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By means of Circular SS. SG. N°84/2023, the Superintendency of Insurance (“SIS”) reminds all insurance entities and insurance intermediaries authorized to operate in the local market about the validity of Resolution SS.SG. No. 45/13 (the "Resolution"), dated 8 August 2013. Specifically, the SIS emphasized the conditions stipulated in Article 1° of the Resolution, which is of particular relevance to the sector.

According to the Resolution, commissions for intermediation and other concepts, agreed between insurance companies and insurance agents or brokers, in the case of life insurance (regardless of whether or not they contemplate the constitution of Mathematical Reserves), may not exceed 30% of the tariff premium as a component of the same, incorporated in the Technical Note approved by the SIS. This means that such commissions must be kept within a reasonable limit regulated by the supervision authority.

In the event that the commission rates set out in the Technical Notes registered with the SIS are lower than the maximum allowed percentage of 30%, the rates set out in these Technical Notes will apply.

It is important to note that this limit also applies to Insurance Hired on Behalf of Others, in accordance with the provisions of article 1565 and concordant articles of the Civil Code.

The SIS reminds the importance of complying with these provisions, which aim to promote transparency and fairness in the insurance market, thus protecting the interests of both insurance companies and customers and policyholders.

The Superintendency of Insurance ("SIS") announced changes in the form of data recording for insurance entities, through Resolution SS.SG. No. 157/23 which amends Resolution SS.SG. N° 166/06. These changes will be effective as from 1 September 2023.

The first modification is in Annex I of Resolution SS.SG. No 166/06, where the first paragraph has been restated as follows: "The name of the file shall be the code (four-digit) of the Insurance Entity, as established by the SIS, plus the year and month of the movement. The file extension shall be TXT. Example: 7036200607.txt".

With the second change, the Length, Description and Format of the field "Identifies the insurer" of Record Type-1 "Header Record" established in Annex I of Resolution SS.SG. No. 166/06, and the configuration for this field has been established as follows:

Field	Type	Length	Description	Format
Identifies the Insurer	Number	04	Code of the Insurance Entity established by the Superintendency of Insurance.	9999

Likewise, in the third adjustment, the Length and Format of the field "Identifies the user" of Record Type-1 "Header Record" established in Annex I of Resolution SS.SG. No. 166/06 are modified, establishing the configuration for this field as follows:

Field	Type	Length	Description	Format
Identifies the user	Alphanumeric	20	Name of the user account responsible for submitting information to the Superintendency of Insurance	aaaaaaaaaaaaaaaaaaaa

By means of Circular N° 157/2023, the Superintendency of Insurance informs the insurance market that as of 1 September 2023 a new platform will be available for the submission of data from the Accounting Module corresponding to the period August 2023 onwards, disabling the previous platform.

To access this new platform, all insurance entities must complete the user authorization request form, which will be available on the Financial Communication Network under the "SS Instructions" section. This section will also hold the instructions for the use of the Accounting Module platform, thus providing a detailed guide for its correct use.

In the "SS Structure" section of the Financial Communication Network, the validation parameters used for the admission of information submitted through the new platform will be available. All submissions made by the supervised entities shall comply with the provisions of Resolution SS.SG. No. 157/2023 dated 18 July 2023, entitled "Modification of Resolution SS.SG. No. 166/06 dated 13 July 2006".

It should be noted that the information corresponding to the Central Information Module and the Electronic Books Module will continue to be submitted using the current procedures, with no changes to the platform or users involved in these processes.

The Secretariat for the Prevention of Money or Asset Laundering (SEPRELAD) issued Circular No. 04/23 last July 23, in which it communicates important changes for the Regulated Entities under Resolution No. 490/22 "Whereby the Regulation for the Prevention of Money Laundering (LA) and Financing of Terrorism (FT) based on a Risk Management System for Non-Profit Organizations (NPOs)", which have dependent entities within their constitution and structure, is approved. According to the circular, these NPO entities, which may be internal units, subsidiaries or branches, must manage their registration in the Integrated Operations Reporting System (SIRO) through the parent entity.

For this purpose, the parent entity will be responsible for declaring all its internal units, subsidiaries or branches at the time of registration or re-registration in the SIRO application. This will generate a single registration or re-registration, and a single proof of registration will be issued. It should be noted that registration or re-registration requests submitted by dependent entities independently in the SIRO system will not be accepted.

The issuance of the new registration or re-registration certificate through SIRO to the parent entity will be sufficient for the internal units, subsidiaries or branches to be able to open accounts or other services in entities of the financial system and/or cooperatives. These measures seek to strengthen controls in the prevention of money laundering and provide greater efficiency in the registration of entities dependent on the NPO sector.

The Securities Market Commission (CNV) issued on July 17, 2023 the Circular No. 024/23 in order to introduce modifications to the mandatory formats for the daily remittance of information established in Circulars CNV/DIR No. 005/2022 and 010/2022. Pursuant to the provisions of the General Regulations of the Securities Market, the fund management companies must submit daily information related to the transactions closed within the portfolios of the managed funds, in accordance with the instructions issued by the CNV through Circulars.

In this regard, the Board of Directors of the CNV established the following changes:

1. Modification of CNV/DIR Circulars Nos. 005/2022 and 010/2022;
2. Replacement of the mandatory daily information submission format, provided under CNV/DIR Circular No. 010/2022, with an electronic spreadsheet format attached to the Circular; and
3. Precise instructions are included for filling out the electronic spreadsheet, among which the prohibition to alter the format, the name of the sheets or the linking of cells to other files by means of formulas.

It is important to note that the information must be submitted daily, and the fund management companies must ensure that all the columns of the spreadsheet are completed with the requested information, using the format and the "cloudCNV" platform enabled for such purposes. In addition, in case of updates or modifications, the files hosted on the platform must be maintained and differentiated with the label "modified" followed by the corresponding number.

The fund management companies shall strictly comply with these provisions and observe the preparation guide provided in Annex 2 of the Circular. Any non-compliance or alteration of the format may give rise to penalties in accordance with the provisions of the regulations in force. In the event of any changes or queries, the fund management companies should contact the Directorate of Economic Studies and Financial Analysis of the CNV.

The National Securities Commission (CNV) issued on July 31, 2023 Resolution No. 39/23, by which it introduces amendments to the General Securities Market Regulations (the "Regulation"), addressing key areas related to the valuation of investments and registration requirements for issuing corporations (the "SAEs").

Valuation of Investments and Accounting Criteria

One of the main amendments made by Resolution No. 39/23 is the modification of Article 1 of Chapter 7 and Annex D of Title 19 of the Regulation with respect to Investment Management Companies and Equity Funds. This amendment establishes that the valuation of investments of equity investment funds shall follow internationally accepted parameters and shall be included in the internal regulations of the relevant entities. In addition, the valuation of real estate investments must be shown in the fund's financial statements at their historical cost value, excluding any adjustment based on technical revaluations.

The CNV also reserves the power to evaluate and issue instructions regarding the form of valuation of the fund's investments. This provision seeks to ensure that investments are valued accurately and transparently, fostering investor confidence in the market.

Modification to the Registration Requirements for SAEs

Another important aspect of Resolution No. 39/23 relates to the registration requirements for SAEs. Said resolution modified in particular paragraph j) of Article 1 of Chapter 1 of Title 4 of the Regulation, deleting the obligation of the SAE to add to its bylaws the clause previously required to register as such before the CNV, which stated: "The company may issue shares and securities for trading in the stock market, through the Bolsa de Valores y Productos de Asunción S.A. or other entities that may be created, prior authorization of the Comisión Nacional de Valores and in accordance with the laws that regulate the matter. In case of discrepancy between these bylaws and the laws regulating the public offering and the stock market, the provisions of the rules governing the public offering and the stock market shall prevail".

Notwithstanding the above, it is worth nothing that such provision remains in force for the SAECAs.

Through a press release, President-elect Santiago Peña announced his choice to lead the Central Bank of Paraguay (BCP). The appointee is the economist Carlos Dagoberto Carvallo Spalding, who held positions in the private sector and previously held the position of director at the BCP during the period from 2015 to 2020. Peña’s appointment must be ratified by Congress.

The Central Bank of Paraguay ("BCP") by Resolution No. 1, Act No. 35 dated 11 July 2023, approves and brings into force the General Regulation of the Payment Systems of Paraguay (SIPAP Regulation). This new resolution also repeals several previous resolutions regulating the matter, including Resolution No. 1, Act No. 67 dated 27 December 2012 "General Regulations of the Payment Systems of Paraguay", the former SIPAP regulations, Resolution No. 24 of Act No. 54 dated 25 August 2011 "Project for the Modernization of the Payment Systems of Paraguay - Alternative Network for the Payments and Securities Systems of the BCP", Resolution No. 1, Act No. 26 dated 17 May 2022, "General Regulations of the Payment Systems of Paraguay", among others.

The new SIPAP Regulation includes innovations aiming to modernize Paraguay's Payments System. These innovations consist of the introduction of new defined terms that the previous regulation did not contemplate, among them; "Alia-s", "Commercial Customer", "Return of Funds", "Central Addressing Scheme (CAS)", "Payment Initiation Service Provider (PISP)", "Request for Return of Funds", "Request for Payment", "Self-managed Credit Transfer", and some modifications to terms already established by the previous regulation.

Another relevant change affects Securities Depositories (DEPO), in the case of non-fulfilment of bids. Closed bids in the DEPO that are not settled in the forms and at the times stipulated by the BCP, will make the participants who demand or offer liquidity liable to the following penalties:

• If the default is on the part of the claimant participant, the BCP may debit the equivalent of interest to the claimant participant to comply with the payment of the amount borrowed plus interest to the offering participant.
• In the event of default due to lack of funds or securities of the bidding/complaining participant, the latter may not trade in tripartite repo operations, short-term liquidity management (ADL) and permanent deposit facility (FPD) for a period of 5 business days.
• In the event of a repeat offence within 3 months of the last offence, the participant will be suspended for a period of 10 working days for the aforementioned operations.

The SIPAP Regulation also modifies the section of service participants, to whom it assigns new responsibilities, among them;

• The Beneficiary Participant, whether or not the sender of the transaction, shall be responsible for the validation of the Beneficiary Customer's data. It is mandatory to validate the correspondence of at least the following data: account number, type and number of identification document.
• The Paying Participant shall, prior to the remittance of the transfer, request confirmation from its customer of at least the following data of the beneficiary customer: name of the beneficiary, account number, type and number of identification document. Once confirmed by the customer, the transaction can be executed. This validation is required for both CAS and non-CAS transactions, in which case the data uploaded by the customer must be used for validation.
• The Paying Participant is responsible for including a data revalidation step in their applications before confirming the credit transfer by the customer, where at least the following is displayed: the account number, the name of the beneficiary and the entity.
• The Beneficiary Participant is responsible for validating and communicating to his client the receipt of a funds transfer, through the communication channels available to his clients, such as: SMS, email, push messages, etc.

Additionally, the SIPAP Regulation includes substantial amendments to the instant payment system (SPI), where new functionalities will be implemented and made available to customers from 11 September; such as:

• Return of funds: to return a transfer that was received incorrectly.
• Requesting a refund: if a mistake is made when making a transfer, the sender can request a refund. The return of the money is subject to the acceptance of the other party.
• Sub-participant: for cooperative customers, they may send and receive transfers up to Gs. 5,000,000, 7 days a week, 24 hours a day.

The SIPAP Regulation also includes new functionalities for customers starting 16 October, including;

• Payment initiation request: a business may contract a service from a third party (e.g. payment operators), in order to collect payments through the apps.
• Payment request: a business may contract the service of its bank or financial institution, in order to make payments through the apps provided by its institution.
• Use of aliases: the alias will be the only data required to make a transfer. The types of aliases enabled will be: ID number, RUC, mobile phone or email.

Bill approving the loan agreements between ANDE and Kreditanstalt fur Wiederaufbau (KfW), for up to USD 75,000,000, and between ANDE and FONPLATA, for up to USD 45,000,000 ("Bill") for the financing of the construction project of the 220KV transmission line between Villa Hayes - Villa Real - Pozo Colorado - Loma Plata and the Pozo Colorado substation, Western Region ("Project")

A. Aspectos Generales

On June 15, the Senate (originating chamber) approved the Bill, thus initiating the second constitutional procedure before the Chamber of Deputies (revising chamber). Since June 22, 2023, the Bill has been under review by the Committees on Economic and Financial Affairs, Foreign Relations, Public Works, Public Services and Communications, Budget, and Accounts and Budget Execution Control.

The purpose of the Bill is to increase the capacity of the Northern and Western Transmission System and part of the Bajo Chaco Distribution System through the construction of a 220 KV transmission line, the Pozo Colorado Substation, and the construction of 4 new feeders in the influence area of the Pozo Colorado Substation.

The execution of the Project will be carried out by ANDE. The Works are part of ANDE's Short and Medium-Term Master Plan for Transmission, Distribution, Information Technology, and Communication, 2021-2030, and the Short, Medium, and Long-Term Master Plan for Generation, 2021-2040, by ANDE.

B. Financing

The total cost of the Project amounts to USD 126,000,000, with USD 75,000,000 financed by KfW and USD 45,000,000 by FONPLATA, with a local counterpart of USD 6,130,000 ("Loan").

It is important to mention that the components of the Project already have the code from the National Public Investment System (SNIP) of the Technical Planning Office, through which public investment projects are managed. It should be noted that the Project will result in a budget expansion of PYG 248,494,507,904, directly affecting ANDE's budget. The Bill provides for the possibility of a local counterpart for additional resources to the Loan, if necessary to complete the Project.

The USD 75,000,000 Loan provided by KfW is backed by a Sovereign Guarantee granted by the Republic of Paraguay and has an amortization period from May 15, 2027, to May 15, 2038.

Additionally, the loan with KfW provides that the parties will define, in a separate agreement, the details of the disbursement procedure and how ANDE must verify the use of the Loan, as well as the proportions and order of the respective disbursements under the loan agreement.

Regarding the USD 45,000,000 loan with FONPLATA, the loan contract establishes a repayment period of 20 years.

C. Project Structure and Contracting System

Project Structure and Procurement System

    (a) Componente 1 (“Works”): Investments in 220 KV Substations and Transmission Lines:

1. 220 KV transmission line between Villa Hayes and Villa Real, consisting of a rural single-circuit of 200km and a section of double-circuit line of approximately 25km, including the crossing of the Paraguay River.
2. 220 KV transmission line between Villa Real - Pozo Colorado - Loma Plata, consisting of a rural single-circuit of 343km and a 1km section of urban line near the Villa Real Substation.
3. Pozo Colorado Substation at 220KV, including the supply and installation of 1 three-phase 220/23KV transformer with a capacity of 50 MVA.
4. Construction of 4 feeders and reinforcements.

    (b) Component 2: Environmental and Social Management, and Right-of-Way Clearing.

    (c) Component 3: Technical Assistance, Auditing, Supervision, Administrative Commission, and Contingencies.

According to the background information of the Project, the Loan will be executed as follows:

Regarding the project's contracting method, the Project Law establishes that contracts for the project's execution will be carried out using the International Public Bidding system in accordance with local law, while consultancy services will be procured in accordance with the current regulations on public tenders and the "Policies for the Acquisition of Goods, Works, and Services in Operations Financed by FONPLATA of July 2017".

D. Final Comments

The Project is a key endeavor for the country's medium and long-term development as it encompasses one of the most dynamic and promising growth regions, the Chaco. Ensuring energy security in the Chaco is crucial to guarantee a sustained pace of growth and development. Therefore, the approval of the loan by the Legislative Power is urgently needed to commence the works. In this regard, we anticipate that the bidding processes for the Project will commence in the second half of the year once the new government takes office.

The Project is already in its second constitutional process in the Chamber of Deputies. According to the latest information, the Budget Committee of this Chamber ruled in favor of the approval of the Project.

We will closely monitor the legislative process of file S-231893 of the Project Law and will provide updates on any relevant developments.

For further information on any of the topics covered in this edition of our newsletter, please contact our experts: Luis Marcio Toraleslmtorales@vouga.com.py); Silvia Benítez (sbenitez@vouga.com.py); Manuel Acevedo (macevedo@vouga.com.py); Rodolfo G. Vouga (rgvouga@vouga.com.py) 

Bill approving the Loan Agreement signed between Paraguay and CAF for up to US$ 52,292,000 ("Bill") to finance the Intermediate Cities Sanitation Program that will be under the responsibility of the Ministry of Public Works and Communications (MOPC).

A. General Aspects

On June 21, the National Congress enacted the Bill to finance the Intermediate Cities Sanitation Program ("Project"). The Project is aligned with the United Nations Sustainable Development Goals (SDGs). SDG 6 commits member countries to achieve 100% access to clean drinking water, equitable access to sanitation and hygiene services, and improve water quality by reducing pollution and harmful discharges by 2030.

Currently, Paraguay has a sanitary sewerage network coverage of 15.4% and only 7.5% in wastewater treatment. Due to the country's population growth, without urgent measures, these numbers are likely to worsen. Therefore, the implementation of this Project is strategic for improving the overall health of the population.

The cities beneficiated by the Project are: (i) Santa Rita, Alto Paraná Department; (ii) Carapeguá, Paraguarí Department; (iii) San Ignacio, Misiones Department; and (iv) Santa Rosa del Aguaray, San Pedro Department ("Beneficiary Cities").

The execution of the Project will be carried out by the Ministry of Public Works and Communications (MOPC) as the implementing body on behalf of the Paraguayan government. Initially, the operational part of the Project was under the responsibility of the Water and Sanitation Directorate of the MOPC (DAPSAN); however, according to the latest information we have obtained, the Project will likely be transferred to the Coordination of Drinking Water, Sanitation, and Hydraulic Works of the MOPC (CAPSOH).

The Project is primarily based on the construction of a sanitary sewerage system, wastewater treatment plant, and improvement of the drinking water system in the Beneficiary Cities. It is estimated that the Project will benefit around 110,000 people. 

B. Financing

Financing for the Project is provided by Corporación Andina de Fomento (CAF) for up to USD 52,292,000 ("Loan") over a period of 16 years from the entry into force of the Loan Agreement, with a grace period of 5 years. The Project will result in a budget increase of PYG 400,000,000 in the General Budget of National Expenditures, to be borne by the MOPC.

C. Project Structure and Contracting System

According to the general conditions of the loan agreement ("Loan Agreement"), the procurement processes for goods, works, and services related to the Project must comply with the following principles:

1. Wide dissemination
2. Equality
3. Transparency
4. Free competition

According to the terms of the Loan Agreement, International Public Bidding ("IPB") shall be used for the following cases:

• When the procurement of goods exceeds USD 1,500,000
• When the contracting of works has a value exceeding USD 6,000,000
• When the contracting of consultants has a value exceeding USD 750,000

IPB may be waived only in special cases that are technically justified and duly supported by the Borrower, and expressly authorized by CAF. Additionally, the terms of reference must be previously approved by CAF and comply with the principles.

Regarding the structure, the Project includes the following components: (a) Water and Sanitation Projects, (b) Program Administration and Management, and (c) Evaluation and Financing Expenses.

(a). The Water and Sanitation Projects component considers the financing of the comprehensive program, including the necessary infrastructure and equipment for the proper provision of water and sanitation services, which includes the following items:

• Civil works and equipment. including infrastructure works and required equipment, such as networks, treatment plants, pumping lines, and pumping stations.
• Contingencies. which allocate resources from the loan to cover eventualities regarding the component of works and equipment.
• Land acquisition. which allocates resources for the acquisition of land where treatment plants and pumping stations will be located.

(b). The Program Administration and Management component includes the following items:

• Oversight. includes resources for external oversight of the works.
• Program management, oversight, and monitoring. includes resources to support project management and administration, as well as technical, environmental, and social oversight of the works to be financed by CAF.
• Socio-environmental management. Includes resources to ensure the overall environmental and social sustainability of the Project.
• Institutional management. Includes resources for the institutional strengthening of the operators of the Project's works.
• Studies and consulting services. Involves the hiring of specialized consulting services to support the Project's implementation, covering topics related to drinking water, sewage, wastewater treatment, sludge management, circular economy, incentives for connection, commercial management, development of strategies to promote health, nutrition, hygiene, and sanitation practices, and tariff studies, among other relevant topics.
• External auditing. Includes costs for conducting external audits of the Project.
• Contingencies. Which allocate resources from the loan to cover eventualities regarding the Project management component.

(c). The Evaluation and Financing Commission Expenses component includes the evaluation expenses and financing commission of CAF.

The execution and allocation of the Loan will follow the following tentative schedule:

The Loan disbursements will follow the following tentative schedule:

Year	1	2	3	4	5	Total
CAF loan	5,0	11,0	15,0	16,0	5,3	52,3
%	9,6	21,0	28,7	30,6	10,1	100,0

D. Final Comments

On July 6, 2023, the Executive Branch enacted the Bill, which was published in the July 7, 2023 edition of the Official Gazette as Law No. 7124/2023. On the other hand, the MOPC has not yet issued the call for International Public Bidding (IPB); considering that the new government will take office on August 15, we believe that the Project will likely be tendered during the third quarter of this year or the first quarter of 2024.

It is important to mention that this Project complements another project financed by the Inter-American Development Bank (IDB) and the Japan International Cooperation Agency (JICA) worth over USD 150,000,000 for the drinking water and sanitation project in the Metropolitan Area of Ciudad del Este (the country's second-largest city). The loan for this project was approved by Law No. 7088/2023 and enacted on May 11, 2023. For more information about this project, you can find it on our website.

For further information on any of the topics covered in this edition of our newsletter, please contact our experts: Luis Marcio Torales (lmtorales@vouga.com.py); Silvia Benítez (sbenitez@vouga.com.py); Manuel Acevedo (macevedo@vouga.com.py); Rodolfo G. Vouga (rgvouga@vouga.com.py)