Paraguay Approves Bilateral Investment Protection Agreement with Japan (Law No. 7,688)
Paraguay has taken another step toward strengthening its legal framework for foreign investment with the approval of the bilateral Investment Agreement between Paraguay and Japan.
Law No. 7,688, which approves the Agreement between Japan and the Republic of Paraguay for the Promotion and Protection of Investment, was promulgated on July 31, 2026 and published on August 4. The agreement itself had been signed in Asunción on December 5, 2025.
The treaty is designed to provide investors from both countries with greater legal certainty when investing in the other jurisdiction. Among its main provisions are national treatment for established investments, most-favored-nation treatment, fair and equitable treatment, rules governing expropriation and compensation, freedom to transfer investment-related funds and mechanisms for the settlement of investment disputes.
For Paraguay, the agreement is particularly relevant as the country seeks to attract a larger share of long-term Asian investment. Japan represents an important potential source of capital, technology and industrial know-how, particularly in sectors such as manufacturing, agribusiness, logistics, infrastructure and technology.
The agreement also fits within Paraguay’s broader strategy of improving the legal and institutional environment for international investors. In recent years, the country has combined relatively low taxation, competitive energy costs and macroeconomic stability with reforms aimed at facilitating foreign investment and modernizing investment incentives.
Paraguayan congressional approval represents an important domestic legal step, although the treaty should not yet be treated as fully effective. International investment treaty databases continue to classify the Japan-Paraguay agreement as signed but not yet in force, pending completion of the procedures required by both countries.
Once effective, the agreement should reduce part of the legal and political risk associated with cross-border investment by providing Japanese investors with an additional layer of treaty protection beyond Paraguayan domestic law.
For Paraguay, its significance therefore goes beyond bilateral relations with Japan. The agreement reinforces the country’s attempt to present itself internationally as a predictable, rules-based jurisdiction for foreign capital and as an increasingly attractive platform for investment in South America.
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