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Doing Business in

Paraguay
Country Cost Elements

Technical Unit for Industrial Studies


UTEPI

MINISTERIO
DE INDUSTRIA
United Nations Industrial
Y COMERCIO Development Organization
Ministerio del Desarrollo (UNIDO)
Doing Business in Paraguay: Country Cost Elements

Ministry of Industry and Commerce (MIC) and United Nations Industrial Development Organization (UNIDO).

Ministry of Industry and Commerce


Avda. Mcal. Lpez 3,333 and Dr. Wiss
Tel.: (+595-21) 616-3000; 616-3092; Fax: (+595-21) 616-3208
Asuncin, Paraguay
E-mail: utepi.info@mic.gov.py
Website: www.mic.gov.py

United Nations Industrial Development Organization


Vienna International Centre, P.O. Box 300, A-1400
Tel.: (+43-1) 260260; Fax: (+43-1) 2692669
Vienna, Austria
E-mail: unido@unido.org
Website: www.unido.org

November 2007

Project manager: Diana Hubbard (UNIDO)


International consultant: Manuel Albaladejo
National coordinator: Anbal Gimnez Kullak (MIC)
National adviser: Csar Pastore Britos (MIC)

Researchers: ngel Bentez Vera (MIC)


Guido Brtez Gmez (MIC)
Nathalia Rodrguez Romero (MIC)

Editing: Jos Hidalgo, Roger Peniston-Bird


Design and layout: Andrs Dvila

The information contained in this report may be used provided that the source is cited as follows:

UTEPI (2007). Doing Business in Paraguay: Country Cost Elements. Cooperation between the United Nations Industrial Development Or-
ganization and the Industry Division of the Ministry of Industry and Commerce. Asuncin, Paraguay.

Suggestions and comments: Technical Unit for Industrial Studies (UTEPI), utepi.info@mic.gov.py

ISBN: 978-99953-838-2-4

Copyright: ALL RIGHTS RESERVED. TOTAL OR PARTIAL REPRODUCTION WITHOUT DUE AUTHORIZATION IS PROHIBITED. THE
DEPOSIT REQUIRED UNDER LAW 1328/98 HAS BEEN EFFECTED.
FOREWORD

For Paraguay to find its place in an increasingly globalized and competitive world requires clear poli-
cies that will promote economic growth with emphasis on the industrial sector, that are oriented towards sus-
tainable development and that will encourage the generation of better employment opportunities in order to
improve the quality of life of the Paraguayan people.

The business climate for the successful development of enterprises and for attracting new investment
is improving, thanks, inter alia, to macroeconomic stability, legal conditions and the simplification of proce-
dures for starting up new businesses. The result has been a steady increase in domestic and foreign invest-
ment in recent years.

In the effective utilization of business opportunities, the availability of information plays a key role. In
this context, the Ministry of Industry and Commerce, through the Industry Division and the Investment and
Exports Network, and in order to meet the needs of the business sector on an expanding basis, have produced
this important analytical reference tool which it is placing at the disposal of the productive sector.

The present document, Doing Business in Paraguay: Country Cost Elements 2007, is the fruit of a joint
effort made by the public and private sectors, with technical and financial support from the United Nations
Industrial Development Organization (UNIDO), to collect, arrange and classify information concerning
transactions and costs that needs to be taken into account when making decisions on investment in Paraguay.

It is our hope that this report will serve as a useful reference guide for local and foreign investors, as
well as helping to identify obstacles that still need to be removed if optimum conditions are to be ensured for
Paraguay to become a destination for investment.

Translated from Negocios en el Paraguay: Elementos del Costo Pas published in November 2007

iii
CREDITS AND ACKNOWLEDGMENTS

The report Doing Business in Paraguay: Country Cost Elements 2007 has been prepared within the fra-
mework of the first stage of the project of the United Nations Industrial Development Organization in Para-
guay entitled Institutional Support and Capacity Building in Competitiveness Analysis (XP/PAR/06/001),
within the Industry Division (SSEI) of the Ministry of Industry and Commerce. This study aims to meet the
needs of investors for information relevant to decision-making, particularly as concerns the costs of the ne-
cessary procedures.

The work was carried out under the supervision of Anbal Gimnez Kullak, Deputy Minister for Indus-
try and National Project Coordinator, and Diana Hubbard, Chief of the Commercial Analysis and Conformity
Infrastructure Unit of UNIDO. Manuel Albaladejo, an international adviser, offered assistance and made
available his valuable experience during the first stage of the work; Csar Pastore, Director-General for In-
dustrial Policy, acted as national economic adviser.

The team of professionals of the Technical Unit for Industrial Studies (UTEPI) were responsible for
planning, organization, collection of data and the drafting of the report; the team consisted of ngel Bentez
(researcher), Guido Brtez (researcher) and Nathalia Rodrguez (coordinator). Thanks are expressed to all
the UTEPI staff for the review and analysis of the various sections of the document.

Jos Hidalgo (Corporation for Development Studies -CORDES-) was the editor of the original Spanish
text; Roger Peniston-Bird edited the English translation, and Andrs Dvila (CORDES) was responsible for
the graphics.

More than 120 institutions in the public and private sectors cooperated in the preparation of the docu-
ment, including: six government ministries and their departments concerned with matters relating to inves-
tors; the decentralized State agencies; the Central Bank of Paraguay, banks and financial institutions in the
public and private sectors; private sector organizations and associations; and 13 municipalities, including
the capital, Asuncin, and the main cities of the interior of the country. We are deeply grateful to all these ins-
titutions, since the work would not have been possible without their cooperation. Thanks are also expressed
to all institutions and individuals who contributed directly or indirectly to the preparation of this report.

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TABLE OF CONTENTS

Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

Credits and acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv

Abbreviations and acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii

CHAPTER 1. Issues of interest to the investor . . . . . . . . . . . . . . . . . . . . . . 1


1.1. General information about Paraguay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Economic environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3. The Paraguayan industrial sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.4. Domestic and foreign investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

CHAPTER 2. Incorporation of companies . . . . . . . . . . . . . . . . . . . . . . . . 9


2.1. Institutional relationship and regulatory framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2. Processes of incorporation, registration and monitoring. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2.1. Modernization and technological development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2.2. Approval and registration through the Unified System for the Opening of Businesses . . . . . . . . . . . . 10
2.2.2.1. Registration with the Directorate-General for Public Registers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.2.2.2. Immigrant visas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2.2.3. Business licences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2.3. Fees of notaries public . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2.4. Services, monitoring and auditing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.3. Environmental licences and certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.4. Industrial registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

CHAPTER 3. Industrial land and property rental costs . . . . . . . . . . . . . . . . . 17


3.1. Industrial parks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.1.1. Technological Park Itaip . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.1.2. Taiwan Industrial Park. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.1.3. Avay Industrial Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.1.4. MERCOSUR Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.2. Property taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

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CHAPTER 4. Employment and labour costs . . . . . . . . . . . . . . . . . . . . . . . 21
4.1. Legislation and labour institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.2. Minimum wages and statutory benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.2.1. Minimum monthly wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.2.2. Sectoral tables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.2.3. Additional benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.2.4. Regulations on working hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.2.5. Termination costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.2.6. Social security contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.3. Labour market recruitment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.4. Public and other holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

CHAPTER 5. Communication services . . . . . . . . . . . . . . . . . . . . . . . . . 27


5.1. Legal and institutional framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.2. Fixed telephony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.3. Mobile telephony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.4. Internet services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.5. Postal service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

CHAPTER 6. Electricity, drinking water and fuel costs . . . . . . . . . . . . . . . . . 33


6.1. Electricity sector and costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.1.1. Legislation and institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.1.2. Electricity production and consumption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.1.3. Price systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.2. Drinking water . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.3. Cost of fuels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

CHAPTER 7. Other industry costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41


7.1. Fees for trademark, design and patent registration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.2. Fees for public services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.3. Membership in chambers of commerce and industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

CHAPTER 8. Accreditation and certification agencies . . . . . . . . . . . . . . . . . 45


8.1. National Accreditation Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.2. National Institute of Technology and Standardization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.3. National Service for Animal Health and Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.4. National Service for Plant and Seed Quality and Health. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

CHAPTER 9. Transportation services and infrastructure . . . . . . . . . . . . . . . . 49


9.1. Road and land transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.2. Rail transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

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9.3. Maritime transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.4. Storage facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.5. Air transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.6. Insurance services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

CHAPTER 10. Cost of living . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59


10.1. Costs for the rental of housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.2. Domestic service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.3. Security services for dwellings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.4. Health insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.5. Education: School enrolment and tuition fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.6. Rental of vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.7. Vehicle insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

CHAPTER 11. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63


11.1. Tax on income from commercial activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.2. Tax on personal income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.3. Value added tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.4. Excise tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
11.5. Vehicle licence tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
11.6. Other taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
11.6.1. Tax on documents and deeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
11.6.2. Tax on agricultural income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
11.7. Other municipal taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
11.8. Agreements to avoid double taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

CHAPTER 12. Financial costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69


12.1. Reference interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

CHAPTER 13. Foreign trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73


13.1. Export regime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
13.1.1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
13.1.2. Exports of soya and meat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
13.1.3. Certificate of origin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
13.1.4. Drawback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
13.2. Import regime. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
13.3. Customs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
13.4. Foreign trade agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

CHAPTER 14. Incentives for investment and exports . . . . . . . . . . . . . . . . . . 81


14.1. Law 60/90 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
14.2. Maquiladora regime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

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14.3. National Regime for Motor Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
14.4. Regime for Imports of Raw Materials and Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
14.5. Free trade zones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

Legislation consulted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

TABLES

Table 1: Manufactured exports per capita, 2000-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6


Table 2: Types of companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Table 3: Registration of enterprises through the Unified System for the Opening of Businesses . . 11
Table 4: Requirements for the registration of commercial companies . . . . . . . . . . . . . . . . . . . . . . 12
Table 5: Requirements for the registration of single-owner businesses and single-owner limited
liability companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Table 6: Tariffs for immigration visas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Table 7: Business licence charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Table 8: Fees of notaries public . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Table 9: Requirements for obtaining the Environmental Impact Statement . . . . . . . . . . . . . . . . . 15
Table 10: Additional environmental impact studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Table 11: Requirements for obtaining industrial registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Table 12: Minimum monthly wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Table 13: Sectoral tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Table 14: Additional benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Table 15: Annual leave . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Table 16: Cost of night work and overtime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Table 17: Termination costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Table 18: Social security contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Table 19: Wages on the freely-contracted labour market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Table 20: National public holidays and other holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Table 21: Cost of and time needed for telephone line installation . . . . . . . . . . . . . . . . . . . . . . . . 27
Table 22: Telephone charges by category . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Table 23: Cost of mobile phones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Table 24: Mobile phone plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Table 25: Internet rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Table 26: Rates for regular national mail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

x
Table 27: Rates for airmail and the international Express Mail Service*. . . . . . . . . . . . . . . . . . . . 32
Table 28: Development of electricity coverage in Paraguay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Table 29: Costs for connection to the electricity grid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Table 30: Electricity rates, low and medium voltage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Table 31: Electricity rates, high and very high voltage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Table 32: Electricity rates for electricity-intensive enterprises. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Table 33: Prices of electricity supply for residential consumers . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Table 34: Prices for electricity supply for industrial consumers. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Table 35: Connection charges Empresa de Servicios Sanitarios del Paraguay S.A. . . . . . . . . . . . 37
Table 36: Drinking water rates Empresa de Servicios Sanitarios del Paraguay S.A. . . . . . . . . . . 38
Table 37: Drinking water rates sanitation boards and private companies (average) . . . . . . . . . 38
Table 38: Prices for fuels in the capital and the metropolitan area . . . . . . . . . . . . . . . . . . . . . . . . 39
Table 39: Fees for trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Table 40: Fees for patents and utility models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Table 41: Monthly charges for refuse collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Table 42: Monthly charge for public lighting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Table 43: Fees for membership in chambers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Table 44: Accreditations with the National Accreditation Agency . . . . . . . . . . . . . . . . . . . . . . . . . 45
Table 45: Procedures for exporting and importing products of plant origin . . . . . . . . . . . . . . . . . 47
Table 46: Basic characteristics of the road infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Table 47: Fees at the toll stations managed by the Ministry of Public Works and Communications 50
Table 48: Tolls charged by Tape Por . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Table 49: Land transport freight costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Table 50: Duty-free storage facilities granted to Paraguay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Table 51: Cost of maritime shipping to major ports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Table 52: Monthly storage costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Table 53: Incentives for imports at particular terminals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Table 54: Port costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Table 55: Flight time between cities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Table 56: Air fares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Table 57: Air freight costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Table 58: Rates for insurance of international freight against all risks . . . . . . . . . . . . . . . . . . . . . 58
Table 59: Rental costs per month . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Table 60: Monthly wages for domestic service in Asuncin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Table 61: Monthly cost for security services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Table 62: Monthly cost of health insurance plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

xi
Table 63: School enrolment and tuition fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Table 64: Cost of rental of vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Table 65: Tax on personal income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Table 66: Value added tax rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Table 67: Excise tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Table 68: Vehicle licence tax in Asuncin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Table 69: Vehicle licence tax in the interior of Paraguay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Table 70: Other municipal taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Table 71: Bilateral tax agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Table 72: Reference annual interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Table 73: Credit options through the Development Finance Agency . . . . . . . . . . . . . . . . . . . . . . . 71
Table 74: Procedure for exporting soya using the Single Window for Exports . . . . . . . . . . . . . . . 74
Table 75: Process for exporting meat using the Single Window for Exports . . . . . . . . . . . . . . . . . 74
Table 76: Certificates of origin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Table 77: Certificate of origin for wood products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Table 78: Fees of customs clearance agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Table 79: Import regime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Table 80: Other taxes and charges payable in customs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Table 81: Foreign trade agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

DIAGRAMS

Diagram 1: Population of Paraguay by age group, forecast for 2007 . . . . . . . . . . . . . . . . . . . . . . . 2


Diagram 2: Changes over time in the gross domestic product, 2000-2007 . . . . . . . . . . . . . . . . . . . 2
Diagram 3: Structure of the Paraguayan economy in 2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Diagram 4: Inflation and interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Diagram 5: Average monthly exchange rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Diagram 6: Outstanding external debt as a percentage of the gross domestic product . . . . . . . . . . 5
Diagram 7: Domestic investment and net flows of foreign direct investment . . . . . . . . . . . . . . . . . 7
Diagram 8: Share of imports of hydrocarbons in the total imports of Paraguay . . . . . . . . . . . . . . 38
Diagram 9: Changes over time in the number of passengers transported (1998-2006) . . . . . . . . 57
Diagram 10: Trends in investment under the incentives regime established by Law 60/90 . . . . . 82
Diagram 11: Development of exports using the maquiladora regime . . . . . . . . . . . . . . . . . . . . . . 83
Diagram 12: Trends in the production of motorcycles and bicycles . . . . . . . . . . . . . . . . . . . . . . . 85

xii
BOXES

Box 1: Macroeconomic forecasts for 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5


Box 2: Goals, achievements and services of the Unified System for the Opening of Businesses . . 10
Box 3: Potential of the Paraguayan hydroelectric sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Box 4: Outlook for the fuels sector in Paraguay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Box 5: Land transportation: outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Box 6: Development Finance Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Box 7: Investment and Exports Network. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

xiii
INTRODUCTION

The availability of information, besides being an essential condition for successful decision-making,
helps to minimize the costs of transactions and reduce the risk of errors in the operations of enterprises.

The different processes involved in satisfying a particular procedural requirement are usually handled
by a number of different institutions and departments, which generates a high bureaucratic cost. In order to
simplify the requirements for investing in Paraguay, the Industry Division and the Investment and Exports
Network, with the assistance of UNIDO, have prepared the present document, setting out the main economic
and legal aspects that need to be known to and considered by potential investors and by those already esta-
blished in the country.

The preparation of the document has required consultations with the official institutions responsible
for each procedure, surveys of enterprises offering different services and summaries of the laws and decrees
relating to the business environment. An important advantage of the report is the up-to-date nature of the da-
ta and information given; the data was collected between June and November 2007. The tables showing the
costs for the different procedures are expressed in both guaranes and United States dollars; the exchange ra-
te used represents the average for September 2007, namely 5,012 guaranes to one dollar.

The document is divided up in the following manner. Chapter 1 describes the main characteristics of
the country, the culture, the economic environment, trends in investment flows and participation in world
markets.

Chapters 2 to 8 discuss aspects relating to the operation of enterprises: the procedures for starting up
operations, the industrial areas available for establishing plants, labour costs, labour regulations, access to
road communications and services that are offered to enterprises. Information is also given on the costs of ba-
sic services, such as electricity and water, and other industrial costs such as those for trademarks and registra-
tion, public services and membership in chambers of industry; the agencies responsible for the certification
of products are also described. Chapters 9 to 14 detail other factors that affect enterprises, such as the road in-
frastructure, transport costs and living costs in the capital, the nearby towns and Paraguay's main cities.

Another sphere that affects the capacity of a country to attract investment relates to taxes. The taxes le-
vied on different economic activities are specified. Regarding the financial area, reference interest rates and
the products offered on the Paraguayan financial market are indicated. Concerning foreign trade, the docu-
ment includes a chapter describing export and import regimes. Lastly, a summary is given of the main incenti-
ves offered to enterprises under special regimes designed to promote and accentuate Paraguay's export pro-
file.

xv
ABBREVIATIONS AND ACRONYMS

ADSL Asymmetric Digital Subscriber Line


AFD Development Finance Agency (Agencia Financiera de Desarrollo)
AFIDI Phytosanitary Import Accreditation (Acreditacin Fitosanitaria de Importacin)
ALADI Latin American Integration Association (Asociacin Latinoamericana de Integracin)
ANDE National Electricity Administration (Administracin Nacional de Electricidad)
ANNP National Authority for Navigation and Ports (Administracin Nacional de Navegacin y Puertos)
BCP Central Bank of Paraguay (Banco Central del Paraguay)
CAB Basic Environmental Questionnaire (Cuestionario Ambiental Bsico)
CADELPA Cotton Chamber of Paraguay (Cmara Algodonera del Paraguay)
CAMP Centre for Arbitration and Mediation of Paraguay (Centro de Arbitraje y Mediacin del Paraguay)
CAN Andean Community (Comunidad Andina de Naciones)
CAPADI Paraguayan Internet Chamber (Cmara Paraguaya de Internet)
CAPECO Paraguayan Chamber for Cereals and Oilseeds (Cmara Paraguaya de Cereales y Oleaginosas)
c.i.f. cost, insurance and freight
CMC Council of the Common Market
National Chamber of Commerce and Services of Paraguay (Cmara Nacional de Comercio y Servi-
CNCSP
cios de Paraguay)
National Board of Maquiladora Industries for Export (Consejo Nacional de Industrias Maquiladoras
CNIME
de Exportacin)
CONACYT National Council for Science and Technology (Consejo Nacional de Ciencia y Tecnologa)
CONATEL National Telecommunications Commission (Comisin Nacional de Telecomunicaciones)
COPACO S.A. Compaa Paraguaya de Comunicaciones S.A.
CPI Consumer Price Index
CTA Customs Procedure Centre (Centro de Trmites Aduaneros)
DGCE Directorate-General for Foreign Trade (Direccin General de Comercio Exterior)
Directorate-General for Statistics, Surveys and Censuses (Direccin General de Estadsticas, Encues-
DGEEC
tas y Censos)
DGGC Directorate-General for Major Contributors (Direccin General de Grandes Contribuyentes)
DGM Directorate-General for Migration (Direccin General de Migraciones)
DGPI Directorate-General for Intellectual Property (Direccin General de Propiedad Intelectual)
DGRP Directorate-General for Public Registers (Direccin General de Registros Pblicos)
Directorate-General for the Quality and Harmlessness of Products of Animal Origin (Direccin Ge-
DIGECIPOA
neral de Calidad e Inocuidad de productos de Origen Animal)
DINAC National Directorate of Civil Aviation (Direccin Nacional de Aeronutica Civil)

xvii
DINATRAN National Transport Directorate (Direccin Nacional de Transporte)
DNA National Customs Directorate (Direccin Nacional de Aduanas)
DRE Directorate for Special Regimes (Direccin de Regmenes Especiales)
EAP economically active population
EMS Express Mail Service
EPH Permanent Survey of Households (Encuesta Permanente de Hogares)
ERSSAN Regulatory Body for Public Health Services (Ente Regulador de Servicios Sanitarios)
ESSAP Empresa de Servicios Sanitarios del Paraguay S.A.
FEPAMA Wood Industry Federation of Paraguay (Federacin Paraguaya de Madereros)
f.o.b. free on board
FOCEM Structural Convergence Fund of MERCOSUR (Fondo de Convergencia Estructural del MERCOSUR)
G guaranies
GATT General Agreement on Tariffs and Trade
GDP gross domestic product
GSM Global System for Mobile Communications
GSP Generalized System of Preferences
ICT information and communications technologies
IDB Inter-American Development Bank
IMF International Monetary Fund
National Institute of Technology and Standardization (Instituto Nacional de Tecnologa y Normali-
INTN
zacin)
IPS Social Security Institute (Instituto de Previsin Social)
ISC excise tax (Impuesto Selectivo al Consumo)
ISIC International Standard Industrial Classification of All Economic Activities
ISO International Organization for Standardization
ITU International Telecommunication Union
kW-h kilowatt-hour(s)
MAG Ministry of Agriculture and Livestock (Ministerio de Agricultura y Ganadera)
MCC Millennium Challenge Corporation
MERCOSUR Southern Common Market (Mercado Comn del Sur)
MH Ministry of Finance (Ministerio de Hacienda)
MIC Ministry of Industry and Commerce (Ministerio de Industria y Comercio)
MJyT Ministry of Justice and Labour (Ministerio de Justicia y Trabajo)
MOPC Ministry of Public Works and Communications (Ministerio de Obras Pblicas y Comunicaciones)
MW-h megawatt-hour(s)
ONA National Accreditation Agency (Organismo Nacional de Acreditacin)
PETROPAR Petrleos del Paraguay
PROCAR Property Register Programme (Programa de Catastro Registral)
PTI-MD Technological Park Itaip - Margen Derecha (Parque Tecnolgico Itaip - Margen Derecha)

xviii
PYMES small and medium enterprises (pequeas y medianas empresas)
RAN National Regime for Motor Vehicles (Rgimen Automotor Nacional)
REDIEX Investment and Exports Network (Red de Inversiones y Exportaciones)
RUC Single Taxpayers' Register (Registro nico de Contribuyentes)
RUE Single Register for the Exporter (Registro nico del Exportador)
SEAM Secretariat of the Environment (Secretara del Ambiente)
SENACSA National Service for Animal Health and Quality (Servicio Nacional de Calidad y Salud Animal)
National Service for Plant and Seed Quality and Health (Servicio Nacional de Calidad y Sanidad Ve-
SENAVE
getal y de Semillas)
SET Taxation Division (Sub Secretaria de Estado de Tributacin)
SNC National Cadastre System (Sistema Nacional de Catastro)
System for the Fiscal Organization of Customs Levies (Sistema de Ordenamiento Fiscal de Impuestos
SOFIA
Aduaneros)
STP Technical Secretariat for Planning (Secretara Tcnica de Planificacin)
SUAE Unified System for the Opening of Businesses (Sistema Unificado de Apertura de Empresas)
UIP Paraguayan Industrial Union (Unin Industrial Paraguaya)
UNDP United Nations Development Programme
UNESCO United Nations Educational, Scientific and Cultural Organization
USAID United States Agency for International Development
UTEPI Technical Unit for Industrial Studies (Unidad Tcnica de Estudios para la Industria)
VAT value added tax
VUE Single Window for Exports (Ventanilla nica de Exportacin)
WTO World Trade Organization
ZFI International Free Trade Zone (Zona Franca Internacional)

xix
.
CHAPTER 1 Issues of interest to the investor

T
he Paraguayan economy has shown positive results in the last four years and the prospects for 2007 are
encouraging. This constitutes a favourable setting for attracting investment and for successful
business activities.

This first chapter presents Paraguays main characteristics and its macroeconomic indicators, obtained from
the official institutions responsible for preparing them.

1.1. General information about Paraguay

Paraguay is situated in South America, sharing borders with Brazil, Bolivia and Argentina and having an area
of 406,752 km2. The river Paraguay divides the country into two regions: the Eastern and Western Regions.

Paraguay is blessed with abundant water resources, as it forms part of the Guaran Aquiferous System, consi-
dered the largest freshwater reserve in the world. In addition, the numerous rivers that traverse the country
make its soil very suitable for the cultivation of various products, some of them exportable, such as soya, co-
tton, etc.

The copious waters of the river Paran provide the country with abundant hydroelectric energy, produced at
the binational Itaip and Yacyreta power stations and at the national Acaray plant.

Paraguay has various sites of natural and historical interest, such as the Jesuit ruins of Jess and Trinidad, de-
clared world heritage sites in 1993 by the United Nations Educational, Scientific and Cultural Organization
(UNESCO). The hydroelectric dams, the numerous national parks, ranch tourism and many other attrac-
tions bring large numbers of tourists to the country every year.

Paraguay is a nation with an identity of its own, having two official languages, Spanish and Guarani, and its
customs are deeply rooted in the population, the majority of whom are young, as is shown in diagram 1. The-
re is consequently abundant labour available in Paraguay.

GENERAL INFORMATION OF PARAGUAY


Location: South America (shares borders with Brazil, Bolivia and Argentina)
Capital: Asuncin
Area: 406,752 km2
Population:* 6,119,642
Official languages: Spanish and Guarani
Currency: Guaran
Gross domestic product (GDP) per capita, 2007 forecast (current US Dollars)** 1,858
* Forecast for 2007 by the Directorate-General for Statistics, Surveys and Censuses (DGEEC).
** Forecast by the Ministry of Finance (MH).

1
Doing Business in Paraguay: Country Cost Elements

Diagram 1: Population of Paraguay by age group, forecast for 2007

80+

70-74

60-64

50-54
Age group

40-44

30-34

20-24

10-14

0-4

- 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000

Population

Source: Technical Secretariat for Planning (STP)/Directorate-General for Statistics, Surveys and Censuses.

1.2. Economic environment1


According to official forecasts, economic growth in Paraguay for 2007 will be 4.5%. If this prediction proves
correct, it will be the fifth consecutive year with positive results, encouraging a climate of optimism and eco-
nomic stability.

These results are supported by the dynamic nature of domestic demand, which is the result of the increase in
investment and in levels of public and private consumption, and also by growing external demand, which has
led to an increase in Paraguayan meat exports.

Diagram 2: Changes over time in the gross domestic product, 2000-2007

4
(constant 1994 dollars)

3
Percentage variation

0
2001 2002 2003 2004 2005 2006* 2007**

-1

* Preliminary figures.
** Forecasts.
Source: Central Bank of Paraguay (BCP).

1 The data were taken from official statistics of the Central Bank of Paraguay.

2
Chapter 1. Issues of interest to the investor

In constant terms, the GDP of Paraguay increased from USUS$8,228 million in 2005 to USUS$8,560 million
in 2006, the most dynamic sectors being animal production, services and manufacturing industries.

In 2004, the rate of real growth of GDP was 4.1%, the highest since 2001. This was a consequence of the reco-
very of important meat markets and the good performance of the crop-farming sector, supported by the in-
crease in international prices.

As can be seen from diagram 3, the sectors with the highest shares in the economy of Paraguay are commerce,
crop production, government services and animal production.

Diagram 3: Structure of the Paraguayan economy in 2006

C OCommerce
M ER C IO 20.4
A Crop
G R ICproduction
ULTUR A 17.9
SER VC IO S G UBGovernment
ER N A M ENservices
TA LES 7.5
Animal
G A Nproduction
A D ER IA 7.1
Others
O TR OS 6.5
SER VIC Services
IO S A H Ofor
GAhomes
R ES 6.3
TR A N SPTransport
O R TES 4.5
Communications
C O M UN IC A C IO N ES 4.2
Construction
C O N STR UC C IO N 3.9
P R O D UC C IOMeat
N D Eproduction
CARNE 3.3
SER VIC IO SServices
A LA S for
EMenterprises
P R ESA S 2.8
Textiles
TEXTILES Y P R EN D A S Dand clothing
E VESTI R 2.5
Financial
O N FIN Abrokerage
IN TER M ED IA C I N C IER A 2.3
BBeverages
EB ID A S Yand
TAtobacco
BACO 2.1
FO RForestry
ESTA L 2.1
Letting
LER D and
A LQ UI E VIdwellings
VIEN D A 2.0
Electricity
ELEC TR IC ID A D and
Y A water
G UA 2.0
R ESTA URRestaurants
A N TES Y Hand hotels
O TELES 1.2
FA B .D E P R O DManuf.
UC TONon
S N metallic
O M ETAproducts
LIC O S 1.1

0 5 10 15 20 25
Share in GDP (%)

Source: BCP.

It may be said that the positive growth of the Paraguayan economy in recent years has been due to the good
performance of the services (mainly telecommunications), animal production and manufacturing sectors.
In addition, crop production has benefited from the increase in international prices and favourable climatic
factors.

Inflation, for its part, fell from 14.6% in 2002 to 2.8% in 2004. In 2005 and 2006, however, inflation increa-
sed again, reaching 9.9% and 12.5% respectively. According to the preliminary economic report for 2006 of
the Central Bank of Paraguay, inflation has resulted primarily from the increases recorded in the volatile
items of the Consumer Price Index (CPI) basket, which have been affected by a commercial policy seeking to
encourage local production in order to bring about self-sufficiency in the short and medium term. In October
2007, cumulative inflation reached 7%, mainly as a result of trends in the prices of foodstuffs, affected by ex-
ternal factors including, inter alia, the costs of agricultural inputs.

Based on a weighted average of private banks, the real active interest rate for loans in foreign currency de-
creased from 9.94% in 2002 to 8.29% in September 2007; for loans in national currency, the rate fell from
34.22% in 2002 to 18.44% in September 2007, representing a significant decrease. This trend may be due to
various factors such as the lowering of interest rates worldwide, the appearance of alternative credit possibi-
lities and greater liquidity in the market.

3
Doing Business in Paraguay: Country Cost Elements

Diagram 4: Inflation and interest rates

40% Inflation
Interest rate, foreign currency
35% Interest rate, national currency

30%

25%

20%

15%

10%

5%

0%
2002 2003 2004 2005 2006 2007*

* Cumulative inflation as at October 2007 and interest rates in September 2007.


Source: BCP.

Diagram 5 shows that, from January 2006 to September 2007, the guaran appreciated vis--vis the dollar. It
should be stressed, however, that the United States currency has been losing value in relation to many other
currencies.

Diagram 5: Average monthly exchange rate

6,500

6,000
Guaranes/Dollars

5,500

5,000

4,500

4,000
Ene-06 Feb-06 Mar-06 Abr-06 May-06 Jun-06 Jul-06 Ago-06 Sep-06 Oct-06 Nov-06 Dic-06 Ene-07 Feb-07 Mar-07 Abr-07 May-07 Jun-07 Jul-07 Ago-07 Sep-07

Source: BCP.

One of the commitments of the present Paraguayan Government is to lower the external debt. Between the
end of 2003 and May 2007, the outstanding debt was reduced from US$2,478 million to US$2,174 million,
representing a decrease of 12.3%, and it is hoped that this trend can be continued. If so, net international re-
serves, which are currently at levels close to the level of the external debt, could come in the medium term to
exceed it, putting Paraguay in a better position to comply with its contracted obligations. At the present time
the external debt represents 24.1% of Paraguays GDP (diagram 6).

4
Chapter 1. Issues of interest to the investor

Diagram 6: Outstanding external debt as a percentage of the gross domestic product

35%

30%
Debt as percentage of GDP

25%

20%

15%

10%

5%

0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007*

* Preliminary estimate.
Source: Ministry of Finance.

In the year 2004, the Law on Administrative Reorganization and Fiscal Adjustment was adopted, aimed at
the formalization of the economy, improved competitiveness, more equity in the tax burden and incentives
for investment.2

Box 1: Macroeconomic forecasts for 2007

The Ministry of Finance and the Central Bank of Paraguay have made the following forecasts for 2007:

Real GDP growth 4.5%


Inflation (movement of CPI) 7.1%
Net international reserves (millions of US$) 2 015.0
Average nominal exchange rate (G/US$) 5 043.0
Nominal GDP (millions of US$) 11 402.5
Per capita GDP (current US$) 1 858.0

As may be seen, 2007 could be the fifth consecutive year in which the Paraguayan economy achieves positive results, which would
continue to promote a greater flow of foreign capital into the country.
It is important to note, however, that the increase in international monetary reserves, which went up from US$531.9 million in
July 2007 to US$2,150 million in June 2007, was partly due to momentary factors such as the reduction of the interest rate, the
flow of remittances, the good year enjoyed by soya producers, etc

1.3. The Paraguayan industrial sector


Between the years 2003 and 2006, the Paraguayan industrial sector showed an average growth of 2.9%. Ma-
nufactured exports, for their part, increased at a rate of 11.4% between the years 2000 and 2005. During this
period, the most important role was played by medium- and high-technology products, exports of which in-
creased at rates of 33% and 26% respectively.

Table 1 shows manufactured exports per capita for all Latin American countries. As may be seen, Paraguay
ranked fifteenth in 2005, moving up one place in relation to the year 2000. At the same time, whereas manu-
2 See chapter 11, Taxes.

5
Doing Business in Paraguay: Country Cost Elements

factured exports of Paraguay per inhabitant came to US$76.4 in 2005, the average for the region was
US$374.2.

Table 1: Manufactured exports per capita, 2000-2005


Ranking Current US Dollars per capita
Country
2005 2000 2005 2000
1 1 Mexico 1 693.8 1 465.7
2 2 Costa Rica 1 242.8 1 020.1
3 3 Chile 1 217.6 570.5
4 6 Argentina 570.9 367.4
5 7 Brazil 459.9 242.9
6 5 Uruguay 458.4 374.8
7 10 Guatemala 304.1 117.4
8 11 Peru 299.5 99.9
9 9 Colombia 216.3 130.5
10 4 Venezuela 196.2 470.0
11 8 El Salvador 179.6 144.4
12 14 Ecuador 149.5 90.6
13 15 Honduras 144.1 58.6
14 13 Bolivia 97.6 98.3
15 16 Paraguay 76.4 54.3
16 12 Panama 65.3 99.5
17 17 Nicaragua 51.2 30.0
Note: The data for El Salvador correspond to the year 2004.
Source: United Nations Commodity Trade Statistics Database (UN Comtrade).

The destinations of many Paraguayan manufactured exports are concentrated in the region, mainly in the
countries of the Southern Common Market (MERCOSUR). In 2006, 69% of Paraguayan manufactured ex-
ports went to Latin America and 64.2% to the MERCOSUR countries. Further away, other important destina-
tions for manufactured exports from Paraguay are the United States of America, which accounts for 10.51%,
Italy (3.54%) and China (2.86%).

Manufactured exports represent 29% of total exports from Paraguay, the most important being products ba-
sed on natural resources, followed by low-technology products, medium-technology products and, lastly,
high-technology products.

1.4. Domestic and foreign investment


The Government of Paraguay, through the Ministry of Industry and Commerce, has been making efforts to
attract greater flows of investment to the country, both domestic and foreign. In this context, there are special
regimes which the investor can take advantage of, such as that provided by Law 60/90 on the System of Fiscal
Incentives for the Investment of Domestic and Foreign Capital, the Maquiladora Regime, the National Regi-
me for Motor vehicles and the Regime for the Importation of Raw Materials and Inputs.3

3 For more details on these regimes, see chapter 14 concerning systems of incentives for investment and exports.

6
Chapter 1. Issues of interest to the investor

According to the national accounts published by the Central Bank of Paraguay, between 1996 and 2006 do-
mestic investment (measured by gross fixed capital formation) reached its highest level in 1997 and, from
then on, decreased until 2002. Since 2003, however, domestic investment has shown an upward trend (dia-
gram 7).

Diagram 7: Domestic investment and net flows of foreign direct investment

400 2,500
Foreign direct investment
Domestic investment
350
Foreign direct investment (million dollars)

2,000

Domestic investment (million dollars)


300

250
1,500

200

1,000
150

100
500

50

0 0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006*

*Preliminary figures.
Source: BCP.

In 2006, according to estimates by the Central Bank of Paraguay, net flows of foreign direct investment in-
creased substantially. As can be seen in diagram 7, foreign direct investment went up from US$5.6 million in
2002 to approximately US$103 million in 2006. The main destinations of foreign direct investment were the
food and beverages sector, chemical industries and telecommunications.

7
.
CHAPTER 2 Incorporation of companies

E
nterprises may be divided into two types: there are single-owner businesses and there are companies,
with two or more partners. In this chapter we shall consider companies and the procedures required
for their legal incorporation.

2.1. Institutional relationship and regulatory framework

The incorporation of companies is subject to the Civil Code, Law 438/94 on Cooperatives and Law 117/93 on
Capital and Industry; the legislation recognizes ten types of companies, detailed in table 2.

Table 2: Types of companies


Types of companies Number of partners Form of capital contribution
Simple partnership Two or more Cash and/or kind
General partnership Two or more Cash and/or kind
Simple commandite (sociedad en comandita simple) Two or more Cash and/or kind
General partners
Limited partners
Partnership limited by shares (sociedad en comandita por acciones) Two or more Shares
General partners
Limited partners
Cooperative society 20 or more Contribution certificates
Capital-and-industry partnership Two or more Business capital and labour, knowledge or skill
Private limited company (sociedad de responsabilidad limitada) Two to twenty-five Corporate shares (cuotas sociales)
Open company (sociedad annima) Two or more Shares
Source: Paraguayan Civil Code, Law 438/94 on Cooperatives and Law 117/93 on Capital and Industry.

The articles of association must be transcribed by a notary public, then presented to a judge for civil matters
under the auspices of a lawyer and, when the judge so authorizes, registered with the Directorate-General for
Public Registers, a dependency of the judicial branch of government, with a view to obtaining the necessary
legal personality.

2.2. Processes of incorporation, registration and monitoring

2.2.1. Modernization and technological development

As from 2007, efforts have begun to accelerate the procedures for starting up an enterprise. For this purpose,
the Unified System for the Opening of Businesses (SUAE) has been established; the aim is to facilitate and

9
Doing Business in Paraguay: Country Cost Elements

simplify the process of incorporation of enterprises and make it less bureaucratic. This System is being deve-
loped within the framework on an inter-agency agreement which receives support under the Umbral Pro-
gramme.4

In its first stage, SUAE seeks to reduce the time, cost and number of steps needed for the incorporation of an
enterprise. In a second stage, it is planned to modify the legal aspects in order to simplify requirements and
procedures. SUAE also has an online service for following up the status of registration of the enterprise, avai-
lable through its website or through the website of the Ministry of Industry and Commerce.5

Box 2: Goals, achievements and services of the Unified System for the Opening of Businesses

Below are shown the goals that were set when SUAE was established and achievements up to June 2007. As may be seen, the time
that it takes to start up an enterprise has gone down from 74 to 25 working days, on average.
Goals for the first stage:
Reducing enterprise start-up time from 74 to 36 working days.
Reducing the number of steps from 17 to 9.
Reducing the cost per registration from US$725 to US$250.
Achievements up to the present date:
Time required for the start-up of an enterprise: 25 working days on average (it may take less).
Number of steps required: six.
Average cost per registration: US$80 (following the methodology used by the World Bank).
Services:
Entry in the Register of Legal Entities.
Entry in the Public Mercantile Register.
Certification of Registration and of Entry in the Single Taxpayers Register (RUC).
Certification of Worker and Employer Registration with the Social Security Institute.
Certification of Employer Registration with the Ministry of Justice and Labour.
Approval of the premises.
Commercial licence.
Source: http://suae.mic.gov.py.

2.2.2. Approval and registration through the Unified System for the Opening of
Businesses

SUAE, a system developed by the Ministry of Industry and Commerce, centralizes all the procedures for the
start-up of an enterprise, thus reducing the cost of the process both in terms of money and time.

There are six institutions in which the procedures for the legal initiation of an enterprise have to be carried
out. Table 3 details these institutions and the procedures to be carried out in each one.

At the present time, SUAE includes only the services of the Municipality of Asuncin. Consequently, if the in-
vestor wishes to set up a business in another locality, the procedures must take place in the corresponding
municipality. The procedure involves obtaining approval of the premises and the business licence.

4 The Umbral Programme has been designed by the Government of Paraguay, is sponsored by the Millennium Challenge Corporation (MCC), implemented by the Presidential
Council for Modernization of Public Administration and administered financially by the United States Agency for International Development (USAID). Among its activity areas,
the Programme provides for the design and implementation of 1-stop shops user support centres to facilitate the legal incorporation of enterprises.
5 http://suae.mic.gov.py (http://www.mic.gov.py).

10
Chapter 2. Incorporation of companies

Table 3: Registration of enterprises through the Unified System for the Opening of Businesses
Steps Instructions Services Cost (Guaranes)
Registration of legal entities
1 Directorate-General for Public Registers 46,916
Entry in the Public Mercantile Register
2 Ministry of Justice and Labour (MJyT)* Certification of Employer Registration with MJyT 1,000
3 Ministry of Finance Certification of Registration and of RUC Entry
Certification of Worker and Employer Registration with the Free of charge
4 Social Security Institute
Social Security Institute
Approval of the premises
5 Municipality of Asuncin** 10,200
Business licence
6 Directorate-General for Migration (DGM)*** Residence visa 365,940
Summary
Total Guaranes**** 424,056
Total US Dollars**** 80
Approximate time 25 days
* The cost is G1,000 per form.
** The cost in the municipalities varies, depending on the locality in which investment is desired.
*** Applies only to foreign investors.
**** The amount in guaranes is calculated by UTEPI and the amount in US Dollars is the average cost calculated by SUAE.
Source: SUAE.

Investors who are foreign nationals must obtain residence visas, which are issued by the Directorate-General
for Migration.

The following sections discuss the procedures for registration in the public register, and for obtaining immi-
grant visas and business licences. These procedures can be complied with through SUAE.

2.2.2.1. Registration with the Directorate-General for Public Registers

The Directorate-General for Public Registers (DGRP), which comes under the judicial branch, is responsible
for granting enterprises legal personality. The necessary steps are the following.

First, a public document containing the articles of association of the enterprise must be transcribed by a no-
tary public. The cost of this procedure is specified in Law 1.307/87 on the Fees of Notaries Public and descri-
bed in section 2.2.3 below.

When the public document has been drawn up, it is presented to a court for civil matters so that its registra-
tion with DGRP can be approved.

Within DGRP, the enterprise is entered in the Public Register of Legal Entities, after verification that the name
adopted by it is available. Finally, the enterprise or company is given legal personality, which enables it to
commence its activities.

Table 4 shows the requirements for registration of the different types of commercial companies.

The requirements for single-owner businesses and single-owner limited liability companies (EIRL) are diffe-
rent. Table 5 shows the costs for forms and the corresponding rates.

11
Doing Business in Paraguay: Country Cost Elements

Table 4: Requirements for the registration of commercial companies


Costs
Requirements
Guaranes US Dollars
Sworn statement form for registration 3,000 0.60
Form for judicial proceedings concerning registration 5,000 1.00
Proceedings fee 18,766 3.74
Fee for entry in the Register of Legal Entities 23,458 4.68
Fee for entry in the Public Mercantile Register 23,458 4.68
Special fee for entry in the Public Mercantile Register 18,766 3.74
Total 92,448 18.45
Source: SUAE.

Table 5: Requirements for the registration of single-owner businesses and single-owner limited liability companies
Costs
Requirements
Guaranes US Dollars
Form for registration 5,000 1.00
Proceedings fee 18,766 3.74
Judicial fee for entry in the Public Mercantile Register 18,766 3.74
Special fee for entry in the Public Mercantile Register 23,458 4.68
Total 68,990 13.76
Source: SUAE.

2.2.2.2. Immigrant visas

The granting of visas for immigrants is the responsibility of the Directorate-General for Migration, which re-
ports to the Ministry of the Interior.

Table 6 sets out the relevant scale of tariffs, established by Executive Decree No. 7,402 of 26 April 2006.

Table 6: Tariffs for immigration visas


Category Guaranes US Dollars
Permanent residence 406,600 81.13
Temporary residence 365,940 73.81
Change of occupation 203,300 40.56
Change of category 406,600 81.13
Certificate of settlement 81,320 16.23
Certificate of return 81,320 16.23
Certificate for customs purposes 81,320 16.23
Fine (art. 32), Regulatory Decree No. 1,8295/97 328,405 65.52
Source: Directorate-General for Migration.

2.2.2.3. Business licences

The business licence is one of the requirements for the commencement of commercial activities and its issue
is the responsibility of the municipality where the trade premises are located.

12
Chapter 2. Incorporation of companies

The Municipality of Asuncin has its own by-law establishing a taxation system; the other municipalities of
Paraguay (referred to as the municipalities of the interior) are governed by Law 620/76 and its amendments
in Law 135/91.

Table 7 gives the scales for the payment of the charge for the business licence in Asuncin and in the other mu-
nicipalities. The licence charge is made up of a percentage of the amount of total assets declared by the enter-
prise and a basic tax, which also depends on the amount of the assets.

Table 7: Business licence charges


Asuncin
Total assets
Basic tax Percentage of
Guaranes US Dollars
total assets
Lower limit Upper limit Lower limit Upper limit Guaranes US Dollars
0 100,000 0 20 2,300 0.5 0.00%
100,001 500,000 20 100 2,300 0.5 0.85%
500,001 1,000,000 100 200 5,700 1 0.80%
1,000,001 5,000,000 200 998 9,700 2 0.55%
5,000,001 10,000,000 998 1,995 31,700 6 0.40%
10,000,001 50,000,000 1,995 9,976 51,700 10 0.28%
50,000,001 100,000,000 9,976 19,952 163,700 33 0.22%
100,000,001 300,000,000 19,952 59,856 273,700 55 0.20%
300,000,001 500,000,000 59,856 99,761 673,700 134 0.18%
500,000,001 1,000,000,000 99,761 199,521 1,033,700 206 0.15%
1,000,000,001 1,500,000,000 199,521 299,282 1,783,700 356 0.13%
1,500,000,001 2,000,000,000 299,282 399,042 2,433,700 486 0.10%
2,000,000,001 2,500,000,000 399,042 498,803 2,933,700 585 0.08%
2,500,000,001 Upwards 498,803 Upwards 3,333,700 665 0.05%
Interior of Paraguay
1,000,000 1,000,001 200 200 13,800 3 0.00%
1,000,001 3,000,000 200 599 13,800 3 0.85%
3,000,001 6,000,000 599 1,197 34,200 7 0.80%
6,000,001 30,000,000 1,197 5,986 58,200 12 0.55%
30,000,001 60,000,000 5,986 11,971 190,200 38 0.40%
60,000,001 300,000,000 11,971 59,856 310,200 62 0.28%
300,000,001 600,000,000 59,856 119,713 982,200 196 0.22%
600,000,001 1,800,000,000 119,713 359,138 1,642,200 328 0.20%
1,800,000,000 3,000,000,000 359,138 598,563 4,024,200 803 0.18%
3,000,000,001 6,000,000,000 598,563 1,197,127 6,202,200 1,237 0.15%
6,000,000,001 9,000,000,000 1,197,127 1,795,690 10,702,200 2,135 0.13%
9,000,000,001 12,000,000,000 1,795,690 2,394,254 14,602,200 2,913 0.10%
12,000,000,001 15,000,000,000 2,394,254 2,992,817 17,602,200 3,512 0.08%
15,000,000,001 Upwards 2,992,817 Upwards 20,002,200 3,991 0.05%
Sources: Asuncin Ordinance No. 331/06, Law 620/76 and Law 135/91.

2.2.3. Fees of notaries public

The fees charged by notaries public are established in Law 1,307/87 on the Fees of the Notaries Public. Table
8 shows the most important rates from the point of view of an investor.

13
Doing Business in Paraguay: Country Cost Elements

Table 8: Fees of notaries public


Value of the legal documents Tariff
Up to G1,000,000 Five times the minimum daily wage*
Over G1,000,000 2% of the value of the legal documents
Above G50,000 000 1.75% of the value of the documents
Above G75,000,000 1.50% of the value of the documents
Above G100,000,000 1.25% of the value of the documents
Above G150,000,000 1.00% of the value of the documents
Above G200,000,000 0.75% of the value of the documents
Other items
For the transcription of the articles of association Ten minimum wages
Administrative expenses Five minimum wages
Drafting of articles of association 20% on what is calculated for the legal documents
* At the present time, the minimum daily wage is G51,607.
Source: Law 1,307/87 on the Fees of Notaries Public.

The determination of the amount of the fee for each public document is based on: (a) the price of the object;
(b) the value assigned to the object by the parties; (c) the amount of a loan or total value of an obligation; (d)
the value or total cost of a contract; and (e) the capital authorized, subscribed, paid in, issued, increased, re-
duced, liquidated or withdrawn.

2.2.4. Services, monitoring and auditing

It is for the law courts to settle legal disputes in which a company may be involved.

As from 2002, under Law 1,879, the Centre for Arbitration and Mediation of Paraguay (CAMP) was set up un-
der the National Chamber of Commerce and Services of Paraguay (CNCSP). The purpose of this Centre is to
promote, in institutionalized form, the application of alternative, extrajudicial methods for the solution of
disputes in companies.

Finally, the Directorate-General for Taxation Monitoring, under the Taxation Division (SET), is responsible
for monitoring compliance with tax obligations, apart from those under the supervision of the Directorate-
General for Major Contributors (DGGC).

2.3. Environmental licences and certificates


Under Law 293/93 on Environmental Impact Assessment and other legislation in force, all projects that
affect the environment (i.e., that affect life in general, biodiversity and the quality or utilization of natural or
environmental resources, or require a significant quantity of such resources) are obliged to undertake an
evaluation of their environmental impact.

The Secretariat of the Environment (SEAM) is in charge of the coordination, supervision and implementa-
tion of environmental measures, and for ecological and environmental management in general. Thus this
agency executes and regulates environmental policy and is the body responsible for issuing the Environmen-
tal Impact Statement. This Statement, which must be issued for all projects involving possible damage to the

14
Chapter 2. Incorporation of companies

environment, constitutes a licence for beginning or continuing the work or activity in question. In addition,
this document is an indispensable requisite for obtaining subsidies or tax exemptions and for taking advanta-
ge of the various special regimes offered by the Paraguayan Government.

Table 9 shows the costs of the requirements for obtaining an Environmental Impact Statement. The normal
process is as follows. The Basic Environmental Questionnaire (CAB) is obtained and must be completed by
an environmental consultant accredited by SEAM.6 The CAB is then submitted along with the Municipal Lo-
cation Certificate and, if the project is located outside the capital, the no-objection certificate from the Office
of the Governor of the corresponding department.7

Table 9: Requirements for obtaining the Environmental Impact Statement


Costs
Requirements
Guaranes US Dollars
Basic Environmental Questionnaire 375,000 74.82
Notarized copy of the title deed 46,915 9.36
Municipal Location Certificate 72,350 14.44
No-objection certificate from the departmental Governors Officel free of charge free of charge
Photocopy of the identity card of the proponent 400 0.08
Collection of the environmental decision 70,372 14.04
Environmental consultant Depending on nature of project Depending on nature of project
Source: SEAM.

Within a maximum period of 30 days from the submission of these documents, SEAM will rule as to whether
or not it is necessary for an environmental impact assessment to be carried out. If such an assessment is neces-
sary, the investor must cover the costs set out in table 10.

Table 10: Additional environmental impact studies


Costs
Requirements
Guaranes US Dollars
Environmental impact study* 70,372 14.04
Environmental management plan* 70,372 14.04
Study on effluent disposal* 70,372 14.04
Environmental consultant** Depending on nature of project Depending on nature of project
* These payments cover the submission of these documents, but not the study carried out by the environmental consultant and SEAM experts.
** Some indicative prices are between US$400 and US$2,000.
Source: SEAM.

It should be noted that the Directorate for Technical Matters Concerning the Environment, attached to the
Ministry of Industry and Commerce, provides information and guidance on environmental regulations in
force to industrialists, investors and consultants, and advises them on adjusting their projects to these requi-
rements.

6 The list of environmental consultants accredited by SEAM will be found on its website: www.seam.gov.py.
7 The majority of the 17 Governors Offices in Paraguay issue the certificate free of charge, and the others charge a very low fee.

15
Doing Business in Paraguay: Country Cost Elements

2.4. Industrial registration


For purposes of the registration of industrial enterprises, the Ministry of Industry and Commerce, in its Reso-
lution No. 228/07, has established that industrial activities are understood to mean the transformation, in
essence and/or form, of raw materials or other materials into new products, including assembly activities,
and that an industrial establishment is an economic unit which, coming under a single legal entity, devotes
itself exclusively or principally to a category of industrial activity at a single location. The object of the regis-
ter is to provide basic information on industrial activities for purposes of formulating national industrial po-
licy.

The Directorate for Industrial Registration, depending on the Ministry of Industry and Commerce, is the or-
gan in charge of issuing industrial registration certificates, which are necessary so that industrial enterprises
of any kind can take advantage of the tax benefits and incentives for investment offered by the Paraguayan
Government.8 If the project is in its initial stage, the enterprise receives a provisional certificate, valid for six
months, and the certificate valid for three years is issued to it subsequently.

Table 11: Requirements for obtaining industrial registration


Costs
Requirements
Guaranes US Dollars
Request for renewal or registration Free of charge Free of charge
Industrial registration form Free of charge Free of charge
Authenticated photocopies of: RUC registration, identity card of the responsible officer, articles of
association, title deed or rental contract, balance sheets, municipal licence and receipt of payment of Free of charge Free of charge
the technical verification fee
Environmental licence and photographs of the industrial establishment Free of charge Free of charge
Technical verification fee 200,000 39.90
Source: Directorate for Industrial Registration.

The process for obtaining industrial registration is the following: the Directorate for Industrial Registration
receives all the required documents, following which an expert appointed by the Ministry of Industry and
Commerce carries out a technical check of the establishment and, finally, once a decision has been taken, the
industrial registration certificate is issued. The average time needed for these procedures is one week. At the
present time, the Industrial Register is being digitalized and this will allow the documents necessary for ob-
taining industrial registration to be submitted via the Internet.

8 See chapter 14 concerning systems of incentives for investment and exports.

16
CHAPTER 3 Industrial land and property
rental costs

3.1. Industrial parks

F
actories may be erected in cities or on their peripheries, but development poles facilitate the
formation of production clusters. This leads to the concept of the industrial park, which offers an
appropriate infrastructure for the development of industrial activities.

These parks, besides promoting development in the area in which they are situated, encourage the relocation
of industry from highly urbanized areas and the grouping of factories so that synergies can be created among
them.

Industrial parks, in which industrial activities are established with their sites and infrastructure determined
in advance, provide common services for these activities. In general, such parks offer certain minimum con-
ditions such as: reinforced internal streets, illumination of streets and approaches, sewerage and storm dra-
ins and basic services.

Another advantage offered by these areas is the lower cost of land, infrastructure and common services,
which are centralized. Mention may also be made of greater reliability in the supply of electricity, drinking
water and telecommunications. It should be stressed, in addition, that there is more effective environmental
control in industrial parks.

3.1.1. Technological Park Itaip

In June 2006, the Technological Park Itaip was started up, with the aim of promoting the economic and so-
cial development of Paraguay through the practical application of scientific and technical knowledge.

The Technological Park Itaip Margen Derecha (PTI-MD) includes an industrial park of 54 hectares, situa-
ted in the area that housed the workers during the construction of the Itaip Hydroelectric Power Station.9
This area has been overhauled and is awaiting investment under the comodato10 system in the establishment
of industrial activities on the site, using or altering what exists or erecting new premises.

There is also a site with an area of 154 hectares in the town of Hernandarias. Although there are no construc-
ted premises here, it is ready for the establishment of industrial activities of any kind, using the comodato sys-
tem.

The industrial park situated in PTI-MD also benefits from the experience of other organizations established
on the site, such as the Industrial Incubator and the Technological Research Centres. Apart from these orga-
nizations, PTI-MD can boast of seven organizational units, programmes for cooperation between universi-

9 See box 3, Potential of the Paraguayan hydroelectric sector.


10 The comodato is a contract under which one party makes available an object or movable or immovable property, free of charge, for the other partys use. The user, who acqui-
res possession but not ownership of the property, must return it when its use ends.

17
Doing Business in Paraguay: Country Cost Elements

ties and enterprises, telecentres for making available information and communications technologies (ICT)
to the Paraguayan population, the Environment Unit and a cultural centre.

The industrial park offers all basic services: electricity, drinking water and access to telephone lines.

In spite of the short time in which PTI-MD has been operating, several enterprises have already started busi-
ness. Noteworthy in the Industrial Incubator are two companies producing machinery and developing re-
search processes with a view to improved production of biodiesel, and an enterprise that develops software.
In the Enterprise Centre there are three companies engaged respectively in the production of motorcycles
and three-wheeler vans, motor vehicle parts and textiles. Two further companies are engaged in the final
procedures for starting up operations; they will be devoted to the production of satchels, handbags and suit-
cases and of computer and telecommunication products.

The main achievements of PTI-MD are the attraction and establishment of direct productive investment and
the development of new high-technology industrial sectors.

3.1.2. Taiwan Industrial Park

The Taiwan Industrial Park is situated in the department of Alto Paran, 23 kilometres from Ciudad del Este
and only 5 kilometres from Guaran International Airport, located in the town of Minga Guaz. The park co-
vers an area of 40 hectares and, in view of its proximity to Ciudad del Este and the commercial zone integra-
ted with MERCOSUR, is strategically situated, which represents a big advantage for commercial investment.

It should be stressed that, in the near future, a Consultation Centre will be established to help investors solve
their problems and concerns. Industrial and commercial advice will also be offered and the investors will ha-
ve at hand the tools for taking advantage of the incentives offered by the Ministry of Industry and Commerce.
The rate of occupation of the park is 36%, which means that 64% of the park is available for new investment.

At the present time three enterprises are operating, devoted to the production of fishing articles, tape for
packaging, and stuffed animals and toys, respectively, and employing about 200 workers. These same com-
panies have already submitted expansion projects for an approximate amount of US$5 million which, if im-
plemented, will allow the creation of 300 new jobs in the period 2007-2008.

Apart from the excellent rental prices offered in the park, in 2007 and 2008 all investors setting up operations
will be exempt from rental payment, and in 2009 and 2010 rebates of 50% are envisaged. After this period,
the rent will be US$0.625 (G3,133) a month per square metre. Plots of different sizes can be rented, depen-
ding on the investors needs. The possibility of selling the lots is currently under study.

The park is totally walled and urbanized and equipped with sanitary systems, drinking water, a permanent
security service, electricity with the parks own substation, asphalted streets, green areas and recreation
areas. In addition, all the lots have communication and fire prevention systems. Condominium maintenance
charges are US$0.1 (G500) per square metre a month.

18
3.1.3. Avay Industrial Park

The Avay Industrial Park is situated in the town of Villeta, 35 kilometres from Asuncin and 1,500 metres
from the port of Villeta, one of Paraguays main port terminals. The area of the park is 350 hectares.

The administration offers sewerage and storm drains, drinking water and fixed telephone lines. There are al-
so completely asphalted streets, a permanent security service, a porters lodge service and a substation of the
National Electricity Administration, ensuring a reliable and secure electricity supply for all users. There is a
firefighting vehicle to deal with fires.

The average purchase price of the sites is around US$7 (G35,084) per square metre, but the price varies de-
pending on the capacity occupied and the proximity of the plot to the access gates and to the river Paraguay,
which flows alongside the park. Instalments may be payable monthly or yearly, as stated in the contract. The
minimum size of a site, according to the internal regulations of the park, is half a hectare; no upper limit has
been established.

The charges for maintenance and security to be paid monthly by users depend on the area of the plot and the
buildings on it. However, the average charge per hectare is US$173.16 (G867,900).

There are 10 industrial undertakings operating in the park at the present time, engaged in the manufacture
of chemical products and agrochemicals; two grain silos have also been set up, and there are enterprises pro-
ducing spurge oil and paper bags and recycling plastics.

3.1.4. MERCOSUR Park

The MERCOSUR Industrial Park is strategically situated on the International Highway, 9 kilometres from the
centre of Ciudad del Este and a similar distance from the citys port. The site has an area of 30 hectares, with
20 hectares already built on and construction in process on the other 10. The purchase price for a shed of 800
m2 is US$70,000 (G350,840,000) i.e., US$87.5 (G438,550) per square metre. The sheds are standardized
models and do not include offices. For the maintenance of each shed of 800 m2 (refuse collection and general
maintenance), US$186.55 (G935,000) is paid per month.

The complex offers: permanent security, a porters lodge service, drinking water, electricity (the administra-
tion is responsible for complete external lighting) and telephone lines.

In this park, 60 enterprises of different sectors and sizes are operating: 8 industrial enterprises, 15 importing
firms, 10 distributors and 27 warehouses.

3.2. Property taxes

The urban and rural property tax system is governed by Law 125/91, in the section relating to taxes on immo-
vable property, and by Decree 14,956/92, which defines the technical rules for the establishment and upda-
ting of the property register.

The National Cadastre Service (SNC), coming under the Ministry of Finance, is responsible for keeping an
official register of all immovable property in Paraguay.

19
At the present time SNC is implementing the Property Register Programme (PROCAR) with financing from
the Inter-American Development Bank (IADB) in an amount US$9 million, with US$1 million as local coun-
terpart funds. Among the aims of the programme are to provide an appropriate legal framework for the esta-
blishment of the property register and to convert to digital format all the archives of the Directorate-General
for Public Registers.

The Tax on Immovable Property is payable annually and is collected by the municipality where the piece of
land subject to tax is situated.11 Both natural and legal persons may be liable to tax.

The taxable base of the Tax on Immovable Property is provided by the assessed value established by SNC, ta-
king into account factors such as the purpose for which the lot is being used, the area covered by buildings
and the public utilities available. In the case of rural properties, improvements or buildings do not form part
of the taxable base.

The tax rate for the Tax on Immovable Property is 1% of the taxable base. There are additional taxes for unu-
sed urban land (waste land) and for large plots of land.

11 The Tax on Immovable Property became a municipal tax under the 1992 Constitution.

20
CHAPTER 4 Employment and labour costs

A
ccording to the Permanent Survey of Households (EPH) for 2006, the economically active population
(EAP) represents 59.4% of the Paraguayan population of working age (approximately 2,735,646
persons). The overall employment index is 93.3% and the total unemployment rate (open plus
concealed unemployment) is 11.4%. It should be stressed that more than 50% of the employed population
works in the tertiary sector.

4.1. Legislation and labour institutions

The legal framework for employment in Paraguay is defined in various laws. In the Constitution, chapter VIII,
section I, mention is made of the rights of workers and of the mandatory nature of a minimum wage to cover a
persons basic needs and of social security. The Labour Code establishes the norms that govern relations bet-
ween workers and employers. Finally, Law 1,626/00 on the Civil Service regulates the employment situation
of civil servants and public employees.

The State organ responsible for ensuring proper compliance with employment provisions is the Ministry of
Justice and Labour. For its part, the National Council on Minimum Wages, made up of representatives of the
Government, employers and workers, decides on policy regarding minimum wages. The minimum wage is
reviewed every two years or when, within this period, the CPI shows a variation of 10% or more; any propo-
sed change is submitted to the Executive for consideration.

All enterprises, whether single-owner businesses or companies, must be registered, free of charge and within
the time limits laid down, in the Employers Register of the Ministry of Justice and Labour.

4.2. Minimum wages and statutory benefits

4.2.1. Minimum monthly wages

As has already been mentioned, the National Council on Minimum Wages proposes to the Executive any
change in the minimum monthly wage, such a change being introduced by presidential decree.

Table 12 shows minimum wages by occupational group, taking into account the decisions of the Ministry of
Justice and Labour.

21
Doing Business in Paraguay: Country Cost Elements

Table 12: Minimum monthly wages


Occupational group Guaranes US Dollars
Workers in general 1,341,775 267.71
Domestic service 500,000 99.76
Micro-enterprise workers (excluding handicrafts) 1,355,197 270.39
Handicraft workers 1,341,775 267.71
Minimum daily wage, 30-day basis 44,726 8.92
Minimum daily wage, 26-day basis 51,607 10.30
Source: Ministry of Justice and Labour and surveyed companies.

When the workers tasks require less than a month, remuneration is on a daily basis. The workers minimum
daily wage is the result of dividing the corresponding minimum monthly wage by 30; however, for workers
paid on a daily basis, their minimum wage must be divided by 26.

4.2.2. Sectoral tables

The Ministry of Justice and Labour and the National Council on Minimum Wages publish sectoral tables
every year showing specific minimum incomes for the various economic branches and activities of the priva-
te sector. The wage levels change on the basis of the inflation indices provided by the Central Bank of Para-
guay.

For reference purposes, table 13 shows the wages for certain jobs.

Table 13: Sectoral tables


Monthly wages
Post
Guaranes US Dollars
Employee, insurance firm 1 355 197 270.39
Employee, commercial, industrial or private desk 1 361 957 271.74
Employee, transport sector 1 341 775 267.71
Bus or lorry driver 1 355 197 270.39
Employee, meat-packing plant 1 341 775 267.71
Employee, textile industry 1 358 380 271.03
Employee, processing of plant raw material 1 355 197 270.39
Employee, skins and hides sector 1 341 775 267.71
Miscellaneous unspecified activities 1 341 775 267.71
Journalist - chief editor 1 987 299 396.51
Journalist - reporter 1 454 958 290.29
Graphics - linotypist 1 648 395 328.89
Masons and carpenters - skilled worker 1 569 271 313.10
Masons and carpenters - labourer 1 355 197 270.39
Employee, banking sector (1 year's seniority) 2 196 490 438.25
Employee, animal production sector 476 802 95.13
Employee, crop-farming establishment 1 341 775 267.71
Employee, commercial sector 1 341 775 267.71
Source: Ministry of Justice and Labour.

22
Chapter 4. Employment and labour costs

4.2.3. Additional benefits

Table 14 shows the benefits additional to the monthly wage required by the Labour Code, to which all formal
workers in Paraguay are entitled.

Table 14: Additional benefits


Benefit Percentage or value
Aguinaldo (Christmas bonus)* One twelfth of the total annual wage
Family bonus 5% of the total wage for each child
Paid annual leave Contractual monthly wage
* The aguinaldo is paid once a year in December.
Source: Ministry of Justice and Labour.

Under the Labour Code, the annual leave entitlement increases with the seniority of workers in their job. Ta-
ble 15 indicates the days of leave to which workers are entitled depending on their seniority.12

Table 15: Annual leave


Seniority Time established
From 1 to 5 years 12 working days
From 5 to 10 years 18 working days
Over 10 years 30 working days
Source: Labour Code.

4.2.4. Regulations on working hours

Under the Labour Code, the duration of the working day in the case of work during daytime is 8 hours and, in
the case of night work, the working day is 10 hours (from 8 p.m. to 6 a.m. the following day). The payments to
be made by an employer whose employees work a night shift or overtime are detailed in table 16.

Table 16: Cost of night work and overtime


Period Amount
Night shift Daily wage + 30%
Overtime (normal working day) Daily wage + 50% per day
Overtime (holidays) Daily wage + 100% per day
Source: Ministry of Justice and Labour.

4.2.5. Termination costs

When it is desired to terminate an employment relationship covered by a contract for an indefinite period,
the parties must notify their decision with a period of notice established in the Labour Code and varying
according to the seniority of the worker in the post. The Code provides for compensation in the case of absen-
ce of notice or unjustified dismissal, the amount of compensation depending on the workers seniority (ta-
ble 17).

12 According to Article 218 of the Labour Code, leave is to begin on a Monday or on the following working day if the Monday chosen is a holiday.

23
Doing Business in Paraguay: Country Cost Elements

Table 17: Termination costs


Seniority Days of notice Compensation for absence of notice Compensation for unjustified dismissal
Up to 1 year 30 30 daily wages 15 wages for each year of service
From 1 to 5 years 45 45 wages
From 5 to 10 years 60 60 wages
Over 10 years 90 90 wages 30 wages for each year of service
Source: Labour Code.

4.2.6. Social security contributions

To protect workers in the event of sickness, maternity, occupational accidents or old age, the Paraguayan Go-
vernment, through Law 1,860/50 and its updating amendments, has made social security mandatory.

Contributions to the Social Security Institute (IPS), the public entity responsible for social security, are man-
datory and must be made both by employers and by employees. The various social security benefits cover
both contributors and their families.

It should be mentioned that there are also private social security schemes, negotiated directly between the
contributor and the insurer. However, those who contract for private insurance are still required to contribu-
te to IPS.

Table 18: Social security contributions


Monthly contribution Percentage of total wage
Employees contribution to IPS 9%
Employers contribution to IPS 16.50%
Total contribution 25.50%
Source: IPS.

4.3. Labour market recruitment


Several private organizations carry out wage surveys among enterprises. One of the most complete is the Ge-
neral Wage Survey undertaken every six months by the international firm PricewaterhouseCoopers. This
survey covers 113 firms, 50% of which are national enterprises and the other 50% international enterprises.
Depending on the activity of the businesses, the survey is broken down as follows: 20% industrial enterpri-
ses, 5% pharmaceutical concerns, 42% commercial enterprises, 28% service enterprises and 5% non-go-
vernmental organizations.13

Table 19 shows average monthly wages for the various employment levels.

13 More details on the survey are available at www.pwc.com/py and from abelando.depaula@py.pwc.com.

24
Chapter 4. Employment and labour costs

Table 19: Wages on the freely-contracted labour market


General sample National sample International sample
Level
Guaranes US Dollars Guaranes US Dollars Guaranes US Dollars
Managerial 11,880,000 2,370 9,831,000 1,961 14,967,000 2,986
Middle management 4,529 000 904 3,967,000 792 5,769,000 1,151
Subordinate staff 2,283,000 456 2,050,000 409 2,758,000 550
* Average for July 2007.
Source: PricewaterhouseCoopers (General Wage Survey).

4.4. Public and other holidays


In Paraguay, national public holidays and other holidays are established by presidential decree. There are ni-
ne official holidays per year, set out in table 20. In addition to the dates indicated, some towns in Paraguay ha-
ve local holidays.

Table 20: National public holidays and other holidays


Date Celebration
1 January New Year's Day
1 March Death of Marshal Lpez, the country's principal hero
Changing each year Maundy Thursday and Good Friday
1 May Labour Day
15 May Independence Day
12 June Peace of Chaco
15 August Founding of Asuncin
29 September Battle of Boquern
8 December Day of the Virgin of Caacupe, Patroness of Paraguay
25 December Christmas Day
Source: UTEPI.

25
.
CHAPTER 5 Communication services

5.1. Legal and institutional framework

T
he National Telecommunications Commission (CONATEL), established by Law 642/95 on
Telecommunications, is responsible for the development, monitoring and regulation of national
telecommunications and has the aim of promoting and strengthening competition on the market and
attracting new private investment. For this purpose, CONATEL must follow the guidelines laid down in
Decree 14,135/96, adopting regulatory provisions under the Law on Telecommunications.

5.2. Fixed telephony

At the present time, the Compaa Paraguaya de Comunicaciones S.A. (COPACO S.A.) is the only firm provi-
ding fixed telephony services. During the process of privatization of public entities (a process that has not yet
been completed), the State telephone service became an enterprise under private law in which the largest
shareholder is the Paraguayan State.

COPACO S.A. is currently engaged in a campaign for the installation of low-cost telephone lines. The connec-
tion cost for each line went down from G825,000 (US$164.60) to G350,000 (US$69.83).

Table 21: Cost of and time needed for telephone line installation
Connection charge
Permanent connection Time*
Guaranes US Dollars
Residential category 350,000 70 15-22 das
Commercial category 350,000 70 15-22 das
Temporary connection Guaranes US Dollars Time**
Periods of up to 5 days 206,250 41 Inmediata
Periods of 6 to 10 days 275,000 55 Inmediata
Periods of 11 to 20 days 324,500 65 Inmediata
Periods of 21 to 30 days 495,500 99 Inmediata
Periods of 31 to 60 days 569,800 114 Inmediata
Periods of 61 to 90 days 666,600 133 Inmediata
* Approximate time.
** From the submission of the request.
Source: COPACO S.A.

Between the years 2000 and 2006, the number of users of the basic fixed telephony service increased at an
average rate of 5% per year. According to data from the Permanent Survey of Households for 2006, 16.7% of
the Paraguayan population has access to the fixed telephony service.

27
Doing Business in Paraguay: Country Cost Elements

Table 22: Telephone charges by category


Basic monthly charge
Guaranes US Dollars
(value added tax (VAT) included)
Residential category 22,000 4.39
Commercial category 30,800 6.15
Urban tariff (VAT included) Guaranes per impulse US Dollars per impulse Specification
Normal times* 100 0.02 One impulse per minute
Cheaper period** 100 0.02 One impulse per 5 minutes
Interurban tariffs (VAT included) Guaranes per minute US Dollars per minute Times
200 0.04 Normal times
From 1 to 100 km
100 0.02 Cheaper period
400 0.08 Normal times
Over 100 km
100 0.02 Cheaper period
International tariffs (VAT included) Guaranes per minute US Dollars per minute Times
MERCOSUR (including Bolivia, Chile and Peru) 2,200 0.44 ND
United States and Canada 1,980 0.40 ND
Cuba 3,720 0.74 ND
Rest of the Americas 2,750 0.55 ND
Rest of the world 3,850 0.77 ND
500 0.10 Normal times
Border calls
450 0.09 Cheaper period
Guaranes per minute US Dollars per minute
Fixed/mobile calls (VAT included)
1,230 0.25
ND: no difference with regard to time of call.
* Normal times: from 6 a.m. to 8 p.m.
** Cheaper period: from 8 p.m. to 6 a.m.
Source: COPACO S.A.

5.3. Mobile telephony


The share of the communications sector in GDP (at constant prices) increased from 2.17% in 1996 to 3.57%
in 2005, mainly thanks to the expansion of cellular telephony.14

Four companies offer mobile telephony services in Paraguay: Millicom Internacional Cellular S.A., using the
trademark TIGO; Ncleo S.A., with the trademark Personal; Hola Paraguay S.A., with the trademark VOX;
and Amrica Mvil, with the trademark CTI MOVIL. According to the International Telecommunication
Union (ITU), the coverage of such services in Paraguay increased from 8.13% of the population in 1999 to
51.31% in 2006.

The operators use GSM technology, with its different variants. In general, obtaining a mobile telephone line
in Paraguay costs nothing. Users who already have a mobile phone need only buy the GSM chip, which costs
little, and pay the cost of calls and text messages through pre-paid cards or other arrangements offered by the
companies.

The mobile phones are sold directly by the operators or in a large number of shops which offer varying prices.
Table 23 shows, for reference purposes, the prices for the models of mobile phone most widely sold.

14 Preliminary national accounts of the Central Bank of Paraguay. System of National Accounts of Paraguay, series 1996-2005.

28
Chapter 5. Communication services

Table 23: Cost of mobile phones


Company Model US Dollars Company Model US Dollars
Nokia 1108 50 Motorola C115 60
Tigo Nokia 6070 130 Personal Nokia 1108 66
Motorola V3 270 Motorola V3 385
Sagem My 400 L 180 Nokia 1112 39
Vox Motorola ROKR E1 270 CTI Nokia 6080 141
Motorola V3 299 Motorola V3 244
Source: Mobile telephone companies surveyed.

The user may choose plans covering six months, one year or more. The costs of calls and text messages under
these plans are much lower than if pre-paid cards are used. Table 24 summarizes the standard plans of the

Table 24: Mobile phone plans


Price of calls (US Dollars/second)
Monthly cost
Company Plan To the same network
(US Dollars) To COPACO To other mobile networks
Normal times Cheaper period*
Personal Plan Control 10.0 0.0016 0.00083 0.0016 0.0016
Vox Plan Lmite 9.8** 0.0020 0.00083 0.0020 0.0020
Tigo Plan Tigo 9.9 0.0016 0.00083 0.0024 0.0042
CTI Kit Prepago 9.8** 0.0027 0.00170 0.0035 0.0061
* Cheaper period: from 9 p.m. to 7 a.m.
** The exchange rate used to give prices in US Dollars is G5,110 to 1 dollar.
Note: The services offered by operators vary with regard to area of coverage, price for text messages and multimedia functions.
Source: Mobile telephone companies surveyed.

four mobile telephone operators. However, it must be mentioned that the four companies offer various plans
and packages with different peak/non-peak hours, call times, equipment and additional services.

The four mobile telephone operators also offer corporative plans, with benefits including, besides lower
costs for calls, free minutes, invitations to events, mobile phones at lower cost or even free, and others.

5.4. Internet services


All the companies that provide Internet services in Paraguay, except COPACO S.A., belong to the Paraguayan
Internet Chamber (CAPADI). These companies offer various technologies, such as wireless, optical fibre,
ADSL, dial-up, etc. It should be mentioned that the mobile telephone companies also offer an Internet service
to their customers via mobile phone.

Table 25 gives the rates of some Internet providers. As may be seen, the user has several options, depending
on the bandwidth that he chooses. This information, updated to 10 July 2007, comes from the websites of the
companies concerned.

29
Doing Business in Paraguay: Country Cost Elements

Table 25: Internet rates


COPACO S.A.
Description PARAWAY Net CLICK ADSL
Connection charge (VAT included) US$100 US$30
Normal plan Household plan Commercial plan
Bandwidth
Monthly cost (US Dollars)
64 kbps 73 25 33
128 kbps 145 41 52
256 kbps 290 54 78
384 kbps 435 - -
512 kbps 580 78 147
1 Mbps 1 160 145 278
* There is also a dial up service costing US$7 a month.

TIGO
Description
Broadband PYMES
Connection charge (VAT included): US$88
Plan WIMAX Plan XL
Bandwidth
Monthly cost (US Dollars)
128 kbps 73 73
128/256 kbps 96 96
256/512 kbps 184 184
512/1024 kbps 290 290
1024/2048 kbps 445 -
2048 kbps 891 -
CONEXION
Description
WIRELESS Plans*
Connection charge: US$100
Plan for individuals Plan for companies
Bandwidth
Monthly cost (US Dollars)
144 kbps - 200
188 kbps 200 250
232 kbps 250 300
276 kbps 300 -
320 kbps 350 -
* Shared bandwidth.

ADSL NET MAX


Plans for individuals
Monthly costs (US Dollars)
Connection charge (VAT included): US$33.00
Plan Full (Full 24 h), monthly 33.00
Plan Mega, monthly 44.40
Plan Mega Plus, monthly 66.60
Plans for companies
Monthly cost (US Dollars)
Connection charge: US$99.00
64 kbps 91.20 + IVA
128 kbps 158.40 + IVA
256 kbps 308.80 + IVA
512 kbps 617.60 + IVA
1024 kbps 1170.00 + IVA
Note: Under the plans for individuals, speeds are 64 kbps and 96 kbps.
Source: Websites of the companies, telephone consultations, COPACO S.A.

30
Chapter 5. Communication services

5.5. Postal service


At the present time, postal services in Paraguay are in the hands of the Paraguayan National Postal Service,
which comes under the Directorate-General of Postal Services, and also of private companies, including in-
ternational companies for the transport of mail and parcels such as DHL, UPS and FedEx.

Tables 26 and 27 show the rates for regular mail and for airmail and the Express Mail Service (EMS). The
costs vary depending on the type of mail and the weight of what is being sent.

Table 26: Rates for regular national mail


Letters, cards, packages and printed material
Rates
Weight in grams
Guaranes US Dollars
Up to 20 700 0.14
Up to 50 900 0.18
Up to 100 1,000 0.20
Up to 250 1,800 0.36
Up to 500 2,400 0.48
Up to 1,000 4,500 0.90
Up to 1,500 6,500 1.30
Up to 2,000 9,500 1.90
For each additional 500 g 2,500 0.50
Literature for the blind Free
Rates
Special national rates
Guaranes US Dollars
Charge for certified mail 500 0.10
Fee for advice of receipt 500 0.10
Fee for notification by telephone 1,000 0.20
Fee for change of address 500 0.10
Regular national mail service for corporate clients
Rates
Weight in grams
Guaranes US Dollars
101-500 600 0.12
501-1 000 500 0.10
1,001 upwards 400 0.08
Source: Paraguayan National Postal Service.

31
Doing Business in Paraguay: Country Cost Elements

Table 27: Rates for airmail and the international Express Mail Service*
Regular airmail
Weight in grams Rates
Description
From To Guaranes US Dollars
Letters, cards, small packages and printed material 0 2,000 45,400 9.06
Solely for printed material 2,001 7,000 194,980 38.90
EMS
Weight in grams Rates
Description
From To Guaranes US Dollars
0 250 105,000 20.95
Documents 251 10,000 305,055 60.86
10,001 20,000 722,400 144.13
0 250 114,800 22.91
Goods 251 10,000 336,125 67.06
10,000 20,000 798,015 159.22
* Average values.
Source: Paraguayan National Postal Service.

32
CHAPTER 6 Electricity, drinking water and
fuel costs

6.1. Electricity sector and costs

6.1.1. Legislation and institutions

T
he provision of electric power services is regulated by the Constitution of Paraguay, by Law 966/64
Creating and Organizing the National Electricity Administration (ANDE), and by Law 976/82, which
expands the original Law in connection with security and service areas for electricity transmission and
distribution lines.

The agency responsible for the electricity sector is ANDE, a decentralized, autonomous entity with the task of
meeting the country's electricity needs in order to contribute to its development. This agency is linked to the
Executive through the Ministry of Public Works and Communications.

The functions of ANDE are: to draft plans and programmes for the development of the energy sector; to de-
sign, build and operate facilities for power generation, transmission and distribution; to regulate all matters
relating to electric power; and to decide on the pricing system, which has to be approved by a decree of the
Executive.

6.1.2. Electricity production and consumption

According to the data of ANDE, which has a monopoly for the supply of electricity at national level, about
93.85% of Paraguay's territory is covered by electricity services, a high rate in comparison with the other
countries of the region. Coverage is 100% in the capital and over 90% in the departments of Central, Alto Pa-
ran, Guair and Cordillera, the most populated departments of Paraguay. In 2002, according to the last Na-
tional Census, coverage reached 95% in the urban areas of the country and 70% in the rural sector.

Table 28 shows the development of electricity coverage in Paraguay in recent years. If the trend observed is
maintained, coverage could reach 100% of the national territory in a few years.

Table 28: Development of electricity coverage in Paraguay


Year Coverage (percentage of the territory)
2001 83.90%
2002 88.87%
2003 90.20%
2004 91.51%
2005 92.58%
2006 93.85%
Source: ANDE.

33
Doing Business in Paraguay: Country Cost Elements

During 2006, electricity consumption per inhabitant in Paraguay was 852 kW-h, 8% more than in 2002,
when it was 791 kW-h. As for industrial consumption, which gives a better idea of the growth of the electricity
sector, it increased from 1,074 gigawatt-hours in 2002 to 1,408 gigawatt-hours in 2006, representing a
growth of 31%.

Box 3: Potential of the Paraguayan hydroelectric sector

Paraguay is one of the few countries whose energy consumption is met almost entirely from clean and renewable sources. In 2006,
99% of the 8,493,551.70 MW-h produced in Paraguay came from hydroelectric power stations.
That same year, 87% of energy consumed in Paraguay was generated at the Itaip Binational Hydroelectric Power Station, the lar-
gest in the world in terms of installed capacity, with 14,000 MW (20 generating units of 700 MW each). The plant of this power sta-
tion has exceeded its historical records for various consecutive years. In 2006, the power station achieved the second highest elec-
tricity production in its history: 92,689,963 MW-h.
Paraguay has at its disposal 50% of what this plant generates, but the present national consumption is less (in 2006, Paraguay
consumed about 16% of the energy belonging to it). The situation is somewhat similar with the Yacyreta Binational Hydroelectric
Power Station, so that there is a wide margin of growth for energy demand, particularly for highly electricity-dependent
investment projects. In view of the energy crisis affecting several countries of the region, therefore, Paraguay is in an excellent
situation to attract new industrial undertakings.

6.1.3. Price systems

The rates charged by ANDE for the supply of electricity have been kept relatively stable, and the last change
occurred in May 2005.

ANDE offers four supply alternatives, depending on the needs of the user: low voltage (380 volts), medium
voltage (23,000 volts), high voltage (66,000 volts) and very high voltage (220,000 volts). In addition, ANDE
divides consumers into three general categories: residential, industrial and commercial. Costs vary depen-
ding on the voltage required, the category of consumer and the type of meter used.

Table 29 shows reference costs for the installation of electricity services for the different categories of consu-
mers, assuming low-voltage supply.

Table 29: Costs for connection to the electricity grid


Cost*
Categories
Guaranes US Dollars
Residential 684,245 136.52
Industrial 1,045,625 208.62
Commercial 1,101,115 219.70
* Includes connection charges and security deposits.
Source: ANDE.

Once the electricity service has been installed, the monthly rates to be paid by customers depend on the cate-
gory to which they belong, the voltage of the connection and consumption (table 30).

34
Chapter 6. Electricity, drinking water and fuel costs

Table 30: Electricity rates, low and medium voltage


Low voltage
Price
Category Monthly consumption
Guaranes per kW-h US Dollars per kW-h
1-50 kW-h 311.55 0.06
Residential 51-150 kW-h 349.89 0.07
Over 150 kW-h 365.45 0.07
1-50 kW-h 332.10 0.07
Commercial
Ms 50 kW-h 389.57 0.08
1-50 kW-h 225.18 0.04
Industrial 51-500 kW-h 252.87 0.05
Over 500 kW-h 296.56 0.06
Medium voltage
Price
Category
Guaranes per kW-h US Dollars per kW-h
Residential 256.65 0.05
Commercial 298.16 0.06
Industrial 208.99 0.04
Source: ANDE.

It should be noted that residential users of low-voltage connections whose monthly consumption does not
exceed 75 kW-h receive a subsidy of 75% in their rates, in relation to the normal residential rates, including
VAT. Those users whose monthly consumption is between 76 and 150 kW-h receive a subsidy of 50% in rela-
tion to the normal residential rates, including VAT.

The industrial sector utilizes connections with high and very high voltage, the charges for which are calcula-
ted differently and are shown in table 31.

Table 31: Electricity rates, high and very high voltage


Price
High voltage Measurement unit
Guaranes US Dollars
Reserve power 44,201 8.82 Kilowatt-months
Excess power at peak hours 71,275 14.22 Kilowatt-months
Excess power outside peak hours 32,080 6.40 Kilowatt-months
Electricity 57.12 0.01 Kilowatt-hours
Price
Very high voltage Measurement unit
Guaranes US Dollars
Reserve power 31,032 6.19 Kilowatt-months
Excess power during peak hours 51,649 10.31 Kilowatt-months
Excess power outside peak hours 13,977 2.79 Kilowatt-months
Electricity 47.91 0.01 Kilowatt-hours
Note: Peak hours: from 6 to 10 p.m. in summer and from 5 to 9 p.m. in winter.
Source: ANDE.

For projects that are highly dependent on electricity, as is the case with the iron and steel industry, there are
special rates (table 32).15
15 Decree 2,109/1994, approving the electricity rates to be applied by ANDE to electricity-intensive industries.

35
Doing Business in Paraguay: Country Cost Elements

Table 32: Electricity rates for electricity-intensive enterprises


Price
Types of supply Measurement unit
Guaranes US Dollars
With an operating regime involving peak-hour disconnection (3 hours daily)
220,000 volts 46,110 9.20 Kilowatt-month
Energy ensured 21.00 m US Dollars/kW-h
66,000 volts 47,213 9.42 Kilowatt-month
Energy ensured 21.50 m US Dollars/kW-h
With a continuous operating regime
220,000 volts 52,676 10.51 Kilowatt-month
Energy ensured 24.00 m US Dollars/kW-h
66,000 volts 55,332 11.04 Kilowatt-month
Energy ensured 25.20 m US Dollars/kW-h
Source: ANDE.

Electricity costs have to be considered when choosing where to invest in sectors that are highly dependent on
this utility. Tables 33 and 34 show the prices charged by the various electricity suppliers in Chile and the coun-
tries of MERCOSUR. It should be stressed that Paraguay has the lowest prices in many of the ranges of con-
sumption considered.

Table 33: Prices of electricity supply for residential consumers


75 kW-h/month 150 kW-h/month 200 KW-h/month 400 kW-h/month 800 kW-h/month
US US US US US
Company Company Company Company Company
Dollars/ Dollars/ Dollars/ Dollars/ Dollars/
(country) (country) (country) (country) (country)
MW-h MW-h MW-h MW-h MW-h
ANDE (Py) 16 EDELAP (Ar) 31 EDELAP (Ar) 27 EDELAP (Ar) 20 EDELAP (Ar) 17
EDELAP (Ar) 35 EDENOR (Ar) 31 EDENOR (Ar) 27 EDENOR (Ar) 20 EDENOR (Ar) 17
EDENOR (Ar) 35 ANDE (Py) 33 ANDE (Py) 67 ANDE (Py) 70 ANDE (Py) 71
COPEL (Br) 60 COPEL (Br) 78 CPFL (Br) 104 COPEL (Br) 120 COPEL (Br) 120
CPFL (Br) 73 CPFL (Br) 95 COPEL (Br) 120 CGE (Ch) 125 UTE (Uy) 121
CEMIG (Br) 91 ENERSUL (Br) 122 CGE (Ch) 128 Chilectra (Ch) 127 CGE (Ch) 123
ENERSUL (Br) 94 CEMIG (Br) 124 Chilectra (Ch) 129 UTE (Uy) 134 Chilectra (Ch) 126
Chilectra (Ch) 137 Chilectra (Ch) 131 UTE (Uy) 137 CPFL (Br) 150 CPFL (Br) 150
CGE (Ch) 140 CGE (Ch) 131 ENERSUL (Br) 193 ENERSUL (Br) 193 ENERSUL (Br) 193
UTE (Uy) 145 UTE (Uy) 134 CEMIG (Br) 201 CEMIG (Br) 201 CEMIG (Br) 201
Note: Data updated to March 2007.
Source: ANDE.

36
Chapter 6. Electricity, drinking water and fuel costs

Table 34: Prices for electricity supply for industrial consumers


10 kW-h/month- 15 kW-h/month- 300 kW-h/month- 1 750 kW-h/month- 10 000 kW-h/month-
1 MW-h/month 2 MW-h/month 50 MW-h/month 500 MW-h/month 5 000 MW-h/month
US US US US
Company kW-h/ Company Company Company Company
Dollars/ Dollars/ Dollars/ Dollars/
(country) MW-h (country) (country) (country) (country)
MW-h MW-h MW-h MW-h
ANDE (Py) 54 ANDE (Py) 56 EDELAP (Ar) 40 EDELAP (Ar) 33 ANDE (Py) 20
EDENOR (Ar) 71 EDELAP (Ar) 67 EDENOR (Ar) 44 EDENOR (Ar) 36 EDELAP (Ar) 24
EDELAP (Ar) 77 EDENOR (Ar) 67 ANDE (Py) 61 ANDE (Py) 44 EDENOR (Ar) 25
CGE (Ch) 96 CGE (Ch) 88 UTE (Uy) 99 UTE (Uy) 78 UTE (Uy) 49
Chilectra (Ch) 104 Chilectra (Ch) 94 COPEL (Br) 101 CGE (Ch) 90 COPEL (Br) 70
UTE (Uy) 107 UTE (Uy) 96 CGE (Ch) 111 Chilectra (Ch) 95 CGE (Ch) 73
COPEL (Br) 112 COPEL (Br) 112 Chilectra (Ch) 117 COPEL (Br) 102 Chilectra (Ch) 76
CPFL (Br) 136 CPFL (Br) 136 CPFL (Br) 118 CPFL (Br) 123 CPFL (Br) 98
CEMIG (Br) 197 CEMIG (Br) 197 ENERSUL(Br) 138 ENERSUL(Br) 142 ENERSUL(Br) 101
ENERSUL(Br) 200 ENERSUL(Br) 200 CEMIG (Br) 147 CEMIG (Br) 150 CEMIG (Br) 111
Note: Data updated to March 2007.
Source: ANDE.

6.2. Drinking water


In Paraguay, the supply of drinking water is the responsibility of: the Empresa de Servicios Sanitarios del Pa-
raguay S.A. (ESSAP), which covers a large part of the metropolitan area; associations of users or sanitation
boards; and private enterprises, which provide services in the rest of the national territory.

The institution in charge of regulating the sector is the Regulatory Body for Public Health Services
(ERSSAN), which is governed by the provisions of Law 1,614/2000, the General Law on the Regulatory and
Tariff Framework for the Paraguayan Public Service for Drinking Water Provision and Sewerage.

Tables 35, 36 and 37 show the connection charges applied by ESSAP and the drinking water rates of this en-
terprise, of the sanitation boards and of the private companies registered with ERSSAN.

Table 35: Connection charges Empresa de Servicios Sanitarios del Paraguay S.A.
Connection Extension
Type of connection Type of terrain
Guaranes US Dollars Guaranes US Dollars
Connection of General 600,000 119.71 0 0
Connection of 1 General 880,000 175.58 0 0
Earth 858,000 171.19 15 255 + VAT, linear metre 3.04
Stone paving 858,000 171.19 18 955 + VAT, linear metre 3.78
2 connection
Pavement 858,000 171.19 50 255 + VAT, linear metre 10.03
Reinforced concrete 858,000 171.19 50 255 + VAT, linear metre 10.03
4 connection Use of ESSAP only
Note: Data updated to June 2007.
Source: ESSAP.

37
Doing Business in Paraguay: Country Cost Elements

Table 36: Drinking water rates Empresa de Servicios Sanitarios del Paraguay S.A.
Subsidized Not Subsidized
Category Consumption
Guaranes US Dollars Guaranes US Dollars
Residential
Basic charge 3,089 0.62 5,405 1.08
Range of consumption 1-15 m3 1,124 0.22 1,606 0.32
16-40 m3 1,606 0.32 1,606 0.32
Over 40 m3 1,767 0.35
Non residential
Basic charge 15,444 3.08
Range of consumption 1-40 m3 1,853 0.37
Over 40 m3 2,038 0.41
Source: ESSAP.

Table 37: Drinking water rates sanitation boards and private companies (average)
Central Ciudad del Este Encarnacin
Description
Guaranes US Dollars Guaranes US Dollars Guaranes US Dollars
Basic consumption 21,310 4.25 22,800 4.55 27,500 5.49
Rate per m3 1,737 0.35 2,111 0.42 1,833 0.37
Note: Data updated to June 2007.
Source: Regulatory Body for Sanitation Services.

6.3. Cost of fuels


As Paraguay has no oilfields of its own, its entire demand for fuels has to be covered by imports. Imports of pe-
troleum and its by-products make up a considerable part of the country's total imports (diagram 8).

Diagram 8: Share of imports of hydrocarbons in the total imports of Paraguay

4,000
Imports of petroleum and its by-products
3,500 Remaining imports

3,000

2,500
Million US Dollars

2,000

1,500

1,000

500

0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Source: UN Comtrade.

38
Chapter 6. Electricity, drinking water and fuel costs

In Paraguay, the importation of fuels is free of controls, but the main importer is the public enterprise Petr-
leos del Paraguay (PETROPAR), from which the various distributors obtain their supplies.

The price of fuels depends on market conditions. The exception is diesel, which is of great importance in the
transport of products and whose price is regulated by PETROPAR.

The fuels sector is subject to Law 779/95, amending Law 675/60 on Hydrocarbons of the Republic of Para-
guay, which establishes the legal framework for prospecting and exploration for petroleum and other hydro-
carbons and for their exploitation. At the present time, foreign companies, under Article 2 of this Law, are
prospecting for hydrocarbons in the Paraguayan Chaco.

According to the Directorate-General for Fuels of the Ministry and Industry and Commerce, 12 private com-
panies are currently operating in Paraguay, with about 1,300 fuel retail outlets distributed throughout the te-
rritory.

Table 38 shows the prices of fuels offered by the different distributors.

Table 38: Prices for fuels in the capital and the metropolitan area
Products SR* petrol Econmica SR petrol RON 85 SR petrol RON 95 SR petrol RON 97 Diesel
Companies (Guaranes per litre)
PETROBRAS - 4,440 5,190 6 490 4,250
ESSO STANDARD PARAGUAY SRL - 4,440 5,190 6 490 4,250
COPETROL SA 3,900 4,440 - - 4,250
B&R SA 3,900 4,440 5,190 - 4,250
LUBRIPAR SAECA 3,850 4,440 4,980 - 4,250
PETROSUR SA 3,890 - 4,980 - 4,250
COPEG SA 3,890 - 4,980 - 4,250
TEXACO PARAGUAY DP SRL 3,850 4,440 4,980 - 4,250
GAS CORONA SA 3,890 - 4,980 - 4,250
COMPASA - - - - 4,250
INTEGRAL SA 3,890 - 4,980 - 4,250
CPC SA - - - - 4,250
Average 3,883 4,440 5,050 6 490 4,250
(US Dollars per litre)
PETROBRAS - 0.89 1.04 1.29 0.85
ESSO STANDARD PARAGUAY SRL - 0.89 1.04 1.29 0.85
COPETROL SA 0.78 0.89 - - 0.85
B&R SA 0.78 0.89 1.04 - 0.85
LUBRIPAR SAECA 0.77 0.89 0.99 - 0.85
PETROSUR SA 0.78 - 0.99 - 0.85
COPEG SA 0.78 - 0.99 - 0.85
TEXACO PARAGUAY DP SRL 0.77 0.89 0.99 - 0.85
GAS CORONA SA 0.78 - 0.99 - 0.85
COMPASA - - - - 0.85
INTEGRAL SA 0.78 - 0.99 - 0.85
CPC SA - - - - 0.85
Average 0.77 0.89 1.01 1.29 0.85
* Straight-run.
Note: Data updated to 23 October 2007.
Source: Directorate-General for Fuels (Ministry of Industry and Commerce).

39
Doing Business in Paraguay: Country Cost Elements

Box 4: Outlook for the fuels sector in Paraguay

The fuels sector in Paraguay is governed by Law 2,478/05 on the Promotion of Biofuels and by the decisions regulating the percen-
tages of raw material and imported hydrocarbons to be used in the production of biofuels.
The development of this sector, whose most important products are ethanol and biodiesel, is one of the objectives of the regional
plan aiming to make South America the main world producer of biofuels, taking advantage of the availability of raw material in
the region.
Paraguay has various products that can be used as raw material for the preparation of biofuels. The main products are:
- Coconut
- Castor oil
- Sugar cane
- Animal fats
The main advantages of biofuels are as follows:
They can be used immediately, as engines do not have to be modified for the use of biodiesel;

Availability in the short term, as the resources are renewable;

Combustibility, because biofuels have a higher flashpoint than diesel from petroleum;

They are more environmentally friendly, reducing greenhouse gas emissions;

Their lubrication qualities, enabling the useful life of engines to be prolonged.

The institution responsible for regulating the biofuels sector and promoting its development is the Ministry of Industry and
Commerce, through the Office of the Director of the Biofuels Unit, whose task is to coordinate, plan and strengthen the
production chains in order to attract and promote investment in the production of biofuels and bring about a shared commitment
to development among public and private actors, directed towards improving the quality of life of the Paraguayan people.

40
CHAPTER 7 Other industry costs

7.1. Fees for trademark, design and patent registration

P
araguayan legislation on international property rights is relatively new. It was not until 1981, with the
adoption of Law 868/81 on Industrial Models and Designs, that intellectual creations received legal
support. In the last years of the twentieth century and the opening years of the twenty-first century, in a
joint effort by the Directorate-General for Intellectual Property (DGPI) and various civil society actors, a set
of laws has been adopted promoting the development of intellectual creation.16

DGPI, which reports to the Ministry of Industry and Commerce, is the department responsible for promoting
intellectual creation, in the literary, artistic and scientific fields and in the industrial area, and monitoring
compliance with the laws relating to intellectual property.

Tables 39 and 40 show the cost of the different procedures through which creations and inventions are pro-
tected.

Table 39: Fees for trademarks


Cost
Description
Guaranes US Dollars
Application for registration or renewal of a trademark 51,607 10.30
Annual fee for maintenance of registration 258,035 51.48
Registration of powers 51,607 10.30
Official report on a trademark 25,804 5.15
Statement of objection 25,804 5.15
Registration of the licence for the use of each trademark 51,607 10.30
Registration of transfer of a trademark 25,804 5.15
Issue of a duplicate of the certificate of registration 25,804 5.15
Registration in the list of agents or renewal 25,804 5.15
* These amounts, stipulated in Law 1,294/98, are linked to the minimum daily wage for workers, which is G51,607.
Source: DGPI.

16 Law 1,630/00 on Patents for Inventions and Utility Models and its Regulating Decree 14,201/01; Law 1,294/98 on Trademarks and its Regulatory Decree 22,365; Law
1.328/98 on Copyright.

41
Doing Business in Paraguay: Country Cost Elements

Table 40: Fees for patents and utility models


Cost
Description
Guaranes US Dollars
Application for an invention patent 378,095 75.44
Application for a patent for a utility model 252,063 50.29
Modification of the patent application without additional substantive examination 252,063 50.29
Modification of the patent application with additional substantive examination 378,095 75.44
Conversion of the patent application 302,476 60.35
Modification of patent claims 378,095 75.44
Annual fees* 504,127 100.58
Renewal of a patent for a utility model 378,095 75.44
Copy of the registration document 200,000 39.90
* This payment increases progressively until the twentieth year of the patent, when it reaches G1,134,285 (US$226.31). The payments are due as soon as the applica-
tion is submitted.
Note: These amounts are updated annually by ministerial resolution.
Source: DGPI.

7.2. Fees for public services


This section covers the charges for public services such as refuse collection, public lighting and sewerage. The
latter two appear as additional charges in the bills for light and water respectively. Refuse collection is the res-
ponsibility of each municipality, which may contract out this service in order to meet the needs of its area mo-
re efficiently.

Table 41: Monthly charges for refuse collection


Asuncin* Greater Asuncin Ciudad del Este Encarnacin
Description
(Guaranes)
Collection of residential refuse 6,156 + 1,5 per day 16,025 25,000 + variable charge 88 G/m2
Collection of industrial refuse 17,463 + 4,4 per day 255,438 600,000 209 G/m2
* Minimum values.
Source: Municipalities consulted.

The sewerage service is offered by the Empresa de Servicios Sanitarios del Paraguay S.A. The rate applied,
both for the residential sector and for the industrial sector, is 50% of the consumption of drinking water.

Another service is public lighting, which is the responsibility of the National Electricity Administration. The
monthly charge is fixed and is set out in table 42.

Table 42: Monthly charge for public lighting


Cost
Description
Guaranes US Dollars
Up to 10 watts/metre 427.14 0.085
Over 10 watts/metre 482.88 0.096
Source: National Electricity Administration.

42
Chapter 7. Other industry costs

7.3. Membership in chambers of commerce and industry


In Paraguay there are various chambers bringing together the different local businesses and associations. Ta-
ble 43 shows the fees for admission and the periodic fees (yearly or monthly) which are charged by the main
Paraguayan chambers, on average.

Table 43: Fees for membership in chambers


Admission fee Periodic fee
Chambers
Guaranes US Dollars Guaranes US Dollars
Production 0 0 (Yearly) 833,500 166.30
Industry 2,000,000 399.04 (Monthly) 187,500 37.41
Commerce 500,000 99.76 (Monthly) 473,750 94.52
Source: Associations consulted.

43
.
CHAPTER 8 Accreditation and certification
agencies

8.1. National Accreditation Agency

T
he National Accreditation Agency (ONA), a dependency of the National Council for Science and Te-
chnology (CONACYT), is the institution responsible for directing and administering the National
Accreditation System. It is empowered to accredit enterprises interested in issuing certifications of
products, of quality control, of environmental management and of individuals, and also assumes responsibi-
lity for the accreditation of other agencies or entities that need to demonstrate their competence, under re-
cognized international systems. It is obligatory for laboratory undertakings to be accredited by ONA.

Table 44 shows the costs for the different stages of the accreditation process.

Table 44: Accreditations with the National Accreditation Agency


Prices
Stages of accreditation
Guaranes US Dollars
1 Receipt and study of applications for accreditation by ONA 900,000 179.57
2 Documental evaluation by evaluation leader (charged by the day) 600,000 each 119.71 each
3.a Evaluation on site by evaluation leader (national evaluator paid by the day) 1,000,000 each 199.52 each
3.b Evaluation on site by evaluator and technical expert (nationalevaluator paid by the day) 670,000 each 133.68 each
4 Granting of the accreditation 3,000,000 598.56
National tariff for use of the accreditation symbol and for maintenance on the register of
5 1,800,000 359.14
accredited entities
6 Receipt of application for extension of the scope of the accreditation 600,000 119.71
Source: National Accreditation Agency.

The evaluations can be carried out by national or international experts. The daily rate for the latter is as fixed
in the country of origin. For both national and foreign evaluators, the applicant must cover the costs of travel
and stay.

In general, for a standard certification two evaluators are needed and the studies in situ last from two to three
days approximately.

It should be stressed that all certifying enterprises accredited by ONA may issue ISO (International Organiza-
tion for Standardization) certifications.

8.2. National Institute of Technology and Standardization

The National Institute of Technology and Standardization (INTN) is the entity responsible for certifying pro-
ducts (either by batches or by mark-of-conformity systems), processes and services. The INTN mark certifies
that the products meet certain quality standards. The procedures for obtaining it are as follows:

45
Doing Business in Paraguay: Country Cost Elements

a) The relevant application is submitted, with data on the enterprise attached;

b) A communication is received from the Director-General of INTN explaining that the application
has been admitted and stating the costs that will be incurred;

c) The Director-General nominates the quality inspectors and technical experts for the quality system
evaluation and the taking of samples of the products to be certified;

d) The Director for Standardization and Certification informs the responsible officer of the commen-
cement of certification studies;

e) If concession of the INTN mark is approved, the Director-General of INTN so notifies the applicant
in writing.

The costs for obtaining the certificate are divided into basic costs, amounting to US$83.80 (G420,000), and
variable costs, which depend on the type of product that is to be certified. For enterprises located more than
50 kilometres from the capital there is an additional charge, depending on the distance.

The time that it takes to obtain certification depends on the product being considered, as there is a different
process for each product.

To establish a programme for production monitoring, the enterprise concerned and INTN sign a contract for
two years, but it is the manufacturer who is responsible for the quality of the product.

8.3. National Service for Animal Health and Quality


The National Service for Animal Health and Quality is the agency responsible for certifying products of ani-
mal origin.

The process begins with the approval of the slaughterhouse and/or processing establishment, then the enter-
prise itself is approved and, finally, the Health Certificate is granted, after which the sale of the products can
begin. The certification of the product depends on volume and destination.

The requisites for obtaining product certification are:

Having an adequate infrastructure for the type of animal being processed;

Application for the inspection of the plant;

Possession of an Environmental Licence issued by the Secretariat of the Environment;

Proof of entry in the Single Taxpayers' Register;

Presentation of the enterprise's taxation documents


The cost of obtaining approval, which takes about a week, depends on the type of enterprise. In the case of a
meat-packing plant, the amount is US$299.28 (G1,500,000). For enterprises processing other products of
animal origin, the cost is US$99.76 (G500,000). The cost is the same for annual renewal of approval. The

46
Chapter 8. Accreditation and certification agencies

Health Certificate is obtained immediately and free of charge, but ongoing veterinary inspections are
required.

Once the enterprise has been approved and the Health Certificate obtained, products may be sold on the na-
tional and international market.

8.4. National Service for Plant and Seed Quality and Health
The National Service for Plant and Seed Quality and Health (SENAVE) is the agency responsible for supervi-
sing the quality and health of products and by-products of plant origin. For this purpose, there are various
border crossings where products are checked coming in and out in order to avoid or reduce to a minimum the
introduction and propagation of diseases that will affect crops.

For importing or exporting products and by-products of plant origin, it is necessary to have the plant health
certificate issued by SENAVE, guaranteeing the quality and health of the products. The necessary procedures
can be complied with at the various border crossings, where documentary and health checks of the products
take place. Without these documents, the goods cannot enter Paraguay or other countries where plant health
certificates are required.

Table 45 sets out the necessary procedures for exporting or importing products of plant origin.

Table 45: Procedures for exporting and importing products of plant origin
Procedures for export:
a) Registration at the Single Window for Exports of the Ministry of Industry and Commerce
b) Submission of an application for export of plant products with SENAVE
c) Payment of the corresponding charge
d) Inspection of the products
e) Issue of the Export Certificate of Plant Health
Procedures for import:
a) Registration with SENAVE
b) Application for Phytosanitary Import Accreditation (AFIDI)
c) Submission of the import application at any border crossing
d) Documentary inspection
e) Payment of the corresponding charge
f) Issue of the Import Certificate of Plant Health
Source: National Service for Plant and Seed Quality and Health.

The cost of export and import certificates is composed of the basic charge, which is US$2.10 (G10,513), the
charge for the application, namely US$0.69 (G3,500), the registration fee (solely for the importer) which
amounts to US$17.98 (G90,117) and the inspection fee, which depends on the plant product being conside-
red.

The time required for issue of export certificates depends on the requirements of the country of destination of
the products and the category of phytosanitary risk. The import certificates are issued without delay if the
importer has satisfied the requirements set out in the Phytosanitary Import Accreditation of the country of
origin.

47
.
CHAPTER 9 Transportation services and
infrastructure

T
ransportation plays a vital role in Paraguay's economy. Being landlocked, Paraguay needs to develop
this sector in order to open itself up to the world through the neighbouring countries. A transport sector
is therefore needed that will minimize the costs resulting from the lack of direct access to the sea.

Roads and the basic transport infrastructure are the responsibility of the State, but the State may delegate
certain functions to the private sector in order to bring about greater efficiency.

In 2006, the share of the transport sector in Paraguay's GDP was around 4%.17 This percentage was similar to
that achieved in the period 1996-2005, when the share of the sector, in constant 1994 prices, was 3.66%. This
sector therefore needs investment on a large scale in order to develop the necessary basic infrastructure to fa-
cilitate the sustained growth of the economy.

9.1. Road and land transport

The Ministry of Public Works and Communications (MOPC) is the body responsible for developing, propo-
sing and implementing policy regarding the basic services and infrastructure necessary to ensure the integra-
tion of the country.

Paraguay has a road network which is little developed in comparison with other Latin American countries.
Table 46 shows the characteristics of the country's road infrastructure.

Table 46: Basic characteristics of the road infrastructure


Description Length (kilometres) Percentage of the total national network
a) Broken down by network
National roads 9,763.92 34%
Departmental roads 5,550.34 20%
Local roads 13,220.60 46%
Combined national road network 28,534.86 100%
b) By road type
Paved 4,295.48 15%
Stone-paved 592.68 21%
Unpaved 23,656.70 82%
Total national road network 28,534.86 100%
Source: Directorate for Road Planning of the Ministry of Public Works and Communications.

Of the 17 departments of Paraguay, those with the most extensive road infrastructure are: Itapa (3,484.34
km), San Pedro (3,417.55 km), Boquern (2,460.05 km) and Alto Paran (2,116.69 km).

17 Preliminary national accounts of the Central Bank of Paraguay. System of National Accounts of Paraguay, series 1996-2005.

49
Doing Business in Paraguay: Country Cost Elements

For some years, in order to increase efficiency in infrastructure provision, the Government has been granting
concessions to private companies to operate key segments of the country's road network. For example, a con-
cession was granted in 1997 to the company Tape Por for a stretch of 141 kilometres between the cities of
Coronel Oviedo and Ciudad del Este.

MOPC is responsible for regulating toll charges for the country's roads. Where concessions have been gran-
ted, the amount of the toll is stipulated in the contract signed between the operating company and the State.

MOPC administers 15 toll stations distributed around the national territory. At these stations, tolls are collec-
ted only in one direction. The company Tape Por has two toll stations on the stretch of road operated by it.

Tables 47 and 48 show the toll charges at public and private toll stations:

Table 47: Fees at the toll stations managed by the Ministry of Public Works and Communications
Charge
Type of vehicle Category
Guaranes US Dollars
Light vehicles I 5,000 1.00
Trucks and buses with 2 axles II 7,000 1.40
Light vehicles with trailers III 7,000 1.40
Trucks with 3 axles IV 8,000 1.60
Trucks with more than 3 axles V 15,000 2.99
Source: Income Department, Informatics Division of MOPC.

Table 48: Tolls charged by Tape Por


Minga Guaz Pastoreo
Type of vehicle Category
Guaranes US Dollars Guaranes US Dollars
Car, jeep, light truck, van I 10,000 2.00 9,000 1.80
Truck, truck tractor or bus (2 axles) III 17,000 3.39 15,000 2.99
Truck, truck tractor or bus (3 axles) IV 28,000 5.59 26,000 5.19
Truck, truck with trailer or semi-trailer (4 axles) V 37,000 7.38 33,000 6.58
Truck, truck with trailer or semi-trailer (5 axles) VI 40,000 7.98 36,000 7.18
Truck, truck with trailer or semi-trailer (6 axles) VII 40,000 7.98 36,000 7.18
Motorcycles VIII 3,000 0.60 2,000 0.40
Source: Income Department, Informatics Division of MOPC.

According to the National Transport Directorate (DINATRAN), the total number of motor vehicles in Para-
guay in 2006 was 537,785, a figure similar to that of previous years. In 2006, there were 5,334 authorized
cargo-carrying vehicles in Paraguay, 6% more than in 2005. The majority of these vehicles were authorized
for journeys to the MERCOSUR countries and Chile.

The national transport system is regulated by Law 1,590/00. DINATRAN, in addition to establishing policies
and technical guidelines for all levels of transport, is responsible for regulating all matters concerning natio-
nal land transport, except for the fee schedule. However, DINATRAN must ensure that these are calculated on
the basis of modern organizational and operational criteria and norms.

50
Chapter 9. Transportation services and infrastructure

For this purpose, DINATRAN conducts periodic studies on the operational costs of land transport companies.
These studies serve to determine the minimum prices that these companies may charge. These prices, which
are established by decrees of the Executive, may not be below those fixed in a model approved by the World
Bank, according to which a land transport vehicle with a capacity of 25.25 tons may not charge less than
G300 (US$0.06) per metric ton per kilometre, a sum that already includes a profit margin of 25%.

In Paraguay, international freight transport is covered by Law 1,128/97, confirming the agreement on inter-
national land transport concluded between the countries of the Southern Cone. Table 49 gives reference pri-
ces for the international transport of freight by land.

Table 49: Land transport freight costs


Freight rates for a truck of 27 tons
International routes
Guaranes US Dollars
Asuncin - Buenos Aires (Argentina)
Imports-normal cargo 6,014,400 1,200
Imports-dangerous cargo 7,016,800 1,400
Exports-normal cargo 5,012,000 1,000
Exports-dangerous cargo 6,014,400 1,200
Asuncin - Santiago (Chile)
Normal dry cargo 9,021,600 to 10,024,000 1,800 to 2,000
Dangerous dry cargo 10,024,000 to 11,026,400 2,000 to 2,200
Normal refrigerated cargo 17,542,000 to 20,048,000 3,500 to 4,000
Dangerous refrigerated cargo 20,048,000 to 22,554,000 4,000 to 4,500
Asuncin - Montevideo (Uruguay)
Imports-dry cargo 6,014,400 1,200
Exports-dry cargo 5,513,200 1,100
Asuncin - San Pablo (Brazil)
Imports-dry cargo 10,024,000 2,000
Imports-refrigerated cargo 12,028,800 2,400
Exports-dry cargo 9,522,800 1,900
Exports-refrigerated cargo 11,527,600 2,300
Source: Surveyed companies.

Prices depend on the company's method of billing, on whether the cargo is for export or import, on the form of
cargo (dry or refrigerated) and on the care with which the goods have to be handled during transport.

51
Doing Business in Paraguay: Country Cost Elements

Box 5: Land transportation: outlook

The Ministry of Public Works and Communications, with financing from the Structural Convergence Fund of MERCOSUR
(FOCEM), plans to invest US$71,965,630 in various construction works: feed roads for regional integration corridors,
rehabilitation and improvement of the access and perimeter roads of Greater Asuncin and rehabilitation of road corridors.
In 2007, work on the Paraguayan segment of the Interoceanic Corridor was completed. When the other countries involved
complete their parts, the Corridor will connect the Pacific and Atlantic oceans, which will allow Paraguay, as a landlocked country,
to have direct access to the main ports on each ocean. The Corridor is also beneficial in itself, as it passes through a number of
markets with a total population of 280 million.

Source: National Board of Maquiladora Industries for Export.

9.2. Rail transport


At the present time the national railways are used for tourism, except for the goods trains in the city of Encar-
nacin which provide a connection with the river ports, moving 200,000 kg of freight a year, mainly soya
beans.

Rail trips for tourists leave the capital every fortnight for the city of Aregu. The number of passengers per trip
is between 100 and 150.

It should be noted that Ferrocarriles del Paraguay S.A. is the only public corporation that is in the process of
privatization, and for this purpose international investment studies on the sector are taking place. In view of
the interest shown by several foreign investors in the Paraguayan rail system, it is hoped to finalize some in-
vestment by the middle of 2008.18
18 According to Ferrocarriles del Paraguay S.A., the investors interested are from Russia, India, Austria and China

52
Chapter 9. Transportation services and infrastructure

9.3. Maritime transport


Several rivers and their tributaries flow across the territory of Paraguay, favouring the development of the
port and maritime transport sector. The most important rivers are the Paraguay and the Paran, which are na-
vigable the year round over nearly all their length.

On the river Paraguay, there are 63 port terminals, both private and State-run. The most important of these is
the country's main port at Asuncin. This port has 900 metres of linear wharf for the mooring of large vessels,
a beach with an area of 26,500 m2 for loaded containers and another of 51,250 m2 for empty containers. It
should be noted that the products unloaded at this terminal have "green channel" status (that is to say, they
are released immediately without the need for document examination, physical check or value control19)
and that the process, since the introduction of the Customs Procedure Centre (CTA),20 lasts thirty minutes.

Other major ports are that at Villeta, which has a beach for the storage of loaded and empty containers with
an area of 60,000 m2, and that of PETROPAR, where all imports of crude oil and its by-products arrive.

On the river Paran, there are currently a total of 52 private or public port terminals, the most important be-
ing that of Ciudad del Este, where a large proportion of the imports of high-technology products sold in the
city arrive.

The port and river system of Paraguay is regulated by Law 1,066/65 Establishing the National Authority for
Navigation and Ports (ANNP); this body monitors the proper functioning of the port infrastructure and fixes
the prices for port services. Another important entity is the Directorate-General for the Merchant Marine, de-
pendent on the Ministry of Public Works and Communications and responsible for supervising boats and car-
goes that pass through Paraguayan territory. Under Law 295/71 on Reservation of Cargoes, all boats flying
the Paraguayan flag must be registered with this agency.

In 1994, for the purpose of developing the port infrastructure in all its aspects, Law 414/94 on Private Ports
was adopted, authorizing the construction and operation of private ports, which must have adequate insta-
llations and equipment for users. The rates charged for the use of these ports are decided directly by the ope-
rating companies. The ports can also benefit from the fiscal incentives offered for capital investment.21

To promote the export of its products by ship to the world's main destinations, Paraguay has a large number of
duty-free storage facilities in various countries of the region (table 50).

19 See section 13.2, "Import regime".


20 Source: National Authority for Navigation and Ports.
21 See chapter 14, where reference is made to Law 60/90 on the System of Fiscal Incentives for the Investment of National and Foreign Capital.

53
Doing Business in Paraguay: Country Cost Elements

Table 50: Duty-free storage facilities granted to Paraguay


Locality Country
In operation
Duty-free deposit, Montevideo Uruguay
Duty-free deposit, Antofagasta Chile
Duty-free deposit, Rosario Argentina
Duty-free deposit, Nueva Palmira Uruguay
Duty-free deposit, Rio Grande do Sul Brazil
Duty-free deposit, Santos Brazil
Duty-free deposit, Buenos Aires Argentina
Duty-free deposit, Paranagua Brazil
Under negotiation
Duty-free deposit, El Callao Peru
Duty-free deposit, Mejillones Chile
Source: ANNP.

Table 51 shows some reference rates for sending cargo by sea.

Table 51: Cost of maritime shipping to major ports


Journey Basic charge, US Dollars* Additional charge, US Dollars*
Goods: general cargo (not dangerous)
Asuncin-New York* 2,400 BAF vatos US$425 x 20 DV.
Asuncin-New York* 2,950 BAF vatos US$850 x 40 DV.
Asuncin-New York* 3,050 BAF vatos US$850 x 40 HC.
Asuncin-Long Beach (California)* 3,100 BAF vatos US$425 x 20 DV.
Asuncin-Long Beach (California)* 3,850 BAF vatos US$850 x 40 DV.
Asuncin-Long Beach (California)* 3,950 BAF vatos US$850 x 40 HC.
Asuncin-Bilbao (Spain) 2,300 BAF vatos US$450 x 20 DV.
Asuncin-Bilbao (Spain) 3,100 BAF vatos US$900 x 40 DV.
Asuncin-Bilbao (Spain) 3,200 BAF vatos US$900 x 40 HC.
Asuncin-Rotterdam (Netherlands) 2,100 BAF vatos US$450 x 20 DV.
Asuncin-Rotterdam (Netherlands) 2,800 BAF vatos US$900 x 40 DV.
Asuncin-Rotterdam (Netherlands) 2,900 BAF vatos US$900 x 40 HC.
Asuncin-Hong Kong Special Administrative Region (SAR) 2,300 BAF vatos US$500 x 20 DV.
Asuncin-Hong Kong SAR 3,200 BAF vatos US$1 000 x 40 DV.
Asuncin-Hong Kong SAR 3,300 BAF vatos US$1 000 x 40 HC.
Asuncin-Shanghai (China) 2,300 BAF vatos US$500 x 20 DV.
Asuncin-Shanghai (China) 3,200 BAF vatos US$1 000 x 40 DV.
Asuncin-Shanghai (China) 3,300 BAF vatos US$1 000 x 40 HC.
Asuncin-Xiamen (China) 2,300 BAF vatos US$500 x 20 DV.
Asuncin-Xiamen (China) 3,200 BAF vatos US$1 000 x 40 DV.
Asuncin-Xiamen (China) 3,300 BAF vatos US$1 000 x 40 HC.
BAF: bunker adjustment factor (part of the charge depending on oil prices).
Vatos: valid at time of shipment.
DV: dry van or standard container (not refrigerated).
HC: high cube (container with more volume than the 40 DV).
* Including International Ship and Port Security Charge (ISPS), Chassis Usage Charge (CUC), United States Destination Terminal Handling Charge (DTHC) and
SMDF. Wharfage will depend on the POD (US$3 per ton, minimum US$25 per bill of lading).
Observation: All prices are free on board (f.o.b.) and subject to change depending on market conditions. Non-dangerous cargo is defined according to the standards of
the International Maritime Organization, the specialized agency of the United Nations system concerned with issues of maritime transport safety.
Source: ANNP.

54
Chapter 9. Transportation services and infrastructure

9.4. Storage facilities


In addition to transport costs, the user must take into account the cost of storage of goods while procedures
are taking place. ANNP and the private ports offer storage facilities. Table 52 shows the costs of using the
ANNP warehouses.

Table 52: Monthly storage costs


General goods Dangerous goods (explosives and gases) Calendar days
Percentage of the dutiable value
Imports
1st period 0.65% 0.90% 30
2nd period 1.25% 1.45% 20
3rd period 1.50% 1.75% 20
Imports under the maquiladora regime
1st period 0.325% 0.45% 30
2nd period 0.63% 0.73% 20
3rd period 0.75% 0.88% 20
Exports
1st period 0.325% 0.45% 30
2nd period 0.63% 0.73% 20
3rd period 0.75% 0.88% 20
Source: ANNP.

By decision of ANNP, the cost of storage at some ports shows differences due to criteria relating to commercial
and regional development (table 53).

Table 53: Incentives for imports at particular terminals


Port terminal Observation
Villeta port 1st period, 0.50% on the dutiable value for general, agrochemical and related goods
Port of Encarnacin, Algesa and Campestre 1st period, 0.50% on the dutiable value for agrochemical and related goods
Port of Ciudad del Este 1st period, 0.40% from US$50,000 and 0.45% from US$150,000
Puerto Falcn 1st period, 0.50% from G300 million
Source: ANNP.

Another additional cost of maritime transport consists of payments to the port management for the services
rendered in the loading and unloading of goods. Table 54 gives a summary of these costs at the terminals be-
longing to ANNP.

55
Doing Business in Paraguay: Country Cost Elements

Table 54: Port costs


Service Guaranes US Dollars Observation
Slinging charge 1,800 0.36 Per metric ton or cubic metre
Handling 1,200 0.24 Per metric ton or cubic metre
Truck on board 960 0.19 Per metric ton directly unloaded
Use of dock 1,000 0.20 Per linear metre of vessel and per day or fraction
Use of electricity for refrigerated containers 464 0.09 Per kilowatt-hour
Use of electricity for vessels 300 0.06 Per kilowatt-hour
Supply of drinking water (basic cost) 8,500 1.70 Equivalent to 10 m3
Supply of drinking water (additional cost) 850 0.17 Per cubic metre
Source: ANNP.

9.5. Air transportation


The national aeronautical sector is governed by the Paraguayan Aeronautical Code and the entity responsi-
ble for regulating this sector is the National Directorate of Civil Aviation (DINAC), which reports to the Minis-
try of National Defence.

There are several airlines currently operating in Paraguay, such as TAM Mercosur, Aerosur and Gol, which fly
to various destinations around the world. Paraguay has 11 airports managed by the Airports Department of
DINAC, and of these the airports Silvio Pettirossi, Asuncin, Guaran and Ciudad del Este are international
airports. There are also airstrips for private and military use in different parts of the country.

Several of the principal cities of South America are no more than three hours' flight away from Paraguay,
which allows lower transport costs and facilitates communication with other countries.

Table 55 indicates flight time between Asuncin and other important South American cities.

Table 55: Flight time between cities


From To Time
Asuncin Buenos Aires 1h 20m
Asuncin Curitiba 1h
Asuncin So Paulo 1h 15m
Asuncin Montevideo 1h 40m
Asuncin Santiago 2h 45m
Asuncin Iquique 2h 30m
Asuncin La Paz 2h 40m
Source: Airlines consulted.

The total number of passengers transported in 2006 was 584,403, 49% more than in 2005 (diagram 9).

Table 56 shows air fares from Asuncin to national and international destinations.

56
Chapter 9. Transportation services and infrastructure

Diagram 9: Changes over time in the number of passengers transported (1998-2006)

700,000

600,000

500,000
Number of passengers

400,000

300,000

200,000

100,000

-
1998 1999 2000 2001 2002 2003 2004 2005 2006

Source: National Directorate of Civil Aviation.

Table 56: Air fares


National US Dollars*
Asuncin Ciudad del Este 40
International US Dollars*
Asuncin - Buenos Aires 219
Asuncin - Lima 510
Asuncin - Londres 969
Asuncin - Madrid 1,202
Asuncin - Milan 899
Asuncin - New York 924
Asuncin - Miami 827
Asuncin - Montevideo 289
Asuncin - Paris 969
Asuncin - Santa Cruz 334
Asuncin - Santiago 329
Asuncin - So Paulo 219
* Round-trip fares.
Source: Airlines consulted.

In 2006, a total of 13,683,251 kg of cargo was carried by air via Paraguay's two international airports. Most of
this went through the Guaran Airport, because a large quantity of goods enter by that airport to be marketed
in Ciudad del Este, the country's commercial pole.

Table 57 shows reference costs for air freight to the principal world destinations.

57
Doing Business in Paraguay: Country Cost Elements

Table 57: Air freight costs


US Dollars/kg Guaranes/kg
Origin-destination
From To From To
Asuncin Frankfurt 10.60 3.10 53,127 15,537
Asuncin Madrid 10.60 3.30 53,127 16,540
Asuncin Dubai 12.30 4.20 61,648 21,050
Asuncin Hong Kong 12.30 4.20 61,648 21,050
Asuncin Narita 18.90 5.70 94,727 28,568
Asuncin Buenos Aires 1.20 0.55 6,014 2,757
Asuncin So Paulo 1.20 0.60 6,014 3,007
Asuncin Santiago de Chile 2.95 0.65 14,785 3,258
Asuncin Santa Cruz 1.50 0.70 7,518 3,508
Asuncin Miami 4.60 1.70 23,055 8,520
Asuncin New York 5.00 2.40 25,060 12,029
Rates updated to 17 August 2007.
Source: The agency Airemar S.R.L.

9.6. Insurance services


The insurance sector is regulated by Law 827/96 on Insurance, promulgated in 1996. The Superintendency
of Insurance is the body responsible for the oversight of all insurance and reinsurance companies. This insti-
tution comes under the Central Bank of Paraguay, but enjoys operational and administrative autonomy.

Insurance for the transport of cargo covers goods from when they leave the warehouse of the exporter to
when they arrive at the importer's warehouse. Although there are different types of coverage depending on
the needs of the customer, transport insurance can be divided into two types: insurance "free of particular
damage" and insurance against all risks, which is the more comprehensive form.

The insurance premiums charged by the private sector depend on prevailing market conditions. For referen-
ce purposes, however, table 58 shows rates charged for insurance against all risks.

Table 58: Rates for insurance of international freight against all risks
Activity Percentage of goods value
Imports (normal goods) 0.50%
Imports (refrigerated goods) 0.70%
Exports (normal goods) 0.75%
Exports (refrigerated goods) 1.00%
Source: Surveyed insurance companies.

Rates for goods needing refrigeration are higher because, if there is an accident and refrigeration stops, there
is a complete loss - that is to say, it is not possible to recover a portion of the goods.

For transport within Paraguay the procedure is different: customers must estimate the value of the goods that
they will transport during a year and the insurer charges an annual premium of 10% of this amount.

58
CHAPTER 10 Cost of living

T
he cost of living in Paraguay is among the lowest in the world. According to the cost-of-living survey
published by the firm Mercer and updated to June 2007, Asuncin is the cheapest city for the fifth
consecutive year. The study considers 143 cities in the five continents and compares costs for housing,
transport, food, clothing and household articles.

10.1. Costs for the rental of housing

The information here relates to housing in the Paraguayan capital and its surroundings, where the real estate
market is relatively highly developed. Table 59 shows rental costs for apartments and houses in the centre of
Asuncin and in the residential districts, broken down according to the number of rooms.

Table 59: Rental costs per month


Apartments Guaranes US Dollars
Centre
Three rooms 750,000 to 1,800,000 149.64 to 359.14
Four rooms 1,000,000 to 2,500,000 199.52 to 498.80
Residential district
Three rooms 700,000 to 1,750,000 139.66 to 349.16
Four rooms 2,000,000 to 4,000,000 399.04 to 798.08
Houses Guaranes US Dollars
Centre
Three rooms 800,000 to 1,500,000 159.62 to 299.28
Four rooms 1,500,000 to 2,500,000 299.28 to 498.80
Residential district
Three rooms 2,000,000 to 4,000,000 399.04 to 798.08
Four rooms 2,500,000 to 7,000,000 498.80 to 1 396.65
Source: Estate agencies and newspaper advertisements.

10.2. Domestic service

The difficulties encountered by unskilled personnel, especially women, in finding employment in the formal
sector of the economy and the increasing migration from rural to urban areas result in an abundant supply of
labour for performing household duties. Table 60 shows the average wages paid to those who perform these
tasks in the capital. The amounts may, however, vary considerably depending on the size of the home and
whether work is full-time or not.22

22 Many domestic employees live in the homes where they work and leave only at weekends.

59
Doing Business in Paraguay: Country Cost Elements

Table 60: Monthly wages for domestic service in Asuncin


Services Guaranes US Dollars
All services* 500,000 99.76
Care of children 400,000 79.81
* Includes cleaning of the home and the care of children.
Source: Employment agencies consulted and advertisements.

10.3. Security services for dwellings


Several companies provide security services for dwellings. Costs depend on the number of guards needed by
customers, the appliances at their disposal and the duty hours (round the clock, daytime or night-time). Ta-
ble 61 shows the average cost of security services for houses and buildings.

Table 61: Monthly cost for security services


Type of dwelling Guaranes US Dollars
Houses 2,447,500 488
Buildings 2,447,500 488
* Amounts include VAT and refer to the cost of a security guard working 12 hours a day.
Source: Security companies consulted.

10.4. Health insurance


In Paraguay, all insurance and reinsurance services, including health insurance, are governed by Law 827/96
on Insurance.

The Paraguayan insurance market is relatively competitive. In 2006, the company with the largest share con-
trolled 14% of the market. There are 33 insurance companies in operation at the present time.23

The earnings of insurance companies from life insurance premiums increased by 16% between 2003 and
2006, showing the sectors dynamism. Of the total value of premiums collected in 2006, 7.11 per cent repre-
sent group life insurance policies and 0.17% individual policies. Health insurance, with a variety of plans and
services offered, has also shown an upward trend.

Table 62 shows two options for health insurance plans offered by two companies operating in the local mar-
ket. The costs vary according to the services included in the plans.

In general, companies offering health insurance have a national coverage as well as complementarity agree-
ments with other companies within MERCOSUR.

Persons covered by health insurance in Paraguay constitute 21.7% of the population. Of this segment, 78.5%
have private insurance and the remainder are insured with the Social Security Institute. However, health in-
surance coverage is considerably greater in the urban area than in the rural area.24

23 Analytical indicators for the insurance sector, 2005-2006. Superintendency of Insurance. Central Bank of Paraguay.
24 Atlas de Desarrollo Humano Paraguay 2005. United Nations Development Programme (UNDP).

60
Chapter 10. Cost of living

Table 62: Monthly cost of health insurance plans


Type of insurance Plans
OAMI BL PLUS OAMI BL
Company OAMI
Guaranes US Dollars Guaranes US Dollars
Policyholder, spouse and three minor children 540,000 107.74 481,000 95.97
Unmarried policyholder plus two relatives 540,000 107.74 481,000 95.97
Individual policyholder up to age 65, without maternity coverage 290,000 57.86 230,000 45.89
VIP MEDICAL
Company ASISMED
Guaranes US Dollars Guaranes US Dollars
Policyholder, spouse and children up to age 22 540,000 107.74 481,000 95.97
Policyholder and spouse 460,000 91.78 481,000 95.97
Policyholder alone 290,000 57.86 250,000 49.88
Source: BL&ASOCIADOS S.A.

10.5. Education: School enrolment and tuition fees


According to the Permanent Survey of Households for 2005, 28.5% of the Paraguayan population have ten or
more years education and 95% can read and write, a rate higher than the average for Latin America.

In Paraguay there are many educational institutions, mainly in urban areas, where there is a wide variety of
options. There are both public and private institutions of a high level, although the private schools can gene-
rally offer more in terms of additional services such as the study of foreign languages and computing, and ar-
tistic and extracurricular activities. Noteworthy within the range of choices are certain bilingual and other
schools where the International Baccalaureate diploma can be obtained, permitting entrance into universi-
ties worldwide recognizing the diploma.25

Table 63 shows the costs of schools in the upper and medium range. The classification is based on the area in
which the school is located and the particular services it offers.

As far as higher education is concerned, there is also a wide variety of universities and courses of study. The
public universities generally emphasize technology and natural sciences, while private universities tend to
concentrate on commercial courses and the social sciences.

Table 63: School tuition and enrolment fees


Enrolment Annual tuition fee
Range
Guaranes US Dollars Guaranes US Dollars
Upper range
Primary 1,322,619 264 11,471,131 2,289
Secondary 1,565,667 312 14,983,208 2,989
Medium range
Primary 472,500 94 3,727,500 744
Secondary 558,750 111 5,062,313 1,010
* Average figures for all the years making up each educational level.
Source: Educational institutions consulted.

25 For more information on the International Baccalaureate programmes consult www.ibo.org.

61
Doing Business in Paraguay: Country Cost Elements

10.6. Rental of vehicles


There is an ample supply of rental cars in Paraguay, both for foreign customers and for nationals. The compa-
nies offering this service are of national scope. Most have branches in the main Paraguayan cities and offer a
wide range of vehicles.

The rental costs depend on the type of vehicle chosen and the additional services requested, with regard to in-
surance for oneself and third parties, the area of coverage, hours for assistance services, etc.

Table 64: Cost of rental of vehicles


Charge per additional kilometre (US Do-
Type of vehicle Basic charge (US Dollars)*
llars)
Economy 47.75 0.52
Compact 65.50 0.63
Pick-up truck 4x4 76.25 0.82
Estate car 56.00 0.63
Estate car (van type) 99.00 0.82

10.7. Vehicle insurance


It is not mandatory for vehicles in circulation in Paraguay to be covered by insurance, with the exception of
vehicles used for public transportation. However, an increasing number of people are taking out insurance
for vehicles, occupants and even third parties. The coverage of such insurance extends to the whole national
territory and, where agreements with other companies exist, also to the MERCOSUR countries.

The minimum capital required for the establishment of an insurance company is US$500,000.26 The pre-
miums charged by these companies may vary greatly, and the Superintendency of Insurance does not esta-
blish upper limits. However, as a market average, the annual premium for a vehicle valued at G 75,000,000
(US$14,964.09) is around G5,265,000 (US$1,050.48) and the annual premium for a vehicle insured for
G100,000,000 (US$19,952.11) is around G6,710,000 (US$1,338.79).

These premiums cover all risks (theft, collision and third party claims) and include the green card, valid for
one year.27

26 Law 827/96 on Insurance, article 17.


27 Card certifying civil liability insurance, valid for circulation in other countries of the region.

62
CHAPTER 11 Taxes

W
ith the adoption in 2004 of Law 2,421/04 on Administrative Reorganization and Fiscal
Adjustment, which seeks to increase equity in tax treatment, the Paraguayan taxpayer base was
broadened. This Law modifies key aspects of Law 125/91 (in force since 1991), which had
regulated tax matters until then. Aspects in which the new Law introduces changes include taxes on business
income, on agricultural income, on small contributors and on consumption. A Tax on Personal Income was
also introduced.

The changes began to be applied in 2005, but most of them, apart from the tax on personal income, which is
not yet applied, were fully implemented in 2006 and 2007. The philosophy of the new tax regime can be sum-
med up under three aspects: reduction of tax on the income of enterprises, generalization of value added tax
and formalization of the economy, through the involvement of all actors with a requirement for the legal do-
cumentation of their operations, thus generating greater equity and justice in the distribution of the tax bur-
den.

In 2006, taxes on consumption represented 62% of Paraguays tax revenue. Taxes on commercial activities
constituted only 15%. To encourage investment, the State has had to sacrifice part of its revenue. Of the total
decrease in revenue, 38% has been due to the incentives provided for in Law 60/90 on the System of Fiscal In-
centives for the Investment of Domestic and Foreign Capital.28

11.1. Tax on income from commercial activities

This is a direct tax applicable to all income from Paraguayan sources derived from commercial, industrial or
service activities, except activities of a personal character. Income from Paraguayan sources is income gene-
rated by activities within the Republic, irrespective of the nationality or residence of those engaged in such
activities.29

Liable to such tax, inter alia, are single-owner businesses, companies of any kind, associations, corporations
and other private entities of whatever nature, and also foreign-based entities or persons carrying out activi-
ties taxable in Paraguay.30

At the present time, the general rate applied under this tax is 10%, or 20 percentage points less than the 30%
rate that applied before the tax reform. However, if the enterprise distributes profits to its shareholders, an
additional tax of 5% is applied to the net amounts credited or paid. In the case of companies domiciled
abroad, the head office or the shareholders must pay 15% on net amounts remitted.

28 Informe Econmico Tributario Enero a Diciembre de 2006. Directorate for Taxation Planning and Methodology. Department for Economic Studies on Taxation. Ministry of Fi-
nance.
29 Law 2,421/04 on Administrative Reorganization and Fiscal Adjustment, articles 2 and 5.
30 To determine the taxable income of persons or entities domiciled abroad, the branch of activity concerned is taken into account. The law also provides for certain expenditu-
res that may be made.

63
Doing Business in Paraguay: Country Cost Elements

11.2. Tax on personal income


This is a direct tax applicable to income from Paraguayan sources derived from activities that generate perso-
nal income that is to say, professions, trades, occupations and the rendering of services of any kind. Also in-
cluded are 50% of the dividends, profits or surpluses obtained by a shareholder or partner in an enterprise
engaged in activities liable to the Tax on Income from Commercial Activities.31

This tax was due to come into effect at the beginning of 2006 but it was suspended by the Paraguayan Con-
gress. However, table 65 gives the rates that will apply when the tax comes into effect.

Table 65: Tax on personal income


Personal income Percentage payable in tax
Monthly income exceeding 10 times the minimum wage or annual income exceeding 120 times
10%
the minimum monthly wage
Monthly income exceeding 3 times the minimum monthly wage (but below 10 times) or annual
income exceeding 36 times the minimum monthly wage (but below 120 times) 8%

Note: During the first year of application of the tax, only persons whose monthly income exceeds 10 times the minimum wage or whose annual income exceeds 120
times the minimum monthly wage will be liable to tax. Subsequently, the level of income taxable will be lowered each year by once the monthly minimum wage, until the
amount of 3 times the monthly minimum wage is reached.
Source: Law 2,421/04 on Administrative Reorganization and Fiscal Adjustment.

11.3. Value added tax


VAT is an indirect tax applicable to all operations involving the delivery of goods, whether with transfer of
ownership or with the effect of giving recipients the right to use the goods as if they were their owners.32 Each
player in the value chain pays his or her predecessor the corresponding VAT, and it is the final consumers who
bear the burden of the tax.

In 2006, this tax, which has many contributors, represented 45% of the tax revenues of the Paraguayan Sta-
te.33

Under the new taxation regime, the rate of VAT depends on the type of product. A rate of 5% is applied to cer-
tain basic household purchases and certain transactions. In the remainder of cases, the rate applied is 10%
(table 66).

31 Law 2,421/04 on Administrative Reorganization and Fiscal Adjustment, Article 10.


32 Law 2.421/04 on Administrative Reorganization and Fiscal Adjustment, Article 82.
33 Informe Econmico Tributario Enero a Diciembre de 2006. Directorate for Taxation Planning and Methodology. Department for Economic Studies on Taxation. Ministry of Fi-
nance.

64
Chapter 11. Taxes

Table 66: Value added tax rates


Nature of transaction Tax rate
Contracts for the cession of the use of goods and the transfer of real property 5%
Purchase of the following basic household goods: rice, noodles, mat, edible oils, milk, eggs, uncooked meat, flour
5%
and iodized salt
Payment of interest, commissions and charges for loans and financing 5%
Sale of pharmaceutical products 5%
All other cases 10%
Source: Law 2,421/04 on Administrative Reorganization and Fiscal Adjustment.

Although the nominal rate for the transfer of real property is 5%, the Law on Administrative Reorganization
and Fiscal Adjustment treats as the taxable value 30% of the sales price of the property transferred, with the
result that the effective rate is 1.5%.34 It should also be noted that agricultural products in their natural state
are exempt from VAT, as are handicraft products, whether for export or for sale on the local market.35

11.4. Excise tax


This tax is applied to products whose consumption is considered socially undesirable and to products consi-
dered luxury goods, irrespective of whether they are produced in Paraguay or abroad. Table 67 shows the ra-
te of excise tax (ISC) applied to certain representative products.

Table 67: Excise tax


Product Maximum rate
Cigarettes/cigars of any category 12%
Manufactured tobacco, cut or loose, as snuff or in any other form 12%
Aerated drinks without alcohol, sweet or not, and, in general, unspecified drinks without alcohol or with a maximum
5%
of 2% of alcohol
Beer in general 8%
Distillery products, anisette, bitters, Fernet and the like, vermouth, punches, spirits in general 10%
Fuels obtained from petroleum 50%
Weapons and ammunition and their parts and accessories 5%
* In all cases the tax is collected on a monthly basis, except for the excise tax on fuels, which is paid weekly.
Source: Law 2,421/04 on Administrative Reorganization and Fiscal Adjustment.

Under article 106 of the Law on Administrative Reorganization and Fiscal Adjustment, the Executive may fix
differential rates for the different types of products, but only up to the maximum rate established.

Excise tax represents 17% of Paraguays total tax revenue. The largest role in revenue under this tax is played
by revenue from the excise tax on fuels.

34 Instructivo Tributario para Actividades e Ingresos de Personas Fsicas (2007). High-level Technical Institute for Tax and Business Training. Nora Ruoti Emprendimientos
S.R.L.
35 Law 2,448/04 on Handicrafts.

65
Doing Business in Paraguay: Country Cost Elements

11.5. Vehicle licence tax


In order to circulate in the country, any motor vehicle, whether for private or commercial use, must pay an-
nually the vehicle licence tax. In Asuncin, vehicles for private use whose owner lives in Asuncin and vehi-
cles for commercial use by businesses established in Asuncin must be registered. Table 68 shows details re-
garding the payment of the tax in the capital.

Table 68: Vehicle licence tax in Asuncin


Assessed value (guaranes) Basic tax (guaranes) Variable element based on
Lower limit Upper limit Minimum Maximum excess over lower limit
0 500,000 0 7,500 0.00%
500,001 1,000,000 7,500 12,000 0.90%
1,000,001 2,000,000 12,000 20,000 0.80%
2,000,001 3,000,000 20,000 26,000 0.60%
3,000,001 3,500 000 26,000 29,000 0.60%
3,500,001 4,000,000 29,000 34,000 1.00%
4,000,001 Upwards 34,000 Upwards 1.00%
Source: Ordinance 331/06 of the Municipality of Asuncin.

Table 69 shows the rates charged by the municipalities in the interior of Paraguay.

Table 69: Vehicle licence tax in the interior of Paraguay


Description Rate Age of the vehicle
0.5% New
Percentage of taxable value* 0.475% Up to 10 years old
0.25% Over 10 years old
* For the payment of taxes on the importation of vehicles, the taxable value is established by the Ministry of Finance.
Source: Law 620/76 and Law 135/91 on Municipalities in the Interior.

In addition to this tax, each municipality may impose charges for the administrative costs of vehicle authori-
zation and driving licences.

11.6. Other taxes

11.6.1. Tax on documents and deeds

This tax applies to obligations, acts and contracts whose existence is evidenced in some document. Among
documents and contracts related to financial intermediation, it applies to bills of exchange, drafts, money or-
ders, letters of credit and, in general, any operation involving the transfer abroad of funds or foreign exchan-
ge.

66
Chapter 11. Taxes

It is the drawer of the document who is liable for this tax, and the withholding agents are the financial inter-
mediary institutions. The rate varies between 1.5 per mille and 2 per mille. In 2006, this tax represented only
1% of Paraguays total tax revenues.36

11.6.2. Tax on agricultural income

Under article 27 of the Law on Administrative Reorganization and Fiscal Adjustment, agricultural activities
are activities directed towards obtaining primary vegetable or animal products using the factors land, capital
and labour (for example, the raising and fattening of livestock, the production of wool or leather and crop
and milk production). The rate applied is 10% on the net income assessed.

11.7. Other municipal taxes


The municipalities of Paraguay, on the basis of Law 620/76 and of Law 135/91 amending it, have their own
local ordinances on tax questions. In the case of the Municipality of Asuncin, the tax regime is established by
a special ordinance.37

Table 70: Other municipal taxes


Asuncin Gran Asuncin Ciudad del Este Encarnacin
Description
(Rates)
Permit for opening of premises intended for
G34,100 + 0.73% MDWa/ G25,000 G1,800 G1,800
economic activities
Rates for public health services* 2% to 5% 5% 5% 5%
Rates for cleaning of public thoroughfares G3,775 + 0.96% MDWm/ G8,500 G4,167 + 0.2%m/ 264 G/m2
Tax on transfers of real estate** 3 per mille 2 per mille 2 per mille 2 per mille
3
Rates for disinfection services*** G446 + 0.01% MDW G300 60 G/m No data
Special contribution for maintenance of the road a/
G37 200 + 0.79 MDW G200 G200 G518.
surface****
* Percentage of the business licence fee.
** Based on the value of the transaction.
*** Limit, cubic metres of enclosed premises.
**** Buildings located on asphalted roads, per square metre of road surface in front of the building.
MDW: Minimum daily wage.
a/ Annual payments.
m/ Monthly payments.
Note: Unless otherwise specified, payments are made at the request of the party concerned.
Source: Local by-laws of the municipalities in question.

11.8. Agreements to avoid double taxation


Paraguay has signed bilateral agreements to avoid double taxation with several countries, which are listed in
table 71. With the help of such agreements, Paraguay aims to attract investment, to align itself with world ta-
xation practices through increased awareness of international agreements and to exchange taxation data in
order to help avoid evasion.
36 Informe Econmico Tributario Enero a Diciembre de 2006. Directorate for Taxation Planning and Methodology. Department for Economic Studies on Taxation. Ministry of Fi-
nance.
37 The municipalities included within Greater Asuncin are: San Lorenzo, Lambar, Fernando de la Mora, Luque, San Antonio, Villa Elisa, Villeta, emby, Ypan and Mariano
R. Alonso.

67
Doing Business in Paraguay: Country Cost Elements

Table 71: Bilateral tax agreements


Country Subject Entry into force
Argentina Air, river and land transport 19 April 2000
Belgium Air transport 1 July 1987
Chile Air and land transport 21 September 1995
Chile Tax on income and capital Pending
Germany Air transport 13 April 1985
Uruguay Air transport 27 May 1993
Source: Directorate for Treaties. Ministry of Foreign Affairs.

68
CHAPTER 12 Financial costs

R
egulation of the Paraguayan financial sector is the responsibility of the Central Bank of Paraguay,
through the Superintendency of Banks, which has the task of verifying that banks, finance companies
and other credit institutions comply with the laws that concern them.

The Paraguayan financial system is regulated by Law 861/96 on Banks, Finance Companies and Other Credit
Institutions, and by the Law Establishing the Central Bank of Paraguay, in which the functions of this supervi-
sory body are set out. There are also several laws and resolutions regulating the various areas of financial in-
termediation.

Since a minor crisis in 2002, deposits with the financial institutions of Paraguay have maintained high rates
of growth demonstrating the confidence of the public in the countrys financial structure. As a result of the de-
preciation of the dollar in relation to the guaran, local currency deposits have increased considerably. In Ju-
ne 2007, the assets of the banking system amounted to
G19,545,400 million and liabilities to G17,329,300 million, representing increases of 26.8% and 27.6% res-
pectively over June 2006.38

Since 2006, the Development Finance Agency has been acting as a second-tier bank, facilitating access to me-
dium-term and long-term lines of credit at preferential rates.

12.1. Reference interest rates

By law, the Superintendency of Banks must disseminate the average lending and borrowing rates of the Para-
guayan financial market, on a monthly basis, as reference rates, and establish maximum rates above which
lending is considered to constitute usury.39 Within this limit, interest rates are governed by market condi-
tions.

Table 72 gives the reference lending rates and deposit rates for August 2007.

38 Informe Econmico, June 2007. Bureau for Economic Studies. Central Bank of Paraguay.
39 Law 2,339/03 to amend article 44 of Law 489/95 Establishing the Central Bank of Paraguay.

69
Doing Business in Paraguay: Country Cost Elements

Table 72: Reference annual interest rates


Banks Finance companies
Lending rates National currency Foreign currency National currency Foreign currency
Nominal Actual Nominal Actual Nominal Actual Nominal Actual
Commercial (terms below or equal to one year) 10.91% 11.61% 7.32% 7.55% 21.37% 23.75% 10.45% 10.89%
Commercial (terms above one year) 8.57% 8.81% 6.55% 6.68% 30.44% 35.33% 13.51% 14.26%
Development (terms below or equal to one year) 8.92% 9.15% 8.28% 8.50% - - - -
Development (terms above one year) 11.48% 11.83% 8.36% 8.59% - - - -
Consumption (terms below or equal to one year) 15.16% 16.38% 9.81% 10.15% 33.45% 38.37% 12.57% 12.91%
Consumption (terms above one year) 25.00% 28.62% 10.50% 10.79% 37.18% 44.24% 13.92% 14.69%
Simple average of lending rates 13.34% 14.40% 8.47% 8.71% 30.61% 35.42% 12.61% 13.19%
Maximum rates National currency Foreign currency
Terms up to 90 days 47.77% 14.93%
Terms up to 180 days 40.35% 16.51%
Terms up to 365 days 47.85% 15.76%
Terms above one year 49.48% 17.32%
Banks Finance companies
Lending rates National currency Foreign currency National currency Foreign currency
Nominal Actual Nominal Actual Nominal Actual Nominal Actual
Demand deposits 0.32% 0.32% 0.13% 0.13% 1.28% 1.29% 0.19% 0.19%
Term deposits
180 days 3.27% 3.31% 3.19% 3.23% 6.34% 6.49% 2.75% 2.77%
Below or equal 4.83% 4.90% 3.89% 3.95% 8.64% 8.87% 3.80% 3.82%
Above 365 days 9.27% 9.49% 4.77% 4.84% 11.17% 11.66% 6.08% 6.21%
Simple average of deposit rates 4.42% 4.51% 3.00% 3.04% 6.86% 7.08% 3.21% 3.25%
Note: Updated to August 2007.
Source: Superintendency of Banks. Central Bank of Paraguay.

Box 6: Development Finance Agency

To facilitate the access of the Paraguayan productive sector to credit, Law 2,640/05 established the Development Finance Agency
(AFD), a second-tier banking agency which, as such, offers its credit products exclusively through banks, finance companies and
cooperatives.
At the present time, AFD works with eight banks, eight finance companies, 16 cooperatives and the Livestock Fund, a decentrali-
zed public entity for promoting the animal production sector.
Since the commencement of its operations in 2006, AFD has approved credit totalling
G226,000 million (US$45,090,000) for approximately 2,500 beneficiaries, including both individuals and companies. For 2007,
AFD was budgeted to make available a total of US$17.6 million.
Table 73 shows the various credit options offered by AFD.

70
Chapter 12. Financial costs

Table 73: Credit options through the Development Finance Agency


Products Purpose Type of currency Term Maximum amount Rate of interest*
Term below two years:
12% + the rate of the IFI**
FIMAGRO Agricultural machinery US Dollars Up to five years US$500,000
Term above two years:
7.5% + the rate of the IFI
Term below two years:
Up to ten years with
Guaranes and U p t o 8 0 % o f t h e 12% + the rate of the IFI
PROCRECER Investment in general a two-year grace
US Dollars investment Term above two years:
period
7.5% + the rate of the IFI
Term below two years:
Micro and small 12% + the rate of the IFI
MICRDITO Guaranes Up to five years G250,000,000
enterprises Term above two years:
7.5% + the rate of the IFI
Up to 80% of Term below two years:
Purchase, construction or 12% + the rate of the IFI
the value of the
MICASA renovation of houses and Guaranes Up to 20 years
property or Term above two years:
apartments
G400,000,000 7.5% + the rate of the IFI
Term below two years:
Up to seven years 12% + the rate of the IFI
Investment in animal Up to 100% of
PROCAMPO Guaranes with a two year
production the investment Term above two years:
grace period
7.5% + the rate of the IFI
Term below two years:
Investment by members of Guaranes and G250 000 000 per 12% + the rate of the IFI
PROCOOP Up to twelve years
production cooperatives US Dollars member Term above two years:
7.5% + the rate of the IFI
* The interest rate consists of the basic rate applied by AFD plus the profit margin of the IFI. For loans in US Dollars, the rate is 6 per cent plus the rate applied by the IFI.
** IFI: Intermediate financial institution.
Source: AFD.

71
.
CHAPTER 13 Foreign trade

P
araguays international trade relations take place within the international legal framework established
by the rules and regulations of the World Trade Organization (WTO) and the treaties for regional
integration of the Latin American Integration Association (ALADI) and MERCOSUR. Paraguay also
benefits from the Generalized System of Preferences (GSP), which provides for customs reductions and
benefits for products coming from developing countries.

At the national level, legislation on foreign trade is contained in the Customs Code and its regulations,40 Law
1,095/84 Establishing the Customs Tariff and other laws, decrees and regulations mentioned in the para-
graphs below.

The bodies concerned with external trade are the National Customs Directorate and the Ministry of Industry
and Commerce, through: the Directorate-General for Foreign Trade (DGCE), the Investment and Exports
Network and the Single Window for Exports (VUE).

13.1. Export regime

13.1.1. Overview

In order to simplify export procedures with the help of information and automation technologies, the Single
Window for Exports was established in 2006, a system depending on the Ministry of Industry and Commerce
and recognized by WTO and the United Nations.

VUE is an electronic system for the approval or modification of data via the Internet. The process is as follows:
export applications are received, they are transmitted to the relevant institutions, electronic authorizations
are received and they are transmitted to the National Customs Directorate. The applicant can ascertain by
means of the Internet the stage in the process where his document is.

All persons and companies interested in exporting must be entered in the Single Register for the Exporter
(RUE), through which they can have access to the VUE system and its services. The charge for the services of
RUE is four times the minimum wage.

It should be noted that export goods are exempt from customs and exchange charges.41

40 Decree 4,672/05 regulating the Customs Code.


41 Law 1,095/84 Establishing the Customs Tariff, Article 7.

73
Doing Business in Paraguay: Country Cost Elements

13.1.2. Exports of soya and meat

Paraguay is one of the main producers of soya beans at the regional and world level. This crop is cultivated
over a wide area and uses advanced technology, making it an important source of foreign exchange for the
country. Table 74 shows the procedures required for exporting soya and its by-products, making use of the
Single Window for Exports.

Table 74: Procedure for exporting soya using the Single Window for Exports
Stages Steps
a) Commencement of the export process 1) Export application
b) Phytosanitary check at the border crossing 2) Check and control at the border crossing
3) Dispatch to the National Service for Animal Quality and Health
c) Request for and issue of the phytosanitary certificate (SENACSA), using the VUE system
4) Printing of the document
d) Preparation of the export documentation 5) Officializing of the documentation
e) Control and checking of the document 6) Checking of documents
7) Customs check
f) Physical check of goods/evaluation
8) Load verification
g) Payment of rates and tariffs 9) Payment of rates
10) Checking of embarkation
h) Custody/control and embarkation
11) Certification of embarkation
i) Closure of file 12) Closure of file
Source: VUE.

Meat also has considerable importance for Paraguays economy. Indeed, the good showing of this product in
the past years, resulting to a great extent from the recovery of major markets and the maintenance of the sta-
tus of Paraguay as a country free from foot-and-mouth disease, was responsible for much of the growth of
the Paraguayan economy. Table 75 summarizes the procedures required for exporting meat.

Table 75: Process for exporting meat using the Single Window for Exports
Stages Steps
1) Entry into the VUE system
a) Commencement of the export process
2) Application for export procedures
b) Approval by the Official Veterinary Inspector of the meat 3) Dispatch to the National Animal Quality and Health Service
-packing/cold-storage facility (SENACSA), using the VUE system
c) Export authorization from the Directorate-General for the Quality
4) Preparation of the export authorization
and Harmlessness of Products of Animal Origin (DIGECIPOA)
d) Certificate of the loading official - Official Veterinary Inspector of the 5) Loading of products
meat-packing/cold-storage facility 6) Preparation of the loading official's certificate
e) Preparation of the export documentation 7) Officializing of the documentation
8) Checking of document acceptability in the VUE system and the Sys
f) Control and checking of documents
tem for the Fiscal Organization of Customs Levies (SOFIA)
g) Physical check of goods/evaluation 9) Customs check
10) Checking in the meat-packing/cold-storage facility
h) Payment of rates and tariffs
11) Payment of rates
12) Preparation of the health certificate
i) Issue of the health certificate
13) Printing of the health certificate
14) Checking of embarkation
j) Custody/control and embarkation
15) Embarkation check/SENACSA
Fuente: VUE

74
Chapter 13. Foreign trade

Box 7: Investment and Exports Network

In December 2004, in order to create an appropriate framework for increasing the competitiveness of Paraguayan
industrial exports, the Executive adopted by decree the National Export Plan and established the Investment and Exports
Network (REDIEX), a network under the responsibility of the Ministry of Industry and Commerce.
The task of REDIEX is to implement the National Export Plan with the participation of the public sector, the private sector
and universities.
To promote dialogue between the players, sectoral boards have been established, presided over by a representative of the
private sector and including governmental and private organizations and universities, all concerned with a specific sector.
Their objective is to improve the competitiveness of exports in this sector.
Eight sectoral boards have so far been created, concerned with meat and leather, information and communication techno-
logies, tourism, textiles and clothing, forestry products, fruit and vegetables, bio-fuels and stevia.42
In addition to the sectoral boards, there are units that offer support to exporters and provide information relating to foreign
trade, both for those wishing to export for the first time and for those who wish to improve their export capacity.
In certain sectors, there are also consortia which, unlike the sectoral boards, are made up solely of private sector actors. The
consortia at present in operation are concerned with mattresses, furniture and printing. A leather consortium is being set
up.
It should be stressed that REDIEX also finances investment projects directed towards promoting exports. Funding may
constitute up to 65% of the value of projects if they involve one or two companies, up to 75% when there are three or more
beneficiary enterprises and up to 100% for projects adopted at the initiative of REDIEX.43 In addition, there is financing for
projects seeking to strengthen the sectoral boards. All the companies participating in any of these boards are eligible for
such financing, which may constitute up to 85% of the value of the project or up to 100% if the proponent is REDIEX.44

13.1.3. Certificate of origin

The certificate of origin, showing that an item of merchandise has been produced in a specific country, is of
particular importance in international trade as it permits the products of the country to benefit from the va-
rious customs preferences to which the country has access.

To comply with the MERCOSUR origin regulations,45 Paraguay has introduced a system of electronic mana-
gement for the issue of the certificate of origin for all products, except for those covered by the GSP, for which
certificates must in all cases be applied for in the Ministry of Industry and Commerce. In order to obtain the
MERCOSUR origin certificate, up to 2008 the national content of Paraguayan goods has to be only 40%. As
from 2014, the national content must increase to 60%.

In order to achieve greater efficiency, the Ministry of Industry and Commerce has decentralized the issue of
certificates of origin to the various production chambers, namely: the Cotton Chamber of Paraguay
(CADELPA), for cotton products; the Paraguayan Chamber for Cereals and Oilseeds (CAPECO), for cereals
and their by-products and oil seeds and their by-products; the National Chamber of Commerce and Services
of Paraguay, for all customs matters except with regard to wood in all its forms; the Wood Industry Federation
of Paraguay (FEPAMA), for wood in all its forms; and the Paraguayan Industrial Union (UIP), for all customs

42 Stevia is a plant with sweet leaves whose chemical components can be used as a sugar substitute.
43 Annex to REDIEX Resolution No. 32. Export Promotion Project.
44 Annex to REDIEX Resolution No. 32. Sectoral Projects of a Structuring Nature.
45 Complementarity Agreement No. 18 concluded between Argentina, Brazil, Paraguay and Uruguay.

75
Doing Business in Paraguay: Country Cost Elements

matters except those relating to wood in all its forms. The Ministry, through the Directorate-General for Fo-
reign Trade, is responsible for authenticating the certificates.

Electronic processing takes place through the VUE system, with the participation of the relevant chamber, to
which the exporter must submit a sworn declaration from the producer and an authenticated copy of the
commercial invoice. Obtaining the certificate of origin takes 40 minutes on average.

Table 76 shows the current rates for obtaining the certificate of origin, 50% of which go to the Ministry of In-
dustry and Commerce for the necessary authentication. Payments are made at the rate of exchange prevai-
ling on the day.

Table 76: Certificates of origin


Value of exports (US Dollars f.o.b.) Rate (US Dollars)
Up to 50,000 10
From 50,001 to 100,000 20
From 100,001 to 200,000 30
From 200,001 to 400,000 40
From 400,001 to 600,000 50
600,001 upwards 60
Source: Directorate-General for External Trade of MIC; authorized chambers.

Under Resolution No. 72/02 of the Ministry of Industry and Commerce, wood products have varying rates.
The rates differ for different tariff items of the Common MERCOSUR Nomenclature and External Tariff (ta-
ble 77).

Table 77: Certificate of origin for wood products


Tariff items Rate (US Dollars per metric ton)
4402, 4409, 4410, 4411, 4412, 4414, 4415, 4416, 4417, 4418, 4419, 4420, 4421, 9403 0.5
4401, 4403, 4404, 4405, 4406, 4407, 4408, 4413 1
Source: Directorate-General for Foreign Trade of MIC; authorized chambers.

13.1.4. Drawback

The drawback system allows for partial or total reimbursement of import duties paid for products that beco-
me part of export goods or for products consumed during the production of exportable goods.45

The Executive has to decide which goods can be covered by the drawback system.46

46 Law 2,422/04 on the Customs Code, article 177.


47 Decree 4,672 regulating the Customs Code, article 236.

76
Chapter 13. Foreign trade

13.2. Import regime


The body responsible for monitoring and improving customs operations is the National Customs Directorate
(DNA). The import regime is regulated by the Constitution, the new Customs Code, Law 125/91, Law
2,421/04 on Administrative Reorganization and Fiscal Adjustment and the various laws governing ports.

Importers must be registered with DNA. The requirements for registration depend on the type of company or
the legal capacity of the importer who, in turn, needs in all cases a customs clearance agent; these agents
work as commercial and customs agents. The customs clearance agent must be authorized by DNA.

The fees of customs clearance agents are fixed by law and depend on the value of the imports (table 78).

Table 78: Fees of customs clearance agents


Value of imports (guaranes) Additional fee (percentage of the
Basic fee (guaranes)
From To value of the imports cleared)
1 10,000,000 50,000 2%
10,000,001 50,000,000 250,000 1%
50,000,001 100,000,000 750,000 0.80%
100,000,001 250,000,000 1,550,000 0.50%
250,000,001 en adelante 2,800,000 0.30%
Source: Law 220/93 on the Fees Schedule for Customs Clearance Agents.

Depending on the level of risk involved, imported goods may enter the country through the following selecti-
ve control channels: the green channel, in which goods are allowed through without documentary
analysis, a physical check or a value control; the orange channel, with examination of documents only;
the red channel, goods being released only after passing through all the monitoring processes esta-
blished.48

All goods imported, except those expressly declared exempt, are subject to a customs tariff. The maximum
rate of duty is 30% on the taxable value of the goods, depending on their category and tariff classification.49
Table 79 summarizes Paraguays structure of tariffs, depending on the origin of the imports and their type.

Imports coming from MERCOSUR (intra-zone), with only a few exceptions, have a general rate of 0%, and
the average common external tariff of the member countries for products coming from third countries (ex-
tra-zone) is 10%.

In addition to customs duties, other taxes must be paid in customs (table 80), notable among them being va-
lue added tax and excise tax.

48 Law 2,422/04 on the Customs Code, article 177.


49 Law 1,095/84 Establishing the Customs Tariff. Article 2.

77
Doing Business in Paraguay: Country Cost Elements

Table 79: Import regime


Category Ad valorem tariff*
Intra-zone tariff (MERCOSUR) 0%
Average of the Common External Tariff 10%
Average of the Basic List of Exceptions 10%
Capital goods 0-6%
Informatics and telecommunications 0-2%
Exception list - Decision No. 31/03 of the Council of the Common Market (CMC) 0%
Exception list - Decision No. 68/00 of CMC 16%
Average for the motor vehicle sector, intra-zone 8%
Average for the motor vehicle sector, extra-zone 12%
Sugar sector 30%
Raw materials 0%
The taxable base for the imported goods is the customs value determined in accordance with the terms of the Agreement on Implementation of Article VII of the
General Agreement on Tariffs and Trade.
Source: National Customs Directorate.

Table 80: Other taxes and charges payable in customs


Category Rate Observation
Charge for valuation services 0.5% On the value determined in customs.
On the value determined in customs and on the customs and internal charges payable
General value added tax 10%
prior to withdrawal of goods from the customs area.
This is of an exceptional and optional nature. It applies to products that will be sold to
Value added tax under the tourism regime 1.5%
non-resident aliens.
Average applied to the affected goods on the value determined in customs prior to
Excise tax 18%
withdrawal of goods from the customs area.
Advance on income tax 0.6% On the value determined in customs.
National Institute for Indigenous Affairs 7% On the charge for consular expenses.
Vehicles tax 2% On vehicles whose assessed value exceeds US$30,000.
Source: National Customs Directorate.

13.3. Customs
In 2005, the new Customs Code came into force, its purpose being to adapt the customs structure for imports
and exports of goods to current international trade requirements. The process included a new organizational
structure and the adaptation of the legal instruments to give greater efficiency to the customs service.

At the present time, all customs procedures are incorporated in the System for the Fiscal Organization of Cus-
toms Levies. This system allows the application of selective control channels, centralization of data for
analysis and dissemination, interactive online consultation and electronic payments through banks esta-
blished in Paraguay. In addition, there is a secure connection through this system with the other customs offi-
ces of MERCOSUR.50

A number of improvements have been introduced in the National Customs Directorate in recent years, and
mention should be made of the electronic facility that will soon be available for shipping agents, which will
facilitate advance submission of the cargo manifest. This system will benefit carriers and importers, reducing

50 For more information, check the web page www.aduana.gov.py.

78
Chapter 13. Foreign trade

delays, and also the customs service, which will be able to apply more efficient control. In addition, the move-
ment of containers will be monitored through the Global Positioning System (GPS).

13.4. Foreign trade agreements


Paraguay, conscious of the limited size of its economy, has signed several bilateral and multilateral trade
agreements (table 81). The main such agreement is that establishing the Southern Common Market
(MERCOSUR), a regional grouping also including Uruguay, Argentina and Brazil, with Venezuela to be
added shortly, and with associated countries such as Chile and Bolivia. The prime objective of this treaty is to
bring about the integration of the countries concerned through the free movement of goods, services and fac-
tors of production.

79
Doing Business in Paraguay: Country Cost Elements

Table 81: Foreign trade agreements


Agreements signed Scope or partner (country of region)
Multilateral agreements
World Trade Organization Worldwide
Latin American Integration Association Latin America and the Caribbean
MERCOSUR Argentina, Brazil, Uruguay and (shortly) Venezuela
MERCOSUR - Andean Community (CAN) Andean countries
With international organizations for selected products Worldwide (with the participating countries)
Global System of Trade Preferences among Developing Countries (GSTP) Worldwide
MERCOSUR - Mexico Mexico
MERCOSUR - Chile Chile
MERCOSUR - Bolivia Bolivia
MERCOSUR - Peru Peru
MERCOSUR - Egypt Egypt
MERCOSUR - South Africa South Africa
MERCOSUR - Canada Canada
MERCOSUR - Central American Common Market Central America
MERCOSUR - United States of America United States
MERCOSUR - European Union European Union
MERCOSUR - Cuba Cuba
MERCOSUR - Russia Russia
MERCOSUR - India India
Bilateral (commercial and investment agreements)
Paraguay - Ecuador Ecuador
Paraguay - France France
Paraguay - United Kingdom United Kingdom
Paraguay - Switzerland Switzerland
Paraguay - Spain Spain
Paraguay - Czech Republic Czech Republic
Paraguay - Portugal Portugal
Paraguay - Bolivia Bolivia
Paraguay - Peru Peru
Paraguay - Venezuela Venezuela
Paraguay - Chile Chile
Paraguay - United States United States
Paraguay - Netherlands Netherlands
Paraguay - Germany Germany
Paraguay - Mexico Mexico
Unilateral agreements
Generalized System of Preferences Worldwide
Agreements under negotiation
Free Trade Area of the Americas Americas
Source: Technical Unit for Industrial Studies.

80
CHAPTER 14 Incentives for investment
and exports

14.1. Law 60/90

T
his law, which came into force in 1990, establishes a system of fiscal incentives for the investment of ca-
pital, both of domestic and of foreign origin. Its objectives are: to increase the production of goods and
services, to create permanent jobs, to promote exports, to replace imports, to promote investment and
reinvestment of profits in capital goods and to incorporate technologies that will allow an increase in produc-
tive efficiency and a greater and better utilization of national raw materials, labour and energy resources.

As benefits, Law 60/90 offers a set of exemptions from national and municipal taxation for fixed capital in-
vestment, for a maximum period of ten years. Notable among such exemptions are:

Total exemption from national and municipal taxation on the establishment, incorporation and re-
gistration of companies and enterprises;

Total exemption from customs duties and charges with equivalent effect on imports of capital goods,
raw materials and inputs intended for local industry and foreseen in the investment project.51

Additionally, the Law on Administrative Reorganization and Fiscal Adjustment introduced substantial
amendments to Law 60/90 and added the following benefits:

Foreign investment exceeding US$5,000,000 is to be exempt from tax on remittances abroad for the
payment of interest and commissions and reimbursement of capital, during the period laid down in
the investment project;

An investment exceeding US$5,000,000 will also be exempt from taxes on the dividends and profits
of the investment project for a period of up to ten years, provided that this tax is not a fiscal credit for
the investor in his country of origin.

Under the new taxation regime, established in Law 2,421/04, investors covered by Law 60/90 are also
exempt from VAT on capital goods, national or imported, directly used in the industrial or agricultural pro-
duction cycle.

The benefits of Law 60/90 and its amendments are available to individuals and legal entities covered by cu-
rrent legal provisions. In their application for such benefits, enterprises must indicate: the full name,
whether the enterprise is an existing or new one, names of the top managers of the enterprise, the activity in
which the enterprise is engaged (in the case of an existing enterprise), the reason for the investment, the lo-
cation of the project and the goods to be produced or services to be rendered; they must also give details on
the financial planning for the project, with special emphasis, inter alia, on the amount of labour that will be
employed and the investment timetable. When all the documents have been submitted, and if there is no re-
quest for the clarification of certain aspects, the estimated time required for the issue of a decision is 60 days.
51 See Law 60/90, Article 5, for more information on the benefits.

81
Doing Business in Paraguay: Country Cost Elements

The body responsible for recommending to the Ministers of Industry and Commerce and of Finance the
approval or rejection of applications for the various benefits is the Investment Board, made up of five repre-
sentatives of public institutions and two representatives of the private production sector. For its part, the De-
partment for Industrial Development, a subdivision of the Ministry of Industry and Commerce, must study
and analyse investment projects, verify that they comply with the requirements under the regime and moni-
tor projects being implemented. It must be stressed that all the procedures within the Ministry of Industry
and Commerce are free of charge, that there are no maximum or minimum amounts laid down for invest-
ment eligible for benefits and that a single enterprise can receive benefits on more than one occasion.

In accordance with Ministerial Resolution No. 350/06, companies benefiting from the incentive regime un-
der Law 60/90 must submit every three months a detailed report on investment made to date.

As of August 2007, 41 investment projects have been approved for a total value of G550,069 million, equiva-
lent to about US$110 million at the rate of exchange valid at the time of the present study.

On the basis of the United Nations International Standard Industrial Classification of All Economic Activities
(ISIC), the sector with the highest share in total investment under the incentives regime of Law 60/90 is ma-
nufacturing, followed by telecommunications, in which companies providing mobile phone services play a
prominent role. Among companies based on foreign capital, companies from Argentina predominate,
accounting for 68% of the total invested up to August of this year, and Brazilian and USA companies, each
with 13% of the investment.

Diagram 10 shows the recent recovery of investment under the incentives regime provided by Law 60/90.
This recovery has had a significant effect on the general situation regarding investment in Paraguay. As can
be seen, in 2006 a level of investment similar to that achieved at the end of the 1990s and in the earlier part of
the present decade was again reached.

Diagram 10: Trends in investment under the incentives regime established by Law 60/90

600

500

400
Million US Dollars

300

200

100

0
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 (*)

* Up to August 2007.
Source: Department for Industrial Development, Industry Division (Law 60/90).

82
Chapter 14. Incentives for investment and exports

14.2. Maquiladora regime


Law 1,064/97 established the National Board of Maquiladora Industries for Export (CNIME), the purpose of
which is to promote the establishment of maquiladora enterprises and regulate their operations. These en-
terprises use local labour and other resources and engage in the processing, manufacture, repair or assembly
of goods of foreign origin imported temporarily for this purpose and for subsequent re-export, in implemen-
tation of a contract signed with a company domiciled abroad.

In other words, the maquiladora system, also known as international subcontracting, is a system by which an
enterprise operating in Paraguay produces specific goods and services and exports them to different parts of
the world on behalf of a parent company abroad, under an international contract. At the present time, there
are four types of maquiladora operation: (a) a maquiladora programme to utilize idle capacity (when an es-
tablished company oriented to production for the domestic market obtains approval for a maquiladora pro-
gramme); (b) a shelter maquiladora programme (companies with approved maquiladora programmes
serving as export projects for foreign companies that provide technology and productive material, without
directly controlling them); (c) submaquila activities (when it involves a supplementary part of the produc-
tion process covered by the programme, the product being returned to the maquiladora that contracted the
service for subsequent export); and (d) maquiladora operations involving an intangible service (a modality
included within the services maquiladora operation, the object being to confer an intellectual or similar
added value on intangible goods imported temporarily by any electronic medium).52

Diagram 11: Development of exports using the maquiladora regime

80,000

70,000 68,068

60,000
54,689
Million US Dollars

50,000

40,000

30,000 27,566

20,000

10,000 7,931 8,408

1,184 2,001
0
2001 2002 2003 2004 2005 2006 2007*

* Values as at November 2007.


Source: National Board of Maquiladora Industries for Export.

The principal advantages of maquiladora operations in Paraguay are: the location of the country (in the
middle of South America and on the Interoceanic corridor); its competitive prices (owing to the low cost of
labour, low social charges, the availability of a young population and accessible costs for real estate); the low
tax burden (the lowest in the region); and zero-tariff access to the market of MERCOSUR for products com-
plying with the origin rules of the grouping.

52 Definitions taken from the text of Law No. 1,064/97 and Regulating Decree No. 9,585/2000.

83
Doing Business in Paraguay: Country Cost Elements

In addition, the maquiladora regime offers the following benefits:

Single tax of 1% on national added value;

Suspension of payment of tariffs and taxes on imports of machinery, parts, tools, raw materials and
inputs;

Indefinite duration of maquiladora contracts.


To begin maquiladora operations, the following steps must be taken: (a) registration with the Executive Se-
cretariat of CNIME; (b) submission of the maquiladora programme/request for approval; (c) approval by
CNIME; (d) promulgation of a ministerial decision; (e) commencement of operations.

The procedures with CNIME are free of charge and the average time needed for approval of the programme is
25 days. However, there are other costs for the investor in connection with procedures for the incorporation
of the enterprise.53

At the present time, 72 enterprises are registered with the Executive Secretariat of CNIME, 41 of them with
approved programmes. Of these, 25 are already in operation, generating 3,518 jobs.

14.3. National Regime for Motor Vehicles


The National Regime for Motor Vehicles (RAN) governs Paraguayan industrial policy in the motor vehicles
sector. The provisions of the regime cover cars, tractors, bicycles and other overland vehicles, together with
their parts and accessories.

The objective of RAN is to create employment, improve industrial competitiveness, enhance labour speciali-
zation through the transfer of technology, increase exports and consolidate the Paraguayan motor vehicles
sector at national and regional level.

This regime is regulated by Decree No. 21,944/98, with implementing regulations in Resolutions 91, 354,
478, 780, 193, 350 and 964, establishing the periodicity for submission of reports, the establishment of a ba-
sic production process, the calculation methodology for the incorporation of national components and the
gradual integration of such components under the timetable established.

To accede to RAN, the following steps are required:

a) Send a note to the Ministry of Industry and Commerce;

b) Submit an investment project;

c) Submit evidence of industrial registration and a certificate concerning environmental impact;

d) Send information on the project to the Directorate for RAN.

53 See chapter 2, Incorporation of companies.

84
Chapter 14. Incentives for investment and exports

The necessary procedures with the Ministry of Industry and Commerce are free of charge and the approxima-
te time needed for approval of the project is one month.

RAN provides for exemption from customs duties on imported inputs, provided that their use in the produc-
tion processes stated in the project are demonstrated; otherwise sanctions may be imposed, such as the total
payment of the tariffs for the import of raw materials. Eligibility for this benefit depends on imports of raw
materials being equal to or greater than US$5,000 c.i.f.

Eleven companies benefit from this regime at the present time, eight of them being now in operation.

RAN has generated 1,206 direct jobs and it is calculated that some 5,000 people are employed in related acti-
vities, such as design workshops, mechanical workshops and sales points for spare parts.

Diagram 12 indicates the increase in the production of bicycles and motorcycles thanks to RAN.

Diagram 12: Trends in the production of motorcycles and bicycles

160,000 Motocicletas
Motocycles
Bicycles
Bicicletas
140,000

120,000

100,000
Units

80,000

60,000

40,000

20,000

0
2002 2003 2004 2005 2006 2007*

* Up to the third quarter of 2007.


Source: National Regime for Motor Vehicles.

14.4. Regime for Imports of Raw Materials and Inputs


The objective of this regime is to encourage imports of raw materials and inputs that are not produced in the
country. The legal framework is provided by Decree No. 11,771/00, Decree No. 6,957/05 and Resolution No.
1/01.

The procedures for access to this regime begin with the submission of the application, which is considered
first by the Directorate for Special Regimes (DRE) and then by the Interinstitutional Technical Committee,
consisting of representatives of the Paraguayan Industrial Union, the Ministry of Finance and the Ministry of
Agriculture and Livestock (MAG). Once the application is approved, a certificate of eligibility for exemption
from customs tariffs is issued and handed over to the applicant following authorization of the password
issued at the Entrance Desk of the Ministry of Industry and Commerce.

85
Doing Business in Paraguay: Country Cost Elements

To obtain certification, the following requirements must be met: (a) the company must be registered in the
Industrial Register of MIC; (b) the raw material must not be produced in Paraguay; (c) the value of the im-
ports must not be less the US$1,500 f.o.b.; and (d) applications must be accompanied by a favourable report
from the Interinstitutional Technical Committee.

The regime provides for a zero customs tariff on imports of raw materials, provided that it is demonstrated
that they are used in the production processes.

The necessary procedures with the Ministry of Industry and Commerce are free of charge and the period nee-
ded for the consideration of the application and the issuance of the certificate is five working days.

14.5. Free trade zones


Free trade zones are delimited geographical areas to which a different customs regime is applicable from that
in the rest of a country (the customs territory). In general, free trade zones enjoy certain tax benefits, such as
non-payment of import taxes. The main purposes of the free trade zones in Paraguay are: developing busi-
ness centres, avoiding smuggling and piracy and increasing the competitiveness of exports.

In Paraguay, Law 523/95 and its implementing decree establish and authorize the free trade zones regime.54
The new Customs Code established by Law 2,422/04 also contains some articles relating to this regime.

Under Law 523/95, any individual or legal entity, by a contract with the Executive, may acquire the right to
set up, administer and exploit a free trade zone. Concessions are granted for a period of 30 years, which may
be extended. Concessionaires may avail themselves of the incentives for investment established in Law
60/90 and are exempt from value added tax. Projects for free trade zones must be submitted to the National
Council of Free Trade Zones, to be submitted subsequently to the Ministry of Finance.

The free trade zones in Paraguay are intended for activities in the areas of commerce, industry and services.55
The users are exempt from tax on the incorporation of companies, remittances of profits, payment of
commissions and fee and any other remuneration for services, technical assistance, transfer of technology,
loans and financing and any other service provided from third countries.56 Users whose activities are directed
exclusively to exports pay a single tax known as the free trade zone tax, the rate being 0.5% of the total va-
lue of gross income derived from such sales.57

Imports into the Paraguayan customs territory from companies established in the free trade zones are subject
to all import taxes. Capital goods imported into the free trade zones are exempt from all tax. Exports of any
kind from the customs territory to a free trade zone are treated like exports to third countries.58

MERCOSUR also has its own legislation on free trade zones. A point that may be worth mentioning in this le-
gislation is that goods maintain their initial origin when they are stored in free trade zones.

54 Decree No. 15,554/96, regulating the Free Trade Zones Law.


55 Law 523/95, establishing and authorizing the free trade zones regime. Article 3.
56 Law 523/95, establishing and authorizing the free trade zones regime. Article 13.
57 Law 523/95, establishing and authorizing the free trade zones regime. Article 14.
58 Law 523/95, establishing and authorizing the free trade zones regime. Articles 20 and 22.

86
Chapter 14. Incentives for investment and exports

At the present time, there are two free trade zones in operation in Paraguay: the Global Free Trade Zone of Pa-
raguay and the International Free Trade Zone, both situated in Ciudad del Este, in the department of Alto Pa-
ran. There are a total of 78 users in the two free trade zones, only one of them being engaged in industrial ac-
tivities; the rest carry on commercial activities.

It should be mentioned that exports to third countries from the free trade zones during the period from Au-
gust 2006 to July 2007 increased by 610.9% in comparison with the period August 2005 to July 2006.

The free trade zones offer the following advantages: reduction in volumes of stocks, reduction in financial
costs resulting from goods in stock, facilities for the distribution of products under the MERCOSUR Rules of
Origin, efficient distribution to the MERCOSUR countries as a result of the geographical situation and the in-
frastructure available, a stable legal framework, total complementarity with other special regimes, security,
logistics, labour and low rental costs.59

Those wishing to become free trade zone users must apply in writing to the concessionaire, requesting regis-
tration, and transmit a copy of the documentation to the National Council of Free Trade Zones. The user must
then present the certificate to the National Customs Directorate and to the Taxation Division for registration
and authorization within the System for the Fiscal Organization of Customs Levies. The whole procedure
lasts only 48 hours, approximately.

International Free Trade Zone (ZFI)

In this free trade zone, 53 companies are operating, all devoted to commercial activities. However, industrial
concerns engaged in reconditioning mobile phones and electronic products for the home and in the produc-
tion of plastic fabric and steel pipes are expected to confirm their intention to start operations in the coming
months.

The average rental cost of sheds for the installation of businesses is US$2 per square metre, although the
amount is adjusted to the workplan proposed by the user. ZFI includes over 57 sheds of areas varying from
207 m2 to 800 m2, with 25 hectares available for construction.

Among the services offered by ZFI, the following may be mentioned: access to the Internet, private security
services, structured cabling for the offices, telephone lines and a direct medium-voltage connection with the
National Electricity Administration. ZFI also has a large interior space for the storage of goods and raw mate-
rials, together with a restaurant for plant personnel.

59 Rental costs and sales prices for properties inside the free trade zones are governed by market conditions.

87
.
LEGISLATION CONSULTED

Chapter I
Law 2,421/04 on Administrative Reorganization and Fiscal Adjustment

Chapter II
Civil Code
Law 438/94 on Cooperatives
Law 177/93 on Capital and Industry
Law 1,307/87 on the Fees of Notaries Public
Decree No. 7,402/06
Law 620/76 and its amendments in Law 135/91
Ordinance No. 331/06 of the Municipality of Asuncin
Law 1,879/02 on Arbitration and Mediation
Law 293/93 on Environmental Impact Assessment
Resolution No. 228/07 of MIC

Chapter III
Law 125/91 Establishing the New Taxation Regime
Decree No. 14,956/92

Chapter IV
Constitution of Paraguay
Labour Code
Law 1,626/00 on the Civil Service
Law 1,860/50, updated by Laws 1,085/65, 427/73 and 98/92

Chapter V
Law 642/95 on Telecommunications
Decree 14.135/96

Chapter VI
Constitution
Decree No. 2,109/94
Law 966/64 and Law 976/82 expanding it
Law Creating and Organizing the National Electricity Administration
Law 1,614/00, the General Law on the Regulatory and Tariff Framework for the Paraguayan Public Service for Drinking Wa-
ter Provision and Sewerage
Law 779/95 on Hydrocarbons
Law 2,478/05 on the Promotion of Biofuels

89
Chapter VII
Law 868/81 on Industrial Models and Designs
Law 1,630/00 on Patents for Inventions and Utility Models
Decree No. 14,201/01
Law 1,294/98 on Trademarks
Decree No. 22,365/98
Law 1,328/98 on Copyright

Chapter IX
Law 1,128/97 Confirming the Agreement on International Land Transport, with its annexes and amendments
Law 1,066/65 Establishing the National Authority for Navigation and Ports
Law 295/72 on Reservation of Cargoes
Law 414/94 on Private Ports
Law 60/90 on the System of Fiscal Incentives for the Investment of Domestic and Foreign Capital
Paraguayan Aeronautical Code
Law 827/96 on Insurance

Chapter X
Constitution
Law 1,334/98 on Consumer and User Protection
Law 827/96 on Insurance

Chapter XI
Law 2,421/04 on Administrative Reorganization and Fiscal Adjustment
Law 125/91 Establishing the New Taxation Regime
Law 2,448/04 on Handicrafts
Ordinance No. 331/06 of the Municipality of Asuncin
Law 620/76, and Law 135/91 updating it, on Municipalities in the Interior

Chapter XII
Law 861/96 on Banks, Finance Companies and Other Credit Institutions
Law 489/95 Establishing the Central Bank of Paraguay
Law 2,339/03 to Amend Article 44 of Law 489/95 Establishing the Central Bank of Paraguay
Law 2,640/05 Establishing the Development Finance Agency

Chapter XIII
Constitution
Law 2,422/04 on the Customs Code
Decree 4,672/05 Regulating the Customs Code
Law 1,095/84 Establishing the Customs Tariff
Law 2,421/04 on Administrative Reorganization and Fiscal Adjustment
Law 125/91 Establishing the New Taxation Regime
Resolution No. 32 of the Investment and Exports Network

90
Economic Complementarity Agreement No. 18 concluded between Argentina, Brazil, Paraguay and Uruguay
Resolution No. 72/02 of MIC

Chapter XIV
Law 60/90 on the System of Fiscal Incentives for the Investment of Domestic and Foreign Capital
Law 2,421/04 on Administrative Reorganization and Fiscal Adjustment
Law 1,064/97 Establishing the National Board of Maquiladora Industries for Export
Decree 21,944/98
Resolution No. 91 of MIC
Resolution No. 354 of MIC
Resolution No. 478 of MIC
Resolution No. 780 of MIC
Resolution No. 193 of MIC
Resolution No. 350/06 of MIC
Resolution No. 964 of MIC
Decree No. 11,771/00
Decree No. 6,957/05
Resolution No. 1/01
Law 523/95 Authorizing and Establishing the Free Trade Zones Regime
Law 2,422/04 on the Customs Code

91
.
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