Invest in Paraguay

Investing in Paraguay

The main assets of Paraguay’s emerging, agrarian economy are soybean production and hydroelectric generation. The latter makes up nearly 100% of Paraguay’s electricity, and 90% of the energy generated is exported abroad, mostly to Argentina and Brazil. According to the World Bank, Paraguay is an upper middle income country with financing needs that are set to remain high in the short to middle term, but with a low risk premium compared with its more well-known Latin American neighbours.

In addition to renewable energy, Paraguay can boast several strong investment opportunities – from a booming real estate sector that offers returns of potentially 50% higher than in other regional markets, to a flourishing start-up scene in major cities such as Asunción and Ciudad del Este. The country’s well-established agriculture sector includes the mass production and export of soybeans – Chinses demand has increased Paraguay’s soy production by 69% over the past five years, making it the world’s third largest exporter – and for a landlocked country, it boasts impressive oil and gas reserves.

Investors in Paraguay can also make the most of the country’s membership and free trade access to key markets in the Southern Common Market, a.k.a. Mercosur, whose members include major economies like Argentina, Brazil and Uruguay. Paraguay is also currently negotiating with Chile to establish its first bilateral free trade agreement (FTA), potentially creating more major opportunities for domestic and foreign investors.

While the effects of the COVID-19 pandemic on both the global and regional economy are undeniable, Paraguay has gained international plaudits for a number of policies that have helped to stimulate Foreign Direct Investment (FDI) during this period, cementing its status as one of the most reliable Latin American countries in which to invest.

As a result, experts claim the country has weathered the economic impact of the coronavirus pandemic better than any other nation in the region so far. In fact, Paraguay is forecast to be the first South American country to fully recover from the economic crisis prompted by the pandemic, with the Economist Intelligence Unit (EIU) predicting that real gross domestic product (GDP) should return to pre-pandemic levels – and possibly exceed them – by early 2023.

The Paraguayan government’s ambitious US$2.5-billion economic recovery plan is expected to drive this unprecedented national recovery, by focusing on boosting investment in infrastructure and public works projects, as well as exploring alternate financing and procurement models.
In late 2020, the government announced it would be streamlining the residency process for foreign investors – in an addendum to the country’s notably lenient dual residency laws – and promoting Paraguay’s low-tax regime and long term stability, in a bid to attract greater foreign investment. In early 2021, the government consolidated regulations for transfer pricing to bring the country in line with OECD standards, which have traditionally inspired investor confidence worldwide.

5 reasons to invest in Paraguay

1. A young, competitive workforce

Paraguay is home to one of the youngest workforces in Latin America – with an average age of 26 – 62.5% of whom currently live in urban areas. The country registered a gross national income (GNI) of $5,140 per capita in 2020, meaning highly competitive rates for local employees. Moreover, Paraguay is also among the top five nations in the region for English proficiency, following a significant rise in recent years, making it an even more attractive venue for international businesses looking to expand into Latin America.

2. Strong returns in real estate

Paraguay real estate sector is one of the strongest on the continent, and returns on investment often reach up to 50% higher than other neighbouring markets, bolstered by a low-tax regime which sees value-added tax (VAT) set at just 10%. This attractive set of circumstances and opportunities have led to an influx of local capital and investment in recent years, notably from neighbouring Argentina.

3. An increasingly international outlook

While Paraguay remained economically isolated from the outside world until the 1980’s, the country is now adopting an international outlook that seeks to encourage foreign investment. This approach has led to talks with Chile over what looks set to be the country’s first bilateral free trade agreement (FTA), in addition to agreements in place with Mercosur members – Argentina, Brazil and Uruguay. It has also seen the adoption of new transfer pricing norms in keeping with OECD standards — an international trade organization known as the “good practice club”, which Paraguay is aiming to join as a full member.

4. Ease of doing business

Paraguay is a pro-business country that not only highly encourages FDI, but also runs an economic regime that makes it easy for foreign entities to invest in – including no history of confiscations or sudden changes in investment rules, a robust set of employment laws, and strict protection of intellectual property, all of which provides significant confidence and peace of mind to investors. The country’s company formation process comes with a minimum of red tape, as well as a well-established industrial base for manufacturing sector entities, and a growing innovation secto

5. Streamlined residency for investors

One of the measures which Paraguay has taken to incentivise outside investment is the streamlining of the residency process for business owners looking to invest in the country. In December 2020, then-Finance Minister Benigno Lopez announced that the country would be slashing the time required to gain residency through investment, from two years to just a few months. This is in addition to Paraguay already having one of the region’s most favourable residency regimes for investors.