The most important productive sector of Paraguay is agriculture, not to mention the growth of the cattle industry in recent years. The main products are soybeans, cotton, sugar cane, corn, wheat, tobacco, fruits, vegetables, beef and pork, milk and wood.
There also exist factories: glass, cement, steel, plastic and metallurgical plants, and the agro-industry is very important for its sugar mills, meat processing, beverage factories, textile, wood, processing plants of fruit juices, food preparation, miscellaneous vegetable oil and essential oils and leather manufacturing.
Important factors for the country’s economic development constitute the binational hydroelectric dams Itaipú and Yacyretá, located on the Parana River. The first built in partnership with Brazil has a capacity of 14,000 MW with an energy production capacity of 90,620 GWh per year and the second with Argentina, with a capacity of 3,200 MW and the capacity to produce 19,000 GWh per year.
In 2007, these hydropower dams along with the Paraguayan Acaray, produced together, 70 billion kWh. 99.9% of total production of electricity from Paraguay comes from these ventures.
Another important factor for development is the network of 4,300 kilometers of paved roads in Paraguay.
Vital physical means of regional integration will be completed once the interconnection of roads is completed that will link the Atlantic and Pacific oceans, called the bioceanic corridor and the Paraguay-Parana waterway project.
The latter is a project undertaken by Paraguay, Argentina, Bolivia, Brazil and Uruguay, which aims to improve the navigability of 3,400 kilometers of the Paraguay and Parana rivers, from the port of Caceres in Brazil until Nueva Palmira, Uruguay, by performing dredging works, deepening and maintenance of appropriate conditions for deep-water ships, which will lower the cost of river transportation for goods in the region.
Paraguay is located in a strategic geographical position in the center of South America, where the main river systems of the Paraguay-Parana waterway and bi-oceanic path flow, which possibly facilitates the way for delivering products to the rich areas as Brazil, Bolivia and Paraguay as well as access to the most important markets in the regions. The distance of international airports of Asuncion’s Silvio Petirrossi and Ciudad del Este’s Guarani are less than two hours of flight to the capitals and main economic centers of neighbor countries.
Paraguay is a member of the economic integration of Mercosur, constituted by Paraguay, Argentina, Brazil, Uruguay and the countries like Chile, Bolivia and Peru that joined as partnership according to the Asuncion Treaty which was signed on April 26th, 1991. Mercosur’s target is to establish a free trade area with zero tariffs, a union customs with a common external tariff and the coordination of macroeconomic policies among the memebers that covers an area of 13158,000 km2 and a population of 250 million inhabitants.
The huge hydroelectric dams Itaipu and Yacyreta, which are bi-national ventures with Brazil and Argentina, make Paraguay have the cheapest renewable, non-polluting energy, and the largest exporter of electricity.
The abundant nature resources, including water, which in Paraguay’s subsoil is one the richest global reserve, the Guarani Aquifer, low land prices, the low cost of labor, tax incentives for importing of machinery and exemption from VAT for agricultural products make Paraguay become an ideal destination for investment.
As for the human factor, it is important to notice that 70% of the population is less than 30 years old, constituting an active labor force in a country of nearly three million people. Paraguay has political stability, no ethnic or religious problems, and does not face any regional conflicts.
Traditional items such as corn, sunflower, sesame and soybeans, of which Paraguay is a major global exporter, have reached significant levels of profitability. The production of vegetable oils from soybeans, canola and sunflower, essential oils, organic sugar, manufactures food, fruit juice, sweets, textiles and garments through the integral use of cotton and bio-fuels are the sectors that offer great opportunities for investment in an era while global demand for energy and food has been growing in an accelerating rate.
Also the livestock industry is expanding due to the increased destinations of current meat products more than fifty countries which import beef from Paraguay, which also create new opportunities for investment about livestock breeding, establishing new refrigeration plants and the leather industry.
The forestry sector, floriculture, aquaculture, breeding of tilapia and shrimp, are also areas where attract investments in Paraguay due to climate conditions and favorable terrain.
One thing that can’t fail to mention is also the electro-intensive industries such as ferry-alloy, fertilizer, fibers (rayon/acetate); telecommunications, plastic industries, assembly, pharmaceutical, cement, the sectors of information technology and transportation service, electricity, water and sanitary services, hotels, such these areas that offer magnificent opportunities for investment.
The advantages listed can be found in the following tax laws:
Law 60/90 with some modifications was implemented by Decree 22031 on August 14th, 2003, this law grants benefits to investors such as exemption from all taxes and municipal taxes for the establishment, documentation and registration of companies; exoneration of 95% of income tax for five or ten years, total exemption of customs tax and Value Added Tax on investment for the initial installation and other benefits for reinvestment.
Maquila Act 1064/97 allows foreign investors to outsource manpower and purchase Paraguayan raw materials to be used in the process of production and processing assets with a view to export, with a Paraguayan 1% taxation of the added value. This act further recognizes the possibility of introducing products to the domestic market up to 10% of the total output of goods covered by the scheme. For its tax-free introduction to the markets of member States of MERCOSUR, the products under this scheme should be composed of 40% of inputs from MERCOSUR and 60% of extra-regional origin.
Law 117/91 General Investment gives equal treatment and an equal footing to domestic and foreign investment, giving the same guarantees, rights and obligations, allowing free and unlimited transfer of funds and also giving investors the opportunity to hire local or foreign insurance companies or establish joint ventures.
Law 523/94 establishes the Free Trade Zones System, which are areas where you can develop all kinds of trade, industrial and service sectors, with advantages in terms of tax exemptions.
Finally, a moderate fiscal and monetary policy has produced a long-term macroeconomic stability for investment because of its predictability and low levels of inflation it creates a healthy environment for Paraguay to qualify as an interesting destination for foreign investments.