Category: Uncategorized

The Ordinary Shareholders' Meeting of the Asuncion Stock Exchange (Bolsa de Valores y Productos de Asunción S.A. – BVA, by its Spanish acronym), which has appointed authorities for the 2023-2024 period, was held on April 19, 2023. The current composition of the board is as follows:

• Chairman: Eduardo Borgognon
• First Vice-President: César Paredes
• Second Vice-President: Raymundo Mendoza
• Director: Albaro Acosta
• Director: René Ruíz Diaz
• Director: Sergio Pérez
• Director: Roland Holst
• Director: Maria Fernanda Carrón
• Director: Rafael Lara
• Alternate Director: Rodrigo Callizo
• Alternate Director: Pablo Lu
• Alternate Director: Federico Montossi
• Alternate Director: Daniel Moreno
• Alternate Director: Mathias Angulo
• Syndic: José María Peña Nieto
• Alternate Syndic: Fernando Álvarez

For further information please contact Cynthia Fatecha (cfatecha@vouga.com.py), Carlos Vouga (cvouga@vouga.com.py), Georg Birbaumer (gbirbaumer@vouga.com.py) or your usual Vouga contact.

On 21 April 2023, Law No. 7066/2023, "Modifying Article 7 of Law No. 489/1995 "Organic Law of the Central Bank of Paraguay", as amended by Law No. 6104/2018", was published in the Official Gazette.

Pursuant to Article 6 of the Organic Law of the Central Bank of Paraguay (Banco Central del Paraguay – BCP, by its Spanish acronym), the information, data and documents of third parties held by the BCP, by virtue of its functions, are confidential, unless otherwise provided by law. Any person who performs or has performed duties at the BCP and has or has had knowledge of confidential information, data and documents of third parties is obliged to maintain the secrecy of such information. Failure to comply with this obligation shall imply criminal and other liabilities provided for by law. These persons may not give any statement or testimony, nor may they publish, communicate or exhibit information, data or documents of third parties, even after having left their service at the BCP, unless expressly mandated by law.

With regards to the aforementioned duty of secrecy, Law No. 7066/2023 amends and incorporates certain provisions related to the exceptions allowed to disclose confidential information to which they had access, as detailed below:

• It clarifies that the exception to disclose information on credit institutions declared judicially insolvent shall not apply to the operations of their clients.
• It expands on the information that can be requested by congressional chambers and investigation commissions, such requests for information will be granted only in relation to financial institutions, but not about the operations of their clients. The BCP shall put in place appropriate measures to ensure that information on the operations of clients of financial institutions is not disclosed.
• The information requested by the Ministry of Finance shall be made through the Undersecretariat of State for Taxation, in the exercise of its functions.
• Requests for information made by the Secretariat for the Prevention of Money or Asset Laundering, the State Prosecutor's Office and the prosecutors of the Prosecutor’s Office must be justified and refer to a specific person, who must be subject to any investigation or proceedings initiated by the aforementioned institutions.

The amendments and additions made by Law No. 7066/2023 provide protection to the users of the financial system and oblige both the BCP and the recipients of such sensitive information to guarantee the inviolability of the data provided.

For further information please contact Cynthia Fatecha (cfatecha@vouga.com.py), Carlos Vouga (cvouga@vouga.com.py), Georg Birbaumer (gbirbaumer@vouga.com.py) or your usual Vouga contact.

On May 2, 2023, the Secretariat for the Prevention of Money Laundering and Asset Laundering (Secretaría de Prevención de Lavado de Dinero o Bienes - SEPRELAD, by its Spanish acronym) issued Resolution No. 158/23, by which it approves the procedures and requirements for the registration as regulated entities in the SEPRELAD Registry of the regulated entities in the sector of safe deposit boxes, transport or storage of securities or valuables, art and antiques and philatelic or numismatic investments (the Regulated Entities) through the Integral Operations Reporting System (Sistema Integrado de Reporte de Operaciones - SIRO, by its Spanish acronym), including as attachment the procedures and requirements for the registration of the same.

SEPRELAD urges such Regulated Entities to register or, as the case may be, re-register through the SIRO, establishing a deadline for re-registration through said system until July 31, 2023. Until such date, the Regulated Entities already registered under Resolution SEPRELAD No. 218/11 will be exempted from paying the registration fee.

It is worth mentioning that, according to the provisions of the aforementioned resolution, all the registration certificates of the regulated entities under Resolution SEPRELAD No. 218/1, which is repealed, will become null and void as from July 1, 2023.

For further information please contact Cynthia Fatecha (cfatecha@vouga.com.py), Carlos Vouga (cvouga@vouga.com.py), Georg Birbaumer (gbirbaumer@vouga.com.py) or your usual Vouga contact.

On April 28, 2023, the Secretariat for the Prevention of Money or Asset Laundering (Secretaría de Prevención de Lavado de Dinero o Bienes - SEPRELAD, by its Spanish acronym) issued Resolution No. 146/23, by which it established that the following regulated entities must submit their Suspicious Transaction Reports (STRs) as well as their negative STRs through the Integral Operations Reporting System (Sistema Integral de Reporte de Operaciones - SIRO, by its Spanish acronym): (i) real estate companies; (ii) stock exchange; (iii) mutual investment and retirement fund administrators; (iv) individuals and legal entities that carry out activities of transportation or storing of securities or cash; (v) companies which main activity is development or exploitation of electronic payment systems (Entidades de Medio de Pago Electrónico - EMPEs, by its Spanish acronym); (vi) individuals and legal entities that carry out activities associated with virtual assets (Proveedores de Servicios de Activos Virtuales - PSAV, by its Spanish acronym); (vii) individuals and legal entities engaged in activities related to the trade of jewelry, precious stones and metals; (viii) pawnshops; (ix) non-profit organizations (NPOs); (x) individuals and legal entities engaged in activities related to the operation of games of chance; and (xi) individuals and legal entities that provide safe deposit box rental services.

To correctly implement and make the necessary adjustments in the operating process of the SIRO for such regulated entities, this resolution establishes a review and contingency management period of 90 calendar days as from its effective date. Within such period, the regulated entities must communicate to the National Directorate of Information Technology and Innovation of SEPRELAD all contingencies, errors, or problems in the use of the SIRO within 72 hours from the moment in which they are identified.

The resolution also establishes that delays or errors in the production and uploading of reports through the SIRO during such period, resulting from contingencies notified by the regulated entities, will be exempted from the eventual responsibilities and sanctions that could be applied to them and their compliance officers.

For further information please contact Cynthia Fatecha (cfatecha@vouga.com.py), Carlos Vouga (cvouga@vouga.com.py), Georg Birbaumer (gbirbaumer@vouga.com.py) or your usual Vouga contact.

On April 30, 2023, the Secretariat for the Prevention of Money or Asset Laundering (Secretaría de Prevención de Lavado de Dinero o Bienes - SEPRELAD, by its Spanish acronym) issued Resolution No. 112/23, approving the procedures and requirements for registration in the SEPRELAD Registry of regulated entities in the pawnshop sector through SEPRELAD´S Integral Operations Reporting System (Sistema Integrado de Reporte de Operaciones - SIRO, by its Spanish acronym), and annexing the procedures and requirements for such registration.

Likewise, Resolution No. 112/23 urges such regulated entities to register or re-register, in case they are already registered, through the SIRO, establishing a registration or re-registration update period for regulated entities already registered under Resolution SEPRELAD No. 218/11, until June 30, 2023.

Additionally, it renders ineffective all the registration certificates of such regulated entities within the framework of Resolution SEPRELAD No. 218/11 as of July 1, 2023.

For further information please contact Cynthia Fatecha (cfatecha@vouga.com.py), Carlos Vouga (cvouga@vouga.com.py), Georg Birbaumer (gbirbaumer@vouga.com.py) or your usual Vouga contact.

Last April 27, 2023, the Central Bank of Paraguay (Banco Central del Paraguay - BCP, by its Spanish acronym) issued Resolution No. 40 Minute No.21, approving the Regulation for Loan Portfolio Purchase Transactions (the Regulation), abrogating BCP Resolution No. 14, Minute No. 18 dated March 22, 2018, as amended by Resolution No. 15, Minute No. 24 dated April 17, 2018.

The purpose of the Regulation is to establish the rules and requirements to be complied with by supervised financial institutions for the purchase of loan portfolios of any nature from individuals or legal entities, whether or not they are supervised by the BCP. The Regulation also provides that its provisions are applicable to financial intermediation entities supervised by the BCP that are subject to Law No. 861/96 as amended, as well as to other entities supervised by the BCP according to its special laws, such as the Development Finance Agency (Agencia Financiera de Desarrollo) the Retirement and Pension Fund for Bank and Related Employees (Caja de Jubilaciones y Pensiones de Empleados de Bancos y Afines), the Agricultural Allotment Credit (Crédito Agrícola de Habilitación) and the Livestock Fund (Fondo Ganadero).

According to the Regulation, the purchase of loan portfolios may be with recourse or without recourse. The purchase with recourse implies that the seller guarantees payment of the loan through a joint and several liability of the debt; consequently, in the event of default, the seller remains at risk for the supervised entity. In the case of a non-recourse purchase, the supervised entity assumes the risk of non-payment of the loan and everything related to its collection.

In order to carry out a loan portfolio purchase operation, every supervised entity must comply with certain requirements, such as including the loan portfolio purchase operation in its Credit Policies and Procedures Manual, including the intention to carry out portfolio purchase operations in its Business Plan, possessing the technical capacity and administrative and technological infrastructure necessary to carry out a technical analysis of the portfolio to be acquired, employ adequate internal control systems and procedures, request the documentation required by the Secretariat for the Prevention of Money or Asset Laundering (Secretaría de Prevención de Lavado de Dinero o Bines -SEPRELAD, by its Spanish acronym) from the assignor, ensure that the credit assets to be acquired do not correspond to loans from debtors that have been sold by the same supervised entity in the last twelve months, among others.

Likewise, the supervised entity shall have the original settlement of the acquired operation, maintain the original structure and conditions of the loan, not establish portfolio return clauses for periods exceeding forty-five days, and ensure that the portfolio to be acquired hast not expired, with no payment in arrears or default whatsoever.

On the other hand, it establishes the minimum content that loan portfolio purchase agreements shall contain, namely, basic information on the parties involved, the type of transaction (with or without recourse), precise identification of the loans acquired, price and form of payment, prohibition for the seller to carry out collection actions, the seller's obligation to notify the assigned debtor and deliver the corresponding documentation, alternative security mechanism if agreed upon and guarantees, if any.

Likewise, it establishes the requirements to consider valid the documents evidencing the existence and ownership of the credits, such as that they are freely available to the seller, that they represent non expired credits, that they have as a genuine source the business or productive activity of the seller and that they are transferable by endorsement or by any other form permitted by financial laws

It also establishes the seller's obligation to notify the assigned debtor of the assignment made and the identity of the new creditor, in accordance with the provisions of the Paraguayan Civil Code. In addition, the buyer must ensure that the debtors have been properly notified and must assume the management of the collection of the acquired credits from the moment it assumes the credit risk.

In addition, the Regulation establishes rules and requirements that must be complied with by the parties involved in the purchase of loan portfolios to prevent money laundering and financing of terrorism. In this sense, it establishes that the parties must apply the prevention rules issued by SEPRELAD and the related provisions issued by the BCP or the Superintendency of Banks. In addition, when the purchase of loan portfolio is formalized among related companies, these must obtain prior authorization from the Superintendency of Banks and consider the required legal limits.

Finally, specific rules are included for the accounting recording of portfolio purchase transactions, the purchase of portfolios in resolution process and renewals, refinancings and restructurings of purchased loans, and warns that supervised entities that do not comply with the Regulations will be subject to the sanctions provided for in Law No. 489/95 "Organic Law of the Central Bank of Paraguay".

For further information please contact Cynthia Fatecha (cfatecha@vouga.com.py), Carlos Vouga (cvouga@vouga.com.py) or Georg Birbaumer (gbirbaumer@vouga.com.py) or your usual Vouga contact.

On February 9, 2023, the new Paraguayan General Securities Market Regulation (the New Regulation) was issued, which brought with it important modifications and incorporations that reflect the advances in the area during the last few years. In addition to the New Regulation, the competent authority, the National Securities Commission (Comisión Nacional de Valores - CNV. by its Spanish acronym), has issued, through subsequent circulars, clarifications, extensions of deadlines and model contracts to be used by regulated entities.

Below, a summary of the key modifications and additions made by the New Regulation and the circulars:

1. Stock exchange

Significant modifications can be found in the chapter referring to stock exchanges; namely, (a) market makers, and (b) direct market access (DMA).

(a) What is a market maker?

A market maker is an intermediary company that assists in maintaining liquidity in the financial market. These entities are in charge of buying and selling financial assets (i.e. stocks, bonds, etc.) in a given market, and establishing the selling and buying prices for these assets. Their main objective is to ensure that there are always buyers and sellers for the financial assets that are traded, in order to maintain liquidity in the market.

The New Regulation establishes that, in order to act as market makers, brokerage firms must have the corresponding authorization. Likewise, the New Regulation establishes the minimum standards that the stock exchange must follow to regulate the operation of the market makers through the Electronic Trading System (Sistema Electrónico de Negociación -SEN, by its Spanish acronym).

(b) What is the Direct Market Access?

The DMA is a way for investors to send buy or sell orders directly to the trading systems of the stock exchanges, without the need to use intermediaries such as brokers or brokerage houses. This allows investors to have greater control and speed in the execution of their orders, in addition to reducing costs and improving transparency in operations.

While clients will be able to send their orders directly with the DMA, brokerage firms will still be responsible for ensuring that the necessary requirements are met in order to execute trades and must make their best efforts to protect and look after the interests of their clients. In addition, only securities that are registered with, and authorized by, the CNV and the stock exchange can be traded through the DMA.

As for implementation deadlines, when the stock exchange (the Bolsa de Valores de Asunción BVA by its Spanish acronym)) enables the DMA, brokerage firms will have 120 days to start offering it to their clients. To this date, such authorization by the BVA has not yet occurred.

2. Brokerage firms

The section of the New Regulation referring to brokerage firms incorporates several changes and inclusions, the most relevant of which refer to (a) shareholding and new payments of corporate capital, (b) disqualification to be a shareholder and (c) appointment and removal of operators, as summarized below:

(a) Shareholding and new payments of corporate capital: Brokerage firms must submit an affidavit certifying that they have performed their due diligence under the expanded regime with respect to those shareholders who own a percentage equal to or greater than 10% of the shares, both at the time of registration and periodically, each time there is any change that presents a share ownership equal to or greater than 10%. In addition, capital payments must be made through authorized accounts in banks and financial institutions regulated by the Central Bank of Paraguay (Banco Central del Paraguay - BCP, by its Spanish acronym). These payments may not be made with securities issued by related entities and must be made with securities rated A, similar or higher.

(b) Disqualification to be a shareholder: The New Regulation establishes that the bylaws of brokerage firms must contemplate that those who are included in the lists of financial sanctions related to terrorism and the proliferation of weapons of mass destruction indicated in the regulations of the Secretariat for the Prevention of Money or Asset Laundering (Secretaría de Prevención de Lavado de Dinero o Bienes - SEPRELAD, by its Spanish acronym) may not be shareholders or have voting rights, nor hold positions on the board of directors. This measure is in line with what has been established by SEPRELAD and seeks to prevent the participation of persons linked to illegal activities in the ownership and management of brokerage firms. In addition, the New Regulation establishes that brokerage firms have a period of 6 months from the date of its enforcement to amend their bylaws to expressly include this disqualification.

(c) Appointment and removal of stock exchange operator: The mechanism to appoint and remove operators was modified as regards to the need to have powers of attorney or revocation of powers of attorney registered before the public registries. From now on, it will be sufficient to submit to the CNV the minutes of the board of directors' meeting, notarized before a public notary, evidencing the decision of the board of directors to appoint or remove the operators. This means that the term for the appointment or removal of operators will be significantly reduced.

3. Model of single agreement for stock exchange services

The New Regulation establishes a single service agreement to be used both by brokerage firms in process of registration, as well as by those already authorized and registered prior to the issuance of the New Regulation. The single service agreement may be signed in a handwritten or electronic form. Finally, the New Regulation establishes that any additional or complementary form agreements that brokerage firms enter into with their clients must be sent to the CNV for prior approval.

The form of the single service agreement was released through a circular issued by the CNV and establishes the terms and conditions of services between a brokerage house and a client, detailing the services that the brokerage house will offer to the client. The services include securities brokerage, advice on securities and stock exchange operations, administration and custody of securities, credit or margin, subscription of mutual fund quotas, direct market access and account opening for financial derivative operations, among other provisions.

Regarding the implementation term, the CNV informed that the brokerage firms already authorized and registered have until June 30, 2023, to adopt this single service agreement form.

4. Issuer companies

Regarding the issuer companies (Sociedades Anónimas Emisoras or SAE, by its Spanish acronym, and Sociedades Anónimas Emisoras de Capital Abierto or SAECA, by its Spanish acronym), the New Regulation makes innovative inclusions and modifications for the market, of which the most important are regarding (a) the special regime for small and medium-sized companies (Pequeñas y medianas empresas - PYMES, by its Spanish acronym), (b) the reform of the bylaws of issuer companies, and (c) the automatic suspension of trading, as summarized below:

(a) Small and medium-sized enterprises (PYMES): Pursuant to the provisions of the New Regulation, companies that do not have the corporate type of a Corporation that comply with the requirements established by the Ministry of Industry and Commerce (Ministerio de Industria y Comercio -MIC, by its Spanish acronym) to be classified as PYMES, and have the respective categorization certificate issued by the MIC, will be eligible for the special regime for small and medium-sized companies.

(b) Requirement of bylaw amendments: The New Regulation establishes the text to be included in the bylaws regarding the securities that may be traded depending on whether the company is a SAE or a SAECA.

(c) Automatic suspension: Trading of shares and bonds issued by issuer companies that do not comply with the regular filing of information established in the New Regulation will be automatically suspended in the primary market, unless such companies have obtained an extension of time granted by the CNV. It should be noted that this suspension is not considered a sanction, but a preventive measure.

5. Debt securities

The most significant amendments regarding debt securities are those related to (a) the need to file an affidavit by issuers that do not engage in financial intermediation, (b) issuances secured by security trusts, (c) redemption and call option mechanisms to be included in the prospectus, and (d) elimination of restrictions regarding short-term bonds, as indicated below:

(a) Affidavit of resources to be collected: In the case of issuers that are not authorized by the BCP to carry out financial intermediation activities, in accordance with the provisions of the New Regulation, they must submit a sworn statement in which they undertake not to use the proceeds of the issuance to carry out financial intermediation activities.

(b) Issuances secured by guaranty trusts: The New Regulation establishes that in the event that an issuance is backed by a guaranty trust, the guaranty will be considered to be total if the value of the issuance is equal to the quick sale value of the asset used as security. If the value of the issuance is greater than the quick sale value of the asset, the security shall be deemed to be partial.

(c) Redemption and call option mechanisms to be included in the prospectus: In the event that an issuer allows early redemption or call option by the investor, as established by the New Regulation, all relevant information, including the redemption price and details of the applicable conditions, must be clearly specified in the issuance prospectus.

(d) Elimination of restrictions: Under the New Regulation, restrictions on the amount of short-term bonds that may be issued, and the level of indebtedness allowed are eliminated.

6. Shares

The section dealing with regulations related to shares has undergone minor changes, which are specified below:

(a) Adjustments to the application documents: the New Regulation indicates that in the event that preferred shares are issued that are subject to redemption, the redemption value must be previously specified in the issuance instrument.

(b) Inclusion of requirements for share registries: according to the New Regulation, in order to register the issued and integrated shares and those released from payment with the CNV, it will be necessary to file a general prospectus including a facsimile copy of the shares, a copy of the document authorizing the issuance, and a description of the security measures to be applied in the production of the certificates in question.

7. Investment fund management companies

The section corresponding to the investment fund management companies (Administradoras de Fondos patrimoniales de Inversión -AFPISA, by its Spanish acronym) has been subject to several modifications and additions in the New Regulation, especially those related to (a) corporate capital, bylaw changes and form of agreements, (b) investments of committed equity, (c) investment funds, and (d) mutual funds.

(a) Regarding corporate capital, changes in the bylaws and the single agreement, the New Regulation sets forth the same provisions made in said document for brokerage firms. If the company wishes to enter into other agreements with its clients, in addition to the single agreement, it must have prior approval from the CNV. On the other hand, the AFPISAs have (i) a term of six months since February 11, 2023 to carry out the corresponding bylaw amendments and (ii) until June 30, 2023 to implement the forms of the single mutual fund subscription agreement and the form mutual fund installment placement and redemption agreement.

(b) The New Regulation establishes the conditions under which the AFPISAs may invest within the minimum committed equity, based on the minimum proportion set by the CNV. They are limited to invest in movable and immovable assets that are not destined to the company and in securities that are not traded on the stock exchange, unless permitted by the New Regulation. As for securities eligible for investment, they include term securities issued by institutions authorized by the BCP, as well as bonds, debt securities or securities issued under securitization processes that have a local risk rating of “BBB” or higher and whose issuance is registered in the Securities Registry of the CNV. In addition, notwithstanding the foregoing, the AFPISAs may invest the surplus of their committed equity in real estate, securities and investment assets included in Title 19, Chapter 6, Article 1 of the New Regulation.

(c) The investment funds section includes the terms for (i) the placement and (ii) the subscription of the fund quotas:

• For the first term referred, it cannot be greater than twelve (12) months, unless it is extended by the CNV in accordance with the Law on Equity Investment Funds. In the event that the term expires without extension, the number of installments will be reduced to the number of installments actually paid without the need to convene a quota holders’ meeting.
• For the second term, the New Regulation indicates the time in which the fund must reach the minimum amount of assets indicated in the internal rules of procedures and the minimum number of participants established. This period is of six (6) months from the first subscription. If these conditions are not met, the fund managing company must notify the CNV and has up to one hundred and eighty (180) days to rectify the deficit (this extension may be requested up to two times). If the situation is not resolved, the fund is liquidated. It is also established that until these conditions are met, the fund can only invest in securities issued by the Public Treasury or guaranteed by the fund itself, all of which must be included in the internal rules of procedures, or in securities issued by the BCP, or others determined by the CNV. Likewise, before implementing any change in the internal rules of procedures of a fund, the prior approval of the CNV will be required. Once the approval is obtained, an extraordinary quota holders' meeting will be convened so that they also approve the proposed changes. Finally, the New Regulation establishes the obligation to have specific internal rules of procedures for these funds, which must be previously approved by the CNV.

(d) Regarding mutual funds, the implementation of an account statement was included so that the client can view the types of movements (subscriptions or redemptions), identification number of the requests, number of installments, amount settled, etc.

The inclusions and modifications made by the CNV will be reflected in the Paraguayan market during the next few months, and there may be new modifications through circulars or resolutions of the authority. To date, the authorization of the DMA by the BVA is pending.

For further information please contact Cynthia Fatecha (cfatecha@vouga.com.py), Carlos Vouga (cvouga@vouga.com.py) or Georg Birbaumer (gbirbaumer@vouga.com.py) or your usual Vouga contact..

The call for prequalification for the "DIPE Bid No. 01/2023 Prequalification for the Public Investment Project for the Expansion and Improvement of Route PY01 in the Cuatro Mojones-Quiindy section" (ID 1288) (the «Project»is still open for interested bidders. It is important to note that the deadline for queries and clarifications is May 2nd, and the deadline for submission of pre-qualification applications is May 31st, 2023. The Project's terms and conditions are available using the following link.

Some key points of the Project are:

• Contract term: 30 years (44 months of design and construction - 26 years and 4 months of operation and maintenance).
• Contract value: USD 445 million.
• Forms of payment:
  • Deferred Investment Payments (PDI):
    • 15 fixed and irrevocable, secured payments per milestone achieved.
  • Payment for Availability (PPD):
    • Fixed payments during the operation stage, subject to adjustments and deductions for non-availability and level of service and quality.
  • Payments Linked to Traffic (PVT):
    • Variable payments subject to traffic demand risk that complement the PPD and are articulated on the effectively accounted demand, based on the existing toll in the city of Itá.
• Prequalification Criteria:
  • The Financial ratio criteria is put aside, and capitalization requirements are being considered instead. A capital of at least USD 50 million is required.
  • Experience in the financing of at least 3 infrastructure projects under PPP modality in the last 20 years.
    • Initial investment: at least USD 100 million (per project)
    • Amount financed: 60% in at least one of the projects.
    • Experience in at least one infrastructure project with toll operation.
    • Participation of at least 20% in the entity holding the contract at the time of financial closing.
    • National, international, or mixed consortiums: Creditable experience of members that individually meet the requirements or jointly by all members adding up experiences (that meet the requirements) when they hold at least 20% equity interest in the bidding consortium.
  • Technical capacity:
    • Experience in at least 5 projects that include construction and/or maintenance of road infrastructure:
      • In the last 10 years.
      • Minimum total amount: USD 300 million (cumulative among all projects).
      • National, international, or mixed consortium: Can be accredited individually by any of the members that satisfy the minimum requirements or jointly by all members directly or through their subsidiaries, branches or parent company.

Below is an estimated schedule of the bidding process for the Project:[1]

For more information on the Project or the competitive dialogue stage please visit the following links:

Paraguayan government approves expansion and improvement of Route PY01- section Cuatro Mojones - QUIINDY

Prequalification for Route PY01 Project under PPP

http://snip.hacienda.gov.py/normativas/guia_dialogo_competitivo.pdf/

 or contact Rodolfo G. Vouga (rgvouga@vouga.com.py), Manuel Acevedo (macevdo@vouga.com.py), Carlos Vouga (cvouga@vouga.com.py), Luis Marcio Torales (lmtorales@vouga.com.py), Juan Manuel Ros (jros@vouga.com.py) or your usual Vouga contact.

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[1] Source: Ministry of Public Works and Communications (Ministerio de Obras Públicas y Comunicaciones) – Office of Strategic Projects (Dirección de Proyectos Estratégicos)

On April 19, 2023, the House of Representatives passed a Bill[1] approving two loan agreements entered into by the Republic of Paraguay, the first with the Inter-American Development Bank (IDB) for an amount of up to USD 115,000,000, and the second with the Japan International Cooperation Agency (JICA) for an amount of up to JPY 9,130,000 (approximately USD 66,000,000) (the "Loans"). The purpose of the Loans is to finance a project for the provision of potable water and sanitation services for the metropolitan area of Ciudad del Este (the «Project»).

The Project seeks to cover the lack of potable water service coverage in the metropolitan area of the country's second largest city, which currently accounts for only 30% of potable water coverage through public supply networks; the remaining 70% of the demand is obtained from other sources, such as shallow wells in backyards or independent suppliers.

El Proyecto estará a cargo del Ministerio de Obras Públicas y Comunicaciones (MOPC) a través de la Coordinación de Agua Potable y Saneamiento y Obras Hidráulicas (CAPSOH). El llamado a licitación está previsto para la segunda mitad del año, ya con el nuevo gobierno. La licitación será lanzada bajo la modalidad de «Licitación Pública Internacional» (LPI).

The Bill will be approved on April 28 and then will require enactment by the Executive Power. It is estimated that the total value of the Project will reach USD 200 million and will benefit about three-hundred thousand inhabitants.

For more information on the Project please contact Rodolfo G. Vouga (rgvouga@vouga.com.py), Manuel Acevedo (macevdo@vouga.com.py), Carlos Vouga (cvouga@vouga.com.py), Luis Marcio Torales (lmtorales@vouga.com.py), Juan Manuel Ros (jros@vouga.com.py) ) or your usual Vouga contact.

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[1] File No. S-221781. To access the text of the Bill please see the following link: http://silpy.congreso.gov.py/expediente/125458

Executive Summary:

Standard	Content	Date
Law No. 7050	Se establecen los límites presupuestarios del 2023 para que la Subsecretaría de Estado de Tributación (la “SET”) acredite importes por pago indebido o en exceso, y por intereses y recargos.	January 4, 2023
Decree No. 8915	The extension of the Mercosur preferential regime of origin for Paraguay until 2032 is incorporated into the national legal system.	March 2, 2023
General Resolution No. 127	Measures related to the informative affidavit on exports of soybean, its derivatives, corn, rice and wheat are established; and aspects related to the rebuttal of the presumption of linkage for transfer pricing are clarified.	March 10, 2023
General Resolution No. 128	Exceptionally, the dates for the filing of the tax returns due in mid-March 2023, as well as for the Financial Statements for the fiscal year ended December 31, 2022, are exceptionally extended.	March 13, 2023

More information:

► Law No. 7050/2023 - Establishes the 2023 budget limits for the SET to credit amounts for undue or overpayment, interest and surcharges.

Law No. 7050/2023 approved the General Budget of the Nation for the fiscal year 2023 and established several tax measures that, to a greater or lesser extent, affect taxpayers. One of these measures is the annual budgetary limits to credit taxpayers for the balances that correspond to them (a) for undue or excess payment and (b) for accessories in the following tax credit recovery processes: (i) refund of Value Added Tax (exporters, export freight forwarders, Yacyretá suppliers, etc.) and (ii) repetition for the undue or excess payment.

This budgetary measure has been implemented every year since Law No. 5061/2013, which provided for it in Article 7. For this fiscal year 2023, the overall and individual (per taxpayer) budgetary limits are as follows:

The global limits represent the maximum amount that SET can credit in the indicated concepts during the fiscal year 2023, while the individual limits per taxpayer are 30% of the global limit for each concept. This means that no taxpayer may represent a percentage of credits higher than the indicated, thus avoiding that only one taxpayer excludes the others.

If, during the fiscal year, the total of the budgetary limits is reached, the amounts pending crediting are deferred to the following fiscal year without generating legal accessories. However, the area responsible for making the credits must correlatively record the resolutions that provide for them for their inclusion in the General Budget of the Nation of the following fiscal year.

► Decree No. 8915/2023 - The extension until 2032 of the Mercosur preferential regime of origin for Paraguay is incorporated to the national legal system.

Through Decree No. 8915/2023, the Executive Power incorporated into the national legal system the Decision of the MERCOSUR Common Market Council No. 13/21, "MERCOSUR Origin Regime", registered before the Latin American Integration Association (ALADI) as "Two Hundred and Sixty Additional Protocol to the Economic Complementation Agreement No. 18".

Through that provision, it was agreed to extend until December 31, 2032, the differential origin treatment for Paraguay, according to which the tolerance of inputs from third countries for that country to issue the Mercosur certificate of origin is 60% of the FOB value of the goods originating in Paraguay, which is twenty percentage points higher than the general tolerance of 40%. The value of inputs used for this measurement is the CIF port of destination or CIF seaport.

Paraguay was not the only beneficiary of this extension since a similar regime was also extended until December 31, 2026, for Argentina and Uruguay, which until December 31, 2026, have a tolerance limit for third-country inputs of 50% of the FOB value of their goods, which will drop to 45% as from January 1, 2027. However, in the case of Argentina, these limits only apply to its exports to Uruguay.

With this decision, the previous extension contained in MERCOSUR Common Market Council Decision No. 32/15, which only granted differential origin treatment for Paraguay until December 31, 2025, was repealed. Consequently, Decree No. 8915/2023 repealed Decree No. 7981/2017, which incorporated that decision into the national legal system.

In this way, Paraguay retains its competitive advantage as an export development pole and a preferential access point to Mercosur for products from all over the world, which contributes significantly to the country's growth, especially through the maquila export regime.

► General Resolution No. 127/2023 - Establishing measures related to the informative sworn statement of exports of soybean, its derivatives, corn, rice and wheat; and clarifying aspects related to the rebuttal of the presumption of linkage for transfer pricing.

The SET issued General Resolution No. 127/2023 (the "RG 127"), in which it addressed two separate but related issues:

1. The Informative Sworn Statement ("DJI") and the supporting documents of the international export price of certain agricultural products reached by numeral 7 of Article 38 of Law No. 6380/2019 (the "Tax Law").
2. Documents that rebut the presumption of linkage between entities under the transfer pricing rules.

First, concerning the DJI, it should be recalled that the goods covered by the referred item 7 of article 38 of the Tax Law are the following: (i) soybeans, (ii) soybean products (oils, meals, pellets, and expellers), (iii) corn, (iv) rice and (v) wheat (the "Commodities"). Through RG 127, the following was established regarding the different periods to be reported with the DJI:

1. Periods from July 2021 to December 2022: The DJI must not be filed as such, but its information must be filed before the entry desk of the General Directorate of Large Taxpayers in electronic spreadsheet format (extension .xls, xlsx or .ods) with the formulas applied that allow the verification of the calculations. The deadline for this submission is May 2023, according to the DJI calendar.
2. Periods from January to April 2023: The DJI must be submitted through the Marangatu System, and the deadline for this is June 2023, according to the DJI calendar.
3. Periods from May 2023 onwards: The DJI must be filed through the Marangatu System, and the deadline for this is the second month after the Commodities exports have been made, according to the DJI calendar (e.g., the DJI for May 2023 is due in July 2023).

Regarding the first of the listed filings, it should be clarified that (i) the filing shall be considered as a sworn statement, (ii) its untimely filing generates a fine of G. 900,000 and (iii) RG 127 indicates January 2021 as the beginning of the periods reported, which seems to be an error, since number 7 of article 38 of the Tax Law became effective as from July 2021, according to article 32, second paragraph, of Decree 4644/2020.

RG 127 also established on this matter that the documentation supporting the adjustments corresponding to the international price of Commodities reported in the DJI must contain at least the following information:

(a) Name and tax identification of the issuer of the documentation or provider of the service described.

(b) Name, denomination or company name and identification of the Single Taxpayers Registry of the Commodities exporter who is the recipient of the documentation.

(c) Date of issue of the document.

(d) Details and description of the service quoted: price, quantity, sections included, period of time covered by the quotation or price indicated in the document, among others.

Secondly, regarding the documents that disprove the presumptive linkage for the transfer pricing rules, the SET changed the format of presentation of such documents for the Corporate Income Tax ("IRE") fiscal year closed as of December 31, 2022 and eliminated some of them in case they deal with an individual resident abroad.

Specifically, the documents that disprove the presumptive linkage of IRE taxpayers (i) with foreign residents and (ii) for operations developed in the fiscal year closed as of December 31, 2022, must be submitted to the SET's entry desk (originally, it was through the Marangatú System) in portable document format (.pdf extension) in March 2023, according to the due date corresponding to each taxpayer, following the perpetual calendar.

On the other hand, according to RG 127, the IRE taxpayer wishing to deactivate the presumption of linkage for operating with individuals located in foreign territories affected by the transfer pricing rules must only submit to the SET the following documents:

• Certificate of tax residence of the non-resident (translated into Spanish); and,
• Functional organization chart of the IRE taxpayer signed by the legal representative.

Thus, to disprove the presumptive linkage, the following documents are eliminated for this type of counterparties, as they are not applicable: (i) list of shareholders, (ii) list of beneficial owners, and (iii) functional organization chart of the non-resident.

► General Resolution No. 128/2023 - Exceptionally extending the dates for the filing of certain tax returns due in mid-March 2023, as well as for the Financial Statements for the fiscal year ended December 31, 2022.

Through General Resolution No. 128/2023 (the "RG 128"), the SET decided to exceptionally transfer the due date for the filing of tax returns and the payment of taxes, according to the following schedule:

In addition, the SET exceptionally extended until June 2023 (per the perpetual calendar of due dates), the deadline for filing the Financial Statements of IRE taxpayers who pay the tax under the general regime and whose fiscal year ends is December 31, 2022.

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