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18 December, 2020updated 30 Oct 2021 05:14

The state of play: FDI in Paraguay

Paraguay’s FDI inflows have been modest over the past few years, and as Covid-19 deals a blow to its trade, the government is ramping up its efforts to attract foreign capital.

By Viola Caon

paraguay-fdi-president

Paraguayan President Mario Abdo Benitez (left) with Brazilian counterpart Jair Bolsonaro at the construction site of the bridge linking Foz do Iguacu in Brazil and Presidente Franco in Paraguay. Brazil is a major investor in Paraguay. (Photo by Norberto Duarte/AFP via Getty Images)

Paraguay recorded a total of $199.2m in foreign direct investment (FDI) inflows in the first half of 2020, after attracting $158.5m in the last quarter of 2019.

At the end of 2019, the country’s FDI flows were virtually the same as the year before at $478m versus $481m, according to the UN Conference on Trade and Investment’s World Investment Report 2020.

Paraguay also attracted a notable greenfield project when Brazil’s ECB Group announced that it would invest more than $800m in the Omega Green complex, which will house the first second-generation renewable fuels plant in the southern hemisphere and produce advanced biofuels.

Room for improvement in Paraguay’s FDI record

Banco Central del Paraguay predicts a 10% drop in FDI flows in the country in 2020, against a more dramatic expected slump of about 40% at global level.

Paraguay has a small but growing economy and the government has been working towards building a more attractive and transparent business environment for foreign investors.

Since president Mario Abdo Benitez took office in 2018, his government has passed several new laws to combat money laundering. Previously, the government had taken measures to improve the investment climate by approving laws addressing competition, public sector payroll disclosures and access to information.

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However, the US Department of State’s 2020 Investment Climate Statement on the country points out that many companies are still wary of working with government offices in Paraguay to solve disputes, highlighting in particular the government’s unwillingness to pay debts incurred under the previous administration and even some current debts.

Paraguay’s main investment partners are the US, Brazil and Spain, with the majority of foreign investments directed towards the food industry.

The agriculture, retail and construction sectors are the major drivers of economic growth and new investments have targeted the automobile, logistics and manufactured goods sectors.

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