Like many other Latin American countries, business between Paraguay and Argentina is built upon a foundation of trade agreements and treaties to strengthen economies and regional integration, and provide new investment opportunities to those interested in entering these markets.
Paraguay and Argentina have a historically fruitful bilateral relationship with a common goal: bilateral cooperation and the exchange of products and human resources.
Paraguay with an emerging economy and a stable political environment has been becoming an attractive economy for investors. Argentina, considered as one of the most important economies in Latin America, constitutes an attractive focus to invest for both local and foreign companies.
We outline a general summary of some of the most important trade agreements and agreements between Paraguay and Argentina in order to highlight the commercial opportunities offered by the two countries in the region.
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Agreements promoting business between Paraguay and Argentina
Yacyreta Treaty
The Yacyreta Treaty, signed in 1973, responded to the world oil crisis by encouraging Paraguay and Argentina to seek a mutually beneficial solution for energy supply.
The objective of the treaty is to manage “The hydroelectric use of the Paraná River, the improvement of navigable conditions and the mitigation of the environmental effects generated by the Project”.
As a result of this agreement, the Yacyreta Bilateral Entity was created. This is a bi-national hydroelectric project that takes advantage of the Paraná river and the start-up of turbines to generate electricity that has served as the basis for the development of the industries of both countries.
Promoting renewable energy activities
This treaty has made a notable contribution to the economic development and business activity between Paraguay and Argentina in the energy sector. With the energy obtained from the Yacyreta power plant, Paraguay covers its electrical requirements, consuming an average of 10-13% of the energy produced. The rest of its 50% share is sold to Argentina who incorporates it into its national electricity system.
The project also provides support to agriculture in the neighboring areas of the two countries, with the use of water to irrigate crops. Additionally, this power plant also functions as a navigation channel, tourist attraction and also as a border crossing between the two countries.
Free trade in the automotive sector
In October 2019, the governments of Paraguay and Argentina signed their first free trade agreement for the automotive sector, which establishes tariff reductions for all cars that Argentina exports to Paraguay.
Argentina currently exports more than 4,000 vehicles to Paraguay and represents the seventh export market for the automotive sector. With this agreement, the export of pick-ups and light cars can be carried out without any tariff.
With this treaty, it is expected that by 2022 all vehicles enter Paraguay without tariffs. This agreement also includes regulations and benefits for the import of used auto parts and vehicles from Argentina to Paraguay.
Memorandum of understanding on fiscal issues
The Ministry of Finance of the Argentine Republic (MDE) and the Ministry of Finance of the Republic of Paraguay (MH) signed a memorandum of understanding (MoU) committed to strengthening relations on economic and fiscal issues.
Neither country currently has a formal double taxation treaty. The main objective of this MoU is to thereby avoid double taxation on the income obtained in any of the countries involved.
The signing of this MoU reflects the interest and willingness of both governments to take the first step to carry out a process that avoids double taxation and that benefits entrepreneurs and investors from both countries.
MERCOSUR treaty
In 1991, Paraguay, Argentina, Uruguay, and Brazil signed a treaty in Asunción for the formation of the Southern Common Market, MERCOSUR. MERCOSUR represents part of the existing trade treaties and agreements promoting business between Paraguay and Argentina.
Much of the trade in Argentina and Paraguay is facilitated through the multilateral agreements integrated in MERCOSUR.
Among the fundamental principles or objectives of MERCOSUR is the economic integration of the countries of the region, facilitating the free movement of people and goods, opening markets and promoting economic development.
MERCOSUR, Paraguay and Argentina, together with the other founding and associated countries, have reached important trade agreements with key international players.
MERCOSUR – European Union agreement
MERCOSUR also has free trade agreements with Mexico, Peru, India, Egypt and Israel, among others. For those who want to create a company in Latin America, these trade agreements between Paraguay and Argentina, in addition to the benefits that each country offers to foreign investors, can be a decisive factor when choosing which country to incorporate your company in.
Take advantage of incentives for business between Paraguay and Argentina
Paraguay and Argentina are attractive markets in the region, even more so if you have prior knowledge of the existing trade agreements between the two countries.
Opportunities for business executives are growing at a rapid rate in Latin America. Take advantage of the incentives to do business between Paraguay and Argentina by partnering with a trusted legal service provider to help you navigate and exceed the legal requirements of your market entry.
Biz Latin Hub has a team of local and expatriate experts supporting businesses in Paraguay and Argentina, ready to provide personalized support. Contact us for personalized assistance.
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