This chapter provides an assessment of Paraguay. It begins with an overview of Paraguay’s context and subsequently analyses Paraguay’s progress across eight measurable dimensions. The chapter concludes with targeted policy recommendations.
SME Policy Index: Latin America and the Caribbean 2024
Towards an Inclusive, Resilient, and Sustainable Recovery
SME Policy Index
14. Paraguay
Abstract
Overview
Figure 14.1. 2024 SME PI Paraguay's score
Note: LAC average 2024 refers to the simple average of the 9 countries studied in this 2024 report. There is no data for the Digitalisation dimension in 2019 as the 2019 report did not include this dimension.
Paraguay's first participation in the SME Policy Index assessment recognises the various efforts the country has made regarding SME development policy but identifies significant gaps across various assessment dimensions (see Figure 14.1). Since 2012, Paraguay has established a relatively well-defined institutional framework for SME policy, with a clearly assigned policy mandate and a practice of medium-term policy planning. However, weaknesses are evident in policy implementation, monitoring and evaluation, and policy coordination. Additionally, Paraguay is in the early stages of legislative simplification and regulatory reforms, which are crucial for enhancing its regulatory environment.
The completion and approval process for launching the third strategic plan for SME development presents an opportunity for Paraguay to enhance SME growth. This can be achieved by ensuring the plan includes quantifiable and time-bound objectives, along with a section on monitoring and evaluating the plan's impact and conducting an in-depth assessment of the quality of the operational environment for SMEs.
Taking these recommendations into account, along with others mentioned throughout the chapter, can enable Paraguay to create a conducive environment for SME development. This, in turn, could positively impact its performance across all dimensions and enhance the productivity of Paraguayan SMEs.
Context
Paraguay has demonstrated commendable economic performance since 2003, rebounding from a period of extended economic and political instability. The country has maintained an average annual real Gross Domestic Product (GDP) growth rate of 4.6%, achieved notable job creation at a rate of 2.8% per year, and successfully reduced poverty from 58% to 27% between 2003 and 2018 (OECD, 2018[1]). Thanks to its macro-economic stability, Paraguay experienced a minimal GDP contraction of 0.8% in 2020, the lowest in the region. Subsequently, it witnessed a robust 4.2% growth in 2021, driven by investments in public and private infrastructure, increased private consumption, and the alleviation of drought conditions (World Bank, 2022[2]). The effective containment of COVID-19 cases played a crucial role in facilitating economic recovery by enabling greater mobility and reactivation of various sectors, including services, industry, and construction (Ministry of Finance Paraguay, 2023[3]). However, in 2022, the Paraguayan economy slowed to a modest growth of 0.1%, influenced by the negative performances in manufacturing and construction, despite satisfactory results in agriculture, power generation, livestock, and services. The contraction in construction impeded GDP growth on the expenditure side, particularly in domestic demand due to investment contraction (CBP, 2023[4]). In 2023, the country experienced a GDP growth of 4.5%, primarily attributed to the positive impacts of agriculture and electricity production, with industry and services also exhibiting robust dynamism. Nevertheless, the contraction in construction continued to temper overall GDP growth. On the expenditure side, exports and imports of goods and services increased, aligned with a significant rise in re-exports and imports under the Tourism Regime (CBP, 2023[5]). The Banco Central del Paraguay (Central Bank of Paraguay, CBP) projects a GDP growth rate of 3.8% in 2024, anticipating an increase in domestic demand and favourable weather conditions (CBP, 2023[5]).
Paraguay witnessed an increase in inflation, aligning with global and regional trends. At the end of 2021, inflation reached 6.8%, up from 2.2% in 2020, primarily attributed to higher commodity prices. This surge was linked to the recovery of economic activity and global demand after the 2020 shock, surpassing the capacity of the supply response (CBP, 2021[6]). In 2022, the country experienced a further rise in prices, reaching 8.1%, driven mainly by increases in food and fuel prices, along with price hikes in the durable goods and services basket (CBP, 2022[7]). However, by 2023, inflation receded to 3.7%, influenced by decreases in fuel prices, tight monetary policy, the anchoring of inflation expectations to the medium-term target, and reduced pressures from food and energy commodity prices (CBP, 2023[5]). Looking ahead to 2024, projections suggest that, with a nearly closed domestic and external GDP gap and international interest rates beginning to narrow in the first half of the year, inflation is expected to oscillate around the lower end of the target range in the initial quarters of 2024. Subsequently, in the absence of further shocks, it is projected to gradually converge to 4% from the third quarter onwards (CBP, 2023[5]).
In 2021, Paraguay experienced a slight increase in open unemployment, reaching 6.7% of the population, with a higher incidence among women (9.4%) and in urban areas (8.2%). Although underemployment decreased, it disproportionately affected women (7%) and workers in rural areas (7.1%), linked to the adverse performance of the primary sector during the year. Moreover, only 21.7% of those employed contributed to social security, indicating a high level of informality. The informal employment rate reached 64.2% for workers in non-agricultural activities, rising to at least 74.7% in rural areas. By 2022, the unemployment rate decreased to 5.7%, with a higher share of women (NIE, 2022[8]). Informal employment remained high at 63% (NIE, 2022[9]). In 2023, the unemployment rate increased to 7.3%, primarily in urban areas (NIE, 2023[10]), while informality remained relatively stable at 65.5%.
The COVID-19 pandemic significantly impacted Paraguayan SMEs, with approximately 47.5% experiencing reduced employment capacity, 70% facing decreased sales, and 68.6% cutting back on investments (Sánchez, Sanabria and Paredes, 2021[11]) In response, the government implemented policies, primarily focused on providing credit support for SMEs. Despite the crucial role played by the SME sector, employing about 75% of the economically active population and constituting 97% of all enterprises, it faces significant productivity challenges (STPDES, 2020[12]).
Dimension 1. Institutional Framework
Paraguay has established a relatively well-defined institutional framework for SME policy since 2012. This includes an operational SME definition, a clearly assigned policy mandate, and a practice of medium-term policy planning. However, weak points are evident in policy implementation, monitoring and evaluation, and policy coordination in the fight against labour and enterprise informality, reflected in a score of 3.69 in this dimension.
The SME definition, which scores 4, has been set by Law N° 4.457 for micro, small, and medium-sized enterprises, approved in 2012. This definition is based on two parameters: the number of workers and total annual sales, with the latter considered determinant in case of doubt.
The institutional framework for SME policy, defined by the Law on SMEs approved in 2012, assigns SME policy to the Ministerio de Industria y Comercio (Ministry of Industry and Commerce, MIC). The law establishes a Vice-Ministry in charge of SME policy elaboration, coordination, and implementation, as well as the Sistema Nacional de MIPYMES (National SME System, SINAMYPIMES), with the mission of supporting the elaboration of policy actions for the development of small-scale enterprises, facilitating policy coordination, and promoting public-private dialogue. The law also defines the scope of SME policy and mandates the government to elaborate medium-term plans for SME development. The first Plan Estratégico MIPYMES covered the period 2018–2023. A new medium-term strategic plan is currently in the final elaboration phase for the 2024-2028 period.
The MIC is directly responsible for policy implementation, working in coordination with other relevant institutions in the field. In 2022, the implementation of the Centro de Apoyos a Emprendedores (Entrepreneurship Support Centers, CAE) began, followed by the establishment of the Centros de Desarrollo Empresarial (Small Business Development Centres, SBDC) in 2023. The CAE received support from technical cooperation funds provided by Chinese Taipei, while the SBDC received joint support from both Chinese Taipei and the United States. This is reflected in Paraguay's score for the sub-dimension of Strategic Planning, Policy Design, and Coordination, which is 3.70.
Furthermore, Channels for Public-Private Consultations (PPCs) are defined by the 2012 Law on SMEs, and consultations are conducted within the framework of SINAMYPIMES. The main event concerning PPCs is the annual meeting of SINAMYPIMES, where the government presents initiatives in support of SMEs and listens to representatives of SME associations. Since 2022, the government has started to conduct informal meetings with major SME associations, such as FEDEMIPYME, and technical meetings with a larger number of private sector organisations. Paraguay scores 3.51 in the sub-dimension of public-private consultations.
Despite measures to reduce labour and enterprise informality, the informal sector in Paraguay remains large. Data from the Encuesta Permanente de Hogares Continua (Continuous Permanent Household Survey, EPHC) 2017-2021 indicates that informal labour accounted for close to 65% of total employment in 2021. The National Development Plan aims for a significant reduction of the informal sector, with a target to formalise up to 90% of the economy by 2030. The main focus is on reducing informal labour, and the government implemented a labour formalisation strategy for 2018-2023. Positive results have been achieved, reflected in a score of 3.53 for this sub-dimension; however, policy coordination among the institutions fighting informality remains weak.
The way forward
Complete the elaboration and approval process for launching the third strategic plan for SME development. Ensure that the plan includes quantifiable and time-bound objectives, along with a section on monitoring and evaluating the plan's impact.
Involve SME representatives in the elaboration and implementation of the plan. Establish a formal framework for public-private consultations, such as creating an SME consultative council within the Sistema Nacional Pymes. Ensure that consultations involve representatives from all different types of enterprises and entrepreneur typologies, including young and women entrepreneurs, start-ups, and enterprises located in less developed areas.
Conduct an evaluation of the measures implemented so far to reduce informality. Design a comprehensive strategy for the reduction of labour and enterprise informality, incorporating the results of the evaluation exercise. Integrate the plan to reduce informality into the next strategic plan for SME development.
Dimension 2. Operational environment and simplification of procedures
Paraguay is currently in the initial phases of developing legislative simplification and regulatory reforms, laying the groundwork for enhancing its regulatory environment. While challenges persist, such as the complexity of starting a business process and tax filing procedures, there have been strides in promoting e-government services to SMEs, indicating a positive trajectory in this dimension that scores 2.40. Although a comprehensive regulatory reform plan is lacking and Regulatory Impact Analysis (RIA) implementation is yet to be realised, the country's efforts demonstrate a commitment to streamlining regulations and fostering a more conducive environment for businesses.
Paraguay scores 1.90 in the Legislative Simplification and Regulatory Impact Analysis. The operational environment for SMEs in Paraguay is characterised by a combination of complex regulations and high administrative burdens. Furthermore, the process of legislative simplification and regulatory reform is at a very early phase, with less than 25% of the legislation related to business activity reviewed to date. Currently, there is no active plan for legislative simplification and regulatory reform, but proposals have been presented by the Federación de MyPEs, and the government is elaborating a reform plan. RIA is not applied, but the government is considering its introduction.
Starting a business in Paraguay is relatively complex. This is reflected in the 2.54 score for the company registration sub-dimension. Critical features include the time required (35 days) and the cost, amounting to 52.2% of the average annual income per capita, while the number of procedures is relatively contained (7 against a Latin America and Caribbean region average of 8.1). The most time-consuming procedure is related to the registration with Sistema Unificado de Apertura y Cierre de Empresas (Unified System for the Opening and Closing of Businesses, SUACE), a comprehensive registry coordinated by the MIC. According to the 2020 Doing Business report, registration with SUACE takes an average of 25 days. The high cost is due to the need to use notary services and the level of fees charged by the different administrations involved in the starting a business process.
Companies receive four identification numbers Registro Único del Contribuyente (Single Taxpayer Register, RUC); Registro Patronal (Employer Registration); Registro de Empresa (Company Registration), and Registro PyME (SME Registration), but the RUC number is the most relevant. An enterprise without the RUC and Registro Patronal numbers is not considered formal. Some registration procedures can be performed on-line, but only for Empresas por Acciones Simplificadas (Simplified Joint-Stock Companies, EAS). The EAS is a new legal entity designed with an entrepreneurial focus, enabling the lawful pursuit of lucrative activities in an organised and expedited manner. The main advantage is that it is processed entirely online and at no cost. The company's incorporation is completed within a maximum period of 72 hours.
On another note, filing and paying taxes in Paraguay represent a relatively complex operation, although not significantly worse than in many other Latin American countries. However, since late 2018, the first stage of the Sistema Integrado de Facturación Electrónica Nacional (National Integrated Electronic Invoicing System, SIFEN) has been initiated. This involved a pilot programme where 14 companies were selected to issue the first electronic invoices. Presently, over 3,900 companies are already issuing their invoices electronically.
Starting from 2019, tax reforms have been implemented in Paraguay, resulting in a reduction in the number of taxes imposed on private enterprises- unification of several taxes. The reforms also aimed at simplifying tax-filing procedures and introducing a simplified tax regime for SMEs. However, according to the tax administration, not all SMEs are aware of this opportunity. Paraguay scores 2.5 in the Ease of filing taxes sub-dimension.
Finally, the development of digital government in Paraguay is at an intermediary stage, with a score of 2.83. The country obtained an Electronic Government Development Index (EGDI) of 0.6332 out of 1 and ranked 94 out of 193 countries in the UN 2022 E-government Survey. The Plan Nacional TIC 2022 al 2030 outlines strategic directions for the digitalisation of public administration in Paraguay. The Ministry of Technology, Information, and Telecommunications (MITIC) is responsible for coordinating the implementation of the plan. A dedicated electronic platform has been established to provide services to SMEs, reflecting the government's commitment to advancing digital initiatives in public administration.
The way forward
Conduct an in-depth assessment of the quality of the operational environment for SMEs, followed by the development of a legislative simplification and regulatory reform medium-term strategy, in close consultation with the Federación de MyPEs.
In parallel, the government should plan for the application of RIA on the most relevant new legislative and administrative acts. This involved identifying a public institution to serve as a coordinator and overseer of RIA applications, establishing a team of RIA specialists.
Streamline company registration procedures and reduce associated costs.
Dimension 3. Access to finance
Paraguay achieves an overall score of 3.12 in the Access to Finance dimension slightly below the average for LA9 countries (3.25). It also scored 4.03 in the Legal, Regulatory and Institutional Framework sub-dimension, surpassing the regional average (3.46). This high score is mainly due to progress in securities market regulation and the development of the asset register, as well as a strong performance in the collateral weighting.
Regarding the percentage of collateral required for medium-term SME loans, the country's regulation is minimal. The regulatory and institutional development of the registry for tangible and intangible assets is average. Although a cadastre exists, it is not yet fully functional and is only accessible to certain groups, with partial online availability. The system for registering security interests in movable assets is operational, but the ownership of registered pledges is neither documented nor publicly accessible online.
On the other hand, the development of the legal framework for access to finance is driven by government provisions in the securities market. There is a legal framework to regulate the capital market for SMEs, including a separate section in the stock market for these low-capitalisation companies. However, there is no strategy to assist SMEs in meeting listing requirements.
Paraguay scores 4.15 in the Diversified sources of Enterprise Finance, below the regional average of 4.32. The country is notable for its Development Finance Agency (AFD), the government's second-tier bank, which offers credit lines for various purposes, including working capital for exports, although these credits are not differentiated by company size. Additionally, Paraguay has the Red de Inversiones y Exportaciones (Investment and Export Network, REDIEX), which provides funds to co-finance companies seeking to export. In terms of guaranteed schemes, the country has the Fondo de Garantía del Paraguay (Paraguay Guarantee Fund, FOGAPY), aimed at providing guarantees and re-guaranteeing loans, leasing operations, and other financing mechanisms for SMEs.
However, Paraguay faces opportunities for improvement regarding microfinance schemes, as it lacks a legal framework, and microfinance services have developed mainly as pilot projects and self-sustaining initiatives. The country has legislation related to asset-based lending (ABL) systems, such as Law 6542/2020 "On Factoring, Negotiable Invoice, and Electronic System of Secured Transactions"; Law 1295/1998 "On Financial and Mercantile Leasing"; Law 215/1970 "On General Warehouses of Deposit," among others. Regarding crowdfunding, while bills and initiatives have been proposed since 2018, they have yet to be submitted or addressed as bills in the National Congress.
Furthermore, the financial education dimension in Paraguay scores 2.45. The country has a National Financial Inclusion Strategy and a National Financial Education Plan, recently updated with CAF's support and in the process of implementation, with a priority focus on SMEs. Additionally, financial capability surveys were conducted in collaboration with CAF in 2017 and 2022, in conjunction with the Ministry of Finance.
Finally, in the sub-dimension of Efficient procedures for dealing with bankruptcy, Paraguay scores 1.83, indicating a need to intensify efforts to improve its regulatory framework in this area. Although the country has laws and procedures for companies facing insolvency or bankruptcy, they do not meet international standards and have a low level of compliance. For autonomous and self-sufficient entities and public companies, the state has subsidiary responsibility; in such cases, a special law will be enacted to dissolve and liquidate the entity, and, if applicable, the processes of reorganisation and transformation into legal entities governed by the relevant norms of private law will be established and regulated, presenting certain limitations.
While there is an official bankruptcy register and a credit insolvency register, public access to the former is restricted. Furthermore, there is no automatic mechanism for exiting the bankruptcy register once full discharge is obtained, unlike the black credit list register when debts are settled. There are also no early warning systems to identify companies at risk of insolvency.
Regarding secured transactions, a legal framework has not been identified, indicating a need for improvement in this area. Regarding the prioritisation of tax debt payments in bankrupt companies, it is confirmed that these have priority and can be fractionated, as in the case of income taxes. However, there are no specific support mechanisms with training for companies that have undergone bankruptcy processes. The creation of the General Directorate of Public Registries, which includes the Pledge Registry, provides a legal framework for registering real guarantees of pledges on movable property. However, in practice, this registry should be more transparent, accessible, and less costly for interested parties, representing a significant area for improvement.
The way forward
Strengthen the cadastre to make it functional, publicly accessible, and online, and promote the registry of security rights in movable assets to be accessible and online.
Promote a separate section or stock market for small-cap SMEs.
Develop a legal framework for micro-finance, encouraging the development of micro-finance initiatives beyond the pilot projects that have been developed in the past.
Create a regulatory framework for alternative sources of business financing, such as crowdfunding, or the operation of seed capital funds, angel funds, and venture capital funds.
Conduct financial capability surveys for SMEs in order to have updated information for the design of financial education programmes, as well as design and implement a follow-up, monitoring, and evaluation system for both policy and programmes.
Strengthen its procedures for handling bankruptcy by implementing an official bankruptcy registry that is freely accessible to the public and has an automatic mechanism to remove firms from the registry when the situation is resolved, in line with international best practices. Implement an early warning system to prevent bankruptcies.
Design training programmes for second chances, targeting individuals who have had their businesses go bankrupt.
Dimension 4. SME development services and public procurement
Paraguay debuts in the SME PI with a general score of 3.59, compared to the regional average of 4.18. The strongest performance is in the area of public procurement (4.60), with lower displays in entrepreneurial development services (3.35) and business development services (3.17).
The provision of business development services in Paraguay is framed by the first Strategic SME Plan 2018-2023, which prioritises entrepreneurship promotion, enterprise development, and business formalisation. The wider SME policy agenda is dictated by the SME Law of 2012 and implemented by the MIC and within the SINAMYPIMES (see Dimension 1. Institutional Framework). According to the information provided for this assessment, the SME strategy is linked to an action plan, but this lacks quantitative objectives and expected outcomes and impact. In addition, the strategic plan is not based on a thorough analysis of the needs and demand for BDS across the country. Furthermore, although the provision of BDS is funded, the independent assessment indicates that the resources are insufficient for the needs of the country and lack specific programmes in important areas such as high-growth enterprises. Funding for BDS is through a combination of domestic public resources, development banks, private sector initiatives, and international donors (e.g., EU, USAID, and Chinese Taipei).
Support for business incubators is also framed by international co-operation with Germany and Uruguay to strengthen the institutional capacities of service providers. In addition, the Paraguayan government implements programmes such as:
A distance learning platform (PCD) developed in collaboration with the Ministry of Technology and Communications. The PCD provides SMEs and entrepreneurs with access to a variety of training courses on topics such as business management, marketing, and technology.
Technology and innovation service centres (CST) in the textile, footwear, food, and dairy sectors. The CSTs provide SMEs and entrepreneurs with access to technical assistance and training on how to use new technologies and innovations to improve their productivity.
Business support centres (CAE) in triple helix territories. The CAEs bring together public, private, and academic institutions to provide SMEs and entrepreneurs with information, training, and networking opportunities.
Public procurement is governed by the new Law 7021/2022, which replaces the previous 2003 law and allows for advancements in “sustainability, value for money, circular economy, revitalisation of strategic sectors, registration of suppliers and buyers, sanctions, disqualifying clauses and conflicts of interests.” The Dirección Nacional de Compras Públicas (National Directorate of Public Procurement, DNCP), through its Higher Technical Institute (ITS) provides courses on the new Law for public officials, businesses and the general public. Article 27 of the Law contains the Programa Annual de Contrataciones (Yearly Contracting Prorgamme, PAC), which lists goods, services, and works to be purchased by the state in a fiscal year. The PAC establishes measures for SMEs, including a set-aside of 20% for SMEs, a preference for SMEs in small contracts, the possibility to open bids exclusively for small businesses, etc. Furthermore, according to the Open Contracting Partnership (OCP), the DNCP is using machine-learning to identify tenders that are most likely to be awarded to smaller businesses, publish those tenders in a “small-business friendly” section in a dedicated microsite, and providing help for SMEs to navigate the process of participating in procurement. The Law, however, does not stipulate sanctions or measures in case of late payments in public procurement.
The way forward
Overall, Paraguay demonstrates a solid performance in public procurement with a modern law and system but lags significantly behind in the provision of support services for SMEs and entrepreneurs. To address those areas, Paraguay could:
Strengthen its strategic approach towards BDS and services for entrepreneurs and start-ups, particularly by undertaking comprehensive assessments of the barriers and challenges for small firms and designing BDS programmes accordingly, as well as defining with more precision the quantitative objectives of support services and their expected outcomes and contribution to impact.
Implement programmes for high-growth and innovative enterprises and determine the financial needs for a more complete array of BDS. It is positive that support is funded with help of international donors, but the long-term sustainability of such model needs to be considered, as BDS should eventually be self-sustained through private sector provision.
Further strengthen its public procurement system by integrating measures to ensure the timely payment for public contracts and penalties and sanctions for late payments.
Dimension 5. Innovation and technology
Paraguay has an overall score of 3.55 in the Innovation and Technology dimension. Its strongest performance comes from the Institutional Framework sub-dimension, for which the country has a score of 3.95. Paraguay’s innovation strategy includes provisions addressing SMEs and entrepreneurs, including, for example, the creation of a public-private mechanism to finance innovative start-ups. The governing body for science, technology and innovation policies is the Consejo Nacional de Ciencia y Tecnología (National Council for Science and Technology, CONACYT), which is represented by a range of entities from the public, private, and academic sectors. CONACYT formulates and proposes policies and strategies to the national government and operates a number of innovation support programmes, such as the Programa de Innovación en Empresas Paraguayas (Paraguayan Business Innovation Programme, Proinnova) and the Programa Paraguayo para el Desarrollo de la Ciencia y Tecnología (Paraguayan Programme for the Development of Science and Technology, Prociencia).
Paraguay’s lowest scoring sub-dimension is Support Services for Innovation at 3.02. This is underpinned by a relatively low availability of key innovation infrastructures such as science and technology parks and business accelerators. More positively, Paraguay scores highly in the monitoring and evaluation component of the Support Services for Innovation sub-dimension, and previous efforts by CONACYT to analyse the performance of innovation support services are to be commended. With that being said, these assessments do not appear to take place with a high degree of regularity, and methodological limitations mean that the causal impacts of the assessed programmes cannot be reliably determined.
Direct financing supports are available to SMEs, which cover the costs of individual or collective innovation projects, as well as the incorporation of innovation managers. Beneficiaries of these initiatives are required to contribute at least 20% of the project cost. Unlike most countries in the region, Paraguay does not have incentives within the tax system to promote research, development, and innovation. There is also an absence of demand-side measures to stoke innovation, such as public procurement for innovation initiatives. Paraguay has a score of 3.69 in the Financing for Innovation sub-dimension.
The way forward
Paraguay could consider the following to strengthen support for SME innovation:
Introducing a wider range of financing supports for innovation, for example R&D tax credits or public procurement for innovation schemes.
Investing in strengthening the business incubator and accelerator system, including through the establishment of a public accelerator programme.
Dimension 6. Productive transformation
Paraguay obtains a score of 2.63 in the Productive Transformation dimension. While it demonstrates notable efforts in the sub-dimension of Productivity Enhancing Measures (3.24), its performance in the Productive Associations Enhancing Measures and the Integration into Global Value Chains sub-dimension impacts the overall score, highlighting areas for improvement.
As presented in the Institutional Framework sub-dimension, Paraguay has the Strategic Plan for SMEs 2018-2023. At the time of writing this assessment, it is in the final phase of the plan for 2024. However, similar to plans in other Latin American countries assessed, this plan faces challenges as it mostly constitutes a set of actions without specific goals, quantifiable objectives over time, or an allocated budget. Therefore, the new plan represents an opportunity to set ambitious goals for the upcoming period, along with monitoring and evaluation measures useful for assessing their impact.
Additionally, Paraguay has the National Employment Plan 2022-2026, focusing on increasing employability and labour productivity in its second axis, impacting SMEs. The Competitiveness Programme for SMEs, framed within the National Development Plan Paraguay 2030 and operated by the MIC - SMEs Vice Ministry, operates through calls with the goal of improving SMEs' productivity. The MiPyMEs Compite programme, a cooperation initiative of the European Union, supports SMEs in enhancing their competitiveness through quality, innovation, and responsible environmental management.
Paraguay scores 2.33 in the sub-dimension of Productive Associations Enhancing Measures, reflecting its early stage of development in this area. Currently, there is no public policy promoting or incentivising the formation of productive clusters. However, the country is collaborating with organisations such as SELA to explore the potential benefits of productive clusters for SMEs within the framework of the Productive Articulation for SMEs project.
Regarding industrial parks, the Law No. 4903/2013 on Industrial Parks includes provisions for promoting and granting benefits to industrial parks, including scientific and technological parks. CONACYT provides incentives through one of the instruments available under Proinnova.
Another area for improvement in Paraguay is encouraging the integration of SMEs into global value chains (2.40). While the SMEs Vice Ministry promotes participation in business rounds and connections with large companies for supply purposes, there is currently no government programme specifically supporting the integration of SMEs into global value chains.
The way forward
Continue to assess the benefits and opportunities associated with implementing Productive Associations Enhancing Measures for SMEs and outline measures considering best practices from other Latin American countries.
Use supplier development programmes to promote business linkages between local SMEs and MNEs, with a view to increasing the participation of SMEs in global value chains.
Dimension 7. Access to market and internationalisation of SMEs
Overall, Paraguay achieved a score of 3.66 in the evaluated dimension, placing it below the average. In the sub-dimension of Support programmes for internationalisation, it scored 4.22. According to Law 4457/2012, the Vice Ministry of SMEs within the MIC is the governing body for programmes targeting SMEs. The activation in 2021 of the General Directorate of Information and Internationalisation within the Vice Ministry of SMEs has enabled a focus on internationalisation activities.
The MIC offers a dedicated section on its website for the internationalisation of SMEs, providing technical advice, training, information on foreign trade, and links to partner programmes and institutions. Among the partnerships, the collaboration with DHL Express in the PYMEXPORTA Programme stands out, facilitating the export process.
REDIEX promotes local and foreign investments, supports exports, boosts the Paraguay Country Brand, and offers services such as exporter diagnostics and the design of co-financing projects. Additionally, Paraguay and the IADB signed Loan Agreement No. 3865 OC-PR in July 2017 for the “Business Development Services Support Project for Paraguayan Exporting Companies,” aiming to increase and diversify exports by providing business development services and financing to exporting companies.
The Exporta Fácil programme simplifies the export process for SMEs through postal shipments, reducing bureaucratic procedures and logistical costs. Additionally, platforms like Paraguay Export facilitate the internationalisation and promotion of exports. These initiatives aim to promote the internationalisation of Paraguayan SMEs, facilitating their access to international markets and strengthening their global competitiveness.
In the sub-dimension of Trade facilitation, Paraguay scored 3.32. The country offers guides and advice to exporting SMEs, such as the “Exporter’s Clock” document developed by MIC – REDIEX, detailing the 12 steps for exporting. It also provides tools like the “Exporter Diagnostic” to assess companies’ export capacities. An initial step is to register as an exporter with the Foreign Trade Single Window (VUCE), an MIC initiative to facilitate export processes.
The Comité Nacional de Facilitación del Comercio (National Trade Facilitation Committee, CNFC), created by Decree No. 7102/17, brings together 27 public sector institutions and 17 private sector institutions to implement trade facilitation measures in line with the WTO Trade Facilitation Agreement.
Paraguay has established agreements to facilitate trade, such as the Letter of Intent with the Government of Chinese Taipei to strengthen the capacity of the SME Guidance System. Additionally, the Trade Agreement with Chile and the Mercosur Trade Facilitation Agreement promote cooperation and economic development, especially for entrepreneurs and SMEs.
Paraguay’s customs service promotes safe and easy trade through the Authorised Economic Operator (AEO) Programme, which seeks to certify companies that meet security and transparency standards in their operations. However, to date, no SME has obtained Authorised Operator status.
Despite these efforts, Paraguay still faces challenges in trade facilitation, showing performance below the regional average in the OECD Trade Facilitation Indicators (TFI) like availability of information (PRY: 0.905; ALC: 1.467) and tariffs and charges (PRY: 0.923; ALC: 1.526).
In the sub-dimension of e-commerce use, Paraguay achieves a score of 3.72. E-commerce regulation is supported by Law No. 4868/2021, which sets standards for electronic transactions and designates the MIC as the enforcing authority.
In 2018, a loan contract for USD 130 million was signed for the "Support Programme for the Digital Agenda," led by the Ministerio de Tecnologías de la Información y Comunicación (Ministry of Information and Communication Technologies, MITIC), which aims to improve economic competitiveness and the quality of public services through investments in information technology.
In 2022, MITIC launched the "+digitales: Digital Extensionism for MIPES" programme, with support from the IADB and Koga Impact Lab, to promote the digital transformation of SMEs through technical assistance and financing for digital services. Additionally, MIC joined the Kolau Digitalisation Plan to digitalise 30,000 SMEs in three years, offering training and access to a free website creation platform, a plan that concluded in 2022. Recently, in April 2022, MIC and CAPACE signed a Framework Cooperation Agreement to train SMEs in e-commerce and conduct joint research and publication activities in this field.
In the sub-dimension of quality standards, Paraguay performed scores 4.31. The country has the Organismo Nacional de Normalización (National Standardisation Organism, ONN), which is responsible for developing, promoting, and disseminating useful standards for the community, in line with recognised international criteria. This organism officially represents Paraguay in international and regional standardisation bodies.
Within the SME Strategic Plan, quality, innovation, and technological development in SMEs are promoted as transversal objectives. Specific goals have been established to increase quality levels, establish a Quality Policy for SMEs, incorporate quality criteria in tourism and craft offerings, develop Quality Certification Centres, and train SMEs on quality practices.
In 2016, the Paraguayan Standard as a management model for SMEs was published. Additionally, the MiPYME Compite Programme, funded by the European Union, focuses on supporting SMEs to improve their competitiveness through quality, innovation, and responsible environmental management, benefiting 365 SMEs up to 2023. However, there is still no specific section for programmes and political initiatives that meet international quality standards.
Finally, in the sub-dimension of benefits from integration efforts, Paraguay scored 1.81. As a member of Mercosur, the country benefits from initiatives aimed at strengthening small and medium-sized enterprises. It also takes advantage of the trade agreements of the bloc with countries and regions such as Singapore, the Eurasian Economic Commission, Egypt, and others, as well as agreements with Associated States. At regional meetings, such as the Mercosur SMEs Meeting in May 2018, the importance of transparency and trade facilitation for the internationalisation of SMEs is discussed, as well as the need to maintain a common position on SME-related issues in international negotiations, as evidenced in the Agreement with the European Union.
The way forward
Implement programmes that maximise the benefits of sub-regional integration, through cooperation and coordination between countries; as well as improve communication channels with SMEs on these benefits.
Provide SMEs with more information and support on requirements, procedures, and processes to facilitate exports and their follow-up.
Increase SME participation in training on the use of the Foreign Trade Single Windows, as well as AEO and other trade facilitation programmes.
Improve mechanisms for compliance, monitoring and evaluation of standards for e-commerce activities, as well as programmes aimed at their growth.
Dimension 8. Digitalisation
Paraguay achieves an overall score of 3.96 in the Digitalisation dimension, with its most notable performance emanating from the National Digitalisation Strategy sub-dimension, where it secures a score of 4.80. Serving as the bedrock of the country's digital transformation initiatives, Paraguay's National Digitalisation Strategy is governed by the Coordination and Interoperability Committee for Electronic Government, established through Law No. 6.207/2018 and Decree No. 2145/2019. This strategy unfolds as a comprehensive roadmap with the ambitious National ICT Plan 2022-2030 at its core. Clear objectives outlined in this plan encompass the digitalisation of all state procedures, achieving 100% interoperability among government entities, and the digitalisation of services in municipalities and governorates. Progress is systematically monitored through annual reports that consider diverse demographic and geographic factors, ensuring Paraguay steadily progresses towards its digital aspirations.
Paraguay's dedication to digital inclusion is evident through its National Connectivity Strategy (ENCONEC). Aspiring to achieve 100% broadband coverage in both urban and rural areas, this strategy aims to connect every household and educational institution to broadband internet. Regular multi-stakeholder consultations involving network operators and regulatory authorities ensure a comprehensive approach to connectivity. Paraguay's commitment to enhancing its international connectivity capacity further emphasises its ambition to become a digitally connected global player. Despite this, Paraguay receives a score of 3.72 in the Broadband Connectivity sub-dimension.
Digital Skills constitute Paraguay’s lowest scoring sub-dimension, with a score of 3.36. Although not explicitly integrated into the national curriculum, digital skills training is provided at various educational levels. Initiatives to fortify these skills encompass teacher training programmes, enhancements in technical education, and specialised IT training for citizens and public officials. Furthermore, efforts are underway to promote digital literacy across citizens of all age groups, signifying Paraguay's commitment to empowering its population with the essential skills necessary to thrive in the digital age.
The way forward
Paraguay could consider the following to strengthen support for SME digitalisation:
Bolster Paraguay's digital skills landscape by implementing a comprehensive digital skills policy. Emphasise the integration of digital skills into formal education, expanding initiatives from school curricula to adult education programmes.
Establish targeted training programmes for SMEs, incorporating online resources and workshops.
References
[4] CBP (2023), Informe de Política Monetaria, https://www.bcp.gov.py/informe-de-politica-monetaria-marzo-2023-i1386.
[5] CBP (2023), Informe de Política Monetaria, https://www.bcp.gov.py/informe-de-politica-monetaria-diciembre-2023-i1425.
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[6] CBP (2021), Informe de Inflación (IPC), https://www.bcp.gov.py/informe-de-inflacion-mensual-i362.
[3] Ministry of Finance Paraguay (2023), Informe de las Finanzas Públicas de la República Paraguaya, https://economia.gov.py/application/files/2816/9895/3279/PGN_2023.pdf.
[10] NIE (2023), Boletín Trimestral de Empleo. EPHC 3er trimestre 2023, https://www.ine.gov.py/Publicaciones/Biblioteca/documento/235/Bolet%C3%ADn%20Trimestral_EPHC_3er%20Trim%202023.pdf.
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[8] NIE (2022), Tasa de desocupación disminuyó en el 4º trimestre del año 2022, https://www.ine.gov.py/noticias/1480/tasa-de-desocupacion-disminuyo-en-el-4-trimestre-del-ano-2022#:~:text=En%20relaci%C3%B3n%20al%20mismo%20periodo,entre%20mujeres%20del%20%C3%A1rea%20urbana.
[1] OECD (2018), Multi-dimensional Review of Paraguay Volume 1. Initial Assessment, https://www.oecd.org/development/mdcr/countries/paraguay/Paraguay_Vol_1_Overview_En.pdf.
[11] Sánchez, E., D. Sanabria and J. Paredes (2021), Impacto Económico de la Crisis COVID-19 Sobre las MIPYMES en Paraguay, Universidad Nacional de Asunción, FAEDPYME.
[12] STPDES (2020), Mipymes, una de las prioritarias para la reactivación económica ante COVID-19, https://www.stp.gov.py/v1/mipymes-una-de-las-prioritarias-para-la-reactivacion-economica-ante-covid-19/.
[2] World Bank (2022), Paraguay overview, https://www.worldbank.org/en/country/paraguay/overview (accessed on 12 March 2024).