Professional Documents
Culture Documents
Exporting
TOBACCO
From India
To Paraguay
Dinesh G. Mhatre.
Four countries (China, Brazil, India, USA) produce two-thirds (67 percent) of the world’s tobacco (2007). China
produced 40 percent of the world’s tobacco leaf in 2007
Paraguay chiefly imports road vehicles, consumer goods, tobacco, petroleum products, and electrical machinery,
and its imports in 2006 were mainly obtained from China, followed by Brazil, Argentina, Japan, and the United
States.
Paraguay is a land-locked nation of 157,047 square miles (406,752 square kilometers) in South America,
surrounded by Brazil, Argentina, and Bolivia. No reliable figures on international trade exist because a large part of
that trade consists of the re-exportation and transshipment of licit and illicit goods. The major recorded exports
include soybeans and cotton, meat products, and timber. Half of Paraguay's international trade is with nations in
the Southern Cone Common Market (Brazil, Argentina, and Uruguay). Brazil is the most important trade partner,
followed by the Netherlands, which imports soybeans for crushing. Unrecorded re-exports include a wide variety
of goods that range from cigarettes to automobiles, contraband compact discs, and drugs. Paraguay's major
imports include machinery, vehicles, spare parts, fuels and lubricants, and alcoholic beverages and tobacco, much
of which is re-exported. Brazil and Argentina provide most of Paraguay's imports, followed by the United States
and Japan.
Information on Paraguay:
The Republic of Paraguay is situated on the South American continent. The information on Paraguay lists relevant
facts like its industry and naturally occurring resources.
The foremost of the information on Paraguay is the country's languages. Two languages- Spanish and Guarani is in
colloquial use. Spanish is the language that is imported from Europe in colonial times. Guarani is the indigenous
language that is a result of decades of colonialism. Spanish is spoken in the urban areas. Guarani is spoken in the
rural hinterlands. The Paraguayan culture is a mix of the Spanish settler and indigenous South American cultures.
The Republic of Paraguay can be visited all around the year. The country does not fall on the standard tourist trail.
This lends a certain frisson of adventure to the activity oriented traveler visiting the country. The principal
resources of Paraguay is centered around the natural beauty prevalent in the South American region. The activity
of fishing forms the bulwark of the rural Paraguayan economy. The rivers of the country are used for physical
transportation from one place to another. The economy of Paraguay is dependent on farm products and its further
downstream processing industries. Agricultural products like sugarcane, soybean, wheat, potatoes, and tobacco
provide much needed foreign currency through exports.
Paraguay- Business and Economy is overtly dependent upon the South American countries of Argentina and Brazil.
More than 40% of its exports end in these two countries. The Paraguayan economy is dependent on agriculture
and its downstream industrial products. The South American country is the biggest exporter of soybeans in the
world. Paraguay also exports copious amounts of beef.
The economy of Paraguay is highly influenced by its geographical position. The land-locked country has negotiated
with Brazil and Argentina to access marine ports in those two countries. The ports are duty free. The business
climate in Paraguay is positive. The South American country is noted for protecting the business interests of
foreign investors. The early 1990's saw Paraguay implementing free market reforms. The Paraguayan economy
was liberalized. Large scale privatization of Paraguayan government companies occurred during this period. The
economic crisis of its neighbors affected Paraguay during that period. Paraguay has shown consistent economic
growth at the rate of 2.7% per year after liberalization. The weakness of the banking sector form the weak link in
the economic chain.
Following is consumption of Tobacco in central South America and Paraguay is circled. Population is relatively
young and tobacco consumption by men is more.
Hence, Approximately 50% population consumes tobacco which is good sign of business.
2.2. Paraguay Imports Statistics
Paraguay import is seen to be increasing over the last decade and in year 2009 it almost increased by 50%.
Market Access
As judged by the latest Market Access TTRI (including preferences), on which it is ranked 39th out of 125 and
scores 2.3 percent, Paraguay’s agricultural and manufactured exports would seem to enjoy more favorable access
to international markets than the average of its comparators. However when factoring in non-tariff measures,
Paraguay’s Market Access Overall Trade Restrictiveness Index (MAOTRI) score of 14.0 percent, points to a more
restrictive access to world markets than its lower middle‐income comparators. Its MFN duty‐free exports
constituted 35 percent of all its exports in 2006, equivalent to an average LAC and a lower‐middle‐income country.
Paraguay is a member of MERCOSUR (which includes neighboring Brazil, Argentina, and Uruguay) and to a lesser
degree of the Latin American Integration Association (LAIA). It is also a Generalized System of Preferences (GSP)
beneficiary with a number of industrialized countries. After a depreciation of 4.7 percent in 2000–04, the currency
appreciated 10 percent in 2006–07 on an average, per year, trade‐weighted real basis.
Franchising
Franchising operators are slowly penetrating the market. Several foreign companies have granted franchising
rights to local firms in the areas of fast foods, laundry, clothing, and pest control. This could be a growth sector in
the future once the economy recovers.
PROHIBITED ITEMS
Molds and machinery designated for the manufacture of currency
Daggers, Stilettos, hatchets
Canes or fans
Firearms, swords
Immoral or obscene books or films, folders, printed matters, paintings, illustrations or objects
Military equipment, arms or any war machinery
Gambling items
Plants
Food items (restricted: requires health inspection that will prolong process)
MOTOR VEHICLES
Required documentation:
Bill of lading
Pre-shipment inspection Certificate (Car Condition Report)
SGS or Veritas Verification Certificate
Duty free entry for diplomats only
PETS
Health and vaccination certificates required.
USEFUL INFORMATION
All required documents must be in hands of the Agent at least two weeks before the arrival of the shipment. If
these documents do not arrive as indicated, additional expenses could be incurred.
NOTE - Customs regulations of Paraguay are subject to change at any time. The proceeding information is a brief
summary of customs regulations applicable to household goods shipments to Paraguay (this destination) and is
being provided for general guidance to assist our Agents and Customers. Since such regulations are subject to
change without notice, Always double check with your local embassy or consulate before you make your move to
Paraguay.
2.5. Culture & Trade
Paraguay Culture
Paraguay culture is highly influenced by different groups of Europe, Spain as well as indigenous origins. The mixed
culture can be witnessed in various forms of arts & crafts, music, festivals, literature, languages of Paraguay. The
theater and cinema also display the richness of Paraguay culture. The different forms of art of Paraguay have won
the international recognition. The openness of the culture of Paraguay can also be witnessed in the fashion of
Paraguay. The women of Paraguay are quite advanced to take part in fashion shows. They have been the proud
contestants in the Miss Universe, Miss World contests.
In the languages of Paraguay, one can find the influence of different regions. The languages spoken and written in
Paraguay are Spanish as well as Guarani. Paraguay cultural heritage can also be witnessed in the tolerance towards
different religions. The different religions abiding peacefully in Paraguay include Roman Catholics, Mennonite and
other Protestant groups.
The richness of the Paraguayan culture can be found also in the embracing of new technologies. Though, the latest
techniques have been adopted, the roots have never been neglected by the Paraguay people. The mixture of the
old and new has contributed profusely to the rich production of the arts & crafts of Paraguay.
Trade Outcomes
Paraguay’s estimated real growth in total trade in 2007 is very low, resulting in its rank of 139th (out of 160) on
trade outcome. Paraguay’s exports and imports of goods and services, as reported in international databases,
shrunk in absolute terms in the late 1990s, while the real growth of total trade in the early 2000s was 1.5 percent,
rising to 14 percent in 2005–06 and declining to 3.5 percent in 2007—a rate still less than half that of an average
LAC (7.5 percent) or a lower‐middle‐income (8.3 percent) country. Paraguay’s trade share in GDP, based on
“registered” flows, increased slightly from an average of 93.4 percent in 2000–04, to 119.8 percent in 2005–06 and
to 121.4 in 2007, much higher than the regional average (88.2 percent) and the lower‐middle‐income country
group means (98.8 percent). The services share in total exports has decreased from an average of 21.1 percent in
the early 2000s to 15.7 percent in 2005–06 to 14.1 percent in 2007. In addition to “registered” flows, the Central
Bank reports small but not insignificant volumes of “unregistered” and “other” imports and exports, including a
significant amount of goods that are resold mainly via Ciudad del Este in the Brazilian market (for example,
information technology, beverages, perfumes, and electronics). Most such re-exports are entirely legal (in the
context of MERCOSUR) and provide the basis for a significant portion of formal tax collections. Despite being as
large as registered exports (in 2006, in fact, re-exports were larger than registered exports), they are not counted
in the official statistics that are reported to international databases due to weakness in the data collection
systems.1 Paraguay’s major registered exports in 2005 were soy beans (23 percent), meat of bovine animals (21
percent), maize, oilcake, and soybean oil; main export markets in 2005 included the neighboring economies of
Uruguay (absorbing 25 percent of total exports in 2005–06), Brazil, Argentina, and Chile. Paraguay chiefly imports
road vehicles, consumer goods, tobacco, petroleum products, and electrical machinery, and its imports in 2006
were mainly obtained from China, followed by Brazil, Argentina, Japan, and the United States. Remittances in
Paraguay constitute an important share of exports of goods and services; they were 8.7 percent in 2005.
3. SWOT Analysis
3.1. Strength:
Tobacco is one of the chief imports of Paraguay and its imports in 2006 were mainly obtained from China,
followed by Brazil, Argentina, Japan, and the United States.
India is word’s second largest un-manufactured Tobacco producer after China and has share of approximately
10.5% in world’s un-manufactured tobacco production.
In supply of tobacco leafs there is no brand competition involved and hence the competition is perfect
competition at international level.
Tobacco leafs are ready to export raw material and don’t need.
3.2. Weakness
Immense Competition with tobacco suppliers from China in terms of volumes and thereby prices as China is
major supplier of tobacco to Paraguay.
Competition with tobacco suppliers from neighboring countries viz. Brazil, Argentina in terms of the lead time
for supply.
Tobacco production in some developing countries, receives direct price support or indirect input subsidies.
However, even if such subsidies were to be removed, tobacco profitability would not be challenged in
comparison with alternative cash crops. Thus, even in countries where such subsidies are used, production
might be expected to continue to increase, even if these subsidies are partly removed.
3.3. Opportunity
Acquire market share of China Tobacco suppliers by offering competitive prices.
As per the table below India is offering competitive price to China in world tobacco market. This competitive
price can help to capture market share of Brazil tobacco suppliers to Paraguay as their prices are almost
double the price offered by India / China.
3.4. Threats
Competition from China in terms of volumes and hence prices.
Hike in tobacco prices may lead to increase in export unit price and so lessen the demand.
4. PESTEL Framework
(Political / Economical / Social / Technological / Environmental / Legal)
The PESTEL framework is designed to provide managers with an analytical tool to identify different macro-
environmental factors that may affect business strategies, and to assess how different environmental factors may
influence business performance now and in the future.
The PESTEL Framework includes six types of important environmental influences: political, economic, social,
technological, environmental and legal. These factors should not be seen as independent factors. Factors such as
technological advances may probably affect the social and economic conditions in different markets.
Since the end of General Alfredo Stroessner's 35-year rule in 1989, Paraguayans have struggled to introduce
democracy. Former Bishop Fernando Lugo, supported by the left-wing Patriotic Alliance for Change coalition, was
elected president in April 2008, ending more than 50 years of domination by the conservative Colorado Party. Lugo
vowed to support the indigenous population, redistribute land to the poor, and secure more revenue from the
Itaipu Dam, a joint hydroelectric project with Brazil. Nearly half of all jobs are in agriculture (the major export
earner), unemployment is high, and more than one-third of Paraguayans live below the poverty line. Improved
security cooperation with neighboring countries and the United States has led to reduced smuggling and closer
scrutiny of suspected Middle Eastern terrorist–supported groups operating in the tri-border area with Brazil and
Argentina.
Paraguay taxes
Paraguay taxes on the corporate are presently 10%. The personal income tax in Paraguay is also 10%. It has
taken a very long time for the government in attracting foreign investment by privatization. The reason behind
it was the opposition from the political parties.
Paraguay taxes also include a 10% value added tax on most of the goods and services in Paraguay. The
Paraguay tax rate on stock exchange companies is 15%. There is also a special kind of tax at Paraguay that has
to be paid by the companies that are under the 'maquila' regime. The rate is fixed at 1% of value-added. Some
are exempted from paying any tax in Paraguay. These include activities related to culture like education and
publishing of books for the same purpose.
The tax for the companies in free zones is 0.5% of the gross income in lieu of all other taxes. Dividends to
resident shareholders are free of taxation in Paraguay. But nonresident shareholders are subject to a taxation
rate of 5%. Thirty percent is the tax charged on capital gains of all assets. There is also an annual property tax
on the properties like land and buildings in proportion to the fiscal valuation of real estate.
Tax policies
In 2003 the basic corporate tax rate was 30%, but there are a number of exceptions. Reinvested income and
investment in reforestation are taxed at 10%, and stock exchange companies are taxed at a reduced rate of
15% until 2008. Cultural activities like education and book publishing for educational purposes are exempt
from income tax. Priority activities encouraged by the government can qualify for a tax rate of 1.5% for
periods of five to ten years. Companies under the "maquila" regime pay a special tax of equal to 1% of value-
added. The tax of companies in free zones (FZs) is 0.5% of gross income in lieu of all other taxes. Paraguay's
general fiscal incentives package for foreign investors includes a 95% reduction in corporate tax for five years,
renewable to 10. Dividends to resident shareholders are not taxed, but profits and dividends paid to
nonresident shareholders are subject to an additional 5% tax. Branches of foreign companies established in
Paraguay, apart from the maquila, FZ, and investment incentives regimes are subject to a 35% corporate
income tax. There is a license tax payable by all persons and entities engaged in permanent forms of business.
Remittances to non-residences are subject to a 5% withholding tax. Capital gains on all assets are taxed at
30%.
Paraguay only directly taxes "high-level" executives on their income, but this may be handled through the
corporation tax if the company only deducts the amount of executive salaries held to be tax-exempt under the
law. If the company deducts all executives' salaries, individual executives are subject to income tax. Social
security taxes total 26% of payroll, with 16.5% from the employer and 9.5% from the employee. All land and
buildings are also subject to an annual property tax proportional to the fiscal valuation of real estate.
The main indirect tax is Paraguay's value-added tax (VAT) with a standard rate of 10%.
Since the early 1990s, Paraguay's political and economic reforms have been strengthened by the increased
security of access resulting from its accession to the GATT and the expansion of its commitments in the
Uruguay Round. The process should be consolidated by improved macroeconomic stability, better
infrastructure and ongoing public sector and financial reforms, which need to be deepened to pave for higher
growth. MERCOSUR has helped to reinforce systemic reforms and is expected to create new investment
opportunities; however, it will lead to some applied tariff increases and greater preference for regional
partners. The expansion of regional trade should continue as new agreements are forged, although Paraguay
is also looking for trade opportunities beyond the region. Full implementation of Uruguay Round
commitments and assured access to foreign markets should further strengthen Paraguay's integration in the
world economy.
The Civil Code and Law 1,034/83 regulate business and industrial activities in the country. Under the existing
framework, the Ministry of Industry and Commerce is charged with overall industrial policy coordination; the
Ministry of Finance handles tax and fiscal policy; and the Central Bank is the principal coordinator of monetary
policy. All businesses need to be registered in three places: the municipality for a business permit, the Ministry of
Industry and Commerce unit at the central civil registry, and the Finance Ministry for tax purposes. The multiple
registration procedure involved multiple steps which took over three months to complete. However, in late 2006
the government instituted a coordinated system among all the offices involved, which reduced the process to one
step to be completed in a little over one month, and lowered the cost to the registrants from USD 840 to
approximately USD 250. The Ministry of Health and the Municipality of Asuncion both regulate food safety issues,
which can include processed food imports and imports for fast food franchises.
Regulatory agencies for sectors such as telecommunications, energy, and potable water are relatively new or in the
process of being established. CONATEL, the telephone regulatory agency, is only nominally independent as the
president of Paraguay chooses its president, who is also subject to influence by the Minister of Public Works and
Communications. A regulatory framework for potable water has been established, but the energy sector shows
little indication of establishing a regulatory framework in the near future.
Draft laws are often introduced into Congress by special interest groups with few opportunities for public
comment. Public participation often requires direct lobbying and press campaigns. The new government has
increased its outreach to the public and coordination with the private sector when devising regulations to
implement new laws.
4.2. Economic factors
Credit accessibility
paucity of credit options hinders the overall economy. Paraguay has a long history as a money-laundering
center. The government has taken steps to curb the problem, but enforcement of anti-laundering legislation
remains inconsistent
Unemployment rates
Labor force: 2.68 million (2005 est.)
Labor force - by occupation: agriculture 45%
Unemployment rate: 16% (2005 est.)
Paraguay’s constitution guarantees the right of workers to unionize and bargain collectively. About 15 percent
of workers are members of one of Paraguay’s 1,600 unions. Strikes are legal and not uncommon.
Interest rates
Paraguay’s banking and financial services industry is still recovering from the liquidity crisis of 1995, when
news of widespread corruption resulted in the closure of several significant banks. Reform efforts spurred by
the International Monetary Fund (IMF) and World Bank helped restore some credibility to Paraguay’s banking
industry. Still, a paucity of credit options hinders the overall economy. Paraguay has a long history as a money-
laundering center. The government has taken steps to curb the problem, but enforcement of anti-laundering
legislation remains inconsistent.
Foreign companies either partially or wholly own most banks and financial institutions in Paraguay.
Paraguayan banks hold less than 10 percent of deposits. Of the 16 banks operating in Paraguay in 2003, 50
percent were wholly foreign-owned and 25 percent were partially owned by foreign companies. Paraguay’s
Central Bank exists to stabilize the financial sector, making sure that another run on banks, such as the one
that occurred in 1995, does not recur. The Superintendencia de Bancos regulates the banking system,
monitoring the percentage of non-performing loans in the banking system. Bank deposits rose significantly in
2004, along with the percentage of local currency in total deposits. Local currency deposits increased by 26
percent in 2004, a sign that Paraguayans are gaining confidence in the stability of Paraguayan currency. In
another promising development, interest rates dropped dramatically in 2004, from 50 percent in 2003 to 27
percent in 2004.
Inflation
Paraguay’s currency is the guarani (PYG). In mid-October 2005, US$1 equaled about YG6155. Price inflation fell
dramatically between 2003 and 2004, from 14.2 percent to a 30-year low of 4.3 percent. President’s Duarte’s
economic reforms and austerity programs have produced results more rapidly than many expected. As of
2005, experts forecast that the inflation rate in Paraguay likely would rise in coming years but remain below
10 percent.
Paraguay is a developing country with a 2005 Human Development Index score of 0.755. It ranks as the second
poorest country in South America with a 2007 GDP per capita of US$4,000. Approximately 2.1 million, or 35%, of
its total population is poor and approximately 1 million or 18% of the population live off less than US$ 2 a
day. However, Asuncion in Paraguay is ranked as the world's least expensive city to live in for the fifth year
running.
Paraguay has a market economy marked by a large informal sector that features both re-export of imported
consumer goods to neighboring countries, and thousands of small business enterprises. Paraguay's largest
economic activity is based on agriculture, agribusiness and cattle ranching. Paraguay is ranked as the world's third
largest exporter of chalk boards, and its beef exports are substantial for a country of its size. A
23.Aug.2008 Financial Times article about Paraguay states “Take record commodities prices, add a subtropical
climate that gives farmers five harvests every 24 months and vast tracts of virgin arable land and it is no surprise
that tiny Paraguay has emerged as one of the big beneficiaries of the global food crisis”. Such perception may put
Paraguay into the focus of international agro producers. Reuters India reports that "Some of India's top vegetable
oil firms plan to lease or buy land in Paraguay."
Paraguay's economic potential has been historically constrained by its landlocked geography, but it does enjoy
access to the Atlantic Ocean via the Paraná River. Because it is landlocked, Paraguay's economy is very dependent
on Brazil and Argentina, its major trade partners. Roughly 38% of the GDP derives from trade and exports to Brazil
and Argentina.
Through various treaties, Paraguay has been granted free ports in Argentina, Uruguay and Brazil through which it
sends its exports. The most important of these free ports is on the Brazilian Atlantic coast at Paranaguá.
The Friendship Bridge that spans the Paraná River between Ciudad del Este and the Brazilian city of Foz do
Iguaçu permits about forty thousand travelers to commute daily between both cities, and allows Paraguay land
access to Paranaguá. A vibrant economy has developed in Ciudad del Este and Foz do Iguaçu mostly based on
international commerce and shopping trips by Brazilian buyers colloquially calledsacoleiros.
Bilateral European Union (EU)-Paraguay trade in goods amounts to €437 million in 2005; the EU importing around
€269 million and exporting roughly €168 million. In 2005, trade with EU represented 8.9% of Paraguay’s total
trade. The EU market represents 13.7% of Paraguay exports and 6.1% of its imports.
While the country’s external debt is 40% of GDP, Paraguay’s economy is still driven by agricultural production (27%
of GDP and 84% of exports). It is a structure which is vulnerable to climatic factors and price volatility. Those
vulnerabilities, combined with inequality, explain why poverty currently affects 40% of the population.
Paraguay’s economy grew by 6.4% in 2007 and 5.8% in 2008, fastest growing sector being agriculture with 10.5%
growth.
Although ranked 112th out of 175 countries in the 2006 World Bank Doing Business ranking, Paraguay has ranked
particularly well in the "Protecting Investors" sub-category within that index. The indexes vary between 0 and 10,
with higher values indicating greater disclosure, greater liability of directors, greater powers of shareholders to
challenge the transaction, and better investor protection, respectively.
The "Disclosure Index" for Paraguay is 6, whereas the Latin American region ranked only 4.3 (OECD countries
ranked 6.3 on average). The country ranked 5 in "Director Liability Index", the same as OECD countries and better
than the 5.1 attributed to its neighbors. In the "Shareholder Suits Index" category, Paraguay obtained 6 points, in
contrast with 5.8 for its neighbors and 6.6 for OECD countries. The comprehensive "Investor Protection Index"
attributed 5.7 to Paraguay, 5.1 to its neighbors and 6.0 to OECD countries on average.
4.3. Social Factors
Age structure
0-14 years: 37.2% (male 1,262,408/female 1,220,809)
15-64 years: 57.7% (male 1,933,559/female 1,915,033)
65 years and over: 5.1% (male 155,660/female 181,617) (2007 est.)
Median age
Total: 21.6 years
male: 21.3 years
female: 21.8 years (2007 est.)
Population
Paraguay is home to 5.7 million inhabitants with a population density of 14.6 per square kilometer. The
population, mostly concentrated in the eastern half of the country, is 54% urban. By the year 2010, it is
estimated that the population will grow to 7,103,087, which would be a 26% increase over that of 2001, given
a rate of birth of 2.6%.
Forty-two percent of the population is of working age. The population pyramid is rather striking, with 65%
under the age of 30. Agriculture is the primary economic activity, employing 30% of the economically active
population, followed by the services sector at 22% and the commercial sector at 21%. Manufacturing employs
12% of the economically active population.
Distribution of Wealth
Paraguay has an extreme gap between the small upper class and the large lower class, and there has
historically been virtually no social mobility. Paraguay has the most unequal distribution of land in the region.
Less than 10 percent of the population owned and controlled over 75 percent of the nation's land in the late
1990s, leaving much of the large rural population landless and living in extreme poverty. In the mid-1990s,
nearly half of the farmers in Paraguay did not own land, according to Ramón López and Alberto Valdés, writing
for the World Bank. The upper 10 percent of the population accounts for 46.6 percent of income and
consumption, and
The upper 20 percent make up 62.4 percent of all income. The poorest 60 percent of the population earns less
than 20 percent of the nation's income.
The extreme gap between the small upper class and the large lower class was widened by the clientelism of
the Colorado Party during the last 50 years. During the 1960s, by selling most unused land to Colorado Party
affiliates, the small elite class came to include a small, newly established agro-industrial elite class. These elites
underpaid workers to maximize their own profits. Cotton and soybean producers (the elite landowners)
continued to underpay peasant workers well into the 1980s, and the government kept labor unions weak and
ineffective. Although the 1990s were a time of newly-developed strength for labor unions, the gap between
the rich and the poor did not change significantly.
There are not enough schools or educational resources throughout the nation, but shortages are worst in
poor, rural areas. Rural areas also have less effective health care available to them. Virtually all urban areas
have access to safe water and good medical care, but only 15 percent of the rural population has access to
safe drinking water and only 42 percent of the rural population has access to medical care. Despite these
problems, it is important to note that Paraguay's government does subsidize education and health care. The
government finances schools and makes teacher training courses available.
The advantage of living in Paraguay is the low cost of essential commodities. The country has a free market
economy. A large portion of the working populace depends on the informal sector for their livelihood. The
economy of Paraguay is dominated by a number of small businesses plying their trade in the country. This
range from street vendors to small scale manufacturing industries for the farm sector. Imported goods are
value added and re-exported to other parts of the world. This results in a higher quality employment
environment suitable for the superior qualified employee.
Educational levels
For the year 2000, projected adult illiteracy rates stood at 6.7%, (males, 5.6%; females, 7.8%). Elementary
education is compulsory and free between the ages of 7 and 14 (ages 9 and 14 in rural areas). Primary
education lasts for six years followed by secondary education in two phases of three years each. In 1997 there
were 905,813 students in primary schools. In that same year, there were 327,775 students and approximately
18,000 teachers at the secondary level. The pupil-teacher ratio at the primary level was estimated at 20 to 1 in
1999. In the same year, 92% of primary-school-age children were enrolled in school, while 45% of those
eligible attended secondary school.
Paraguay is a poor and unequal society. Various poverty estimates suggest that 30-50% of the population is poor.
In rural areas, 41.20% of the people lack a monthly income to cover basic necessities, whereas in urban centers
this figure is 27.6%. The top 10% of the population holds 43.8% of the national income, while the lowest 10% has
0.5%. The economic recession has worsened income inequality, notably in the rural areas, where the Gini
coefficient has risen from 0.56 in 1995 to 0.66 in 1999.
Similarly, land concentration in the Paraguayan countryside is one of the highest in the globe: 10% of the
population controls 66% of the land, while 30% of the rural people are landless. This inequality has caused a great
deal of tensions between the landless and elites.
4.4. Technological factors
Paraguay science and technology has infiltrated every sphere of the nation's life. However, agriculture remains on
the top of the list of priorities of the government sanctioned projects. A number of new technological innovations
are being implemented to enhance the agricultural growth in the country. Other developments pertain to the
development of Engineering goods, as well as social improvement. The country is also an avid supporter of the
anti-Nuclear stance taken in the Vienna convention. Nuclear safety is a major concern for the country. Science and
Technology in Paraguay is now considerably developed to handle a Nuclear situation in terms of rebuilding and
rehabilitations. Computer technology is also being developed in Paraguay.
A number of prestigious institutes have emerged in Asunción in the last few decades to join ranks with the older
and the more traditional scientific research institutes. Together, they continue to contribute meaningfully towards
the development of science and technology of Paraguay. The institutes that lead the way are:
A growing number of students are becoming interested to pursue scientific studies in order to bolster and develop
Paraguay science and technology with their talents and knowledge.
Research in Paraguay
Research in Paraguay largely comprise scientific research in various fields of industrial, nuclear and biological
research. However, telecommunication and law are also significant research fields in Paraguay. Scientific research
in Paraguay is largely supported by the country's government, and is conducted by the prestigious scientific
research institutes of the country. Asunción is the center of most research activities in Paraguay. The institutes that
support and administer research in Asunción, Paraguay are as follows:
Research in Paraguay is largely based on the sector of agriculture and engineering industry. The goal remains to
increase the industrial and agricultural profile of this country. However, the varied wildlife of the country, also
provide bio-researches with a great opportunity to conduct on field research activities. The country's government
is committed towards supporting and encouraging all forms of research activities in the country.
Paraguay is a serious participant of the Vienna convention, and is presently equipped with a commendable
research base to help in the rebuilding and reconstruction in case a nuclear situation arises anywhere. Actually,
nuclear research in Paraguay is being avidly pursued, particularly under the leadership of the university Nacionala
de Asunción or the National University of Asunción. The nuclear research laboratory in Paraguay is the Comision
Nacional de energia Atomica in Asunción.
4.5. Environmental factors
Environmental protection laws
About Environment Protection
Those activities that are likely to cause environmental changes will be regulated by law. The law may also
restrict or prohibit those activities that are considered hazardous.
The manufacturing, assembly, import, commerce, possession or use of nuclear, chemical, or biological
weapons, as well as the introduction of toxic waste into the country are hereby prohibited. The law may
be extended to other hazardous elements. It will also regulate the trafficking of genetic resources and
related technologies to protect national interests.
The law will define and establish sanctions for ecological crimes. Any damage to the environment will
entail an obligation to restore and to pay for damages.
Paraguay has some natural hazards, some of which are the local flooding in the southeastern portion of the
country from early September to June. This can result in the poorly drained plains becoming boggy from early
October to June.
Its major environmental issues includedeforestation; water pollution; inadequate means for waste disposal
pose health risks for many urban residents; and loss of wetlands.
Environment - international agreements: party to: Biodiversity, Climate Change, Climate Change-Kyoto
Protocol, Desertification, Endangered Species, Hazardous Wastes, Law of the Sea, Ozone Layer Protection,
Wetlands
signed, but not ratified: none of the selected agreements
Paraguay has ratified both the main ILO Conventions on discrimination. However, there is extensive evidence
of persistent discrimination.
Paraguay has not ratified the main ILO Convention on child labour and there is evidence that child labour is a
problem, particularly in the agricultural export sector. Sustained government efforts to eliminate child labour
and ensure universal school attendance certainly need to be implemented.
Forced labour is not a generalized occurrence but Paraguay has been criticized by the ILO for its failure to
respect the Conventions on forced labour.
Violations of core labour standards in Paraguay are serious. These problems concern all the areas of
fundamental workers’ rights identified at Singapore and are in direct contradiction to the commitments
accepted by Paraguay at the Singapore WTO Ministerial Meeting and its obligations as a member of the ILO.
The WTO should therefore call upon the Paraguayan government to respect the Singapore commitments and
amend its labour law as needed to bring it into line with its international obligations concerning freedom of
association, as well as to report upon its promotional work in areas such as discrimination and child labour.
The WTO should also request the ILO to intensify its work with the government of Paraguay and provide a
report to the WTO Council on the occasion of the next trade policy review.
Health Risks: Malaria risk is moderate in some areas of Caaguazu, Alto Parana & Canendiyu.
There is little or no risk in other areas. Rabies.
Compulsory Yellow fever certificate is required from travelers arriving from endemic areas &
Vaccinations: leaving Paraguay to go to endemic areas. Exempt infants under 1 year.
Recommended Diphtheria, hepatitis A, hepatitis B, malaria, TB, tetanus, typhoid, yellow fever,
Immunizations: rabies recommended in some circumstances, travelers making 3 or more visits
per year, stays of more than 3 months in a rural area, high-risk occupational
groups & backpackers staying more than 1 month
Trade Regulations and Standards
Trade Barriers
Paraguay is a member of MERCOSUR (Common Market of the South), a common market and Customs union
comprised of Argentina, Brazil, Paraguay, and Uruguay. Since 1995, Paraguay has increased many of its
external tariffs on products from non-MERCOSUR countries to conform to the MERCOSUR Common External
Tariff (CET) of up to 23%. The tariffs on the 399 items on Paraguay's list of exceptions will be increased
annually until they reach parity with the CET in 2006.
Standards
Standards are set by the National Standards and Technology Institute (INTN). INTN is currently working with
the standards institutes of the other MERCOSUR countries to establish MERCOSUR-wide standards. Only a
handful of Paraguayan firms have ISO 900 and ISO 1400 certification.
Labeling Requirements
Paraguayan regulations require that the country of origin be labeled on domestic and imported products.
Expiration dates are required on medical products and some consumer goods. As of January of 1998, imported
beer is required to display detailed manufacture and content information in Spanish, labeled at the point of
packaging. Negotiations for MERCOSUR-wide labeling requirements are underway.
Import Controls
Paraguay has an open market and does not require import licenses; except for guns and ammunition (the
United States prohibits the export of guns and ammunition from the United States to Paraguay).
Both import and export operations must be processed through authorized banks and supervised by
the Central Bank of Paraguay. Documents required for general imports include a letter of credit issued by a
local bank, as well as the following documents provided by the merchandise vendor: certificate of origin,
commercial invoice, packing list, and bill of lading. The last four documents must be certified by a Paraguayan
Consulate in the country of origin.
There are few import prohibitions, one of the most contentious being new regulations outlawing importation
of used clothing.
Export Controls
Paraguay has no export controls.
Free Trade Zones / Warehouses
Paraguay is a landlocked country with no seaports. However, it has been granted free trade ports and
warehouses in neighboring countries' sea ports for the reception, storage, handling, trans-shipment, etc. of
merchandise transported to and from Paraguay. The Paraguayan Port Authority manages its existing free
trade ports and warehouses, but Paraguay has expressed interest in private-sector concessions to develop and
manage new free trade ports. Paraguayan free-trade ports are located in Argentina (Buenos Aires and
Rosario), Brazil (Paranagua and Santos), Chile (Antofagasta and Iquique), and Uruguay (Montevideo and Nueva
Palmira). To date, only the Brazilian free trade ports, Nueva Palmira, Uruguay, and Iquique, Chile are operating
normally. In early 1995, the government approved a law permitting free trade zones in Paraguay, and the
government is developing two such zones: one at the border with Brazil and the other at the border with
Argentina.
DGFT provide exporter a unique IEC Number. IEC Number is a ten digits code required for the purpose of export as
well as import. No exporter is allowed to export his good abroad without IEC number.
However, if the goods are exported to Nepal, or to Myanmar through Indo-Myanmar boarder or to China through
Gunji, Namgaya, Shipkila or Nathula ports then it is not necessary to obtain IEC number provided the CIF value of a
single consignment does not exceed Indian amount of Rs. 25, 000 /-.
Application for IEC number can be submitted to the nearest regional authority of DGFT.
Application form which is known as "Aayaat Niryaat Form - ANF2A" can also be submitted online at the DGFT web-
site: http://dgft.gov.in.
While submitting an application form for IEC number, an applicant is required to submit his PAN account number.
Only one IEC is issued against a single PAN number. Apart from PAN number, an applicant is also required to
submit his Current Bank Account number and Bankers Certificate.
A amount of Rs 1000/- is required to submit with the application fee. This amount can be submitted in the form of
a Demand Draft or payment through EFT (Electronic Fund Transfer by Nominated Bank by DGFT.
So, it becomes important for an exporter to obtain a registration cum membership certificate (RCMC) from the
EPC. An application for registration should be accompanied by a self certified
Copy of the IEC number. Membership fee should be paid in the form of cheque or draft after ascertaining the
amount from the concerned EPC.
The RCMC certificate is valid from 1st April of the licensing year in which it was issued and shall be valid for five
years ending 31st March of the licensing year, unless otherwise specified.
Canalisation
Canalisation is an important feature of Export License under which certain goods can be imported only by
designated agencies. For an example, an item like gold, in bulk, can be imported only by specified banks like SBI
and some foreign banks or designated agencies.
Commodity Boards
Commodity Board is registered agency designated by the Ministry of Commerce, Government of India for purposes
of export-promotion and has offices in India and abroad. There are five statutory Commodity Boards, which are
responsible for production, development and export of tea, coffee, rubber, spices and tobacco.
Textile Committee
Textile Committee carries pre-shipment inspection of textiles and market research for textile yarns, textile
machines etc.
Address: Textile Centre, second Floor, 34 PD, Mello Road, Wadi Bandar, Bombay-400009
Paraguay is the largest illegal cigarette supplier in the region. There are commercial and tax benefits for locating
factories in the country, such as loose controls and low wages, but the primary reason for the growth of the illegal
supply of cigarettes in Paraguay can be traced to changes in Brazilian policies to fight contraband in the latter part
of the 90`s. Those policies, designed to control “export-reentry” devices by companies such as Souza Cruz (BAT)
backfired. Some former managers and engineers relocated to Paraguay becoming owners of illegal trade factories.
Traditional Paraguayan cigarette manufacturers 8 also took advantage of the opportunity to expand their activities
not only towards the clandestine market of Brazil but also to other countries in the region and, increasingly, the
world. Being large no of cigarette factories located in Paraguay there is good a demand for tobacco leafs from the
factories of Paraguay. But since some of the factories are illegal supplier of cigarettes it is risky to build relationship
with such manufactures directly and may pose a serious problem & can be prosecuted in case export rules are
violated. Paraguay follows free market principles. Ports of Brazil & Argentina are accessible to Paraguay and are
duty free.
One significant drawback to selling in Paraguay is Law 194/93, which establishes the legal relationship between
foreign companies and their Paraguayan representatives. The law requires the foreign company to prove just
cause in a Paraguayan court to end a contractual relation with a Paraguayan agent or distributor. If the relationship
is ended without proving just cause, the foreign company must pay its representative an indemnity. The rights
under this law cannot be waived as part of the contractual relationship between both parties.
This drawback can be bypassed by dealing with Paraguay TRADER / Importer as TRADER rather than a
company selling its product to Paraguay. Since Tobacco leafs are raw material there is no maintenance / service /
warranty is involved.
As per Custom Regulation while shipping to Paraguay, all required documents must be in hands of the Agent at
least two weeks before the arrival of the shipment. If these documents do not arrive as indicated, additional
expenses could be incurred.
India cam offer competitive rate for tobacco to China and can overcome Brazil easily as rates of Brazil are double
the rates of China for Tobacco Leafs.
As per dashboard in PESTEL of Paraguay the issues are associated with labor freedom & freedom from corruption
& property rights. Tobacco leaf being raw material no labor or property related issues are associated with it as the
we will be concerned with the shipment to duty free ports of Paraguay and delivery to Paraguay.
Because government effectiveness, regulatory quality, rule of law, and control of corruption is worst the process of
export of tobacco sounds to be a hazel free / not difficult process but time consuming process for setting up
business as overall freedom to conduct a business is limited by Paraguay’s regulatory environment. Starting a
business takes 35 days but obtaining business license makes more than 225 days. Hence performing role of trader
with Paraguay is easiest way to deal with export business in case we are no interested in getting into the
contractual agreement with agent in Paraguay.
9. Bottom Line: _
Tobacco is one of the key imported products of Paraguay. Hence buyer for Tobacco is surely available in Paraguay.
There are number of Cigarette manufacturing companies in Paraguay which can serve as key buyers for the
Tobacco Leafs as well as local Tobacco importers of Paraguay.
Approach to Paraguay can be in two methods to get rid of contractual agreement between the Paraguay Agent
and the business which may lead to paying of indemnity in case uncertain shutdown of the business.
1. Deal as trader and export the tobacco to the local importer to Paraguay without entering and establishing
business in Paraguay.
2. Setup own agency as importer in Paraguay and then establish contract with that agency which can help in
shutting down business without any hazels and exit immediately without getting trapped in prosecution.
There are different advantages & disadvantages of above two approaches as below.
In first approach though we are exporting goods to Paraguay without actually stepping into Paraguay
business by exporting tobacco goods to local importers and hence the chances of marginal profit is less as there
will be number of people involved between we and final customer, which can be one or more & hence cut down
on margin. In this approach we get rid of many issues as we never enter into Paraguay country & its business but
just exporting the tobacco to local importers of Paraguay.
In second approach we can increase the profit on deal as we are importing ourselves and dealing with
final customer. The difficulty will be in gaining end customers and competition with local importers as corruption
play major role in Paraguay economy which not under better control. Hence if some suitable strategy followed
then the customers can be gained. We should go for bulk selling of tobacco leafs to final customer as that will be
better approach as it will save us from putting much attention in selling of tobacco in Paraguay. Infrastructure for
the business can be acquired on lease or rent so that no direct investment is involved which can save on the time
and money to buy the infrastructure.
10. ROAD MAP for Export Firm Setup in INDIA
Apply for PAN Account number through http://www.incometaxindia.gov.in/
Apply & get Current Bank Account number and Bankers Certificate.
Get Application form which is known as "Aayaat Niryaat Form - ANF2A" can also be submitted online at the
DGFT web-site: http://dgft.gov.in.
Application for IEC number can be submitted to the nearest regional authority of DGFT.
Application form which is known as "Aayaat Niryaat Form - ANF2A" can also be submitted online at the DGFT
web-site: http://dgft.gov.in.
Submit Current Bank Account Number & Bankers Certificate & PAN Number to DGFT along with application
form & Rs 1000/- as application fees in the form of Demand Draft or payment through EFT (Electronic Fund
Transfer) by Nominated Bank by DGFT.
Register with DGFT (Director General of FOREIGN Trade) and receive 10 digits unique IEC Number.
Obtain registration cum membership certificate (RCMC) from EPC. An application for registration should be
accompanied by a self certified copy of the IEC number. Membership fee should be paid in the form of cheque
or draft after ascertaining the amount from the concerned EPC.
Register with Commodity Board (Under Dept. of Commerce) for TOBACCO. Forms and registration details can
be obtained from http://www.indiantobacco.com/
Register with TAX Authorities to get benefit of exemption from both Value Added tax (VAT) & Central Sales Tax
(CST).
To start with exporting goods obtain PAN based Business Identification Number (BAN) from DGFT. This is
necessary while dealing with Customs during export process.
11. Registration Requirements Details - PARAGUAY
Procedure 1 : Check the uniqueness of the proposed company name
Time to complete: 1 day
Cost to complete: no charge
Name of Agency:
Comment:
The company must keep special commercial books at their registered office. The number of books and the
accounting system to be used are left to the merchant’s discretion. At a minimum, however, a daily record of
business transactions (daily record book) must be kept, and an accounting of current inventory must also be
maintained in a separate book (inventory record book). Other books may be required for certain types of
commercial activities according to law. Accounting books and documentation must be kept by a merchant for 5
years following the date that the last entry was made. All corresponding business receipts or vouchers must also
be kept and maintained by the merchant during that 5-year time frame, to allow for auditing of the company’s
books or records. A special request to use computer forms instead of books may be filed with the court and the tax
authority. Corporate books are required to keep the records of the minutes of the board of directors and
shareholders’ meetings, as well as the labor books pursuant to the Labor Code and regulations. Books must be
authorized and sealed by each corresponding agency (corporate, tax, labor, social security).
Procedure 6 : Publication of an extract of the bylaws in the Official Gazette and a newspaper
Time to complete: 4 days, after registration with the Public Registry of Juridical Persons and Associations is
completed
Cost to complete: USD 16 Official Gazette + USD 133 newspaper
Name of Agency:
Comment:
The treasury attorney orders the publication of an extract of the bylaws in the Official Gazette and another
newspaper of wide circulation in the market in which the company is located. The extract is published for 3
consecutive business days.