Author: dev_

Last January 20, 2015, the Executive Branch of Paraguay officially published Law 5393/2015, on the law applicable to international contracts (the “Law”), thus putting an end to a long discussion held in academic and professional circles on the possibility of choosing the law governing international contracts.

The new law thus clearly allows the parties to agree on the application of the law they deem most convenient for their international contracts, thus providing greater predictability and confidence to international commercial transactions.

The Law is largely based on the draft Hague Principles on the Choice of Law Applicable to International Contracts (Hague Principles). However, there are some differences introduced by the Congress during the discussions on the draft Law.

Some of the most salient features of this legislation are as follows:

• Excluded from its scope of application are certain agreements such as: arbitration agreements, partnerships or other associations, agency contracts, international distribution, trusts, among others.
• It also contains provisions on police and public order laws, which generally prevail over the agreement of the parties.
• It recognizes the possibility of agreeing to the application of “rules of law”, i.e. non-state or state law. soft law.
• It includes a provision on equitable harmonization of interests, which is perhaps the most striking difference with the Hague Principles.

The entry into force of the Law grants Paraguay the role of “pioneer” - according to the recognition made by the Hague Conference on Private International Law itself - in the legislative incorporation of the Principles into local law. It remains to be seen how the courts and arbitrators in Paraguay will apply and interpret the new legislation.

“The best-kept secret in South America” is the title of the special report on Paraguay just published by the prestigious international magazine TIME. The report highlights the country's strategic location in the heart of South America, as well as its low energy costs and affordable tax burden, characteristics that seduce international investors.

The prestigious U.S. magazine refers to Paraguay as “A jewel waiting to be discovered”. It mentions as key factors the Public-Private Partnership and Fiscal Responsibility laws, as tools for the country's future and sustainable growth. It also indicates that the provision of physical infrastructure is boosting trade and favoring business.

TIME also praises Paraguay's climate and soil fertility, factors that give the country an important comparative advantage in agribusiness. It adds that the Itaipu dam, in addition to demonstrating its competence in terms of technological development, does a commendable job in caring for the environment, which allows Paraguay to obtain renewable and abundant energy at low cost.

Exports of products under the maquila regime increased 50% compared to September of the previous year and with an accumulated volume of 53% (January to September of this year), which is 14% higher than the total exports registered in 2013, according to a report issued by the National Council of Maquiladora Export Industries (CNIME).

In the month of September, exports amounted to USD 15,298,304. From January to September 2013, the accumulated amount of exported products was USD 118,881,074 and in 2014, it already amounts to USD 182,460,284.

The most important sectors in terms of job creation are: auto parts (46.2%), intangible services (19.3%), plastics and their manufactures (10.7%), clothing and textiles (9.7%), wood and its manufactures (6.5%), leather and its manufactures (5.8%) and other minor sectors (1.8%).

The total investments in the maquila regime generated a total of 3,084 new jobs in 2014.

Following the trend of growth and modernization, Paraguay ratified the Apostille Convention last year, which will enter into force at the end of August 2014.

Paraguay has taken an important step towards modernization by ratifying the Hague Convention Abolishing the Requirement of Legalization of Foreign Public Documents, also known as the Apostille Convention. Paraguay ratified the Apostille Convention through Law No. 4987/2013 last year and it will enter into force on August 30, 2014.

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Paraguay has recently issued USD 1 billion worth of sovereign bonds. Following another successful USD 500 million bond issuance in January 2013, this is the largest international issuance in the country's history. With a positive outlook according to Moody's, Paraguay's economy is expected to grow by 4.5% in 2014.

With Bank of America, Merrill Lynch and JPMorgan Chase & Co. as placement agents, this 30-year bond issue with a yield of 6.1% has been Paraguay's most successful issue so far, compared to an average yield of 6.29% for bonds with similar maturities from countries that share Paraguay's BB rating by Standard & Poor's. President Horacio Cartes said in a statement that this yield is unprecedented in the country.

The funds obtained from the issuance will be used for roads, construction and energy infrastructure, as well as for agricultural production. The Ministry of Public Works and Communications (MOPC) will receive USD 350 million for ongoing infrastructure projects, the National Secretariat of Housing and Habitat (SENAVITAT) will receive USD 100 million for the construction of 5,800 housing solutions, and the National Cement Industry (INC) will receive USD 67 million for industrial improvements. Similarly, the Ministry of Agriculture (MAG) will receive USD 50 million to invest in irrigation systems for small farmers and the National Electricity Administration (ANDE) will receive USD 100 million, which will be used for the expansion and modernization of electrical substations and improvements in transmission lines.

For more information about the bond issue or other related inquiries, please do not hesitate to contact us.

On May 21, 2014, Law 5016/2014 was enacted, replacing the outdated previous regulation Decree No. 22,094/47 “General Road Traffic Regulations” of 1947, thus bringing Paraguay's regulations in line with its closest environment of MERCOSUR, and being the control of traffic accidents and the reduction of the mortality rate its inspiring principles.
 
The Standard presents the following new features, among others:

1. Creation of the National Agency of Traffic and Road Safety as the agency in charge of the application of the present National Law and of the future regulatory norms that may be dictated as a consequence. A period of 12 months is established to regulate it, which is important since there are several open points such as the Compulsory Technical Inspection of vehicles, compulsory insurance... The control of traffic on national and departmental roads will be in charge of the Highway Patrol under the MOPC, constituting a mere change in the name of the Highway Police as it is historically known. A National Registry of Driver's Licenses and Traffic Records will also be created, which will record the different infractions committed by the driver and of which we will explain some of the novelties below.
2. Regarding Commercial Advertising, a prohibition is established based on road safety reasons, preventing the placement of advertisements, posters or any other commercial propaganda on the public highway and the roadside in the following cases:Likewise, Art. 45 establishes the absolute prohibition of consuming alcohol on public roads or in commercial establishments that have direct access from highways, national routes, branch roads or departmental roads (the sale in these establishments is not prohibited, however), which may affect numerous premises since in Paraguay the main roads and routes generally constitute the circulation axis of many towns and cities of the Metropolitan area of Asuncion and the rural sector.
   1. Signs or advertising that resembles traffic signs (avoiding possible driver confusion);
   2. Place any type of advertising or publicity on the signs (since they weaken their vision);
   3. Placing advertisements that affect the visibility of the signs.
   4. It is established that it will be up to the authority to regulate the conditions of placement so that it does not affect the driver's visibility or the perception of signals.
   5. It is forbidden to advertise alcoholic beverages and driving.
3. Likewise, Article 45 establishes the absolute prohibition of consuming alcohol on public roads or in commercial establishments that have direct access from highways, national routes, branch roads or departmental roads (the sale of alcohol in these establishments is not prohibited, however), which may affect numerous premises, since in Paraguay the main roads and routes generally constitute the axis of circulation of many towns and cities of the Metropolitan area of Asunción and the rural sector.
4. An important novelty is the inclusion of the Compulsory Technical Inspection of Vehicles, bringing it into line with the rest of the countries in the region. This is motivated by active and passive safety factors as well as environmental factors. It should be noted that the entry into force of Law No. 3850/09, as amended by Law No. 4856/12, which regulates the ITV, was postponed until July 1, 2014, mentioning that this mandatory inspection may not even be carried out if the vehicle does not have the mandatory insurance, another important obligation established by this law (Art. 53).
5. In this sense, the Compulsory Traffic Accident Insurance is a vital issue for the prompt attention of the victims of road accidents (SOAT), it will be mandatory for all motor vehicles and mopeds of all types, covering expenses for medical and surgical care, pharmaceuticals, hospitalization, hospitalization, disability, as well as transportation for the immediate attention of the injured. Vehicles in charge of public passenger transportation, in addition to the SOAT, shall have a mandatory passenger care insurance. The term of the insurance will be annual and it may be contracted with any company established in the country and authorized to operate in the automobile industry. In addition, its regulations are similar to those of other countries, establishing for the companies the possibility of repeating against the insured who has acted with fraud or gross negligence and establishing a contribution (a percentage of the premium collected by the mandatory insurance) by the Superintendence of Insurance for the National Traffic and Road Safety Agency for the fulfillment of its purposes. This presents a great opportunity for insurance companies, which will necessarily see an increase in the number of policies.
6. Other novelties included is the creation of the Carnet por puntos, initially granting 20 points to all drivers, bringing back to the table the validity of this insurance whose Law was repealed at the beginning of 2014.
7. The penalties established are divided into minor, serious and very serious. In general terms, they are punished as follows:
   • Minor misdemeanor - punishable by a warning or a fine of up to 3 minimum wages (up to 210,465 guaraníes). Leaving aside the issue of alcohol abuse (to which we will make special mention), minor offenses are those that are not serious or very serious.
   • Serious misdemeanor - punishable by a fine of 4 to 10 minimum wages (up to 701,550 guaraníes), removal of 3 points or disqualification when applicable. Serious misdemeanors include, among others, the lack of required documentation, driving a vehicle without a license plate or without the mandatory insurance in force, driving faster than the allowed speed or using headphones and/or mobile communication systems of continuous manual operation, driving without any of the occupants wearing the mandatory seat belt or without lights when it is necessary to wear them.
   • Very serious misdemeanor: This is punishable by a fine of 11 to 20 minimum wages (up to 1,403,100 guaraníes), removal of 5 points or disqualification when appropriate. In the case of both minor and serious offenses, if there is voluntary acknowledgement, the fine is reduced by 25%. Examples of very serious offenses are offenses that have caused an accident resulting in bodily injury or property damage, failure to respect traffic lights or the STOP sign, fleeing or refusing to provide documentation when required.
8. With regard to the regulation of alcohol consumption: The following alcoholic beverages scales are established for the graduation of infractions and their corresponding penalties:
   • From 0.001 to 0.2 of alcohol in breathed air will be a minor offense.
   • From 0.2 to 0.799 of alcohol in breathed air will be serious misconduct.
   • The refusal to submit to the test or if the alcohol level decreases the psycho-physical conditions of the driver shall be a very serious offense. It is also a serious offense to consume alcohol on public roads or in commercial establishments with direct access from highways, national routes, branch roads or departmental roads.
9. Finally, the Penal Code is amended to punish with prison sentences of up to 2 years or a fine, among other conducts, when the alcohol level “notably or legally affects the ability to drive” and when driving without a license due to lack of it or having been deprived of it, also punishing the owner of the vehicle who tolerates such conducts.

International Finance Corporation (IFC) hired Vouga Abogados to grant different lines of credit to several banks in Paraguay for a total amount of USD 97 million.

Vouga Abogados has been continuously assisting IFC in the granting of a number of lines of credit to banks in Paraguay. On this occasion, Vouga Abogados again assisted IFC in granting lines of credit to BBVA, for an amount of up to USD 60 Million; BANCO REGIONAL, for an amount of up to USD 30 Million; and BANCOP, for an amount of USD 7 Million.

BBVA, REGIONAL and BANCOP received a total of US$97 million to provide financing to small and medium-size enterprises, which in turn will help Paraguay's economic development.

With the closing of these last credit lines, Vouga Abogados assisted IFC during the last three and a half years in granting loans to banks in Paraguay for approximately USD 262 million.

Vouga Aboagdos represents Archer Daniels Midland (ADM), a global leader in soybean trading and regional leader in the fertilizer business, in the sale of all assets related to the fertilizer business in Paraguay to the American company Mosaic. The transaction has been signed simultaneously in Paraguay and Brazil. This USD 350 million transaction represents the largest transaction of its kind in recent years in Paraguay, and involves ADM's fertilizer business in Paraguay and Brazil. The closing of the transaction will ultimately be subject to obtaining regulatory approvals in Paraguay and Brazil, as well as the fulfillment of certain conditions from both Paraguayan and Brazilian authorities.
 
In Brazil, ADM is represented by Machado, Meyer, Sendacz e Opice Advogados of São Paulo.

“According to the economic indexes calculated by the IFO Institute of Germany and the Getulio Vargas Foundation of Brazil, Paraguay is favorably positioned over the other regional countries with an Economic Climate Index (ECI) of 135.8, even above Brazil which, according to data counted up to April, has an average of 82.5.

A few days ago, the mayor of Asunción, Arnaldo Samaniego, highlighted this fact, arguing that the country is facing an economic policy in which “opportunities are opening up for Paraguay more than ever”.

In 2013, Paraguay achieved the third highest economic growth in the world, with 14.1%. For this year, the outlook is 5.5% to 7%, driven mainly by industry and construction.

According to the Ministry of Industry and Commerce, one of the pillars of this development is the so-called “maquiladoras”, companies that import parts and components of all products to be manufactured (assembled) in Paraguay and then exported.

Ernesto Paredes, executive secretary of the National Council of Maquiladora Industries, reported that 80% of exports are destined for Mercosur countries.

He detailed that up to May 15 of this year, maquiladora sales abroad amounted to close to US$ 80 million. In 2013, the total reached US$ 150 million.

The outlook, according to Paredes, is for continued growth: “Between last year and this year we have 17 new projects”.