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Foreign Direct Investment

FDI flows to Paraguay remain weak compared to flows towards its neighbors. However, according to UNCTAD’s World Investment Report 2023, flows more than doubled to USD 474 million in 2022. Two international project finance deals were announced in the country: a hydrogen project sponsored by Atome Energy (United Kingdom) and the construction of the Bioceanica bridge from Paraguay to Brazil, sponsored by Itaipu Binacional (Brazil) for USD 82 million. At the end of the same period, the total stock of FDI in the country was estimated at USD 8.38 billion, representing around 20.3% of GDP. The majority of investments come from Brazil, the United States, the Netherlands, Uruguay, and Spain. They mainly target the country's natural resources and agri-food industries. Between January and December 2023, the FDI projects sanctioned under the Investment Law 60/90 were distributed as follows: 37% focused on biofuel manufacturing, 10% on food products, 9% on grain and seed production and storage, 7% on services, 7% on cotton and its derivatives, 6% on pharmaceuticals, and an additional 6% on clothing and textiles (data from the Ministry of Industry and Trade).

Paraguay has a small yet expanding open economy, sustaining an average annual GDP growth rate of 3.2% over the past decade, with prospects for further expansion in the coming years. Key engines of this growth include the agriculture, energy, retail, and construction industries. The Paraguayan administration actively promotes foreign investment, offering tax incentives, facilitating full repatriation of capital and earnings, fostering maquila ventures (providing special advantages for export-oriented manufacturing), and ensuring equitable treatment for foreign investors under national law. Despite reforms to the public sector and strengthened legal protections, the business climate remains challenging due to corruption, poor condition of infrastructure, and lack of transparency in regulations. Moreover, the investment climate in Paraguay faces obstacles due to judicial insecurity, while trademark infringement and counterfeiting pose significant challenges. Paraguay ranks in the mid-range or below average in most competitiveness indicators: it stands at the 136th position among the 180 economies on the 2023 Corruption Perception Index, 80th out of 184 countries on the latest Index of Economic Freedom, and 98th out of 132 in the Global Innovation Index 2023.

Foreign Direct Investment 202020212022
FDI Inward Flow (million USD) 110192474
FDI Stock (million USD) 6,7087,0458,384
Number of Greenfield Investments* 687
Value of Greenfield Investments (million USD) 3,41379127

Source: UNCTAD - Latest available data.

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

Country Comparison For the Protection of Investors Paraguay Latin America & Caribbean United States Germany
Index of Transaction Transparency* 6.0 4.1 7.0 5.0
Index of Manager’s Responsibility** 5.0 5.2 9.0 5.0
Index of Shareholders’ Power*** 6.0 6.7 9.0 5.0

Source: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.