Paraguay Land of opportunities Novem ber Novem ber - 2 0 1 3 2 0 - - PowerPoint PPT Presentation

Paraguay

Land of opportunities

Novem ber Novem ber - 2 0 1 3 2 0 1 3

General Information General Information

Paraguay, in the center of South America

Cancer Tropic Equator line Greenwich Meridian

+4 +3 +1 +2

Capricorn Tropic

Facts and figures

Area (Km.2): 406,752 Official lenguages: Spanish & Guaraní Currency: Guaraní (Since 1943) Exchange rate (US Dollar – Guarani) (2012): 1 USD = 4,070 Gs. Population (2012*): 6,672,631 Nominal Gross Domestic Product GDP** (Bill. USD) –Yr. 2012: 18.2 Nominal Gross Domestic Product GDP Per Capita** (USD) –Yr. 2012: 3,770 Country`s Capital: Asunción Other cities and major economic areas Central Metropolitan Area ASU-CDE-ENC-ASU conexion Central Chaco / NE Zona Ciudad del Este, Encarnación, Salto del Guairá, Coronel Oviedo, Concepción, Santa Rita Working Age Population –WAP (2012): 60.7% of Pop. 3,215,510 Rate of unemployment (2012): 5.7% of the WAP

Sources: Central Bank of Paraguay – BCP (www.bcp.gov.py) *STP/DGEEC. Paraguay: Forecasts 2012 **Yr. Base 1.994

Asunción

Regions of Paraguay 60%

Of the total area

40%

Of total area

Western Region or Chaco

97,3%

Of total population

97,3%

Of total population

40%

Of total area

2,7%

Of total population

Total Area (km2) Population 406,752 6,672,631

Source: Dirección Nacional de Estadísticas, Encuestas y Censos (www.dgeec.gov.py) *STP/DGEEC. Paraguay: Forecasts 2012

Eastern Region

Access to attractive markets

 Paraguay is located in the center

• f the region with the highest

income of South America.

Brazil Brazil Peru Peru Bolivia Bolivia Ecuador Ecuador Venezuela Venezuela Colombia Colombia

Guyana Guyana French Guyana French Guyana Suriname Suriname

South South America America (100%) (100%)

MERCOSUR MERCOSUR

(70%) (70%) Paraguay + Paraguay + 1.300 km 1.300 km

Chile Chile Argentina Argentina Uruguay Uruguay Bolivia Bolivia

South South America America (100%) (100%)

MERCOSUR MERCOSUR

(70%) (70%) Paraguay + Paraguay + 1.300 km 1.300 km Population (Mill. people)

360 250 120

GDP Billion US$

2.875 1.948 927

GDP per capita (US$)

7.986 7.792 7.725

Source: 2009 Latin American Statistic Yearbook - ECLAC www.eclac.org

• 33% of South America´s GDP
• 33% of South America`s Pop.
• 96% of South America's average per

capita Income

Paraguay Paraguay

Lower Risk of Natural Disasters

Earthquake risk Tsunami risk Severe weather conditions risk Volcano eruption risk Tectonic plaques Source: US Geological Survey (www.usgs.org)

Structural Resources Structural Resources

Ideal natural conditions – A big water reserve

Paraguay River Pilcomayo River

Average yearly temperature: 28 Cº Average yearly rainfall: 1.200 mm.

Parana River Pilcomayo River

Paraguay is located in the center of the GuaraniAquifer.

Source: Instituto Geográfico Militar – IGM & DGEEC

Comparative low cost Electric Service

PERU MÉXICO COSTA RICA PARAGUAY 129 112 111 82

RESIDENTIAL: 200 KWh/mes

CHILE PERU PARAGUAY

135 105 72 57

INDUSTRIALIST: 50 MWh/mes

Fuente: CIER Report about Electric Tariff in Distribution January / 2012 50 100 150 200 250

URUGUAY GUATEMALA EL SALVADOR COLOMBIA BRASIL CHILE PERU 213 205 187 186 163 147 129

50 100 150 200 250 GUATEMALA COSTA RICA EL SALVADOR BRASIL COLOMBIA URUGUAY MÉXICO

213 204 192 183 156 139 135

$/MWh $/MWh

Young and trainable laborforce

20 30 40 50 60 70 80 73,7 73,4 67,4 65,7 60,1 59,9 54,8

Population younger than 34 years old (%)

 Paraguay has the youngest population in

America.

10 20

Sources: Dirección Nacional de Estadísticas, Encuestas y Censos (www.dgeec.gov.py) Worldmapper (www.worldmapper.net)

Regional Logistics Regional Logistics

An important waterway in the

• Region. Paraguay – Parana.

Rio Paraguay Rio Paraguay

Conchas Conchas Corumbá Corumbá

Santacruz Santacruz Rosario Rosario Nueva Palmira Nueva Palmira Antofagasta Antofagasta Paranagua Paranagua ASU ASU

Rio Paraguay Rio Paraguay

Santos Santos CDE CDE Mejillones Mejillones

Conchas Conchas

Montevideo Montevideo Sao Paulo Sao Paulo Buenos Aires Buenos Aires Santiago Santiago

Main Commercial Centers Paraguayan free ports Important regional ports Barges Transatlantic Ships

Source: Rediex

Waterways Lenght (miles) Conexions Paraguay- Paraná - Uruguay 1,721 Bolivia-Paraguay- Argentina-Uruguay- Tietê – Paraná 1.491 Brazil-Paraguay

Energy for the future Energy for the future

I TAI PU BI NACI ONAL

POW ER: 7 .0 0 0 MW ENERGY: 3 7 .5 0 0 GW h/ YEAR PARTI CI PATI ON: 8 5 %

Hidroelectrical Energy

Source: Administración Nacional de Electricidad (www.ande.gov.py)

ENTI DAD BI NACI ONAL YACYRETA

FI NAL POW ER: 1 .5 5 0 MW FI NAL ENERGY: 1 0 .5 0 0 GW h/ AÑO PARTI CI PATI ON: 1 0 %

CENTRAL ACARAY

FI NAL POW ER: 2 5 2 MW ENERGY: 9 5 0 GW h/ YEAR PARTI CI PATI ON: 5 % PARTI CI PATI ON: 8 5 %

Low Costs of Electric Service

 Electro Intensive Industrial.

(Reglamentado por el Decreto 7.406/11)

 No Electro Intensive Industrial

Fajas de Consumo Precio

1 – 50 MWh 225,18 G/MW/h 51 – 500 MWh 252,87 G/MW/h Más de 500 MWh 296,56 G/MW/h

Zonas Franja de Modulación Precio

Este y Sur 0 a 25 % 33,01 US$/MWh

 Residential

Fuente: Elaboración propia con datos proveídos por técnicos de la ANDE

Este y Sur 0 a 25 % 33,01 US$/MWh Este y Sur 26 a 50 % 37,70 US$/MWh Central 0 a 25 % 35,50 US$/MWh Central 26 a 50 % 40,78 US$/MWh Metropolitana 0 a 25 % 37,00 US$/MWh Metropolitana 26 a 50 % 42,85 US$/MWh

Fajas de Consumo Precio

1 – 50 MWh

311,55 G/KWh

51- 150 MWh

349,89 G/KWh

Mas de 150 MWh

365,45 G/KWh

Business Climate Business Climate

Corporate Income Tax Rate

20% 25% 30% 35% 40%

35% 34% 34% 30% 25% 25% 20%

 This tax has been lowered 66% from 30% to 10% in 2004

0% 5% 10% 15% Argentina Colombia Brasil Perú Uruguay Ecuador Chile Paraguay

10%

Source: Ministry of Finance – www.hacienda.gov.py

Personal Income Tax

Averiguar Uruguay

25% 30% 35% 40% 40% 35% 35% 30% 27,50% 25% 25%

Source: Ministry of Finance – www.hacienda.gov.py

0% 5% 10% 15% 20% Chile Argentina Colombia Perú Brasil Ecuador Uruguay Paraguay 10%

Value Added Tax (VAT)

15% 20% 25% 25% 23% 21% 19% 19% 16%

Source: Ministry of Finance – www.hacienda.gov.py

0% 5% 10% Brasil Uruguay Argentina Chile Perú Colombia Ecuador Paraguay 12% 10%

Business Climate

According to “World According to “World Energy Energy Council”, Council”, Paraguay

Paraguay is the country’s number

is the country’s number

• ne environmental mitigation of global
• ne environmental mitigation of global

energy production. energy production.

Source: Energy Sustainability Index 2012

Asunción, is the 3th.

Capital with lower cost of life in South America.

Source: Mercer Consulting Group 2012

Source: Riskmap Report 2013, Mercer Consulting Group 2012 & Energy Sustainability Index 2013

Business Climate

BEI – October/2013

1,0 Venezuela 5,7 Colombia 4,5 Mexico 5,0 Ecuador

Favorable Business Environment Favorable Business Environment for Investments for Investments

Paraguay ranks First in the economic climate

evaluation, the Business Environment Index (BEI) ranks 6,4 points, over the Latin American average: 4,4 points, according to the report from the Getulio Vargas Foundation (GVF).

4,8 Brazil 6,4 Paraguay 4,8 Uruguay 3,9 Argentina 5,2 Chile 5,4 Bolivia 6,0 Peru Ecuador

*Source: Getulio Vargas Foundation of Brazil (FGV) & University of Munich, Germany

Macroeconomic Stability Macroeconomic Stability

Economic Activity

8,3 13,1 13,0 8,0 10,0 12,0 14,0 Growth by decades Growth in the IMF Forecasts Forecasts from the Central Bank of Paraguay

Source: Banco Central del Paraguay - www.bcp.gov.py & IMF

5,1 3,9 2,4 3,0 4,3

• 1,2

4,6 4,7 4,7 4,7 (2,0) 0,0 2,0 4,0 6,0 1960 1970 1980 1990 2000 2010 2011 2012 2013 2014 2015 2016 2017 Growth in the last years IMF Forecasts

Primary Sector 20,1% Secondary Sector 14,3%

GDP Share by sectors – Yr. 2012

Source: Banco Central del Paraguay - www.bcp.gov.py

Tertiary Sector 46,8% Others 18,8%

Inflation Rate

14,6 9,3 9,9 12,5

10,0 12,0 14,0 16,0

Paraguay Inflation Rate

Source: Banco Central del Paraguay - www.bcp.gov.py *Projection for 2013 according BCP Preliminary Balance

2,8 6,0 7,5 1,9 7,2 4,9 4,0 5,0

0,0 2,0 4,0 6,0 8,0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013*

Inflation %

“We are affirming our ’BB-/B’ foreign and local currency sovereign credit ratings on Paraguay. In our opinion, the impact of former Paraguayan president Lugo’s rapid impeachment in June has been and will remain limited. The stable outlook balances the country’s narrow economy and substantial infrastructure needs against the government’s i mproving fiscal underpinnings and low debt… At the same t ime, the country’s external indicators have continued to stre ngthen as a result of solid export growth…and rising interna tional reserves, which now cover more than five months of c urrent account

Evolution of the Country Rating** Outlook Rating Agencies

5 6 7 8 9 10 11 2006 2007 2008 2009 2010 2011 2012 2013 Ba2/BB Ba3/BB- B1/B+ B2/B B3/B-

S&P Moody’s Fitch

Improving Sovereign Risk Profile

urrent account payments.” S&P January 2013 “Moody’s …has upgraded Paraguay’s government bond rating to Ba3 from B1. The key drivers supporting the upgrade are (1) government finances that we expect will continue to align well with peers in the ‘Ba’ rating category, despite volatile growth, (2) a sustained build-up in international reserves and (3) improved medium-term growth prospects supported by government plans to increase investment in infrastructure” Moody’s January 2013

Regional Comparison (Moody’s /S&P) (1)

Source: Central Bank of Paraguay, EIU, Moody’s, S&P. (1) Foreign Currency Long Term rating

and may be subject to revision or withdrawal at any time.

5 6 7 8 9 10 11 Argentina B3 / B- Ecuador Caa1 / B Bolivia Ba3 / BB- Uruguay Baa3 / BBB- Brazil Baa2 / BBB Paraguay Ba3 / BB- Chile Aa3 / AA- Peru Baa2 / BBB Colombia Baa3 / BBB- Venezuela B2 / B+

Fiscal Balance/GDP

• 0,5%

1,4% 0,7% 0,4% 0,9% 2,3% 0,1% 1,2% 0,7%

0,0% 1,0% 2,0% 3,0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012*

IB IB

Source: Ministerio de Hacienda (www.hacienda.gov.py)

• 4,0%
• 1,0%
• 2,6%
• 0,5%
• 1,7%
• 5,0%
• 4,0%
• 3,0%
• 2,0%
• 1,0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012*

% PIB % PIB

External Debt / International Reserves

170,8 182,8 213,7 289,5 299,0 356,0 251,9 204,7 175,7

200,0 250,0 300,0 350,0 400,0

Source: Ministerio de Hacienda (www.hacienda.gov.py)

118,8 127,1 131,7 170,8 182,8 175,7 131,5 89,6 78,0 57,9 56,0 45,8 45,0 47,2

0,0 50,0 100,0 150,0 200,0

Investment Incentives Investment Incentives

MERCOSUR “Rules of Origin”

Required national components:

• Raw

materials

• Parts &

components

• Labor
• Services
• Energy, water
• Import

Freights*

40% 60%

40% 50% 60% 70%

Necessary regional (MERCOSUR) content %

 Paraguay has a “special treatment” regarding “rules of origin” of manufactured

products until 2023

 It is easier for a product to acquire “MERCOSUR origin” in Paraguay than in other

member country

* If the service is provided by a Company established in Paraguay

Source: Mercosur 01/04 decision – www.mercosur.int

Required national components:

• Raw

materials

• Parts &

components

• Labor
• Services
• Energy, water
• Import

Freights*

Extra-zone imported components allowed in product

40% 60%

0% 10% 20% 30%

Brasil Argentina Uruguay Paraguay

60% 60% 50% 40%

60/90 Law - Fiscal incentives regime for the investment of national & foreign capital Import tariff on Import tariff on Capital Goods Capital Goods

(machinery & equipment) (machinery & equipment)

0%

Value Added Tax (VAT) on acquired Value Added Tax (VAT) on acquired Capital Capital Goods Goods (in

(in or out of the country)

• r out of the country)

0%

Taxes on payment of dividends & transfer of profits Taxes on payment of dividends & transfer of profits abroad abroad (applied for investments over US$ 5 Mill. for 10 years)

(applied for investments over US$ 5 Mill. for 10 years)

Source: Ministry of Finance – www.hacienda.gov.py

0%

Taxes on remittances abroad & payments of Taxes on remittances abroad & payments of loans loans obtained abroad

• btained abroad (capital, interest & commissions)

(capital, interest & commissions)

applied to investments over US$ 5 Mill. applied to investments over US$ 5 Mill.

0%

Value Added Tax (VAT) on acquired Value Added Tax (VAT) on acquired Capital Capital Goods Goods (in

(in or out of the country)

• r out of the country)

Maquila Regime Concept

Contract

MAQUILA ENTERPRISE HEAD OFFICE

ENTERPRISE / PERSON CONTRACTED Legally domiciled in the Paraguayan territory

ENTERPRISE CONTRACTOR ABROAD TO PRODUCE:

• GOODS AND SERVICES

“FOR EXPORT” Contract

ENTERPRISE OFFICE

SUB MAQUILA ENTERPRISE

Single tax rate of 1% over sales invoicing Only “value added” considered in tax calculation

ENTERPRISE / PERSON CONTRACTED trhougth the Maquila Enterprise TO MAKE Partials processes or Underprocesses

Maquila Regime Operational

National Market

(max. 10% of Production previous year)

Product

Market export

previous year)

Other Countries Goods and Services Labor Capital Goods Inputs commodities

MAQUILA ENTERPRISE

National provision

HEAD OFFICE

Duties and Taxes SUSPENDED = Warranty

Fuente: CNIME

Maquila Regime Tax Issues

1% 1% Single Tribute Maquila

(regarding billing)

RECEIPT MAQUILA LABOR + GOODS AND SERVICES + DEPRECIATION + MAQUILA SERVICE RECEIPT RECEIPT submaquila submaquila LABOR + GOODS AND SERVICES + DEPRECIATION + submaquila SERVICE

Fuente: CNIME

SCENARIO IN FREE ZONE

Free Zone

Service suppliers inside ZF Clients inside ZF

0% Impuesto 0% Taxes

0% Taxes

Importación Export

Machineries, capital, raw material enter with 0% of taxes. 0,5% taxes on invoice value

Fuente: Ley523/95 -Consejo Nacional de Zonas Francas

Stock of imported raw materials and imputs

A B C Paraguay Paraguay

Finished Products customers in customers in Paraguay Paraguay International International customers customers Services Suppliers in Paraguay International services suppliers

Exchange of goods and services between users inside the Zona Franca

• Raw materials and goods not liable to tax

while stored inside ZF.

They are places of the country, with temporary suspension:

CustomsTaxes InternalTaxes (during the stay of the goods in the free zone)

Ideal business platform :

 Distribution and logistics centers  Services (Call Centers, Financial, Home Office)  Light Manufacturing  Tourist Offices

FREE ZONE

They are places of the country, with temporary suspension:

CustomsTaxes InternalTaxes (during the stay of the goods in the free zone)

Ideal business platform :

 Distribution and logistics centers  Services (Call Centers, Financial, Home Office)  Light Manufacturing  Tourist Offices

0,5%

Tax Invoice value

Fuente::Oficina de Zona Franca

SOME HIGHLIGHTS

• Paraguay is a full member and founder of

the MERCOSUR.

• MERCOSUR has signed eight Economic

Complementation Agreements - ECAs.

• Paraguay has started negotiations to join

as

• as

Partner Observer tot the Pacific Alliance.

• Close to the signing of a FTA with Mexico.
• Paraguay is part of the group of GSP +

beneficiary countries of the EU.

Investment Opportunities Investment Opportunities

Important Potential Sectors

Meat Meat & Leather Leather Tourism Tourism Biofuels Biofuels Meat Meat & Leather Leather Forest Forest Products Products Tourism Tourism Cotton, textil & Cotton, textil & apparel apparel Biofuels Biofuels TIC’s TIC’s

Important Potential Sectors

Stevia Stevia Fruits Fruits & Vegetables & Vegetables Infraestructure Infraestructure Ecoturism Ecoturism Metalurgic Metalurgic Call Call Centers Centers Oils Oils Energy Energy

Why invest (& live) in Paraguay?

• 1. Abundance of natural resources
• 2. Abundant electrical energy, environmentally

clean and renewable.

• 3. Mainly young population structure and for open

training.

• 4. Stable macroeconomy. Fiscal policy with the

lowest tax burden in the region.

• 5. Ample advantage and benefits for foreign and domestic investment.
• 5. Ample advantage and benefits for foreign and domestic investment.
• 6. Quick return on investment and economic growth following the financial crisis of 2008-09.
• 7. It is among the world’s top exporters of soybeans and beef, with

high productivity and capacity expansion.

• 8. Strategic location in the heart of South America with free access to

MERCOSUR.

• 9. Center of the Paraguay-Parana Waterway with free navigation

throughout the year for river-sea trade. 10.Good levels of quality of life and safety.

BANCO DO BRASIL

• Mcal. López 3333
• esq. Dr. Weiss

Asunción – Paraguay Tel: + (595 21) 616 3000 Telefax: + (595 21) 616 3000 www.mic.gov.py

• Mcal. López 3333
• esq. Dr. Weiss

Asunción – Paraguay Tel: + (595 21) 616 3006 Telefax: + (595 21) 616 3034 www.rediex.gov.py info@rediex.gov.py

• Mcal. López 3333
• esq. Dr. Weiss

Asunción – Paraguay Tel: + (595 21) 616 3000 Telefax: + (595 21) 616 3000 www.mic.gov.py

• Mcal. López 3333
• esq. Dr. Weiss

Asunción – Paraguay Tel: + (595 21) 616 3006 Telefax: + (595 21) 616 3034 www.rediex.gov.py info@rediex.gov.py