Legislation for Foreign Investment Statutes in Countries in the Americas
Comparative Study
1. Legal bases for foreign investment
Objective: Indicate if there is a Foreign Investment Statute and describe it. In the paragraphs below, indicate the legal rank of the norms contained in the Statute, i.e., regulations for expropriation fall under which rank?
1.1 Constitutional
1.2 Legal
Law 60/90, Law 117/91, Decree Law 19/89, Decree Law 27/90, Decree 6361/90.
1.3 Administrative
Investment Council, the advisory body of the Ministry of Industry and Commerce and the Ministry of Finance.
2. Concept and subject of foreign investment
Objective: It is essential that both the investor and the nature of the investment be identified, so as to determine to which activity and to whom the regulations will be applied. This is also essential at the international level, especially in case of dispute and arbitration.
2.1 Is foreign investment in your country legally defined or conceptualized?
It is regulated by Law 69/90, "Fiscal Incentives Regime for National and Foreign Capital Investment" and Law 117/91, "Investments."
2.2 Are there registered records or mechanisms to clearly identify both the foreign investor and the nature of the investment?
The Investment Council maintains records of applications and benefits granted under Law 60/90.
2.3 Is it possible for a natural person to resort to the foreign investment legislation?
Yes. Fiscal benefits are granted to natural and juridical persons, whether nationals or foreigners.
2.4 Is it possible for a citizen or resident to resort to the foreign investment regime?
Yes. Fiscal benefits are granted to natural and juridical persons, whether nationals or foreigners.
2.5 Can a recipient company funded with both domestic and foreign capital resort to foreign investment regulations? Is this subject to restrictions?
Yes. Benefits are granted to national and/or foreign capital investments and mixed investments under the joint venture mechanism.
2.6 Is there a time limit for a foreign investor to be considered as such?
No
2.7 Are restrictions imposed on the executive body or other staff of an enterprise. Are there nationality quotas? Under what conditions can the executives or other staff hired abroad send their earnings to their country of residence?
There are no restrictions in respect of the executive staff or other staff of a company.
There are no nationality quotas.
A free exchange regime is guaranteed for the entry and outflow of capital and for remittances of dividends, interest, commissions, royalties for transfer of technology or other services.
3. Scope of foreign investment activities
Objective: Define the legal scope of foreign investment in your country, as well as their conditions and limitations.
3.1 Describe the regulating principles of economic activity in your country.
a) Describe how economic freedom is guaranteed.
In accordance with Articles 107 and 108 of the Constitution, every person has the right to engage in the legal economic activity of his choice in a system of equal opportunities.
b) Is the principle of economic nondiscrimination guaranteed? Describe how.
Yes. The foreign investor and the companies in which he participates have the same guarantees, rights and obligations as those granted by law to local investors, with no other limitation save those established by law.
Total equality of foreign and local investment is promoted and guaranteed.
Free competition. Monopolies are not permitted.
Freedom to produce, trade and freely fix prices, save exceptions by law.
Free movement of national and foreign products.
Freedom to import and export.
c) Public and private enterprises (local and foreign): do they compete on equal terms, or does the State have higher benefits?
They compete on equal terms.
3.2 Indicate the scope of foreign investment, i.e., does it include movable and immovable property, assets, concessions, claims to money, intellectual property, industrial property, leasing, technology, etc.
Money, financing, credit from suppliers, and other financial instruments.
Capital goods, raw materials, and inputs.
Trademarks, designs, industrial models and processes as well as other forms of technology transfers that can be licensed.
Specialized technical assistance services.
Leasing.
3.3 Reserved sectors
a) Indicate the sectors or economic activities reserved exclusively for the state in your country. Explain the regulations pertinent to these areas.
The State owns the hydrocarbons, solid, liquid and gaseous minerals found naturally in Paraguayan territory, except rocky, earthen and calcareous substances.
The State may grant concessions to persons or private, public or mixed enterprises, whether national or foreign, to prospect, exploit, investigate, or develop deposits for a limited period.
The law regulates the economic regime covering the interests of the State, concessionaires, and owners who might be affected.
b) Indicate the sectors or economic activities in which only foreign investment is excluded, restricted or limited in your country. Explain in what consists said exclusion, restriction or limitation.
Foreign investment is limited with respect to the regime for public work contracts and privatization. All public works must be carried out by Paraguayan professionals or companies.
Where it is necessary to contract foreign companies, they must be associated with Paraguayan companies which must have at least a 40% share for civil engineering works, 20% for civil engineering, and 30% for supplying professional consultancy services.
In respect of privatization, national capital is preferred to foreign proposals.
c) Does the Principle of International Reciprocity exist in the legislation of your country?
Yes, at the constitutional and legal levels.
d) Is foreign investment subject to performance requirements?
No.
e) Can foreign investors take part in the privatization processes of your country?
National capital is preferred to foreign proposals in the evaluation and consideration of offers. In relation to price, that preference favors offers based on national capital even when they are below the other offers by no more than 15%.
4. Rights and protection of foreign investment
Objective: Identify the type of treatment granted foreign investment i.e.: its rights, protection and incentives.
4.1 Treatment granted to the foreign investor and the investment.
a) National treatment or Most-Favored-Nation clause ? (Refer to paragraphs 3.1 and 3.3).
The law recognizes equality of national and foreign investors.
International agreements signed by Paraguay include the most favored nation clause.
4.2 Protection of Property
a) Constitutional or legal grounds that may lead to expropriation of, or limitations to property.
Public utility or social interest, determined by law.
b) How is compensation determined? Which value is it based on? How is it settled?
It is determined by conventional methods or by legal process.
Compensation must be just.
Payment must be made in advance, save unproductive latifundia destined for agrarian reform, pursuant to expropriation procedures established by law.
c) Can the authorities take possession of expropriated assets prior to paying compensation?
No, payment must be made in advance (see the preceding reply).
d) Is property of both corporal and incorporeal assets equally guaranteed?
In the following laws:
a) Law 751/97 on Trademarks
b) Law 773/25 on Patents
c) Law 868/81 on Industrial Models and Designs.
d) MERCOSUR Industrial Property Agreement.
Amendments to these laws are under discussion in Congress.
4.3 Transfers of investment, remittances of capital and benefits.
a) Under what conditions may investments in the form of foreign exchange, capital goods, technology, associated credits, etc., be brought into the country? Are there specific regulations for each item?
There are no specific mechanisms related to the forms in which foreign exchange, capital goods, technology or associated credits may be brought into the country.
b) Are there restrictions to the remittances of capital, benefits, debt service, or other remittances derived from foreign investment?
No. There is free convertibility.
c) Are there different kinds of exchange ratets? To which does the foreign investor have access?
No. The exchange rate is based on the free market to which the foreign investor has access.
4.4 Taxes and incentives to foreign investment.
a) Explain briefly the taxes that foreign investments are subject to.
Profits, benefits, dividends
30%. Only for corporate activities; there is no individual income tax.
Reinvestment of profits
10% under Law 125/91, National Tax Regime.
15% under Law 60/90, Fiscal Incentive Regime for National and Foreign Capital Investment.
Remittances abroad
5%
Royalties
17.5%
Interest on foreign loans
17.5%
Services contracted abroad
17.5%
Investment in capital goods
Exempt
Others
10% VAT.
b) Are there special tax rules for foreign investment?
No. National and foreign investors are subject to the same tax regime.
c) Has your country signed agreements with other countries in the Americas to avoid double taxation? If yes, list those countries.
Uruguay (1991)
Chile (1992)
Belgium (1986)
Taiwan (1994)
d) Are there other incentives to foreign investment, such as access to domestic credit, investment insurance, industrial parks, customs exemptions, etc.?
Law 60/90 exempts foreign investments from the payment of taxes on remittances abroad for five years from the approval of the project.
Access to the Industrial Development Fund
Access to MIGA.
Exemptions on imports of goods earmarked for the investment project
5. Dispute settlement
Objective: Because Bilateral Investment Treaties (BITs) will be part of another study, only an overview of the subject is required here.
5.1 Domestic settlements: Can the foreign investor resort to the same procedures as the national investor? Are there special forms of appeal available to foreign investors? Please describe.
Yes. Equality under the law.
The Civil Procedure Code envisages the creation of arbitral courts to settle trade disputes.
The foreign investor may resort to the use of this arbitration.
5.2 International settlements: Is your country a member of ICSID or other international arbitration mechanisms on the subject of investment?
Agreement Establishing the International Center for Settlement of Investment Disputes (ICSID).
Inter-American Convention on International Commercial Arbitration.
Inter-American Convention on the Extra-territorial Validity of Judgments and Foreign Arbitral Awards.
The MIGA Agreement.
5.3 Has your country signed BITs with other countries in the Americas? What is the present status of said agreements, i.e., approved, ratified, in effect?
Brazil, 1956
Argentina, 1967
Uruguay,
Chile, 1994
Peru, 1994
Ecuador, 1994
5.4 Where in the juridical hierarchy of your country are international treaties and specifically the Investment Protection Agreements? Analyze your response in relation to the Constitution and domestic laws.
Article 137 of the Constitution establishes that: "The supreme law of the Republic is the Constitution. The Constitution, treaties, international conventions and agreements approved and ratified by laws passed by Congress and other juridical provisions of a lower rank, approved as a consequence, form the national laws in that order of priority."
International treaties, including Investment Protection Treaties, once ratified by Congress, become effective. Based on the hierarchy of laws, they have precedence over laws and are only superseded by the Constitution.
5.5 Do said agreements have "direct effect", that is to say, can they be invoked by the parties directly before the Courts and then applied to the case in question? If not, under what circumstances can they be invoked and applied?
Yes, they have direct effect, and as such may be invoked by the parties directly in the courts and applied by the courts.
6. National authorities
Objective: To identify the agencies in charge of foreign investment, their organization and functions.
6.1 Is foreign investment handled by specially appointed offices in your country? What is their hierarchical status? How are their actions integrated? What are their main attributions?
The Investment Council, created by Law 60/90
It is an advisory agency of the Ministry of Industry and Commerce and the Ministry of Finance.
It comprises representatives of the ministries and the primary and secondary sectors.
Its functions include: to evaluate and pass judgment on investment projects; to maintain a registry of requests and authorization; advise, report and pass judgment on the matter.