HomeReportsBureau of Economic and Business Affairs2023 Investment Climate Statements…Paraguay

# 					2023 Investment Climate Statements: Paraguay			

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													EXECUTIVE SUMMARY											

                -  EXECUTIVE SUMMARY 
                -  1. Openness To, and Restrictions Upon, Foreign Investment                    -  Policies Towards Foreign Direct Investment 
                  -  Limits on Foreign Control and Right to Private Ownership and Establishment 
                  -  Other Investment Policy Reviews 
                  -  Business Facilitation 
                  -  Outward Investment 
                -  2. Bilateral Investment Agreements and Taxations Treaties 
                -  3. Legal Regime                    -  Transparency of the Regulatory System 
                  -  International Regulatory Considerations 
                  -  Legal System and Judicial Independence 
                  -  Laws and Regulations on Foreign Direct Investment 
                  -  Competition and Anti-Trust Laws 
                  -  Expropriation and Compensation 
                  -  Dispute Settlement                      -  ICSID Convention and New York Convention 
                    -  Investor-State Dispute Settlement 
                    -  International Commercial Arbitration and Foreign Courts 
                  -  Bankruptcy Regulations 
                -  4. Industrial Policies                    -  Investment Incentives 
                  -  Foreign Trade Zones/Free Ports/Trade Facilitation 
                  -  Performance and Data Localization Requirements 
                -  5. Protection of Property Rights"                    -  Real Property 
                  -  Intellectual Property Rights 
                -  6. Financial Sector                    -  Capital Markets and Portfolio Investment 
                  -  Money and Banking System 
                  -  Foreign Exchange and Remittances                      -  Foreign Exchange Policies 
                    -  Remittance Policies 
                  -  Sovereign Wealth Funds 
                -  7. State-Owned Enterprises                    -  Privatization Program 
                -  8. Responsible Business Conduct                    -  Additional Resources  
                  -  Climate Issues 
                -  9. Corruption                    -  Resources to Report 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 3.2 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, energy, 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 November 2022, Fitch maintained Paraguay’s credit rating at BB+ with a stable outlook, despite a severe drought which weighed on the agriculture sector and resulted in an economic contraction in 2022.

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 in 2018, the 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 was the first country in the region to quarantine as a result of the COVID-19 pandemic, which considerably impacted the services sector of the economy. Beginning in March 2020, the government of Paraguay undertook a series of economic measures in response to the pandemic. These prompt measures to mitigate the economic and social impact of the pandemic and reactivate the economy caused Paraguay to incur additional debt, resulting in an increase in its debt to GDP ratio from 22.4 percent in 2019 to 36.3 percent in 2022, though the government is now committed to a return to pre-pandemic operations. The government also has a sustainable government procurement policy and, although it does not have climate change regulatory incentives, it does have policies and regulations that support the preservation of biodiversity, forests, clean air and water, the use of nature-based solutions, and other ecological benefits. Despite the government’s significant advancement in efforts to eliminate the worst forms of child labor, it continues to occur in agriculture and ranching as well as in the production of bricks, with children working in the streets begging or selling merchandise. Russia’s war of aggression against Ukraine partially contributed to Paraguay’s high inflation rate in 2022, which reached 8.1 percent (compared to the Central Bank of Paraguay’s target inflation of +/- 4 percent). Although the Russia-Ukraine war did not have a major impact on investment climate overall, it did initially affect Paraguayan exports of beef to Russia over sanctions from exporters.

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 and contracts in Paraguay, including questionable public procurement adjudications, 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.

The Ministry of Industry and Commerce (MIC) signed in February 2021 an MOU with the Ministry of Justice to strengthen the rule of law and provide additional legal security to foreign investments in the country. Within MIC, REDIEX provides useful information for foreign investors, including business opportunities in Paraguay, registration requirements, laws, rules, and procedures.

In December 2022, President Abdo Benitez signed a new public procurement law which aims to improve efficiency and transparency in government procurement tenders. This law is based on the concept of “best value” in the tender evaluation process and incorporates new assessment standards such as quality of goods and services, risk management, customer satisfaction, product life cycle, maintenance costs, among others, as opposed to the former criteria mandating “lowest price.” These new evaluation standards are expected to level the playing field for foreign companies interested in bidding on Paraguayan public procurement tenders.

### 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://www.wto.org/english/tratop_e/tpr_e/tp460_e.htm

### 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 platform for registering a local or foreign 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 takes between 24 and 72 hours. This new registration process has been operational since July 2020 and can be accessed through http://eas.suace.gov.py/suace_frontend/.

### Outward Investment

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

							2. Bilateral Investment Agreements 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 trade and 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 (FTA) June 28, 2019, but the final text is pending ratification by Mercosur and EU member parliaments before entry into force. Mercosur also reached an “agreement in principle” August 23, 2019 with the European Free Trade Association, but final details of the agreement are still pending before it can go through the parliamentary approval process. In July 2022, Mercosur substantively concluded negotiations on a free trade agreement with Singapore, though a legal review process must take place before its signing and entry into force. Mercosur has ongoing FTA negotiations with South Korea. In 2021, Uruguay initiated, unilaterally and outside of the Mercosur bloc, FTA negotiations with Beijing and concluded in July 2022 a feasibility study with the PRC. Uruguay has continued to push FTA talks within Mercosur and in January 2023 Uruguayan President Luis Lacalle Pou met with Brazilian President Luiz Inacio Lula da Silva and discuss a potential Mercosur FTA negotiation with the PRC. 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 (TIFA) in January 2017 that Paraguay ratified in December 2017 and formally entered into force in March 2021. The first Trade and Investment Council meeting under this TIFA took place in September 2022 where Paraguay and the U.S. discussed their shared commitments in the areas of trade facilitation, anti-corruption and transparency, intellectual property, digital economy, and agricultural trade. The next TIFA Council meeting is expected to take place in Asuncion sometime in 2023.

Paraguay is a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting and the government is party to the Inclusive Framework’s October 2021 deal on the two-pillar solution to global tax challenges, including a global minimum corporate tax.

							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. More information on draft bills and regulations can be found here: http://silpy.congreso.gov.py/.

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 Paraguayan institutions, as time-consuming processes provide opportunities for front-line civil servants to seek bribes to accelerate the paperwork. The Comptroller General’s Office is leading institutional reforms by digitalizing accountability procedures and trying to implement the use of big data and artificial intelligence (AI) for audits to prevent misuse of government resources, using a model used by the Comptroller Office in Colombia, whom they have close cooperation with, as a result of prior USAID assistance. In addition, the Comptroller General Office has plans to acquire new technology (software and hardware) to gain access to other institutions’ data, such as tax records; to facilitate and expedite audits and improve transparency and accountability.

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.

In 2020, the Ministry of Finance, together with other agencies from the Executive Branch, including the Technical Secretariat for Economic and Social Development, drafted a series of bills to reform the government structure, its procurement processes, its fiscal policy, and the public service in general to gain efficiency, improve expenses, and enhance transparency. However, until now, only the new public procurement bill has entered into law.

Public finances and debt obligations of government institutions, agencies, and state-owned enterprises (SOEs) are available online and mostly centralized by the Ministry of Finance.

### International Regulatory Considerations

Paraguay is a founding member of the Mercosur common market, which was 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, and the laws.

The judiciary is a separate and independent branch of government, however there are frequent reports of political interference with judicial decision making. Judicial corruption also remains a concern, including reports of judges improperly adjudicating plaintiffs’ claims in return for a percentage of monetary payouts.

Paraguay has a specialized court for civil and commercial judicial matters that is charged with ruling on civil suits between individuals, and a specialized court for ruling on administrative lawsuits against government regulations or decrees.

Private entities may file civil suits against government regulations they assess to be contrary to the constitution or Paraguayan law. The Supreme Court is responsible for resolving the constitutional suits. and the specialized administrative court rules on suits against government regulations.

### 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 $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, the president 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, although some are under consideration by the Ministry of Public Works. Large infrastructure projects are usually open to foreign investors.

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-i68Paraguay’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, also available in English: www.bit.do/REDIEX20

### 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. CONACOM’s decisions can be appealed to the specialized administrative court.

### 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 concluded investment disputes involving foreign investors. One registered 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 favor. There are no records of U.S. investors using the ICSID mechanism for an investment dispute in Paraguay.

There are currently three ongoing investor-state disputes involving U.S. companies. Two cases involve delayed government payments to U.S. firms and one involves delays in the process of acquiring environmental permits to initiate a large-scale real estate development.

#### 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 foreign companies to seek expensive out-of-court settlements first with the Paraguayan distributors. 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 (CAMPS), which is a non-profit, private entity that promotes the application of alternative dispute resolution methods.

Under Paraguayan Law 2051/03, 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. The World Bank reported that 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. Under a Mercosur agreement, Paraguay allows the import of raw materials and inputs with a zero percent customs tariff until 2030 under the condition that there is no national production of said materials and if the company demonstrates that materials are used in production processes. 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.

In addition to Law 60/90, Paraguay has an industrial parks law (4903/13) that offers several tax breaks and a 50 percent reduction in the cost of industrial patents. Law 4427/12 also provides incentives for the production, development or assembly of high technology goods in the form of tax breaks and import tariff exemptions on inputs and raw materials.

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. Companies are also exempted from paying remittance taxes over incomes and dividends. However, Paraguayan maquiladoras must comply with all Paraguayan labor laws. 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.

The government of Paraguay does not offer specific incentives to clean energy investments, however it does publicly support them. Paraguay offers a preferential energy tariff for energy intensive industries through law 7406/11.****

Further details of all investment incentives regulations can be found at REDIEX ́s website: http://www.rediex.gov.py/leyes-normativas-y-tramites/

### 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) granting several tax exceptions, including payments of VAT and corporate taxes, and expedited custom procedures to companies operating in the commercial, industry, and services sector. Companies established under this law, which export over 90 percent of their sales in monetary values, must only pay 0.5 percent of their income in sales. As a result of the COVID-19 pandemic, in December 2020, the Ministry of Finance issued a decree to expand the services covered under the FTZ Law, incorporating financial services and companies working in the biotechnology and pharmaceutical sector.

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 80 percent 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. Low water levels caused by prolonged drought occasionally make shipping on Paraguay’s waterways difficult, and barges are frequently forced to travel at 50 percent capacity.

### 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.

Under the argument of incentivizing domestic production during the COVID-19 pandemic, on September 10, 2020, the Paraguayan Congress overrode a presidential veto to pass a modification to Paraguay’s Public Contracting Law (4558/11), increasing the preference in government bids to locally produced goods in public procurements open to foreign suppliers from 20 to 40 percent. Foreign firms can bid on tenders deemed “international” and on “national” tenders through the foreign firm’s local agent or representative. Opponents questioned the constitutionality of the new legislation.

The government continues to make efforts to enhance transparency and accountability, including through the use of an internet-based government procurement system. The country’s National Public Procurement Directorate (DNCP, in Spanish) is generally well regarded, but does not have legal authority to impose sanctions on companies or public entities found to have engaged in procurement irregularities.

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’s 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.

In 2008, the Truth and Justice Commission (CVJ), an organization created by Law 225/03 to investigate human rights violations committed during the dictatorship of Alfredo Stroessner, presented a report stating that in the Eastern Region of Paraguay almost 8 million hectares of ill-gotten lands were illegally awarded during 1954-2003. Accounting for the Chaco Region, it is estimated that this figure would total 20 million hectares.

Paraguay has a “squatter’s rights” law by which ownership of property can be obtained by possession after a lapse of 20 years.

Congress has proposed bills in the past to improve regulation of properties and establish a new National Directorate of Public Registries with the intention of facilitating the adequate registration of land ownership and create a special Congressional Commission to correct underlying problems with property titles; however, Congress has not passed a significant land reform bill. After the previous head of INDERT was removed from the position due to accusations of bribery in October 2020, the new leadership has made noticeable efforts to regularize property title registration in various regions of the interior of the country and has considerably increased the number of regularized property titles and revenues collected by the institution.

### Intellectual Property Rights

Paraguay has been on the U.S. Trade Representative’s (USTR) Special 301 Report Watch List since 2019, due in part to Paraguay’s unfulfilled commitments under a 2015-2020 Memorandum of Understanding (MOU) on intellectual property rights between the United States and Paraguay. The USTR and Paraguayan government updated these commitments in September 2022 in an Intellectual Property Workplan managed under the U.S.-Paraguay Trade and Investment Framework Agreement (TIFA) mechanism.

Ciudad del Este has been named in the USTR Review of Notorious Markets for Counterfeiting and Piracy for over 20 years. The border crossing at Ciudad del Este and the city itself serve 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 384 seizures of counterfeit goods in 2022 with an estimated retail price of $11.7 million. This represented a $8.3 million increase from 2021. In terms of law enforcement related to IPR, Judicial Branch contacts reported that Asuncion had 186 referrals, 29 investigations, four indictments, secured two convictions for IP crimes in the greater Asuncion area (down from eight in 2021), and reported the destruction of counterfeit goods with an estimated value of $18.5 million in 2022; Ciudad del Este had 12 referrals, eight investigations, no indictments, and no conviction. In some instances, authorities worked together to investigate cases and pursue legal actions, but overall weak information-sharing and interagency coordination continued to hamper IPR enforcement efforts.

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. Paraguay signed and ratified September 17, 2020, the Treaty of Nice, which establishes a classification of goods and services for the purposes of registering trademarks and service marks, and the Locarno Agreement, which establishes a classification for industrial designs.  WIPO officially received on May 31, 2021, Paraguay’s instrument of accession to the Nice Agreement and Locarno Agreement. In 2022, Paraguay continued its efforts to adhere to international IP agreements. Paraguay signed and ratified on October 24, 2022, the Nairobi Treaty that protects the Olympic symbol against use for commercial purposes without the authorization of the International Olympic Committee; on November 7, 2022, the Vienna Agreement, which establishes a classification for marks consisting of or containing figurative elements; and on December 21, 2022, the Budapest Treaty concerning the international patent process for microorganisms.

In December 2019, DINAPI officially announced the establishment of an Interagency Coordination Center (ICC), responsible for providing a unified government response to intellectual property rights violations. The ICC continued to convene at least four times a year. However, the ICC still needs to be further developed to be used more actively for interagency collaboration.

During 2022, Congress introduced two bills that raised concerns from IP-related stakeholders. In August 2022, a group of Paraguayan Lower House representatives presented a draft bill proposing a new remuneration right for musical and audiovisual performers to be paid by all digital platforms. The bill would establish a 10 percent statutory rate to be collected by banks and other financial institutions out of the subscribers’ payments to premium accounts, including U.S. digital music platforms, with the proceeds remitted to national Collective Management Organizations (CMOs). DINAPI and some Lower House representatives oppose this bill as it would set a precedent that would negatively impact the market for audiovisual works and recorded music in Paraguay. For now, the discussion of this bill in a plenary session of Congress continued to be suspended. In September 2022, a group of Paraguayan Lower House representatives presented for a second time a draft bill to establish a temporary suspension of royalty payments for patented, genetically modified soy seeds until the end of 2023, arguing this seed variant promotes the usage of more pesticides and therefore results in more costly environmental consequences compared to alternatives. The proposed legislation would violate IPR guarantees in Paraguay’s Constitution, the 1630/2000 Patent Law on Inventions, international treaties such as TRIPS, UPOV, and trade agreements negotiated and concluded (MERCOSUR-EU and MERCOSUR-EFTA). Representatives from DINAPI, the Ministry of Foreign Affairs, the National Service for Plant and Seed Quality and Health Agency, and private sector unions opposed a prior similar bill as it would violate international agreements and affect legal security and the intellectual property rights acquired on biotechnology invention patents, potentially jeopardizing future investments in the country. The lower house has not taken further action on the bill as of the date of this report.

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

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

****Deputy Political and Economic Counselor****U.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:**https://py.usembassy.gov/wp-content/uploads/sites/274/attorneys.pdf

							6. Financial Sector					

### Capital Markets and Portfolio Investment

Credit is available but expensive. As of January 2023, the Central Bank of Paraguay reported that banks charged on average between 17 to 24 percent interest on consumer loans (up to 30 percent), with the vast majority favoring repayment horizons of one year. Loans for up to 10 years are available at higher interest rates with higher collateral requirements. 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 2023, the Asuncion Stock exchange consisted of 147 companies. Many large family-owned enterprises fear losing control via public offerings, dampening enthusiasm for listings. Paraguay passed a law in 2017 abolishing anonymously held businesses, requiring all holders of “bearer shares” to convert them to public registry. 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 $500 million to accelerate development in the country. Since then, Paraguay has issued bonds each year, consistently raising money for the budget at lower interest rates. The debt component of the 2021 bond raised $500 million of new money at the lowest cost ever for a Paraguayan sovereign bond (2.74 percent). The transaction’s historically low interest rate, oversubscription, and its extension of Paraguay’s maturity profile reflected increased investor confidence in Paraguay. In 2022 however, the Ministry of Finance suspended its issuance of bonds both in the domestic and international markets due to the global increase in interest rates, nevertheless, based on the 2023 National Budget, an issuance of $500 million in sovereign bonds is still expected throughout 2023. 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 in 2022 includes 17 major banks with an approximate total $25.5 billion in assets and $18.1 billion in deposits. The banking system is generally sound. 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 under the direction of the Central Bank of Paraguay (BCP, in Spanish).

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. The World Bank reported in 2022 that only 54 percent of adults possess an account at a bank or other financial institution. 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 BCP, the total transactions in local currency increased by 5.6 percent, reaching almost two billion dollars in 2022. Active e-wallets accounts increased from 2.4 million in December 2021 to 3.2 million in December 2022. The growth experienced in the e-wallets sector 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.

Foreigners must have legal residence in Paraguay to establish a bank account.

### 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.

### Sovereign Wealth Funds

Paraguay does not have a sovereign wealth fund. A draft bill introduced in 2020 to create Paraguay ́s first wealth fund to strengthen the country ́s macroeconomic stability in years of poor economic development and/or emergency situations has not been voted on by Congress as of March 2023.

							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 2021 indicate SOEs employ over 16,000 people and have estimated assets of $5.1 billion. Reported net incomes in 2021 of all SOEs are $94 million.

SOEs’ corporate governance is 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. 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 the list of Paraguayan SOEs: https://economia.gov.py/index.php/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 2021, PEC offered the country’s first-ever corporate ethics certification course, in partnership with a local university, which certified 35 public and private sector professionals. The Paraguayan government does not have any formal programs or policies to encourage RBC, but has shown interest in PEC’s work. In June 2021, PEC signed a cooperation agreement with the National Integrity and Transparency Team working under the National Anticorruption Secretariat (SENAC) to promote ethics, integrity and transparency in the business sector by developing and implementing ethical policies. In August 2022, SENAC, MIC, and the National Integrity and Transparency Team launched a program that implements measures and actions to prevent, detect, and address acts of corruption and fraud as well as promote a culture of corporate integrity.

The DNCP issued in March 2020 a resolution to include RBC policies into the standard requirements of public procurements.

Paraguay is neither a signatory of The Montreux Document on Private Military and Security Companies nor a member of International Code of Conduct for Private Security Service Providers’ Association (ICoCA).

Despite the government’s moderate advancement in efforts to eliminate the worst forms of child labor, it continued to occur in agriculture and ranching as well as in the production of bricks. Children commonly worked in the streets as beggars, windshield cleaners, or vendors of newspapers and lottery tickets. Children of impoverished families also accompanied a parent or guardian in their work activities. Approximately 47,000 children, mostly girls, served under the *criadazgo* system in which middle- and upper-income families in urban areas informally “employ” young domestic workers, often the children of impoverished families, in exchange for housing and education. Government representatives and civil society organizations (CSO) estimated that more than 416,000 children were at risk of child labor. Paraguay’s criminal law enforcement agencies also lack resources to sufficiently identify, investigate, and prosecute cases of the worst forms of child labor, especially in remote areas.

Indigenous and farming communities often protest about the government improperly allocating land or natural resources as well as unfair evictions. As recent examples, the 2021/22 Amnesty International report stated that the Paraguayan government failed to return the ancestral lands to the Tekoha Sauce community of the Avá Guaraní people after they had been evicted from their land twice, once to allow the construction of a hydroelectric power plant in Itaipú in the 1970’s. In October 2022, the UN Human Rights Committee issued a resolution holding Paraguay responsible for violating the human rights of the Campo Agua’e Indigenous community through contamination by toxic agrochemicals on their lands.

### Additional Resources 

Department of State

- Country Reports on Human Rights Practices ( https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/ );
- Trafficking in Persons Report ( https://www.state.gov/trafficking-in-persons-report/ );
- Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities ( https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/ );
- U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises ( https://www.state.gov/u-s-national-contact-point-for-the-oecd-guidelines-for-multinational-enterprises/ )
- Xinjiang Supply Chain Business Advisory ( https://www.state.gov/xinjiang-supply-chain-business-advisory/ )

Department of the Treasury

- OFAC Recent Actions ( https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions )

Department of Labor

- Findings on the Worst forms of Child Labor Report ( https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings  );
- List of Goods Produced by Child Labor or Forced Labor ( https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods );
- Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World ( https://www.dol.gov/general/apps/ilab ) and;
- Comply Chain ( https://www.dol.gov/ilab/complychain/ ).

### Climate Issues

**Paraguay ́s economy is highly dependent on agriculture, especially the soybean and beef industries where average exports have grown 119 and 160 percent respectively in the past decade. Rapid agricultural expansion has led to deforestation, impacting local rain patterns and leaving the country vulnerable to adverse effects of climate change, which has considerably affected agricultural production and exports in the recent years. Increasingly powerful agricultural interests have successfully lobbied against environmental regulations.

Paraguay’s climate change legal framework dates from 1992 and includes over ten domestic laws, a National Climate Change Policy, and several related strategies and plans for adaptation and mitigation. Paraguay does not currently have a policy to reach net-zero carbon emissions by 2050. Paraguay ́s latest Nationally Determined Contributions states a commitment to reduce GHG emissions by 20 percent in 2030 compared to a “business as usual” scenario tied to a 1990-2015 baseline. This 20 percent goal is further broken down into 10 percent achieved by Paraguay’s unilateral efforts and 10 percent with external assistance. As a low net GHG emitter, Paraguay’s climate change efforts tend to prioritize adaptation over mitigation. Paraguay ́s Adaptation Plan focuses on private sector contributions to achieving relevant targets and goals, although it does not set quantitative benchmarks.

The National Climate Change Directorate, under the Ministry of the Environment and Sustainable Development (MADES), issued a National Climate Change Mitigation Plan in 2017 to reduce emissions in six priority areas: 1) transportation management; 2) stoves for the efficient use of biomass from reforestation; 3) sustainable use of the Chaco forests; 4) restoration of forest landscapes; 5) waste management; and, 6) sustainable architecture. However, the government agenda continues to focus on adaptation due to the growing frequency of adverse climate events, including droughts, floods, and wildfires. Furthermore, mitigation efforts are limited to avoiding deforestation, which oftentimes contradicts national economic development policies based on the expansion of the agricultural frontier.

Although the government of Paraguay does not have regulatory incentives to decrease emissions, it does have policies and regulations that support the preservation of biodiversity, clean air and water, the use of nature-based solutions, manage forests, and seek other ecological benefits. However, Paraguay often struggles to enforce its regulations due to its lack of financial, human, and technical resources.

The DNCP issued a new Sustainable Procurement Policy in March 2020 that takes into consideration environmental issues during the procurement process including soil contamination, water consumption, waste generation, greenhouse gas emissions, energy consumption, use of toxic substances, use of clean technologies, and conservation of natural resources.

Although the soy and beef industries are major drivers of deforestation in Paraguay, the country does not have environmental policies that oversee particular commodities or supply chains. Some companies from the soy and beef industry do engage in sustainability practices to mitigate their impact on the environment.

							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. Furthermore, the Comptroller Office estimates 90 percent of public institutions have deficiencies in their oversight systems. 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. In addition, the Paraguayan government with assistance from USAID implemented a new unified open data portal to facilitate access to and requests for public information in compliance with its 2014 law on free access to public information and government transparency. USAID also supported the creation of specialized courts for economic crimes, anti-corruption, and organized crime, and in 2022 launched a program to strengthen the jurisdictional capacity of these courts providing judges and magistrates with the tools to impart justice in an objective and impartial manner. Notwithstanding, corruption and impunity continue to affect the investment climate.

In December 2020 President Abdo Benitez signed a decree approving a National Integrity, Transparency, and Anti-Corruption Plan (NITAP) that was developed with USAID ́s technical assistance and has been reviewed by key stakeholders, including the private sector, NGOs, and academia. The NITAP is Paraguay’s five-year (2021-2025) road map to foster integrity and transparency, and fight corruption and impunity. The document includes more than 70 actions and commitments that involve all levels of the three branches of government, as well as the private sector, academia and NGOs, among other key stakeholders. USAID is supporting several actions of the NITAP and noted considerable advancement in SENAC’s implementation of its commitments in 2022.

Although the DNCP has a Good Governance Code that provides internal controls, promotes ethical principles, and addresses conflicts-of-interest in government procurements, it remains one of the areas where corruption in most pervasive.  DNCP issued a resolution in January 2021 creating a committee that would work on identifying and eliminating discriminatory conditions and requirements that would limit participants and free competition in government procurement.

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 creates a gap in disclosure 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.

Civil Society groups and NGOs noted an increase of tools and regulations over the past years to promote access to information, transparency and combat corruption. However, impunity remains the main challenge as political parties dominate the Judicial System.

On July 28, 2022, the Latin American Financial Action Group (GAFILAT), reported that Paraguay passed the organization’s evaluation on the effectiveness of its system to combat money laundering and terrorist financing., though GAFILAT noted Paraguay needed to increase the number of convictions for money laundering.

Through multiple capacity building trainings and exchanges with regional experts, UNODC has helped Paraguay’s national procurement and audit agencies better leverage technology to improve transparency. UNODC’s work contributed to Paraguay increasing its ranking on the Council of the America’s Capacity to Combat Corruption (CCC) Index for the second consecutive year in 2022, with particularly strong scores in overall government transparency. While Paraguay still ranks among the bottom of South American countries in all major global anti-corruption indices, the CCC improvement represents positive momentum.

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 611comunicaciones@ministeriopublico.gov.py

Anti-Corruption SecretariatGeneral Santos 698 c/ Siria, Asunción + 595 21 220 002/3info@senac.gov.py

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

							10. Political and Security Environment					

Large, under-governed areas and porous borders make Paraguay an attractive conduit for narcotics trafficking, money laundering, trafficking in persons, and counterfeiting. Corruption, weak institutions, and limited resources limit the effective prosecution of illicit actors. This is especially true in the Tri-Border Area (TBA) with Argentina and Brazil, where suspected terrorism financing networks operate, some with known or suspected links to Hizballah. Violent criminal activity has continued to increase as organized narco-criminal groups battle over territory and settle scores in public.

Paraguay does not have large numbers of kidnappings, 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 EPP is a small criminal group of less than 20 active members that remains sporadically active in Paraguay’s north-central departments of Concepción and San Pedro. The EPP engages in violence designed to intimidate the population and government and derives income from kidnapping ransoms, typically from wealthy farming families in the area. In September 2020, the EPP kidnapped former Vice President Oscar Denis near Denis’ property in Concepcion department. The Paraguayan government has responded to the EPP threat with combined military and police operations, but its failure to recover hostages – including Denis, whose whereabouts are still unknown at the time of this report – from such a small group has seriously damaged its credibility. 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.

Paraguay experienced an unprecedented and sustained increase in violence that has permeated the country in 2021 and continued in 2022. According to the Interdisciplinary Center of Social Investigation, sicarios (hitmen) have killed 150 Paraguayans between January and October 2021 and such cases have been in an upward trend since then. Most of these reported homicides are drug-related. The Global Organized Crime Index ranks Paraguay fourth highest in general “criminality” among 35 countries in the Americas.

Unknown organized crime-affiliated assailants murdered Paraguayan prosecutor Marcelo Pecci in Colombia on May 10, 2022, and the mayor of Pedro Juan Caballero on May 21, 2022. Paraguayan authorities vowed to redouble the fight against organized crime but gave few details.

							11. Labor Policies and Practices					

With an average annual population growth rate of 1.4 percent during the past decade and 62.8 percent of the population below the age of 35 as of 2022, 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. Paraguay ́s workforce as of 2022 had 3.7 million workers, 58 percent men and 42 percent women. Although, current levels of unemployment are at 5.7 percent for year 2022 (down 1.1 percent from 2021), unemployment for women stands at 7.1 percent while unemployment for men stands at 4.7 percent. The Ministry of Labor has reported that the labor force has come back to its normal levels after the pandemic.

Informal employment remains high in Paraguay. According to the INE, informal employment represented 63.2 percent of the total working population in 2022. SMEs make up 97 percent of all companies in Paraguay, and the Ministry of Industry and Commerce estimates 70 percent of these SMEs work in the informal economy. Latest reports estimate Paraguay ́s informal economy accounts for 46 percent of the country ́s GDP (or $21.3 billion).

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 financial penalties, 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/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/.

							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. In June 2022, DFC announced it would provide $7.5 million in financing to Financiera Finexpar to bolster lending to Paraguayan SMEs.

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

							13. Foreign Direct Investment and Foreign Portfolio Investment Statistics