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Foreign Direct Investment

FDI flows to Paraguay remain weak compared to flows towards its neighbours. After dropping in 2013 due to an institutional crisis that paralysed the country, FDI inflows rebounded since 2014. According to UNCTAD’s World Investment Report 2021, FDI inflows to Paraguay increased by 9% to USD 568 million in 2020, up from USD 522 million in 2019, despite the economic and health crisis triggered by the COVID-19 pandemic. The total stock of FDI in the country is estimated at USD 6.9 billion in 2020. The country's lockdown (nationwide in March and April, and in selected areas afterwards) proved effective and the economy could reopen relatively quickly. Inflows continued to mostly target the country's natural resources and agri-food industries. Paraguay's main investment partners are the US, Brazil and Spain. In 2020, the Brazilian investment holding company ECB Group started construction on an $800 million renewable fuel plant, the so-called Omega Green complex, which will produce advanced biofuels. The construction of a USD 150 million hotel complex that includes a convention centre, restaurants, a casino, luxury shops and an amusement park on San Francisco Island began in mid-2019. For that, the American company Vimerica Development will invest in the project via its subsidiary Vimerica SA along with local and foreign investors.

Paraguay ranked 125th in the last Doing Business report, which was published by the World Bank in 2020, indicating a twelve-spot decrease from the previous year. Most sectors are open to foreign investment; however, several remain under public monopoly, such as the electricity sector. Paraguayan law grants investors tax breaks, allows full repatriation of capital and profits, supports assembly plant operations and guarantees national treatment for foreign investors. Foreign investment is not subject to screening, and foreign entities are permitted to own property. Despite reforms to the public sector and strengthened legal protections, business climate remains challenging due to corruption and insecurity linked to drug trafficking. The political climate, the poor condition of infrastructure and the lack of transparency in regulations are major obstacles for investors. Additionally, labour regulations are outmoded and restrictive. However, Paraguay is able to offer low cost electricity and seeks to become, in the long-term, a centre of integration between the Pacific and the Atlantic. Paraguay also grants investors a number of tax breaks under Law 60/90. The reforms that have been recently implemented by the government - such as the law regulating public-private partnerships - should lead to greater investments.

 
 
Foreign Direct Investment 201820192020
FDI Inward Flow (million USD) 458522568
FDI Stock (million USD) 6,4146,3136,881
Number of Greenfield Investments* 1296
Value of Greenfield Investments (million USD) 4658923,420

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.

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