What Entrepreneurs Should Expect While Doing Business in Paraguay

The landlocked country of Paraguay flies below the radar for many entrepreneurs and travelers alike. Home to 6.7 million people, Paraguay has a GDP of $27.44 billion as of 2016, representing 0.4% of the world economy. Minimum wage is 1,964,507 Guaranies per month, which comes out to roughly US$353. Paraguay is a major producer of hydroelectricity, and the Itaipú dam, the world’s largest generator of renewable energy, is on the Paraná river. Paraguay had the highest economic growth in South America from 1970 – 2013, averaging 7.2% per year, albeit from a low base. Paraguay has a moderate inflation rate of 5% on average and international reserves of 20% of GDP, twice the amount of the external national debt.

Paraguay is the second-largest producer of both stevia and tung oil in the world, as well as the sixth-largest producer of soybeans and corn. While unemployment remains low at roughly 4.9%, studies estimate that 30-40% of the population is poor, and in rural areas, 41.2% of the population lacks the monthly income to cover basic necessities.

For investors and entrepreneurs, there are distinct advantages to doing business in Paraguay. By 2015, there were as many cell phones in the country as there were Paraguayans, partly because of poorly run fixed-line telecommunications services. For investors, the agriculture climate is ripe for high returns. The current rates of return in this industry are ~3% plus potential capital growth.

Foreign investors have the same guarantees, rights, and obligations as Paraguayan investors. Unlike neighbors Argentina and Brazil, Paraguay allows free flows of capital both into and out of the country. The only difference between local and foreign investment is that foreign investments are subject to 5% additional tax and a 15% tax on international remittances to nonresidents. You must be a Paraguay resident to manage a Paraguayan company or serve on board of directors. Entrepreneurs can comply with this restriction by finding a local partner.

There are also drawbacks to those wanting to do business in Paraguay. According to the World Bank’s Doing Business Report, Paraguay ranks 143 for ‘Starting a Business,’ 153 for ‘Paying Taxes,’ and 116 for ‘Trading Across Borders’ (all out of 190). Corruption and lack of transparency hinder the possibility of becoming more competitive on a global scale. Worker’s rights, child labor, and women’s rights issues are problems as well.

On the entrepreneurial side, Paraguay is growing. According to Angel.co, there are only 29 companies in Paraguay and our portfolio company Founderlist doesn’t show many more either…the ecosystem is just really getting started. Co-working spaces such as Welco and Loffice help unite the entrepreneurial community and Koga Labs helps social entrepreneurs. Startups like Argentina’s PagoRural operate in Paraguay’s Agritech sector. A program to teach disadvantaged Paraguayan kids how to play musical instruments is one of the coolest social projects I’ve seen during my time in Latin America.

Roughly 70% of the population is under 35 years old, creating strong entrepreneurial potential. Jóvenes Empresarios del Paraguay (Young Entrepreneurs of Paraguay), which helps entrepreneurs between the ages of 18 and 40, has 120 partners and remains dedicated to the sustainable development of Paraguay through strengthening young entrepreneurs, fostering business opportunities, and providing necessary services. Fundación Paraguaya, an NGO in the country, is a self-sustainable, spearheads microfinance and entrepreneurship in Paraguay and offers entrepreneurial guidance for startups in the country.

Local startups are seeing success. Guaranglish is a language learning app that helps Paraguayans learn English and foreigners learn Guarani a local indigenous language. The Paraguayans who created the app wanted to ensure the local language remained intact. Another company, UnoWifi, leverages free Wifi hotspots to give demographic information about customers, allowing companies to run targeted marketing campaigns. The startup operates in Paraguay and Uruguay and is now looking for international expansion.

There are some practical startups helping to bring Paraguay into the digital world. For instance, Movilpy is an online directory of all businesses related to automobiles, motorcycles and the motor world in Paraguay. Juhu lists all events around the country for movies, arts, and more. Paraguay En Tu Mano serves as the “Yelp” across the country, where businesses can register, and users can find restaurants and events nearby. TAXit! is an app that helps Paraguayans manage taxes.

Paraguay has one of the least developed ecosystems in Latin America and it’s likely one of the harder places to do business when compared to Chile, Colombia or Uruguay. It’s ripe with opportunities, but entrepreneurs should remain aware of the high amount of bribery and corruption they may run across. Those in the Agtech fields should consider Paraguay for its high ROI opportunities but should also consider working with a local partner in the area. Especially since the population is so young, we should expect to see more startup movement and a growing ecosystem in Paraguay in the coming years.

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