Guidance

Overseas business risk: Paraguay

Updated 4 July 2022

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1. General overview

Paraguay is a country that has potential to become one of the main bread baskets of the world, with a population of 7 million producing food for 70 million. This number will continue to expand as new technologies and best practice are introduced in order to improve efficiency. Prior to the pandemic, Paraguay has averaged four percent growth over a fifteen-year period. This allowed Paraguay to fare better during the COVID-19 pandemic than its neighbours who were suffering from economic recessions. According to World Bank information, Paraguayan GDP growth dropped to -0.2% and 0.6% in 2020 and 2021 respectively, but is expected to grow 3.7% in 2022. The currency, the Guarani, recently reached its 70th anniversary with no history of major fluctuations, making it one of the most stable in the region.

2. Politics

Paraguay is a multi-party, constitutional republic and holds elections by popular vote. Democracy was restored in 1989 and the National Constitution was approved in 1992.The President is elected for a 5-year term and cannot hold office a second time. The next presidential elections will be held on April 2023. The current president, Mario Abdo Benítez, from the Colorado Party, was elected in April 2018 and took office in August 2018 promising to pursue an ambitious domestic reform agenda and fight corruption. The Colorado party has a majority in both houses of parliament but its various factions can operate against the president’s laws and hinder government projects. Corruption, contraband and weak judicial security are the main impediments. Poor infrastructure, particularly decent paved roads, is a major block to growth.

3. Economics

According to the World Bank Paraguay is one of the countries that was best able to cope with the COVID-19 pandemic due to its stability and macroeconomic discipline. However, it has increased its debt to 35.5% of GDP in 2021 and has enormous challenges in improving its human capital indices.

Sound macroeconomic policies have benefited Paraguay’s economy over the past two decades. Between 2003 and 2019, Paraguay averaged 4.1% growth, while maintaining low public and external debt, and low and stable inflation.

The COVID-19 pandemic interrupted the economic rebound in early 2020 following a drought that led to near-zero growth in 2019. Well-coordinated monetary and fiscal stimulus, including expansions of cash transfers, helped Paraguay minimise the adverse impacts of the pandemic on households. Although a nationwide lockdown suppressed activity in the first half of 2020, higher commodity prices, especially soybeans, boosted growth in the second half.

The 2021 GDP growth rate was of 5% according to the Banco Central del Paraguay (BCP) and is expected to increase by 3.7% in 2022. According to the Oxford Poverty and Human Development Initiative (OPHI) in 2021, 7.2% of the population of Paraguay were living in a vulnerable state and 1% in severe poverty, considering the indicators that constitute multidimensional poverty.

Rates of poverty have declined with nearly 1 million Paraguayans lifted out of poverty since 2011 but levels of extreme poverty have risen. Most of this is a result of high rates of economic growth and job creation, rather than targeted anti-poverty programmes. Low levels of inflation during this period helped.

In the last edition of the Doing Business Report (PDF, 1,957KB), Paraguay was ranked 125 out of 190 countries in its Ease of Doing Business Ranking. According to the World Economic Forum’s Global Competitiveness Report for 2019, Paraguay ranked 97 out of 141 countries. Paraguay was noted as one of the most profitable countries in Latin America according to the President of the Inter-American Development Bank, Mauricio Claver-Carone. Companies should expect a return in the medium to long term, working with patience in an economy that is still developing but with huge potential.

In 2011, the Central Bank of Paraguay introduced an inflation-target regime, which aims to maintain inflation at a rate of 4% with flexibility of 2%. Inflation was 2.2% in 2020, 6.8% in 2021 and rose to 11.8% in April 2022 (its highest point since 2011). Paraguay’s net international reserves have risen from USD 600 million in 2003 to USD 9.946 (January 2022). It currently constitutes about 30% of its GDP.

The Paraguayan currency, the Guarani, has recently passed its 70th anniversary having survived a number of difficult times without strong devaluations. Exchange rates in Paraguay are relatively stable and predictable.

Paraguay has one of the most competitive tax regimes for foreign investment in South America. Personal income tax is at 10%, while corporate income tax and value added tax are set at less than 10%. The country does not apply taxes and tariffs to imports of capital goods, VAT, remittances and payments in concept of capital, interest, and commissions (for investment over USD 5 million), and dividends and utilities (for investments over USD 5 million for a period of 10 years).

Paraguay has abundant natural resources. Around 70% of Paraguay’s population is under 40 years old. The country has 100% renewable electricity production through its hydroelectric dams. In December 2016 the Itaipu Dam established a new world record in annual generation. Prices of labour and energy are competitive.

Paraguay’s total exports in 2021 were worth approximately USD 9 billion, with its main commercial partners being Brazil (33.3%), Argentina (27.1%), Chile (9.5%) and Russia (6.7%). 47.7% of Paraguay’s exports are agricultural (soy, rice, sugar, corn, cotton, various oils and wood). As previously mentioned, Paraguay is the world’s seventh soybean exporter. Frozen and fresh beef also make up a significant part of Paraguayan exports at 15.1%. Paraguay is the world’s 22nd beef exporter overall, ranking as high as number eight in frozen beef exports.

As for imports, in 2021 they were worth USD 9.9 billion in total. Portable terminals of cellular technology, oil and petroleum products, vehicles, capital goods, and car parts account for most of the total of the past years. Paraguay’s imports came from China (30%), Brazil (24.4%), Argentina 9.7% and the United States (7.2%).

Paraguay entered the international sovereign bond market in January of 2013 with the lowest interest rate recorded in history for a debut of sovereign bonds. As mentioned previously, Paraguay’s debt currently accounts for 35.5% of its GDP. On November 2021, Fitch Ratings affirmed Paraguay’s Long-Term Foreign Currency Issuer Default Rating (IDR) at ‘BB+’ with a Stable Outlook.

4. Business and human rights

Paraguay has made continuous efforts to raise the profile of human rights and democratic concepts. In 2021, Paraguay was elected as member of the Human Rights Council of the United Nations for the 2022-24 period. However, there are still areas where Paraguay’s adherence to human right principles could be improved. Paraguay is marked by deep economic and social inequalities.

The principal human rights problems are impunity in the judicial sector together with lengthy pre-trial detention and trial delays. Prison conditions are harsh, and allow for greater influence of gangs and organised crime. The Police has been associated to criminal activities, including unlawful killings by persons associated with police and the military. The government has taken steps to prosecute and punish officials who committed abuses, but general impunity for officials in the security forces and elsewhere in government remains an issue.

Other problems include corruption, discrimination, and violence against women and indigenous persons, people with disabilities, and the lesbian, gay, bisexual, and transgender (LGBT+) community. Human trafficking occurs at national and international level.

Legislation improved to defend women’s rights. Congress approved a bill for the integral protection of women in 2017. However, women’s rights are not universally enjoyed. Forced child pregnancies and lack of access to comprehensive sexual and reproductive rights is a major problem. The Ministry of Women has made progress in the eradication of domestic and partner violence, but the issue remains a concern.

Paraguay is a member of the International Labour Organization (ILO). Paraguayan law allows unions, strikes, and collective bargaining, and forbids binding arbitration. The law also prohibits forced labour. Labour by children under 14 is illegal, but does occur. Enforcement of laws against these activities is hampered by a lack of resources. There is a minimum wage and a standard workweek, but violations are common. Disparities remain between men and women in terms of access to higher level education and participation in the economy.

Paraguay ranks 96 out of 180 on the Press Freedom Index by Reporters without Borders. Paraguay’s ranking on the index has very slightly improved from previous past years. Concerns on this issue include the concentration of media in the hands of a few, and impunity for crimes against 17 journalists during the democratic era.

Paraguay was subject to the Universal Periodic Review in 2021. The Paraguay delegation rejected seven of the 200 recommendations, and partially accepted two. The rejected recommendations related to access to abortion and on the ratification of the Escazu treaty, a regional treaty on access to information and environmental rights. The partial recommendations were on an open investigation into the death of two Argentinian girls, and on women’s sexual and reproductive rights.

Paraguay joined the OECD’s Development Council in February 2017.

5. Bribery and corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or as Scottish partnership to bribe anywhere in the world. In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case, it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

Corruption is a major problem in Paraguay. It contributes to high levels of mismanagement and acts as an additional break on the already cumbersome bureaucratic system. According to the Corruption Perceptions Index by Transparency International, Paraguay ranked 128 out of 180 countries in the world in 2021.

Some initiatives have been taken by the government to fight this problem. Congress is analysing a package of bills to prevent tax evasion and combat money laundering, although this initiative has not seen significant progress. More recently, congress began work on a project to impose harsher sections for corruption charges. Ever since the passing of the Freedom of Information law in 2014, many government organisations have begun to make their financial information completely public.

A system of e-government is in place and has produced an open information service to citizens in the form of a Paraguay Portal website. Through this website, the public can find all the financial information of government bodies, including transactions made, budgets, investments and salaries. The website also provides information on government employees, economic indicators, and online payment options. The justice system is also in process of being reformed, with Supreme Court judges being studied and replaced according to performance.

It is strongly recommended that UK businesses interested in Paraguay engage with local partners. There are experienced legal advisors and consultants who can help guide businesses when entering the Paraguayan market.

6. Terrorism

See the terrorism section in FCO Travel Advice for Paraguay.

7. Security

See the security section in FCO Travel Advice for Paraguay.

7.1 Commercial disputes

There are no major commercial disputes, although there have been cases of the government not honouring contracts for public tenders. This is mainly due to changes in government. Those interested in participating in public tenders should contact the Embassy and seek advice beforehand.

8. Intellectual property

Copyrights are managed by the DINAPI (national directorate for intellectual property). This information is public, and can be accessed by anyone if requested in a formal letter. This information can be either digital or printed. Trademarks can be registered in the name of a product or service at the DINAPI. Once a trademark is registered, the owner has the exclusive right to use that trademark in Paraguayan territory. Registering a trademark is vital in order to distinguish one´s products or services.

It is extremely important to register copyrights or trademarks to make sure that no one steals or copies your ideas. It is also strongly recommended that UK businesses seek legal advice in this area when entering the Paraguayan market. According to the World Economic Forum, Paraguay ranked 112 out of 140 in intellectual property protection in 2018.

Read the information provided on our intellectual property page.

9. Contact

Contact the Department for Business and Trade (DBT) team for more information and advice on opportunities for doing business in Paraguay.

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