Documente Academic
Documente Profesional
Documente Cultură
Paraguay
Country Cost Elements
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).
November 2007
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.
v
TABLE OF CONTENTS
Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv
vii
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
viii
9.3. Maritime transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.4. Storage facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.5. Air transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.6. Insurance services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ix
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
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
xii
BOXES
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
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.
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.
1
Doing Business in Paraguay: Country Cost Elements
80+
70-74
60-64
50-54
Age group
40-44
30-34
20-24
10-14
0-4
Population
Source: Technical Secretariat for Planning (STP)/Directorate-General for Statistics, Surveys and Censuses.
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.
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.
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
40% Inflation
Interest rate, foreign currency
35% Interest rate, national currency
30%
25%
20%
15%
10%
5%
0%
2002 2003 2004 2005 2006 2007*
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.
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
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
The Ministry of Finance and the Central Bank of Paraguay have made the following forecasts for 2007:
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
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.
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.
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).
400 2,500
Foreign direct investment
Domestic investment
350
Foreign direct investment (million dollars)
2,000
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.
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.
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.
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.
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 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.
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.
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.
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
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.
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).
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
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.
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
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.
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.
16
CHAPTER 3 Industrial land and property
rental costs
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.
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-
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.
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.
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.
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.
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.
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
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.
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.
22
Chapter 4. Employment and labour costs
Table 14 shows the benefits additional to the monthly wage required by the Labour Code, to which all formal
workers in Paraguay are entitled.
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
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.
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
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 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
25
.
CHAPTER 5 Communication services
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.
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
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
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
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.
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
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.
30
Chapter 5. Communication services
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.
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
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.
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.
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%.
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.
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.
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
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.
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
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.
36
Chapter 6. Electricity, drinking water and fuel costs
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.
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: 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
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;
Combustibility, because biofuels have a higher flashpoint than diesel from petroleum;
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
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.
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
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.
42
Chapter 7. Other industry costs
43
.
CHAPTER 8 Accreditation and certification
agencies
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.
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.
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
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.
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.
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.
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.
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.
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.
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
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.
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
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).
53
Doing Business in Paraguay: Country Cost Elements
54
Chapter 9. Transportation services and infrastructure
By decision of ANNP, the cost of storage at some ports shows differences due to criteria relating to commercial
and regional development (table 53).
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
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.
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
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
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
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.
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.
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
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
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.
61
Doing Business in Paraguay: Country Cost Elements
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.
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
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
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
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.
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.
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).
64
Chapter 11. Taxes
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
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
Table 69 shows the rates charged by the municipalities in the interior of Paraguay.
In addition to this tax, each municipality may impose charges for the administrative costs of vehicle authori-
zation and driving licences.
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
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.
67
Doing Business in Paraguay: Country Cost Elements
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.
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
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
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).
13.1.1. 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
73
Doing Business in Paraguay: Country Cost Elements
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
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
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.
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).
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
76
Chapter 13. Foreign trade
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).
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.
77
Doing Business in Paraguay: Country Cost Elements
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
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).
79
Doing Business in Paraguay: Country Cost Elements
80
CHAPTER 14 Incentives for investment
and exports
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
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
80,000
70,000 68,068
60,000
54,689
Million US Dollars
50,000
40,000
30,000 27,566
20,000
1,184 2,001
0
2001 2002 2003 2004 2005 2006 2007*
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
Suspension of payment of tariffs and taxes on imports of machinery, parts, tools, raw materials and
inputs;
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.
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.
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.
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*
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.
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.
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.
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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