Paraguay’s economy is an open one that has, over the past decade, grown at a rate of nearly five per cent, a GDP growth that has beaten the regional average since 2013. This growth has been mainly due to the country’s heavy reliance on natural resources, including energy, which comes from the hydroelectric bi-national entities — Itaipú and Yacyretá — along with soy and livestock production. Together, these represented more than 70 per cent of all Paraguayan exports in 2016. Hydropower accounts for nearly all electricity in Paraguay and 90 per cent of the energy generated is exported to neighbouring countries. Over the past decade, the country has made significant macroeconomic progress after introducing reforms that emphasize fiscal responsibility and inflation control. The country sustains its success with an investment-friendly climate and strong fiscal discipline. Trade with Canada is small, but the impending negotiation of a free-trade agreement between Canada and the MERCOSUR trading bloc is a positive sign. Enhanced trade relations between Canada and Paraguay can also lead to knowledge-sharing. Collaboration in hydroelectric power generation would be one example. Bilateral merchandise trade between Canada and Paraguay totalled approximately $32.7 million in 2017. Paraguay exported $11.8 million to Canada, with the bulk of those exports being sugar, oilseeds and wood products. Canada exported $20.9 million to Paraguay, including machinery, pharmaceutical products, paper articles, printed books and newspapers. Manitoba Hydro International (MHI) is involved in a project with Paraguay’s National Electricity Administration related to transmission lines and administration. MHI, through an agreement with the Itaipú Technological Park in Paraguay, is also participating in a project to transfer knowledge and enhance the technical capabilities of the 12 Paraguayan professionals working in that office, including three graduates from the University of Manitoba. Quebec’s experience as the largest generator of hydroelectricity in North America represents a starting point in the involvement of Canadian companies in the energy sector, comprising co-operation agreements and investments. Paraguay also offers opportunities for investments in mining exploration; a gold mine project is underway. Regarding the legal framework for investments, Paraguay has signed many bilateral and international investment protection treaties and specifically recognizes international arbitration. In fact, foreign investment law grants foreigners the same guarantees, rights and obligations enjoyed by Paraguayan investors. The Law 60/90 is the most important foreign investment incentive. It grants tax incentives for investments that may be in the form of capital (including loans, etc.), equipment, trademarks and technology transfers. Through it, all government fees for registering companies are waived, there’s a total exemption from customs duties, an exemption from withholding tax on repayment of loans exceeding $5 million US and a total exemption from taxes on profits and dividends for 10 years for investments exceeding $5 million US. Generally, incentives under Law 60/90 are approved within 45 days of the application. Paraguay’s Maquila program allows a local entity to sign a contract with a foreign entity to produce goods or provide services for export only. The system allows for the duty-free import of raw materials and a complete tax exemption, except for a one-per-cent fixed tax on turnover. By sector, Paraguay offers foreign investors opportunities in infrastructure, transportation and energy. There are also private and public projects in road construction, railroad transportation and river ports, among others. There are advantages to producing in Paraguay for MERCOSUR markets in various sectors including plastics, textiles, metalwork and others. Further, Paraguay has a young workforce (66 per cent of the population is younger than 35 years of age), quality and low-cost materials, macroeconomic stability, inexpensive clean power, sustainable economic growth and access to other markets. In short, Paraguay boasts the best investment climate in the region, along with a stable, solvent, predictable and reliable economy.
Ines Martinez Valinotti is the ambassador of Paraguay. Reach her by email at imartinez@mre.gov.py or by phone at (613) 567-1283.
