Banking and Finance

Paraguay reaches investment grade for the first time in its history

The risk rating agency Moody's announced that it raised Paraguay's credit rating from Ba1 to Baa3, granting it investment grade for the first time in its history, reported the Ministry of Economy and Finance (MEF) on past July 24, 2024. Paraguay joins a select group of countries in the region to have the sovereign degree, Chile, Colombia, Mexico and Peru.

In a statement, they indicated that this stable outlook is reached after 26 years when the rating agency assigned a rating to Paraguay for the first time and after 9 years since the last upward review. "This unprecedented achievement is based on the country's solid economic fundamentals and its long history of macroeconomic stability," the MEF said.

They claim that it is the result of more than 20 years of responsible, consistent and predictable public policies. Prudent management of macroeconomic policies was able to achieve and preserve the sustainability of public finances and maintain low inflation

Tax

Agreement between Paraguay and Spain to avoid double taxation finally in force

After ratification by Paraguayan Law Nr. 7.271/2024 and publication in the Official bulletin of the Spanish Kingdom on July 29, 2024, said important agreement for the economic relationships between both countries shall be in force starting October 14, 2024, having effect for all tax purposes since January 1, 2025.

The agreement comprehends the Personal Income Tax, Corporate Tax and Non Resident income taxes in both countries (the so called IRP, IRE and IDU, and INR in Paraguay and IRPF, IS and IRNR in Spain) document observes OECD standards and includes measures to prevent tax base erosion and profit shifting (BEPS), affecting to Personal and Company income taxes in both countries (including income taxes for non-residents), which must now be ratified by the respective Congresses for its entry into force. Model Tax Convention on Income and on Capital 2017 shall be applicable for the interpretation of articles 5 (permanent establishment) and 7 (entrepreneurial benefits) of said Agreement.

Energy

Amendment of Law "On the Independent Production and Transmission of Electric Energy (PTIEE)"

On August 20224 Law No. 7299/2024 that amend Law Nr. 3009/2006 was enacted to foster private investments for the generation of renewable electricity through small hydroelectric plants (SHPs), by introducing correction of concepts that blocked the previous legislation to be applicable and improving the legal framework, by extending the threshold to grant licenses up to 50 MW and generation greater than 50MW should be subject to international public tenders, without the requirement of a risk-sharing contract with the national utility company (ANDE) as stated in the previous Law, although it retains a first call right to acquire the energy generated in case it is not exported or it is needed in the internal market.

Among other changes, the Ministry of Public Works and Communications replaced a Council of several Ministries (MOPC, Environment, Industry and Trade, Foreign Affairs) that made the procedure very bureaucratic. It must be clarified that shall Law is only applicable for the generation of electricity from the use of natural gas and/or minor hydroelectric generation, which also includes cogenerators and self-generators. This Law does not apply to other renewable energies (solar, wind) governed by Law No. 6977/2023, on Non-Conventional Renewable Energies (NCRE).

Public Procurement

Enactment of Decree Nr. 2264/2024, which regulates Law No. 7021 of December 9, 2022, "On Public Supply and Procurement".

This decree imposes a significant advance in what has to do with administrative management in public procurement. It seeks to improve efficiency, transparency and all flexibility in everything that has to do with public procurement processes. There are updates in terms of terminology, structure, facilitating reading and limiting the search for information and providing greater clarity to the management of State procurement, reducing the deadlines that have to do with protests, reconsideration appeals and deadlines for responses from public institutions to the DNCP.

A special type of bidding that he highlighted is joint procurement, which he described as an innovation in public procurement. It consists of public institutions coming together to buy goods or services, in search of efficiency through the implementation of economies of scale and administrative standardization. The annual average of the awards is USD 3.246 million, with 9.513 procedures and 3.266 suppliers.

Tax

Agreement between Paraguay and Spain to avoid double taxation submitted to Paraguayan Congress

On July 4th, 2023, the Executive Branch submitted to the Senate the bill “which approves the Agreement between the Republic of Paraguay and the Kingdom of Spain to avoid double taxation and to prevent tax evasion or avoidance on income taxes”, signed in Santo Domingo, Dominican Republic, on March 25th, 2023.

The agreed document observes OECD standards and includes measures to prevent tax base erosion and profit shifting (BEPS), affecting to Personal and Company income taxes in both countries (including income taxes for non-residents), which must now be ratified by the respective Congresses for its entry into force.
In Paraguay, with the assumption of the new Congress last July and afterwards the recently elected President Santiago Peña that must take office next August 15th, 2023, it is expected that such Agreement can be passed into law during 2.024.

Banking and Finance

Regulation of Credit Information Bureaus (BIC) and Protection of Personal Credit Information

On February 21st, 2023, the Board of Directors of the Central Bank of Paraguay (BCP) issued Resolution No. 3, by virtue of which the Regulation of Credit Information Bureaus (BIC) and Protection of Personal Credit Information is approved within the Framework of Law No. 6534/2020 on Protection of Personal Credit Data.

The Regulation entered into force on June 1st, 2023, a subject of broad public interest for citizens and a key normative for compliance on Protection of Personal Credit Data to which Credit information bureau and financial entities must adhere subject to heavy fines in case of violation of personal data rights.

Regulation of operation in the Foreign Currency Forward Market

On January 12th, 2023, the Board of Directors of the Central Bank of Paraguay (BCP) issued Resolution No. 18, which approves the Forward Currency Market Operations Regulations. The new regulation replaces Resolutions No. 8 and 11/2013 and 15/2018.

Antitrust

CONACOM issues new regulations to apply sanctions for non-compliance with the duty of collaboration

Through Resolution D/AD 103/2022 dated November 1st, 2022, the CONACOM Board approved the Regulations for the application of sanctions for breach of the duty to collaborate with CONACOM. Such resolution replaces Resolution D/AD 61/2022 dated June 22nd, 2022.

In that context, recognized companies from various sectors were penalized for not providing information in a timely manner. Through Resolutions D/AL 80, 82 and 83, dated October 5th, 2022, CONACOM sanctioned for the first time three firms that did not respond to information requests received in the framework of a concentration operation related to the supermarket market. The fines amounted in certain cases to one hundred and fifty minimum daily wages (approximately G. 15,000,000 or the equivalent of USD 2,000).

Attorneys from LEGALCORP participated in the draft bill of the Competition Law enacted in 2013 and were member of the public private Commission enacted by the Ministry of Trade and Commerce for the drafting of the regulation of such Law approved by Decree Nr. 1490/2013.

Environment

Carbon Credits Market

On March 16th, 2023, a draft bill on Carbon Credits was presented to the Senate, which aims to establish a regulatory framework to define -among other things- the ownership of reduced carbon avoided and/or captured - and the carbon credits that are generated through projects developed in Paraguay. In addition, it is intended to create a national carbon registry.

By June 30th, 2023, and ad hoc technical Committee formed by public private stakeholders within the Commission of Industry and Trade of the Senate finished its first review of the draft bill introducing some amendments and modifications to improve such legal framework.

With the assumption of the new Congress last July 1st and the Executive Branch which will take office next August 15th, 2023, such technical committee must resume works including the new authorities of the Ministry of Environment and Sustainable Development.

Presentation of progress in the process of Regulation of the Water Resources Law

On March 29th, 2023, the Ministry of the Environment and Sustainable Development (MADES) presented the progress in the regulatory process of Law No. 3239/2007 “On Paraguayan Water Resources” with the participation of representatives of the public and private sectors and civil society.

According to the planification of the General Directorate for the Protection and Conservation of Water Resources, such Direction will be in charge of preparing the draft of 32 resolutions that regulate the Law to be submitted to the general public to receive comments to issue the final wording. Such regulations must set the standards to the legal title for right usages (permits and concessions) and the fee for said usages, as well as technical criteria for each type of usages
(commercial, industrial, agriculture, etc).
Our member of LEGALCORP Attorney Jorge Figueredo Klein is taking part on the cited two works representing the Paraguayan Industrial Guild (UIP).

Energy and Infrastructure

Enactment of the new law that will regulate the independent production of electrical energy from non-conventional renewable sources

On January 26th, 2023, the Executive enacted Law 6977/2023 Regulating Development, Generation, Production, Development and Use of Electrical Energy from Non-Conventional Non-Hydraulic Renewable Energy Sources (Law 6977).

Law 6977 partially replaces Law 3006/09 “On the Production and Independent Transmission of Electric Energy” and its objective is to encourage private investment in the energy sector: its success is essential to guarantee the diversification and energy security of the country, since according to estimates by the National Electricity Administration (ANDE) itself, the state owned sole utility, by the year 2030 there will be a confluence between demand and supply of energy; this will result in Paraguay consuming 100 % of the energy that corresponds to it from its hydroelectric plants, Itaipu (second largest in the world together with Brazil), Yasyretá (together with Argentina)
and Acaray.

Finishing of new bridge “Heroes of Chaco War” connecting the Capital with the Western Region or Chaco

On past July 22nd, the President of the Republic, Mario Abdo Benítez, carried out a verification of the works of the Héroes del Chaco bridge, when he was the protagonist of the first vehicular passage through the new structure that unites the capital of the country with the Western Region or Chaco.

The bridge worth USD 136 million is 603 meters long and 32 meters wide and its constitute a new icon, not only because of its strategic location but also because of its avant-garde design designed for the future, with 2 lanes in each direction, a bike lane and a pedestrian sidewalk, with 7 km of roads if we add all of its components from the Costanera North to the Remanso-Falcón junction.

Once finalized, will serve for the passage of about 10,000 vehicles per day to and from Asunción from the Chaco region (neighbouring with the Argentinean border), decompressing the traffic that is currently on the Remanso bridge, officially inaugurated 45 years ago. Meanwhile, complementary works continue on various fronts in order to have the entire road network ready and enabled in the coming months (by the end of 2023).