Annual Report on Exchange Arrangements and Exchange Restrictions 2005
Chapter

PARAGUAY

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2005
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(Position as of January 31, 2005)

Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: August 23, 1994.
Exchange Arrangement
CurrencyThe currency of Paraguay is the Paraguayan guaraní.
Exchange rate structureUnitary.
Classification
Managed floating with no predetermined path for the exchange rateThe exchange rate of the guaraní is determined by supply and demand. The Central Bank of Paraguay (CBP) intervenes in the foreign exchange market to smooth undue fluctuations in the exchange rate.
Independently floating
Exchange taxEffective January 1, 2005, a 0.2% tax applies to inward and outward transfers of funds.
Exchange subsidyNo.
Forward exchange marketCommercial banks are permitted to enter into forward transactions with respect to trade transactions and on terms that may be negotiated freely with customers. The short or long forward position may not exceed 5% of risk-weighted assets and liabilities.
Arrangements for Payments and Receipts
Prescription of currency requirementsn.r.
Payments arrangements
Regional arrangementsParaguay is a member of the LAIA and MERCOSUR.
Clearing agreementsPayments between Paraguay and the other LAIA countries are made through accounts maintained with the CBP and other central banks that participate in the multilateral clearing arrangements of the LAIA. Clearing takes place every four months.
Administration of controlThe CBP administers laws and regulations pertaining to monetary policy. The CBP supervises, through the Superintendency of Banks, foreign exchange transactions carried out by banks, financial enterprises, and exchange bureaus. The CBP regulates open foreign exchange positions.
International security restrictions
In accordance with IMF Executive Board Decision No. 144-(52/51)Yes.
In accordance with UN sanctionsYes.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)No.
Controls on exports and imports of banknotesBanks and exchange bureaus must notify the Superintendency of Banks of imports or exports of foreign currency within one day of the date of the transaction. Transfers of foreign currency in excess of the equivalent of $10,000 require a declaration.
On exports
Foreign currencyYes.
On imports
Foreign currencyYes.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyYes.
Held abroadYes.
Accounts in domestic currency held abroadYes.
Accounts in domestic currency convertible into foreign currencyYes.
Nonresident Accounts
Foreign exchange accounts permittedNo.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsNo.
Import licenses and other nontariff measuresImports are subject to inspection by such regulators as the Ministry of Public Health and the National Institute of Food and Nutrition.
Import taxes and/or tariffsAs a member of MERCOSUR, Paraguay applies its CET, which is composed of 11 rates ranging up to 20%. As part of the agreed transitional implementation of the CET, Paraguay maintains a number of waivers to the CET, many of which are to be phased out by 2010. These are for computer goods, telecommunications products, processed foods, textiles, clothing, and shoes. Effective March 31, 2004, Paraguay phased out its temporary surcharge on selected imports from MERCOSUR countries.
Taxes collected through the exchange systemYes.
State import monopolySome military equipment and supplies are imported by state agencies.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirements
Preshipment inspectionYes.
Export licenses
Without quotasExports of logs and unprocessed forest products, raw hides, and wild animals are prohibited. In addition, certain exports require prior authorization from the appropriate agency. No other exports are restricted; however, technical standards are imposed by the National Institute of Technology and Standardization, the Ministry of Industry and Commerce, the Ministry of Public Health and Social Welfare, or the Ministry of Agriculture and Livestock, depending on the product exported.
Export taxes
Taxes collected through the exchange systemYes.
Payments for Invisible Transactions and Current Transfers
Controls on these transfers
Trade-related payments
Indicative limits/bona fide testSupporting documents, proving the origin of the funds transferred, are required for amounts exceeding $10,000.
Investment-related payments
Prior approvalFinancial enterprises require prior authorization from the CBP to transfer earnings. All transfers of earnings from financial investments are subject to a 5% income tax.
Indicative limits/bona fide testSupporting documents, proving the origin of the funds transferred, are required for amounts exceeding $10,000.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsNo.
Controls on capital and money market instrumentsNo.
Controls on derivatives and other instrumentsNo.
Controls on credit operationsNo.
Controls on direct investmentNo.
Controls on liquidation of direct investmentNo.
Controls on real estate transactionsNo.
Controls on personal capital transactionsNo.
Provisions specific to commercial banks and other credit institutionsIn accordance with anti–money laundering legislation, financial entities are required to report all suspicious transactions.
Maintenance of accounts abroadAccounts maintained abroad are subject to a legal limit of 20% of a bank’s effective net worth. This limit may be extended to up to 70% in the case of Tier I banks.
Lending to nonresidents (financial or commercial credits)These credits may not exceed 5% of a bank’s effective net worth. Subject to approval of a guarantee by the Superintendency of Banks, this limit may be increased up to a maximum of 20%.
Lending locally in foreign exchangeYes.
Purchase of locally issued securities denominated in foreign exchangeYes.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsReserves on foreign exchange deposits should be maintained in foreign currency. The reserve requirements for maturities of up to 360 days are 26.5% for foreign currency deposits and 15% for domestic currency deposits.
Interest rate controlsInterest rates are subject to ceilings, below which actual rates may be negotiated freely.
Investment regulations
Abroad by banksThese investments are subject to solvency and capital requirements.
In banks by nonresidentsYes.
Open foreign exchange position limitsThe maximum daily long and short foreign exchange positions for financial entities is 4% of risk-weighted assets, excluding loans with maturities longer than 24 months, treasury bonds denominated in foreign exchange, and contingent claims at the end of the previous month.
On resident assets and liabilitiesYes.
On nonresident assets and liabilitiesYes.
Provisions specific to institutional investorsNo.
Other controls imposed by securities lawsNo.
Changes During 2004
Imports and import paymentsMarch 31. The temporary surcharge on selected imports from MERCOSUR countries was phased out.
Changes During 2005
Arrangements for payments and receiptsJanuary 1. A 0.2% tax applies on inward and outward international transfers of funds.

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