FATF Status

Paraguay is no longer on the FATF List of Countries that have been identified as having strategic AML deficiencies

Latest FATF Statement  -  21 June 2013

The FATF welcomes Paraguay’s significant progress in improving its AML/CFT regime and notes that Paraguay has largely met its commitments in its Action Plan regarding the strategic deficiencies that the FATF had identified in February 2010. Paraguay is therefore no longer subject to FATF’s monitoring process under its on-going global AML/CFT compliance process. Paraguay will work with GAFISUD as it continues to address the full range of AML/CFT issues identified in its Mutual Evaluation Report, particularly regarding further implementation of Special Recommendation VI and Special Recommendation IX.

Compliance with FATF Recommendations

The latest Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Paraguay was undertaken in 2022. According to that Evaluation, Paraguay was deemed Compliant for 17 and Largely Compliant for 20 of the FATF 40 Recommendations. It was deemed Highly effective for 0 and Substantially Effective for 1 of the Effectiveness & Technical Compliance ratings.

US Department of State Money Laundering assessment (INCSR)

Paraguay is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes.

Overview

Paraguay’s economy continues to recover as COVID-19 cases decline from their 2020 peak, and most restrictions on the movement of people and goods have eased.  The Tri-Border Area (TBA), comprised of the shared border areas of Paraguay, Argentina, and Brazil, is home to a multi-billion-dollar illicit goods trade, facilitating significant money laundering (ML) in

Paraguay.  Chief among the trafficked items are Andean cocaine and international arms (including from the United States).  Ciudad del Este continues to be a hub for the distribution of counterfeit and pirated products.  Illicit proceeds from public corruption also move through the TBA.  

The government has taken steps to align the country’s anti-money laundering/combating the financing of terrorism (AML/CFT) legal framework with international standards and enhance interagency coordination among the competent authorities.  While Paraguay has made progress implementing its AML/CFT laws, ML criminal convictions remain rare and uneven due to rampant corruption in both the political and judicial sectors.  

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                         28

World Governance Indicator – Control of Corruption             15

Corruption represents one of the major obstacles to businesses investing in Paraguay. In most sectors corruption hinders competitiveness, and practices of favouritism are particularly widespread in public procurement, public services and the natural resources sector. The anti-corruption legal framework of Paraguay criminalises passive and active corruption, money laundering, embezzlement and other offences but does not cover abuse of office or the bribery of foreign officials. Furthermore, implementation of the existing legislation is weak, and many government officials engage in corruption with impunity. Bribery is a widespread practice in Paraguay. For further information - GAN Integrity Business Anti-Corruption Portal

Paraguay has a small but growing open economy, which for the past decade averaged 3.2 percent Gross Domestic Product (GDP) growth per year and has the potential for continued growth over the next decade. Major drivers of economic growth in Paraguay are the agriculture, energy, retail, and construction sectors. The Paraguayan government encourages private foreign investment. Paraguayan law grants investors tax breaks, permits full repatriation of capital and profits, supports maquila operations (special benefits for investors in manufacturing of exports), and guarantees national treatment for foreign investors. Standard & Poor’s, Fitch, and Moody’s all have upgraded Paraguay’s credit ratings over the past several years. In November 2022, Fitch maintained Paraguay’s credit rating at BB+ with a stable outlook, despite a severe drought which weighed on the agriculture sector and resulted in an economic contraction in 2022.

Paraguay scores at the mid-range or lower in most competitiveness indicators. Judicial insecurity hinders the investment climate, and trademark infringement and counterfeiting are major concerns. Since President Mario Abdo Benitez took office in 2018, the government passed several new laws to combat money laundering. Previously, the government has taken measures to improve the investment climate, including the passage of laws addressing competition, public sector payroll disclosures, and access to information. A number of U.S. companies, however, continue to have issues working with government offices to solve investment disputes, including the government’s unwillingness to pay debts incurred under the previous administration and even some current debts.

Paraguay was the first country in the region to quarantine as a result of the COVID-19 pandemic, which considerably impacted the services sector of the economy. Beginning in March 2020, the government of Paraguay undertook a series of economic measures in response to the pandemic. These prompt measures to mitigate the economic and social impact of the pandemic and reactivate the economy caused Paraguay to incur additional debt, resulting in an increase in its debt to GDP ratio from 22.4 percent in 2019 to 36.3 percent in 2022, though the government is now committed to a return to pre-pandemic operations. The government also has a sustainable government procurement policy and, although it does not have climate change regulatory incentives, it does have policies and regulations that support the preservation of biodiversity, forests, clean air and water, the use of nature-based solutions, and other ecological benefits. Despite the government’s significant advancement in efforts to eliminate the worst forms of child labor, it continues to occur in agriculture and ranching as well as in the production of bricks, with children working in the streets begging or selling merchandise. Russia’s war of aggression against Ukraine partially contributed to Paraguay’s high inflation rate in 2022, which reached 8.1 percent (compared to the Central Bank of Paraguay’s target inflation of +/- 4 percent). Although the Russia-Ukraine war did not have a major impact on investment climate overall, it did initially affect Paraguayan exports of beef to Russia over sanctions from exporters.

Paraguay’s export and investment promotion bureau, REDIEX, prepares comprehensive information about business opportunities in Paraguay.

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Country Links

Central Bank of Paraguay