Author: dev_

Paraguay has become the first nation to take advantage of the co-financing model that seeks to enhance the participation of the Development Bank of Latin America (CAF) in local development projects. Last November 30, 2018, CAF -which was advised by Vouga Abogados- and the Regional Bank of Paraguay have signed a loan agreement in the amount of USD 120 million, which will be destined to the national agricultural and agro-industrial sector.

The loan will also be invested in the energy industry to promote its efficiency, as well as in the logistics, transportation and road infrastructure industries. The loan was granted in two tranches: the first -USD 28 million- for five years and the second -USD 92 million- for three and four years. The funds for the latter were provided by major international financial institutions.

This news was highlighted by Lex Latin, which emphasized the participation of national legal advisors in the process of negotiating and obtaining the loan (https://lexlatin.com/portal/noticias/banco-regional-de-paraguay-recibe-usd-120-millones-para-desarrollar-sector-agropecuario).

If you would like to know more about our advice on financing procedures, please do not hesitate to contact Cynthia Fatecha. cfatecha@vouga.com.py, Carlos Vouga cvouga@vouga.com.py and Georg Birbaumer gbirbaumer@vouga.com.py.

Vouga Abogados assisted Tape Pora S.A. in a new bond issue, acquired in full by four national banks, to partially finance the works related to the concession for the construction, duplication and adaptation of Route No. 7 “Gaspar Rodríguez de Francia” in the area between Pastoreo and Minga Guazú. The total amount of the bonds placed on this occasion amounts to 72,000 million guaraníes (US$ 11.9 million).

National banks signed agreements for the purchase of bonds issued and placed by the concessionaire through the Bolsa de Valores y Productos de Asunción S.A. under the Global Issuance Program PEG03.

To ensure the payment to investors, the concessionaire constituted an administration and payment source trust through which it has transferred to the trust the surpluses of the administration and payment trust constituted in 2017, called Tape Pora 02, whose autonomous patrimony is constituted by the toll collection rights in the concessioned section of Route 7. The constitution of the new administration and payment source trust named Tape Pora 03 implies a subordination of the debt service by priority of payment of the bonds under the Global Issuance Program PEG02 in relation to the bonds under the Global Issuance Program PEG03. 

The Congress will have the task of studying twelve bills submitted by the Executive to strengthen the anti-corruption legal framework in Paraguay. This initiative is part of the strategic plan of the Paraguayan State that incorporates new objectives and actions to successfully pass the evaluation of compliance with the 40 Recommendations of the Financial Action Task Force (FATF) on the progress in the Prevention and Fight against Money Laundering and Terrorist Financing, the results of which will be known in 2020.

The intention is to prevent Paraguay from being placed again on the Grey List of non-cooperating countries at the international level. It should be recalled that Paraguay managed to be excluded from this Grey List in 2012. At the same time, the objective is to adjust the national legislation to the “Inter-American Convention against Corruption” and the “United Nations Convention against Corruption”, ratified by Paraguay in 1996 and 2005, respectively.

These projects are also in line with management transparency policies to combat corruption in public administration, which included the creation of the National Anticorruption Secretariat (SENAC) in 2012.

The projects have a broad scope, covering institutional and structural issues, adjustment and creation of criminal types, measures for greater transparency and establishment of more effective procedures. The projects were the result of inter-institutional work with the participation of representatives of the Supreme Court of Justice, the Attorney General's Office, the Central Bank of Paraguay, the National Secretariat for the Administration of Seized and Confiscated Assets, the Public Prosecutor's Office and, from the private sector, the Association of Banks of Paraguay, among others.

Of the twelve bills submitted, six seek to create new laws, the main characteristics of which are summarized below:

1. Bill “Creating the Secretariat of Financial Intelligence and establishing the System for the Prevention and Mitigation of Risks of Acts Intended for Money Laundering”, amending Law 1.015/97 “On the Prevention of Money Laundering”.

It is intended to replace the Secretariat for the Prevention of Money or Asset Laundering (SEPRELAD), the country's current financial intelligence unit. The new Secretariat would have clear powers to internally organize its operation.

2. Bill “By which the special procedure for the application of confiscation, special confiscation, autonomous confiscation and deprivation of benefits and profits is created”..

It seeks to attack the assets of criminal organizations in the understanding that it constitutes an effective way to affect their operations, beyond the prosecution of their members who may have been identified in the investigations.

3. Bill “Creating the Registry of Final Beneficiaries of the Republic of Paraguay”.

In compliance with one of the FATF recommendations, this law would allow effective control of the beneficial owners of legal entities in Paraguay and the creation of a single registry of information that is currently scattered in several registries.

4. Bill “That prevents, typifies and punishes the punishable acts of transnational bribery and transnational bribery”.

Its purpose is to implement the provisions of the United Nations and Inter-American Conventions against Corruption by adapting the current legislation in this area, expanding the criminal offenses to include foreign public officials and officials of international organizations.

5. Bill “Whereby the procedure for the reception and dissemination of the lists of sanctions issued by the United Nations Security Council is established, as well as the inclusion and exclusion of natural or legal persons”.

In addition to complying with the international commitments assumed by Paraguay, it seeks to establish the procedure for the receipt and dissemination of these sanctions among the competent entities, as well as the procedure and criteria for the inclusion and exclusion of individuals and legal entities in the sanctions.

6. Bill “Whereby criminal courts of guarantees, criminal enforcement courts, sentencing courts, criminal appeals courts and prosecutorial agents specialized in money laundering, drug trafficking, kidnapping, financing of terrorism, corruption, organized crime.”

The purpose is that these economic crimes have specialized courts and tribunals and better control by centralizing the treatment of these crimes considered transnational, taking into account that the courts will have their seat in the Capital, with jurisdiction and competence throughout the national territory. This would decompress the workload of the judges of the ordinary courts to facilitate the timely processing of these cases.

The other six remaining bills seek to establish proposals to amend existing laws, as summarized below:

1. Modification of provisions of Law 1.160/97 “Penal Code”.

It seeks to modify the existing rules on confiscation and establish new punishable acts as precedents for money laundering, such as market manipulation, private bribery and bribery. Thus, it is also intended to protect the credibility of investors in our incipient stock market and also to extend the figures of bribery and bribery to the private sphere.

2. Amendment of Article 3 of Law 5.895/17 “which establishes rules of transparency in the regime of companies incorporated by shares”..

Law 5895/2017 provided for the end of bearer share companies in Paraguay. This bill seeks to amend Article 3 to expressly establish the deadline for the exchange of such shares and clarify the penalties in case of non-compliance.

3. Modification of Article 46 of Law 5. 876/17 “On the administration of seized and forfeited assets”, to reorganize the way in which seized and forfeited assets should be distributed, among SENABICO (agency specialized in the administration of seized and forfeited assets), the Public Ministry, SEPRELAD (or its projected replacement), the National Anti-Drug Secretariat, the National Police and projects for the rehabilitation of addicts and social reinsertion, and projects for the prevention of money laundering, organized crime, financing of terrorism, financing of the proliferation of weapons of mass destruction and drug trafficking.

4. Amendment of Articles 1, 2 and 3 of Law 4.024/10 “which punishes the punishable acts of terrorism, terrorist association and financing of terrorism”.

It inserts changes in the penalties, increasing the penalties and incorporating the punishable acts of recruitment and indoctrination, terrorist combatant abroad and apology of terrorism.

5. Amendment of Law 4.503/11 “on the immobilization of funds or financial assets”.

It aims to adjust the jurisdictional procedures to be followed in cases where there are indications that funds or assets may be linked to the financing of terrorism, weapons of mass destruction, acts of terrorism or terrorist association.

6. Repeal of Article 3 of Law 4.673/12, eliminating the prejudicialidad in punishable acts related to tax matters.

It seeks to include tax crimes as predicate offenses for money laundering, eliminating the prejudicial nature of punishable acts related to tax matters. Thus, this project also seeks to fight informality in the Paraguayan economy.

In Latin America and the world, in recent years there has been greater awareness of the negative effects of the phenomenon of corruption, giving rise to initiatives to encourage States to adopt measures to strengthen the integrity of public and private management systems. Several countries have already adopted their own instruments to promote the adoption of compliance programs and codes of conduct by companies.

In this context, these legal reforms are necessary to strengthen the national economy, improve Paraguay's confidence and credibility in the international community, thus increasing foreign investment and presenting Paraguay as a more reliable, transparent and competitive market, all of which would result in greater employment.

If you need more information about these projects or compliance related issues, please do not hesitate to contact Rodrigo Fernandez (rfernandez@vouga.com.py) and Mariel Molas (mmolas@vouga.com.py), as well as on banking or financial legal matters with Georg Birbaumer (gbirbaumer@vouga.com.py).

Due to the growing foreign investment in the country -a result of the numerous opportunities offered by Paraguay-, it has become necessary to reinforce tax stability and increase confidence in the income flows that are channeled internationally. For this reason, the Executive Power submitted to Congress the approval of the “Agreement between the Republic of Paraguay and the Oriental Republic of Uruguay to Avoid Double Taxation and Prevent Tax Evasion and Avoidance on Income and Wealth Taxes”.

In addition to preventing tax evasion, the Double Taxation Avoidance Agreements (DTAs) are intended to promote a greater exchange of goods and services and increase the movement of both capital and people. They also aim to provide a reasonable level of legal certainty and tax predictability to foreign investors.

The agreement in question was signed in September 2017, based on the model of the Organization for Economic Cooperation and Development (OECD), and establishes a 15% limit on the power of each of the States to charge taxes to residents of the other State on earnings from dividends, interest and royalties; without prejudice to specific rules on other types of income and specific conditions to be entitled to the benefits of the agreement. The method adopted to eliminate double taxation is the crediting of taxes paid in one State against those generated in the other State.

The Paraguayan taxes to which the Agreement applies are the Taxes on Income from Personal Services (IRP), on Commercial, Industrial or Service Activities (IRACIS), on Agricultural Activities (IRAGRO) and on Small Taxpayers (IRPC); while the Uruguayan taxes included are the Tax on Income from Economic Activities (IRAE), Personal Income Tax (IRPF) and Tax on Non-Residents (IRNR), as well as the Social Security Assistance Tax (IASS) and the Wealth Tax (IP).

Once approved by the Executive Power, it will enter into force 30 days after the last notification -through diplomatic channels- that both countries have complied with the constitutional requirements established for the entry into force of the Agreement, applying to withholdings made as from January 1 following those 30 days, as well as to fiscal years starting as from said January 1.

For more information on CDI benefits, contact Andrés Vera (avera@vouga.com.py).

As from February 18, 2019, penalties and fines for non-compliance with Law No. 5895/17 “which establishes transparency rules in the regime of companies incorporated by shares” (and its Regulatory Decree No. 9043/18) will be applied. In order to order the processing of virtual procedures, the Treasury Attorney's Office of the Ministry of Finance prepared a calendar through which it will start applying the penalties depending on the termination of the taxpayer's RUC.

This calendar will be used only at the beginning of the application of penalties and will lose its validity as from each date established according to the group of obligors by termination of the RUC. Afterwards, only the legal deadlines will remain as of mandatory compliance. That is to say, non-compliances or violations committed after the deadlines established in the calendar will be sanctioned in accordance with the deadlines established in the law and its regulations. Those committed prior to such dates will not imply penalties for a single time within the established calendar period.

This determination was made through TA Resolution No. 01/2019 dated January 8, 2019 and establishes the following schedule:

Termination of RUC	Application as of:
0 and 1	February 18, 2019
2 and 3	March 18, 2019
4 and 5	April 18, 2019
6 and 7	May 18, 2019
8 and 9	June 17, 2019

The full contents of the resolution can be found in the “Legal Framework” section of the Treasury Solicitor's Office website (www.abogacia.gov.py).

If you would like more information about the requirements that joint stock companies must meet in accordance with current regulations, please do not hesitate to contact Perla Alderete (palderete@vouga.com.py) or Marco Colman (mcolman@vouga.com.py).

The National Directorate of Intellectual Property (DINAPI) informed that, since November 2018, Resolution DINAPI RG No. 20/2018 is in force, which expands and establishes new requirements for registration in the registry of importers of magnetic and optical media and raw materials.

The receiving office of the documentation will be the Importers Registration Unit -depending on the General Directorate of Enforcement-. The main task of this office is the authorization of prior import license applications for the products described in Decrees No. 603/2003 and No. 4212/2015.

The forms can be downloaded from the website (https://www.dinapi.gov.py/index.php/formularios) in both Word and PDF format.

If you need more information on this or any other intellectual property matter, please do not hesitate to contact Laura Lezcano (llezcano@vouga.com.py).

In the latest risk assessment for the country, recently released by Fitch Ratings, Paraguay's rating was upgraded from “BB” to “BB+”, which represents an important step towards investment grade, starting with a “BBB” rating. These indicators measure a government's ability to service its debt and inform potential investors about the risk involved in investing in a country.

The report highlights the country's economic resilience in the face of the regional situation and the government's fiscal discipline, maintaining the lowest ratio of public debt to Gross Domestic Product (GDP) among all 'BB' countries, with a public debt/GDP ratio of 17%, when the average for other countries is 46%.

Among other positive aspects, it also mentions that Paraguay maintained an economic growth of 4.3% in the last five years, even experiencing the effects of a deep recession in Brazil in 2015-2016, the drop in commodity prices in 2014-2015 and the depreciation of the Argentine peso this year. The rating agency expects the Paraguayan economy to continue to grow favorably over the next two years at a rate of 3.9%.

He also emphasizes that the national economy has diversified with the introduction of new productive sectors from the maquila regime, producing auto parts, garments and others.

As for economic prospects, they remain in the “stable” category.

If you would like to learn more about investment possibilities in Paraguay, please contact

Since the fight against and prevention of corrupt behavior has been an essential premise in the international business community for some time now, we wanted to evaluate the reality in our country and for this purpose we conducted the “Compliance Diagnostic Survey”, which would allow us to know the degree of implementation of compliance programs in national companies. To this end, we surveyed representatives of leading local companies on the main questions related to the subject.

The results and conclusions of the survey are not only encouraging, but also highlight the growing importance that compliance programs are acquiring, demonstrating that complying with the correct rules of the game and maintaining ethical behavior are no longer ancillary issues, but are now fundamental for business development at the local level.

Duly documented policies and procedures, written commitments for the implementation of compliance programs, the existence of Codes of Conduct, compliance processes, and the existence of a due dilligence, The existence of whistleblower channels for reporting suspicious behavior, the figure of compliance officers, risk matrices, training programs and external support to the company's compliance area, are all relevant indicators to know the degree of development that this area is reaching and that we have analyzed to obtain this interesting vision of business conduct at the national level.

If you would like to receive the results and conclusions of the “Diagnostic Compliance Survey”, please contact Rodolfo G. Vouga (rgvouga@vouga.com.py), Rodrigo Fernández de Nestosa (rfernandez@vouga.com.py) or Marta Martínez (mmartinez@vouga.com.py). 

Download Compliance Diagnostic Survey

Bearing in mind that micro, small and medium-sized enterprises (MSMEs) represent 75% of the Gross Domestic Product and employ 70% of the Economically Active Population, the Government decided to take measures to achieve their formalization. The benefits of doing so are several, among them, better tariffs, information and access to training, as well as advice on procedures.

The formalization of a company is achieved in three phases:

1. Obtaining the Single Taxpayer Registry (RUC): it is a free procedure and is obtained in 48 hours at the Undersecretariat of Taxation (SET),
2. Registration with the Ministry of Labor and the Social Security Institute (IPS): the fees are not high and take about 30 days; and
3. Application for the commercial patent to the municipality: this is sometimes the most complicated phase, since the municipalities are autonomous and, therefore, have their own rules, which is something we are still trying to solve.

Despite the benefits, so far only 3,000 of the 230,000 companies registered with RUC have the Mipymes card, and only 50,000 are registered with the IPS and the Ministry of Labor. To improve this situation, the Ministry of Industry and Commerce (MIC) is working to simplify the procedures digitally and reduce fees, which have already been reduced by half.

The formalization of MSMEs will also benefit them within the framework of the Cooperation Agreement on Intellectual Property signed in Rio de Janeiro by the National Director of DINAPI (National Directorate of Intellectual Property) and the President of ASIPI (Inter-American Association of Intellectual Property) on November 23. One of the axes of the agreement is the mutual cooperation for the training of actors in the field, as well as the creation of a pro-bono assistance system for MSMEs duly registered and registered with the Vice Ministry of MSMEs.

In addition, a working group has also been set up with representatives of the private sector to provide technology to MSMEs. The objectives include obtaining the fund for compliance with the law for the promotion of the National Software Industry and the promotion of the zero paper law, also including MSMEs in the digital economy. The massification of electronic government will benefit MSMEs by facilitating real-time access to the data of entrepreneurs' cards in open format and by implementing online procedures and the exchange between institutions involved in the management of this type of companies.

If you would like to know more about formalization and the benefits available to MSMEs, please do not hesitate to contact Marco Colmán (mcolman@vouga.com.py) and Walter David Vera (wvera@vouga.com.py).

The Ministry of Public Works and Communications (MOPC) estimates that the infrastructure projects planned for the next 5 years will require an investment of more than US$ 3.5 billion. The works will be financed partly with own resources, partly through bond issues and loans from multilateral organizations.

The first package of road works -of a package of almost 1,000 kilometers that will generate around 7,000 jobs, in addition to improving connectivity in the most vulnerable areas of the Republic- represents an investment of USD 120 million. The first award certificates, corresponding to 18 sections of work to be executed, have already been delivered. The goal is to award all 943 kilometers by the end of the year. At present, 53 kilometers are under study, 206 kilometers are in the tendering stage and 200 kilometers are in the bid evaluation process.

In addition, the construction of two new bridges with Brazil, financed by Itaipu Binacional, is foreseen. One of the bridges will be at Presidente Franco (Alto Paraná department) and the other will be built in Puerto Murtinho (Paraguayan Chaco). The latter will be part of the section of the bioceanic corridor that will cross the country.

Likewise, the opening of prequalifications and bids for the Commuter Train project will be held. So far there are 10 business groups interested in the project. Ferrocarriles del Paraguay (Fepasa) is already working to relocate the first group of squatters in order to free up the track strip. In addition, work is planned for the restoration of the railroad stations in Asunción, Luque, Bertoni and Yegros, with a combined investment of approximately 3.3 billion guaraníes.

If you would like to know more about participation in public works, please do not hesitate to contact Walter David Vera (wvera@vouga.com.py).