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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. Sources Congress of Paraguay – Law No. 7,688/2026 UNCTAD Investment Policy Hub – Paraguay international investment agreements

EU–Mercosur Deal Moves into the Compliance Phase for Paraguayan Exporters With the interim trade agreement provisionally applied since 1 May, the commercial opportunity for Paraguay is becoming increasingly practical: tariff preferences now depend on origin rules, quota management and the ability of exporters to meet European regulatory standards. The EU–Mercosur trade agreement is moving from political headline to day-to-day implementation. On 7 August, Mercosur’s External Relations Group resumed work under Uruguay’s rotating presidency and reviewed implementation of the agreement with the European Union, with Paraguay participating alongside the other regional delegations. The meeting confirms that the immediate challenge is no longer signing the deal, but making its market-access provisions usable by companies. The Interim Agreement on Trade has been provisionally applied between the European Union and the Mercosur parties since 1 May 2026. Paraguay completed its domestic procedures in March. Under the official Paraguayan assessment, the EU will liberalize 93% of imports from Mercosur within a maximum of ten years, while Mercosur will liberalize roughly 90% of imports from the EU over periods extending to fifteen years. Paraguay estimates that at least 95% of its current and potential exports will ultimately receive zero-duty or preferential access. For businesses, however, lower tariffs are only one part of the new framework. Mercosur’s Trade Commission completed the technical adjustment of tariff nomenclatures and rules of origin in May and confirmed that EU tariff-rate quotas had been loaded into the regional quota-management system. Paraguayan exporters therefore need to identify the correct product classification, satisfy the relevant origin test and comply with sanitary, technical and customs requirements before claiming preferences. The agreement may be particularly relevant for Paraguay because its domestic market is relatively small and its investment strategy increasingly depends on export-oriented production. The Ministry of Industry and Commerce highlights more flexible origin provisions for sectors such as auto parts and a transition toward self-certification of origin after the initial adaptation period. This can support manufacturing and processing projects that combine Paraguayan energy and operating costs with access to both Mercosur and European markets. For international investors, the practical lesson is straightforward: the EU–Mercosur agreement improves Paraguay’s market-access proposition, but investment models should now be designed around the agreement’s product-specific origin rules rather than headline tariff reductions alone. Supply-chain structure, sourcing decisions and documentary compliance can determine whether a Paraguayan operation actually qualifies for preferential entry into the EU. Sources Mercosur External Relations Group, 7 August 2026 — https://www.mercosur.int/el-mercosur-retoma-su-agenda-externa-bajo-la-presidencia-pro-tempore-de-uruguay European Commission — EU trade agreements, status of provisional application — https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/negotiations-and-agreements_en Paraguay Ministry of Foreign Affairs — EU–Mercosur agreement — https://www.mre.gov.py/acuerdo-birregional-entre-mercosur-y-la-ue-2/ Paraguay Ministry of Industry and Commerce — EU–Mercosur agreement overview — https://www.mic.gov.py/wp-content/uploads/2026/04/ACUERDO-DE-ASOCIACION-ENTRE-MERCOSUR_-UE.pdf

Paraguay’s Foreign Direct Investment Base Deepens as BCP and FLAR Map $10 Billion in Net Inflows A new study by Paraguay’s Central Bank and the Latin American Reserve Fund shows how foreign investment in the country has broadened beyond traditional activities, with services and manufacturing playing an increasingly important role. Paraguay accumulated approximately US$10 billion in net direct investment flows between 2008 and 2024, according to a new study presented on 6 August by the Central Bank of Paraguay (BCP) and the Latin American Reserve Fund (FLAR). The report offers one of the most detailed recent pictures of how foreign capital has evolved across the Paraguayan economy. Banco Central del Paraguay Non-financial services attracted the largest share of investment over the period, particularly commerce, telecommunications and transport. Manufacturing, meanwhile, has become more diversified and has increasingly moved into higher value-added activities. Financial services recorded comparatively high profitability, while the primary sector represented a smaller share of total investment but has recently expanded into non-traditional activities. Banco Central del Paraguay The findings are significant for international investors because they suggest that Paraguay’s investment story is becoming less dependent on agriculture and commodity production. REDIEX has separately reported that the number of countries investing in Paraguay rose from 39 in 2008 to 68 in 2024, while the accumulated stock of foreign direct investment quadrupled over the same period. MIC This diversification comes at a favorable macroeconomic moment. The Central Bank currently forecasts 4.5% GDP growth in 2026, following estimated growth of 6% in 2025, while its 2026 inflation forecast stands at 3.3%. The IMF has similarly highlighted Paraguay’s macroeconomic resilience, strong external buffers and improving sovereign risk profile. Banco Central del Paraguay For foreign companies evaluating Paraguay, the new investment data reinforces a broader trend: the country is increasingly positioning itself not simply as an agricultural exporter, but as a regional base for manufacturing, logistics, business services and internationally oriented investment. Sources: Banco Central del Paraguay; FLAR; REDIEX; IMF. Banco Central del Paraguay

Paraguay Targets Medical Devices and Digital Health as New Industrial Growth Sectors Paraguay is seeking to develop a new industrial niche in medical devices and digital health, supported by technical cooperation with South Korea and a strategy aimed at using the country as a production platform for the wider Mercosur market. Paraguay’s Ministry of Industry and Commerce (MIC), working with the Korea Trade-Investment Promotion Agency (KOTRA), presented on 12 August a new roadmap for developing the country’s medical-device and digital-health industries. The initiative forms part of South Korea’s Knowledge Sharing Program and is intended to identify practical steps for building local production capacity. citeturn782307view1 The plan reflects Paraguay’s broader ambition to diversify its industrial base beyond traditional agricultural and manufacturing activities. According to the MIC, the country could attract companies interested in establishing production facilities in Paraguay while serving both the domestic market and neighbouring Mercosur economies. citeturn782307view1 Existing technological infrastructure, including the TASK technology centre, is expected to support the production of moulds, components and other inputs required by medical-device manufacturers. Korean cooperation could also facilitate links with Asian companies looking for an entry point into the South American market. citeturn782307view1 The study recommends a ten-year development strategy, improved investment incentives and greater regulatory transparency. It also proposes beginning with one or two successful pilot projects rather than attempting to create an entire industrial ecosystem immediately. citeturn782307view1 The initiative fits within a wider industrial policy presented by the Paraguayan government this week. The MIC has identified access to long-term financing, skilled labour and territorial development as three major constraints on industrial expansion. It is also planning a digital platform providing investors with information on infrastructure, energy, logistics, employment, customs facilities and industrial clusters across the country. citeturn782307view0 For foreign investors, medical technology could become an interesting test case for Paraguay’s industrial strategy: combining relatively competitive operating conditions with Mercosur market access while gradually moving into higher-value manufacturing. Sources: Ministry of Industry and Commerce of Paraguay (MIC); Korea Trade-Investment Promotion Agency (KOTRA).