PARAGUAY LAW AND PRACTICE Contributed by: Manuel Arias, Carla Sosa, Martin Carlevaro, Milena Sljivich, Alexander Berkemeyer and Antonio Villa Berkemeyer, BKM - Berkemeyer
Standard & Poor’s has upgraded Paraguay’s sover - eign rating to BBB-/A-3, granting the country invest - ment grade status with a stable outlook. This confirms Moody’s investment grade rating (Baa3) and gives Paraguay “double investment grade” – a threshold used by many institutional investors for large-scale capital allocation. These upgrades are expected to broaden market access, reduce funding costs and further attract foreign direct investment, enhanc - ing opportunities, creating quality jobs and fostering industrial development. Legislative amendments have created a straightfor - ward, predictable tax regime for FDI. Ongoing FTZs foster industrial complexes, particularly in green initia - tives such as biofuels, green hydrogen and cellulose, alongside established maquila regimes. Immigra - tion authorities report increased residency requests, reflecting growing investor interest. In addition, Paraguay has enacted regulations to unlock its forestry potential through carbon credit markets and has signed co-operation agreements with key markets, including Singapore. These efforts are already yielding results, attracting substantial FDI and enhancing the capabilities of local producers with a strong focus on environmental sustainability. Notably, there has been no significant litigation or enforcement related to FDI, underscoring the coun - try’s stability. The current business climate is expected to continue improving, with no anticipated changes in the economic or political landscape that could disrupt this positive trend.
the shares of the target, generally taking control over the Paraguayan company with all its assets and liabili - ties. Among the key considerations for selecting a transac - tion structure, investors should consider the following factors. • Regulatory approvals – certain sectors may require governmental approval for FDI or a change of con - trol, which may delay the execution of the transac - tion. • Tax implications – depending on the transaction structure, tax consequences may vary significantly, and a case-by-case study should be carried out before conducting the transaction. • Liability exposure – target companies may have existing or potential liabilities in commercial, bank - ing and finance, industrial, administrative, labour, social security or other aspects. Legal due dili - gence is therefore recommended before taking any action, where all the liabilities can be identified and their consequences disclosed to the investor and dealt with or mitigated thereafter. 3.2 Regulation of Domestic M&A Transactions A wide range of regulations must be considered for domestic M&A transactions in Paraguay. Antitrust approval has been an increasingly important fac - tor to consider when structuring an acquisition, as substantial transactions are typically caught by the obligation to obtain a merger authorisation from the antitrust agency. Other matters to consider include the following. • Sector-specific regulations – certain industries are subject to specific regulatory oversight, such as banking, insurance, telecommunications and gam - bling. Acquisitions in these sectors may require additional and prior approval from relevant govern - mental authorities. • Environmental authority approval – all industrial activities and other specific activities determined by the Paraguayan environmental regulation require environmental permission to be obtained. In the case of an asset or share purchase, different notifi - cations must be obtained from the Ministry of Envi - ronment and Sustainable Development (MADES).
3. Mergers and Acquisitions 3.1 Transaction Structures
In Paraguay, mergers and acquisitions are usually structured through asset or share purchases. Both types of operations have their pros and cons. On the one hand, asset purchases imply that the buyer acquires specific assets and liabilities of the target, allowing the investor to select particular assets and avoid unwanted liabilities. On the other hand, share purchases have been increasing in popularity in the last few years in Paraguay, where investors acquire
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