Open to foreign trade and investments

By Rodrigo Aguirre, Berkemeyer Attorneys & Counselors

To measure the degree of commercial openness in relation to the rest of the World a mechanism of percentage of import and export indicators are used. In this regard Paraguay is the country with the greatest dependence on foreign trade in South America, according to stats from World Bank. Both imports and exports where 47 % of GDP in 2012 and according to the latest figures it should reach 50% of GDP for 2013. On one hand, Paraguay’s dependence on foreign trade is due to multiple factors among which we can highlight the trade triangulation, low industrial activity in the country, advantage in the production of certain crops, the valuation of the local currency (Guarani). Specially the industrial sector has to import all kinds of machinery or capital goods that require complex manufacturing processes.

Meanwhile, the bulk of the Paraguayan export matrix is limited to certain products of agricultural origin, which are soy in its various forms of use, corn, rice, wheat, beef (frozen and chilled) and cattle hides. 

As a matter of fact, there are no restricted areas, no discrimination and no limitations to investing in Paraguay. The only difference between foreign investments and those made by Paraguayan nationals lies in taxation on net earnings, as foreign investments
are subject to a five percent additional tax on remittances or credits in favour of beneficiaries, who are not residents of this country. 

Paraguayan Law 60/90, establishes a special tax system offering incentives for foreign investment projects. Companies falling under this legislation enjoy total exemption from taxes of any kind on certain aspects of the investment project, such as taxes on the formation or registration of companies, capital increases, exchange operations and the import of capital goods.

Paraguay has achieved important agreements for cooperation and commerce in the past two decades, including the Mercosur Treaty, signed in Asuncion in 1991 by the Presidents of Argentina, Brazil, Uruguay and Paraguay. The MERCOSUR opens
a large market of millions of consumers and its objective is the total elimination of customs tariffs by establishing gradual reductions every six months after the signing of the Treaty. Approximately 60% of Paraguay exports were destined to MERCOSUR countries. (1) 

(1) PARAGUAY: Land of Opportunies 2013 - Paraguayan American Chamber of Commerce, p. 19

Fuente: Diario 5 Días