Discusses distribution network from how products enter to final destination, including reliability of distribution systems, distribution centers, ports, etc.
Imports enter the country by air through the Asuncion and Ciudad del Este international airports; by river through the ports on the Paraguay and Parana rivers, after transshipment through sea ports on the River Plate Basin; and by road to Asuncion, Encarnacion, Ciudad del Este, and Pedro Juan Caballero, after transshipment through sea ports in southern Brazil, the River Plate Basin, and northern Chile.
Using an Agent or Distributor
Foreign firms interested in establishing operations in Paraguay should consider hiring experienced local attorneys and representatives to assist them in operating in a sometimes confusing and non-transparent business environment. The selection of an appropriate agent/distributor is a determining factor in success or failure. Many local companies offer specialized marketing to foreign companies interested in the Paraguayan market.
Under Paraguayan Law 194 from 1993, foreign companies must demonstrate “just cause” to terminate, modify, or not renew contracts with Paraguayan distributors. Severe penalties and high fines may result if a court determines that the foreign company ended the relationship with its distributor without first having established that just cause exists. This requirement often leads to expensive out-of-court settlements. In a few cases, the courts have upheld the rights of foreign companies to terminate representation agreements after finding the requisite showing of just cause. However, the effect of the law is to discourage foreign investment, given concerns about potential lawsuits and contractual interference.
Because Paraguay is a relatively small market compared to its neighbors, some unscrupulous local representatives of foreign products have reportedly accepted side payments from smugglers in return for ignoring shipments of pirated or gray market versions of those products destined for Brazil and Argentina. Other representatives have re-exported large volumes of luxury items to distant, third-country markets in direct violation of their distribution agreements. These examples underscore the importance of independently monitoring the activities of representatives and licensees.
Establishing an Office
The government of Paraguay allows foreign companies to establish branches or subsidiaries. A legally authorized representative must head the branch office, and voting board members must have Paraguayan residency. The documents listed below must be authenticated by a notary public and the Paraguayan Consul in the country of the head office, and must be filed and recorded in the Commercial Public Registry within the Ministry of Industry and Commerce in Asuncion. The Sistema Unificado de Apertura y Cierre de Empresas (http://www.suace.gov.py/)is the government’s single window for registering a company. The process takes about one month.
1. The documents of incorporation and the by-laws of the company;
2. A certificate from a duly authorized government official or the Chamber of Commerce in the country of headquarters, certifying the legitimacy of the head office in the country of origin;
3. The legal instruments from the head office delegating management responsibilities in the subsidiary or branch office to the person or persons so designated; and
4. Minutes from a meeting of the Board of Directors which:
- Resolve to establish a branch office in the Republic of Paraguay;
- Assign nominal capital to the branch office (a minimum of $10,000 if related to export activities);
- Establish a domicile of the branch office in Paraguay;
- Designate the person or persons to manage the branch office; and
- Grant power to the person designated to manage the branch office.
Express delivery is becoming more popular in Paraguay. Food and pharmaceutical delivery services are common, and deliveries for items such as documents, dry cleaning, grocery, and pet-related products are expanding.