How to open a company in Paraguay
When companies look to expand to Latin America, Paraguay may not be the first location that comes to mind. But the diminutive, landlocked nation is becoming an increasingly popular destination for international brands and would-be companies looking to establish a presence in the regional market. In this article we will examine some of the reasons why this is the case, and what steps are required for foreigners looking to open a company in the country.
Why open a company in Paraguay?
Paraguay is one of the fastest-growing economies in Latin America in terms of GDP, and the latter is expected to grow, and government debt to fall, in coming years. The country, while naturally landlocked, is well positioned for foreign companies looking to break into the significant Latin American market, sharing a border with powerful neighbours like Brazil, Argentina, and Bolivia. This access to excellent trading partners and opportunities has led to Paraguay becoming one of the leading exporters of energy in South America, in addition to the US$6.8 billion worth of goods and services it exports per year.
Paraguay is also a founding member of the Southern Common Market trading bloc, a.k.a. Mercosur – one of the largest in the world, with a combined GDP of more than $2.9 trillion and anticipated deals with the European Union expected to open additional revenue streams in due course. Therefore, opening a company in Paraguay gives you access to demand from the whole of South America – and beyond, via international exports.
With a population of approximately 7 million people – 48% of whom are economically active – and a growing middle class – now representing 25% of the population, or 1.75m people – Paraguay represents a strong market for fledgling businesses, especially those operating in the luxury goods and services markets. Paraguayan consumers have comparatively higher levels of disposable income than those from other developing Latin American markets.
Furthermore, while finding a gap in the market can be a challenge, the government is making it easier and easier for foreign entrepreneurs to set up in the country, making the incorporation of a Sociedad Anónima (S.A), a branch office or a Sociedad de Responsibilad Limitada (SRL) a straightforward investment. Foreigners can apply for a visa to secure residency when setting up a business in Paraguay, making it relatively easy to get started in the region.
Last but not least, Paraguay’s unparalleled reserves of green energy – with the majority of its electricity harnessed from the Itaipu Dam and converted into renewable hydropower – can lead to unique opportunities for prospective business owners. These reserves have reduced Paraguay’s reliance on energy imports and turned it into an exporter of electricity itself. But they also provide local businesses with access to cheap and reliable sources of energy, which can make all the difference in sectors like manufacturing, agriculture and industry, and can serve as a selling point in today’s increasingly environmentally conscious world.
Steps for opening a company in Paraguay
Incorporating a company in Paraguay tends to be easier and faster than in other neighbouring Latin American countries – completing all the required steps takes between 10-12 weeks on average, with very little red tape or governmental intervention – since the country has a vested interest in attracting foreign investors and making the process as streamlined as possible. Foreigners in Paraguay can incorporate a Sociedad Anónima (NB: at least one resident director is required), a Sociedad de Responsibilad Limitada (one national director required) or a Branch Office (one resident director required, who doesn’t need to be a Paraguayan national). No minimum capital is required to set up a company in Paraguay, removing another barrier to entry for foreigners.
If you’re not a native Spanish speaker, working with a local corporate lawyer or dedicated agency can be useful and should speed up the incorporation process even further, ensuring that your company remains fully compliant after it’s been officially launched. Don’t underestimate the importance of sticking to local laws and regulations.
Below we have listed eleven of the key steps required of anyone looking to open a company in this exciting and dynamic Latin American marketplace:
2. Check your chosen company name is available. You can do this via the Treasury Attorney Office’s online database, which lists all available names for organizations based in Paraguay. This will help you avoid unnecessary delays when opening your company.
3. Enact Power of Attorney. This will allow your legal representative to carry out the process locally, assuming you or your shareholders are not based in the country. All foreign and non-Spanish-language documentation needs to be translated, legalized and apostilled where applicable, with the hard copies sent to Paraguay.
4. Draft the company’s bylaws, including the company name, name of legal representative, share capital information, etc. Your company’s articles of incorporation can then be notarized and submitted to the Paraguayan registry responsible for the approval and registration of local companies, the DGRP (Direction general de Registros Públicos). This step can be carried out by a local lawyer.
5. Submit the documentation to the local centralized platform, SUACE, a.k.a. ‘Sistema Unificado de Apertura y Cierre de Empresas’, for revision and approval. The platform will assign an identification number to track the application’s progress. Your company’s documentation should also be submitted to the Treasury Attorney Office, or ‘Abogacía del Tesoro’. Once your company is registered and approved here, it officially exists.
6. Publish company bylaws in the Paraguayan Official Gazette for at least three business days.
7. Apply for a taxpayer ID, or RUC (Registro Único de Contribuyentes). This step should be taken at the Undersecretary of State for Taxation, or Subsecretaría de Estado de Tributación (SET) – the authority in charge of administration, regulation, and tax collection in Paraguay.
8. Obtain your statutory company books, including the Journal, General Ledger and Inventory, all signed by the Public Registry of Commerce.
9. Apply to the local Municipality to assess licenses and permits. If you do not have the required permits for your particular sector, your company may face a fine or even closure by the governing Municipality.
10. Apply to register at the IPS. Paraguay’s Social Security Institute, or Instituto de Prevensión Social (IPS), is in charge of providing social security services in case of illness or accidents. All companies must submit an application to the IPS and the Ministry of Justice and Labor in order to obtain this insurance for their staff, and cannot begin hiring without it. This process can be done at the SUACE.
11. Open a corporate bank account. Choosing the right bank for your company depends on your specific goals and structure, but for foreign entrepreneurs, it is best to seek out institutions with good, flexible pricing structures for international transactions. Bear in mind that some banks may have foreign transaction restrictions in place for companies with foreign shareholders.