Paraguay Country Summary

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 last 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 Highly Effective for 0 and Substantially Effective for 1 of the Effectiveness & Technical Compliance ratings.

Paraguay's investment climate is severely impacted by widespread corruption and impunity, with 90 percent of public institutions lacking effective oversight. Despite some efforts to enhance transparency and accountability, such as the establishment of an open data portal and a new National Strategy to Combat Corruption, significant challenges remain, particularly in the judiciary and legislative branches. Additionally, the country grapples with various criminal activities, including human trafficking, arms trafficking, and drug production, exacerbated by a corrupt political system and ineffective law enforcement.

Paraguay has a small but growing open economy, with an average GDP growth of 2.8 percent over the past decade, driven primarily by agriculture, energy, retail, and construction sectors. The government actively encourages foreign investment through favorable laws, including tax breaks and full repatriation of profits, although challenges such as corruption and judicial insecurity hinder the investment climate. Despite these issues, credit ratings from agencies like Fitch and S&P have improved, reflecting a stable macroeconomic environment.

Paraguay's investment climate is characterized by a government that actively encourages private foreign investment, offering tax breaks and full repatriation of capital and profits. Despite these incentives, challenges such as corruption, judicial insecurity, and bureaucratic inefficiencies hinder the ease of doing business, particularly for U.S. companies facing difficulties in resolving investment disputes. Recent credit rating upgrades by major agencies reflect improvements in macroeconomic stability, but ongoing issues with public procurement and transparency remain significant concerns.