paraguay elaborated and enacted Law 1879/02 for arbitrage and mediation.

***Investor-State Dispute Settlement***

Law 117/91 guarantees national treatment for foreign investors. This law allows international arbitration for the resolution of disputes between foreign investors and the Government of Paraguay. Foreign decisions and awards are enforceable in Paraguay.

Local courts recognize and enforce foreign arbitral awards issued against the government. According to the International Centre for Settlement of Investment Disputes (ICSID), Paraguay has had three investment disputes involving foreign investors. One in 1998 and two in 2007. ICSID resolved the first in the private company’s favor, and the other two in the Paraguayan government’s. There are no records of U.S. investors using the ICSID mechanism for an investment dispute in Paraguay.

Paraguay ranks 72 out of 190 for “Ease of Enforcing Contracts” in the World Bank’s 2020 Doing Business Report. World Bank data states the process averages 606 days and costs 30 percent of the claimed value.

***International Commercial Arbitration and Foreign Courts***

Under Paraguayan Law 194/93, foreign companies must demonstrate just cause to terminate, modify, or not renew contracts with Paraguayan distributors. Severe penalties and high fines may result if a court determines that a foreign company ended the relationship with its distributor without first establishing that just-cause exists, which sometimes compels Paraguayan distributors to seek expensive out-of-court settlements first. Nevertheless, cases are infrequent and courts have upheld the rights of foreign companies to terminate representation agreements after finding the requisite showing of just cause.

Under two laws, Article 195 of the Civil Procedural Code and Law 1376/1988, a plaintiff pursuing a lawsuit may seek reimbursement for legal costs from the defendant calculated as a percentage (not to exceed 10 percent) of claimed damages. In larger suits, the amount of reimbursed legal costs often far exceeds the actual legal costs incurred.

Paraguay possesses an Arbitration and Mediation Center (CAMP, in Spanish), which is a non-profit, private entity that promotes the application of alternative dispute resolution methods.

Under Paraguayan Law 1879/02, foreign companies undergoing contractual problems with any government entity can request arbitration from Paraguay’s national public procurement Agency (DNCP, in Spanish).

**Bankruptcy Regulations**

Paraguay has a bankruptcy law (154/63) under which a debtor may suspend payments to creditors during the evaluation period of the debtors’ restructuring proposal. If no agreement is reached, a trustee may liquidate the company’s assets. According to the World Bank’s 2020 Doing Business Report, Paraguay stands at 105 in the ranking of 190 economies on the ease of resolving insolvency. The report states resolving insolvency takes 3.9 years on average and costs nine percent of the debtor’s estate, with the most likely outcome being that the company will be sold as piecemeal sale. The average recovery rate is 23 cents on the dollar. Bankruptcy is not criminalized in Paraguay.

							4. Industrial Policies					

**Investment Incentives**

Paraguay grants investors a number of tax breaks under Law 60/90, including exemptions from corporate income tax and value-added tax. Paraguay also has a temporary entry system, which allows duty free admission of capital goods such as machinery, tools, equipment, and vehicles to carry out public and private construction work. The government also allows temporary entry of equipment for scientific research, exhibitions, training or testing, competitive sports, and traveler or tourist items.

**Foreign Trade Zones/Free Ports/Trade Facilitation**

Paraguayan Law 523/95 (which entered into force in 2002) permits the establishment of free trade zones (FTZs). Paraguay has two FTZs in Ciudad del Este – one that operates largely as a manufacturing center and a second that focuses on warehouse storage. Paraguay is a landlocked country with no seaports but has numerous private and public inland river ports. About three-fourths of commercial goods are transported by barge on the Paraguay-Parana river system that connects Paraguay with Buenos Aires, Argentina, and Montevideo, Uruguay. Paraguay has agreements with Uruguay, Argentina, Brazil, and Chile on free trade ports and warehouses for the reception, storage, handling, and trans-shipment of merchandise.

**Performance and Data Localization Requirements**

Paraguay does not mandate local employment or have excessively onerous visa, residence, work permit or similar requirements inhibiting mobility of foreign investors and their employees. However, the bureaucratic process to comply with these requirements can be lengthy. Voting board members of any company incorporated in Paraguay must have legal residence, which takes a minimum of 90 days to establish, posing a potential obstacle to foreign investors.

Paraguay does not have a “forced localization” policy requiring foreign investors to use domestic content in goods or technology. There are no requirements for maintaining a certain amount of data storage within Paraguay or for foreign IT providers to turn over source code and/or provide access to surveillance. Paraguayan law requires internet service providers to retain IP address for six months for certain commercial transactions.

Paraguay’s Public Contracting Law (4558/11) gives preference in government bids to locally produced goods in public procurements open to foreign suppliers, even if the domestic good is up to 20 percent more expensive than the imported good. Foreign firms can bid on tenders deemed “international” and on “national” tenders through the foreign firm’s local agent or representative. The government is making efforts to enhance transparency and accountability, including through the use of an internet-based government procurement system. Paraguay is not a signatory to the World Trade Organization (WTO) Agreement on Government Procurement.

							5. Protection of Property Rights					

**Real Property**

The 1992 constitution guarantees the right of private property ownership. While it is common to use real property as security for loans, the lack of consistent property surveys and registries often makes it impossible to foreclose. The latest figures published by the National Rural and Land Development Institute (INDERT, in Spanish) indicate there is 47.5 percent more titled land in Paraguay than physically exists, while other private organizations suggest 70 percent of privately owned land has some sort of problem related to the property title and its registration process. Correct property title registration is a major problem, particularly in the interior of the country. In some cases, acquiring title documents for land can take two years or more. The World Bank’s 2020 Doing Business report ranks Paraguay 80 of 190 for ease of “registering property,” noting the process requires six procedures, averages 46 days, and costs 1.8 percent of the property value.

Paraguay has a “squatter’s rights” law by which ownership of property can be gained by possession of it beyond the lapse of 20 years.

The Lower House proposed a bill in April 2019 to modify the law that regulates rural properties with the intention of facilitating the adequate registration of land ownership. The Senate proposed a bill in November 2019 to create a special Congressional Commission to correct underlying problems with property titles. The bill also proposes the creation of a new National Directorate of Public Registries.

**Intellectual Property Rights**

The United States and Paraguay signed a Memorandum of Understanding (MOU) on intellectual property rights (IPR) in June 2015, under which Paraguay committed to take specific steps to improve its IPR protection and enforcement environment. Additionally, the MOU solidifies bilateral cooperation by which the United States supports Paraguay’s efforts to strengthen the legal protection and enforcement of IPR. This led to Paraguay being removed from the U.S. Trade Representative’s (USTR) 2015 Special 301 Report Watch List pursuant to an Out-of-Cycle Review. Due in part to Paraguay’s unfulfilled commitments under the MOU, Paraguay returned to the Special 301 Report Watch List in 2019 and remained on the Watch List in the 2020 report. The IPR MOU expires December 31, 2020. The market Ciudad del Este has been named in either the USTR Notorious Market List or the Special 301 Report for over 18 years. The border crossing at Ciudad del Este, and the city itself, reportedly serves as a hub for the distribution of counterfeit and pirated products in the Brazil-Argentina-Paraguay tri-border region and beyond. Informality and border porosity in the area remains a challenge.

Concerns remain about inadequate protection against unfair commercial use of proprietary test or other data generated to obtain marketing approval for agrochemical or pharmaceutical products and the shortcomings in Paraguay’s patent regime. Law 3283 from 2007 and Law 3519 from 2008, (1) require pharmaceutical products and agrochemical products to be registered first in Paraguay to be eligible for data protection; (2) allow regulatory agencies to use test data in support of similar agricultural chemical product applications filed by third parties; and (3) limit data protection to five years. Additionally, Law 2593/05 that modifies Paraguay’s patent law has no regulatory enforcement. Because of this, foreign pharmaceutical companies have seen their patented products openly replicated and marketed under other names by Paraguayan pharmaceutical companies.

Although law enforcement authorities track seizures of counterfeit goods independently, there is no consolidated report available online, and the statistics vary between government offices. The National Directorate of Intellectual Property (DINAPI, in Spanish) reported 263 seizures of counterfeit goods in 2019 with an estimated retail price of USD 15.7 million.

Paraguay has ratified all of the Uruguay Round accords, including the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), and has ratified two World Intellectual Property Organization (WIPO) copyright treaties. The Paraguayan Congress ratified the TRIPS Agreement in July 2018.

In their December 13, 2019 joint statement, Presidents Trump and Abdo Benitez reaffirmed their commitment to continue strengthening IPR protection in Paraguay. DINAPI announced December 19, 2019 the establishment of an interagency coordination center responsible for providing a unified government response to IPR violations.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

Regional IP AttachéU.S. Consulate General – Rio de Janeiro+ 55 (21) 3823-2499

Deputy Political and Economic CounselorU.S. Embassy Asuncion+ 595 (21) 213-715

National Intellectual Property Directorate: https://www.dinapi.gov.py/

Paraguayan-American Chamber of Commerce: http://www.amcham.com.py/

Local Lawyers: http://photos.state.gov/libraries/paraguay/5/Consular/Attorneys percent20at percent20Law_001.pdf

							6. Financial Sector					

**Capital Markets and Portfolio Investment**

Credit is available but expensive. Banks frequently charge from 30 percent to 37 percent interest on consumer loans, with the vast majority favoring repayment horizons of one year. Loans for up to 10 years are available at higher interest rates. High collateral requirements are generally imposed. Private banks, in general, avoid mortgage loans. Because of the difficulty in obtaining bank loans, Paraguay has seen growth in alternative and informal lending mechanisms, such as “payday” lenders. These entities can charge up to 85 percent interest on short-term loans according to banking contacts. The high cost of capital makes the stock market an attractive, although underdeveloped option. Paraguay has a relatively small capital market that began in 1993. As of March 2020, the Asuncion Stock exchange consisted of 102 companies. Many family-owned enterprises fear losing control, dampening enthusiasm for public offerings. Paraguay passed a law in 2017 abolishing anonymously held businesses, requiring all holders of “bearer shares” to convert them. Foreign banks and branches are allowed to establish operations in country, as such Paraguay currently has three foreign bank branches and four majority foreign-owned banks.

The Paraguayan government issued Paraguay’s first sovereign bonds in 2013 for USD 500 million to accelerate development in the country. Since then, Paraguay has issued bonds each year and recently in 2020 for USD 450million. Proceeds are expected to finance key infrastructure development programs designed to promote economic and social development and job creation. Commercial banks also issue debt to fund long-term investment projects.

Paraguay became an official member of the IMF in December 1945 and its Central Bank respects IMF Article VIII related to the avoidance of restrictions on current payments.

**Money and Banking System**

Paraguay’s banking system includes 17 banks with an approximate total USD 21.5 billion in assets and USD 15.5 billion in deposits. The banking system is generally sound but remains overly liquid. Long-term financing for capital investment projects is scarce. Most lending facilities are short-term. Banks and finance companies are regulated by the Banking Superintendent, which is housed within, and is under the direction of, the Central Bank of Paraguay.

The Paraguayan capital markets are essentially focused on debt issuances. As the listing of stock is limited, with the exception of preferred shares, Paraguay does not have clear rules regarding hostile takeovers and shareholder activism.

Paraguay has a high percentage of unbanked citizens. Seven out of 10 adults do not have bank accounts. Many Paraguayans use alternative methods to save and transfer money. In recent years, the use of e-wallets has grown considerably to fill this void. According to the Central Bank of Paraguay, the number of transactions increased by 11 percent, from 18.9 million transactions in 2018 to 21 million in 2019 totaling USD 526 million or around USD 25 per transaction. This growth made the Central Bank publish regulations on e-wallets in February 2020 to expand their “know your customer” (KYC) and other requirements to match those of traditional bank operations.

**Foreign Exchange and Remittances**

*Foreign Exchange**Policies*

There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment (e.g. remittances of investment capital, earnings, loan or lease payments, royalties). Funds associated with any form of investment can be freely converted into any world currency. Paraguay has a flexible exchange rate system making the national currency rate fluctuate according to the foreign-exchange market mechanisms.

*Remittance Policies*

There are currently no plans to change investment remittance policies that either tighten or relax access to foreign exchange for investment remittances. There are no time limitations on remittances. Paraguay is a member of the GAFILAT, a Financial Action Task Force (FATF)-style regional body. GAFILAT initiated a review of Paraguay’s work and measures taken against money laundering in December 2019. The final assessment was initially scheduled for December 2020 but will likely be delayed due to COVID-19 pandemic.

**Sovereign Wealth Funds**

Paraguay does not have a sovereign wealth fund.

							7. State-Owned Enterprises					

Paraguay has seven major state-owned enterprises (SOEs), active in the petroleum distribution, cement, electricity (distribution and generation), water, aviation, river navigation, and cellular telecommunication sectors. Paraguay has another two minor SOEs, one dedicated to the production of alcoholic beverages through raw sugar cane and another, essentially inactive, focused on railway services. In general, SOEs are monopolies with no private sector participation. Most operate independently but maintain an administrative link with the Ministry of Public Works & Communications. SOEs have audited accounts, and the results are published online. Public information and audited accounts from 2018 indicate SOEs employ over 17,000 people and have assets for $4.2 billion. Net incomes of all SOEs are approximately $118 million.

SOEs’ corporate governances are weak. SOEs operate with politically appointed advisors and executives and are often overstaffed and an outlet for patronage, resulting in poor administration and services. Some SOEs burden the country’s fiscal position, running deficits most years. SOEs are not required to have an independent audit. The Itaipu and Yacyreta bi-national hydroelectric dams, which are considered semi-autonomous entities administered by joint bilateral government commissions (since they are on shared international borders), have a board of directors.

Link to all SOEs: https://www.economia.gov.py/index.php/dependencias/direccion-general-de-empresas-publicas/direccion-general-de-empresas-publicas

**Privatization Program**

Paraguay does not have a privatization program.

							8. Responsible Business Conduct					

Responsible Business Conduct (RBC) is growing with the support of Paraguay’s largest firms. Additionally, the private sector is taking measures to institutionalize ethical business conduct under initiatives such as the *Pacto****Etico****y**Cumplimiento*** (PEC). An initiative sponsored by the U.S. Department of Commerce and USAID, PEC was established by over 100 local, U.S., and international companies that committed to creating a code of ethics and undergoing a rigorous auditing process to reach certification. In 2020, PEC plans to offer the first corporate ethics certification course, in partnership with a local university. The Paraguayan government does not have any formal programs or policies to encourage the PEC or RBC, but has shown interest in the organization’s work.

							9. Corruption					

Paraguayan law provides criminal penalties for official corruption; however, impunity impedes effective implementation. Historically, officials in all branches and at all levels of government have engaged in corrupt practices. Judicial insecurity and corruption mar Paraguay’s investment climate. Many investors find it difficult to enforce contracts and are frustrated by lengthy bureaucratic procedures, limited transparency and accountability, and impunity. A recent trend is for private companies to insist on arbitration for dispute resolution and bypass the judicial system completely.

The Paraguayan government has taken several steps in recent years to increase transparency and accountability, including the creation of an internet-based government procurement system, the disclosure of government payroll information, the appointment of nonpartisan officials to key posts, and increased civil society input and oversight. Notwithstanding, corruption and impunity continue to affect the investment climate.

The constitution requires all public employees, including elected officials and employees of independent government entities, to disclose their income and assets at least 15 days after taking office and again within 15 days after finishing their term or assignment, but at no point in between, which is problematic for congressional representatives that are re-elected numerous times. Public employees are required to include information on the assets and income of spouses and dependent children. Officials are not required to file periodically when changes occur in their holdings.

***UN Anticorruption Convention, OECD Convention on Combating Bribery:***

Paraguay signed and ratified the UN Anti-corruption Convention in 2005.

***Resources to Report Corruption:***

General Auditors OfficeBruselas 1880, Asuncion, Paraguay+ 595 21 620 0260atencion@contraloria.gov.py

Public MinistryNuestra Señora de la Asunción c/ Haedo, Asuncion, Paraguay+ 595 21 454 611http://www.ministeriopublico.gov.py/direccion-de-denuncias-penales

Anti-Corruption SecretariatEl Paraguayo Independiente esquina Río Ypané, Asunción, Paraguay+ 595 21 450-001/2http://www.senac.gov.py/

Seeds for DemocracyRoma 1055 casi Colón, Asuncion, Paraguay+ 595 21 420 323semillas@semillas.org.py

							10. Political and Security Environment					

While Paraguay has not traditionally been affected by political violence, this streak was broken in March 2017 when approximately 2,500 protesters stormed and partially burned the congressional assembly building. Protesters also damaged and vandalized storefronts, parked cars, and additional government offices in the downtown area. The police response resulted in the death on one protester and numerous injuries. The protests erupted in response to senators passing a bill approving a constitutional amendment to allow former President Cartes and other former presidents to run for re-election.

Paraguay has been spared the large number of kidnappings that occur in neighboring Latin American countries, but a few high profile cases have occurred in recent years, most of them attributed to suspected members of the organized criminal group Paraguayan People’s Army (EPP). The Paraguayan government has responded to the EPP threat with combined military and police operations. Land invasions, marches, and organized protests occur, mostly by rural and indigenous communities making demands on the government, but these events have rarely turned violent.

							11. Labor Policies and Practices					

With a population growth rate above 1.4 percent per annum and more than 64.5 percent of the population below the age of 35, job creation to meet the large and growing labor force is one of the most pressing issues for the government. However, the weak education system limits the supply of well-educated workers and is an obstacle to growth. Current levels of unemployment are at 5.2 percent for year 2019. Employment informality remains high in Paraguay. According to the Paraguayan National Administrative Department of Statistics, informal employment represented 64.3 percent of the total working population in 2018 and studies published by the World Bank suggested the rate reached 71 percent for 2019.

Paraguay’s labor code makes it very difficult to lay off a formally registered, full-time employee who has completed ten consecutive years of employment. Firms often opt for periodic renewals of “temporary” work contracts instead of long-term contracts.

Paraguayan law provides for the right of workers to form and join independent unions (with the exception of the armed forces and the police), bargain collectively, and conduct legal strikes. The law prohibits binding arbitration and retribution against union organizers and strikers. While the law prohibits anti-union discrimination and sets the financial penalty, employers are not required by law to reinstate workers fired for union activity, even in cases where labor courts fine firms for anti-union discrimination.

The minimum age for formal, full-time employment is 18, including for domestic workers. Adolescents between the ages of 14 and 17 may work if they have a written authorization from their parents, attend school, do not work more than four hours a day, and do not work more than a maximum of 24 hours per week. Adolescents between the ages of 16 and 18 who do not attend school may work up to six hours a day, with a weekly ceiling of 36 hours.

For more background on labor issues in Paraguay, please refer to the Department of Labor’s *Findings on the Worst Forms of Child Labor*at www.dol.gov/ilab/reports/child-labor/findings/ and the latest Department of State’s *Country Reports on Human Rights Practices*at https://www.state.gov/j/drl/rls/hrrpt/humanrightsreport/index.htm#wrapper.

							12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs					

The United States and Paraguay signed a 1992 investment guaranty agreement, allowing the DFC (former Overseas Private Investment Corporation) to conduct full operations in Paraguay. DFC has financed telecommunications, forestry, and various renewable energy projects. DFC has also partnered with Citibank to support loans for small and medium-sized enterprises (SMEs) and micro finance loans. DFC last visited Paraguay in September 2019.

Paraguay is a member of the World Bank’s Multilateral Investment Guarantee Agency (MIGA).

							13. Foreign Direct Investment and Foreign Portfolio Investment Statistics					

Significant discrepancies can be noted between the local and the USG statistical sources in terms of U.S. FDI in Paraguay for 2018. UNCTAD total inbound of FDI as a percentage of Paraguay’s GDP differs about four percent when compared to Paraguay’s local statistics. However, if compared to other international statistics, such as the World Bank and the IMF, the relation between total inbound stocks of FDI as a percentage of Paraguay’s GDP is consistent with local statistics.

*Host country statistical data source:***Central Bank of Paraguay*

The information obtained through the IMF’s Coordinated Direct Investment Survey is consistent with the information provided by the Central Bank of Paraguay.

**Table 4: Sources of Portfolio Investment**Data not available.

							14. Contact for More Information					

Javier PérezEconomic SpecialistU.S. Embassy in Asuncion+595 021 248 2179PEREZJ1@STATE.GOV

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### On This Page

                    -  EXECUTIVE SUMMARY 
                    -  1. Openness To, and Restrictions Upon, Foreign Investment   
                    -  2. Bilateral Investment and Taxations Treaties   
                    -  3. Legal Regime   
                    -  4. Industrial Policies   
                    -  5. Protection of Property Rights   
                    -  6. Financial Sector   
                    -  7. State-Owned Enterprises   
                    -  8. Responsible Business Conduct   
                    -  9. Corruption   
                    -  10. Political and Security Environment   
                    -  11. Labor Policies and Practices   
                    -  12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs   
                    -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                    -  14. Contact for More Information   

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