Paraguay’s trade agreements are boosting preferential trade access for importers and exports in the country and wider region.
Paraguay, as a landlocked country between Argentina, Brazil, and Bolivia, has an average GDP growth of 4.8% over the last decade. Despite the diminutive size of Paraguay – less than twice the area of São Paulo, Brazil – it is becoming an attractive destination for foreign investors rapidly.
Paraguay diversified its business and gambled on low import tariffs and low labor costs. This makes the nation a perfect location for any entrepreneur interested in entering the South American commercial environment.
Paraguay has several trade agreements which give them a great benefit over other countries. The country has been growing quietly at a rapid pace, and forming new ties.
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Free trade Agreements in Paraguay: MERCOSUR
Paraguay is one of the original members of the MERCOSUR trade group, also known as the Southern Common Market. Other full members are Argentina, Brazil, and Uruguay. MERCOSUR is the world’s third-largest integrated market and is the most important trade group Paraguay is part of.
Mercosur’s main objective is to increase the efficiency and competitiveness of all member economies by opening markets, promoting economic development in the framework of a globalized world, improving infrastructure and communications, making better use of available resources, preserving the environment, generating industrial complementation and coordinating macroeconomic policies. Achieving a common external tariff is one of the main goals of the block.
Most of Paraguay’s trade is facilitated through the multilateral deals embedded in MERCOSUR. The main export goods of Paraguay are soybeans and soybean meal. Their main imports are refined petroleum and broadcasting equipment. The trade group has free trade agreements with Mexico, Peru, Egypt, India, Israel and most recently, the European Union.
Latin American Integration Association (ALADI)
The Latin American Integration Association (ALADI) is a regional and international organization. Currently, the ALADI has 13 member countries, and any Latin American state may apply for accession. The current members are Argentina, Bolivia, Brazil, Chile, Colombia, Cuba, Ecuador, Mexico, Paraguay, Panama, Peru, Uruguay, and Venezuela.
In this organization, Paraguay benefits from a preferential trading system that leans in favor of the relatively less economically developed countries. Special programs of cooperation (pre-investment, business rounds, financing, technological support), and countervailing measures in favor of the land-locked countries aim to help Paraguay achieve greater access to and integration.
Latin American and Caribbean Economic System (SELA)
The Latin American and Caribbean Economic System, also known as Sistema Económico Latino Americano y del Caribe (SELA), is an organization established to promote economic cooperation and social development among 26 Latin American and Caribbean countries.
The objectives of this system are to reorganize international commerce in basic supplies in order to:
- Increase developing states’ export values
- Improve trade environments
- Stimulate industrial development
- Control foreign-based international corporations
- Create Latin American multinational companies that will use better advantage
The SELA group, brings experts and inter-governmental institutions to the table with these country leaders to find ways to solve problems, boost the economy and establish mutual cooperation targets. The SELA’s framework also aims to support financial, economic and trade negotiations between countries.
Andean Community (associate member)
The Andean Community is a free trade zone with the aim to create a customs union between South American countries Bolivia, Colombia, Ecuador, and Peru.
With a new collaboration agreement with MERCOSUR, the Andean Community earned four new associate members, including Paraguay. This means that there is greater opportunity for open trading between a larger number of South American nations. Paraguayan importers and exporters can expect to experience greater preferential trade access and ease of doing business between member countries.
Economic Commission for Latin America and the Caribbean (ECLAC)
The Economic Commission for Latin America and the Caribbean encourages economic cooperation in the form of a United Nations regional commission. It includes 46 member states and 13 associate members.
Other trade agreements
Inter-American Development Bank (BID)
The Inter-American Development Bank is the largest source of development financing for Latin America and the Caribbean. Paraguay is one of the Borrowing countries and can, therefore, receive loans from the non-borrowing countries.
Forum for East Asia-Latin America Cooperation (FEALAC)
The Forum for East Asia-Latin America Cooperation is a regional council of 36 nations constituting the region of East, Southeast Asia, and Latin America that came together to establish an official and regular dialogue channel between the two regions.
Summit of South American-Arab Countries (ASPA)
The Summit of South American-Arab Countries is a bi-regional mechanism for collaboration and political coordination, which collects the 22 member-States of the League of Arab States and the 12 nations of South America.
Organization of American States
The Organization of American States (OAS) is a continental organization that was founded for the purposes of harmony and cooperation between its member states within the Western Hemisphere.
In the words of Article 1 of the Agreement, the goal of the member states in creating the OAS was “to achieve an order of peace and justice, to promote their solidarity, to strengthen their collaboration, and to defend their sovereignty, their territorial integrity, and their independence.”
Paraguay and Turkey commit to stronger trade ties
Turkey and Paraguay are dedicated to supporting trade between the two countries. The current trade volume does not reflect the potential between the two countries. Paraguay and Turkey have had permanent relations since 1953, the opening of the Turkish embassy in Asuncion on Nov. 20 2018, marked a new stage in the process of strengthening ties.
The mission’s opening was accompanied by a historic visit by Turkish President Recep Tayyip Erdogan to Paraguay.
In an interview with Anadolu Agency, Paraguayan Foreign Minister Antonio Rivas Palacios recalled that “on this visit, we laid the foundations for greater commercial exchange and investment establishment with a Eurasian country of almost 80 million inhabitants, which according to their GDP per capita will be the world’s 13th largest economy.”
Paraguay has a good geographical location for doing business since it is right in the middle of the target market of Turkey. Indicating that Latin America comes to the fore among the target markets identified within the framework of the Export Master Plan. Next to that, the cultures of Turkey and Paraguay are very similar. The opportunities for businesses lie particularly in the sectors of tourism, agriculture, energy, and meat in Paraguay.
Engage with a local legal expert to make the most of Paraguay’s trade agreements
As can be seen in the article Paraguay has a lot of trade agreements which makes doing business easier for importers and exporters of the country. The opportunities for you as an entrepreneur are growing at a rapid pace in Paraguay. Take advantage of this opportunity and partner up with a professional legal services provider you trust.
Expand to Paraguay through Biz Latin Hub. Our team of local and expatriate professionals has the depth of knowledge and experience to enable foreign companies in Paraguay through providing a full range of market entry and back-office services. This includes market entry strategy, trade law advice and support, company formation, ongoing commercial representation, hiring, visa processing, and due diligence activities.
Contact us today for more information, and become part Paraguayan business market.
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