72739 v1 World Trade Indicators 2009/10 Paraguay Trade Brief Trade Policy with Brazil, the government temporarily imposed tariffs on certain imports from Argentina and Brazil, Trade policy is central to the government of Paraguay, arguing it was similar to those placed by the two as it receives a significant portion of its revenues from countries on their MERCOSUR partner. Tariffs customs.1 Paraguay’s tariff regime has become more increased to 10 percent on certain pesticides and rigid since 2006 according to the latest MFN Tariff disinfectants and to 15 percent on paints, varnishes, Trade Restrictiveness Index (TTRI),2 which increased and other related items.3 The tariffs also applied a from 5.7 percent to 7.4 percent in the latest data. Its requirement that importers of textiles be registered level of openness is now closer to the average for the and possess an import license.4 In April 2009, tariffs Latin America and Caribbean (LAC) region and lower- were reduced on raw materials, plastics, chemical middle-income countries, with TTRIs of 7.6 and 8.6, products, medicines, telecommunications equipment, respectively. It ranks 80th of 125 countries (where 1st is and computer equipment.5 least restrictive). There remains a significant disparity between non-agricultural goods and agricultural goods, however, which have TTRIs of 3.6 and 7.1 percent, External Environment respectively. The simple average MFN applied tariff As judged by the latest Market Access TTRI6 has also inched up in recent years to 11.6 percent in (including preferences), on which it is ranked 20th out 2008. When taking into account the preferences, it is of 125 and scores 0.9 percent (down from 2.3 percent slightly lower at 11.2 percent. This is now higher than in 2006), Paraguay’s agricultural and manufactured the average tariff for LAC countries of 9.3 percent and exports enjoy favorable access to international is now more in line with the average for lower-middle- markets. This is compared with the average for the income countries of 11.4 percent. Paraguay’s LAC region and lower-middle-income group, which maximum tariff on all goods (excluding alcohol and have MA-TTRIs of 2 and 2.3 percent, respectively. tobacco) is 25 percent. The trade policy space, as The simple average of Paraguay’s rest of the world measured by the wedge between bound and applied applied tariff has risen to 9.7 percent in 2008 from 3.6 tariffs (the overhang), is 21 percent, with 100 percent percent in 2006. When taking into account the level of of all tariff lines bound. Regarding the extent of its exports, is much lower at 6 percent. Paraguay had one commitment to trade liberalization in services, anti-dumping investigation initiated against it in the Paraguay ranked 105th out of 148 countries according first quarter of 2009 by Argentina. The real effective to the GATS Commitment Index. exchange rate of the Paraguayan guarani appreciated In an effort to stimulate exports and domestic industry 17 percent in 2008, making exporters less competitive amidst the global economic downturn, Paraguay raised abroad. import restrictions on some final goods and reduced As a member of MERCOSUR, Paraguay is currently tariffs on some inputs. As a result of Argentina’s negotiating free trade agreements (FTAs) with many import restrictions and Paraguay’s large trade deficit other trading blocs, including CARICOM, the Southern African Customs Union (SACU), the European Union, and the Gulf Cooperation Council.7 Unless otherwise indicated, all data are as of August 2009 The MERCOSUR countries are also negotiating and are drawn from the World Trade Indicators 2009/10 several bilateral trade agreements, although none have Database. The database, Country Trade Briefs and been signed. An earlier signed, preferential trade Trade-at-a-Glance Tables, are available at agreement on 450 goods with India came into effect in June 2009. http://www.worldbank .org/wti. If using information from this brief, please provide the following source citation: World Bank. 2010. “Paraguay Behind the Border Constraints Trade Brief.� World Trade Indicators 2009/10: Country Trade In terms of the conduciveness of its institutional Briefs. Washington, DC: World Bank. Available at environment to business, Paraguay ranked 124th out of http://www.worldbank.org/wti. World Trade Indicators 2009/10 Paraguay Trade Brief 183 countries in the 2010 Ease of Doing Business 5. WTO, July 2009. index. It also ranked 71st out of 150 countries on the 6. MA-TTRI calculates the equivalent uniform tariff of 2007 Logistics Performance Index with a score of 2.57 trading partners that would keep their level of imports on a scale from 1 to 5, with 5 being the highest constant. It is weighted by import values and import performance. Landlocked Paraguay’s strongest demand elasticities of trading partners. logistics indicator is timeliness of shipment, while its 7. SICE, 2009. weakest is efficiency of customs and other border 8. Webber and Mander, 2008 procedures. 9. All quarterly data is from IMF, 2009. Trade Outcomes References After having low trade growth rates in the early 2000s, Bilaterals.org. April 2009. “MERCOSUR.� . in total trade of goods and services accelerated to 20.8 Foreign Trade Information Service (SICE). 2009. “Trade percent in 2008, but is expected to shrink by 2.1 Policy Developments.� . percent in 2009. Exports grew by 14.6 percent, while Food and Agriculture Association of the United Nations. imports of goods and services grew by 26.3 percent in 2009. “Policy Measures Taken by Governments to 2008. They are expected to shrink by 1.8 and 2.4 Reduce the Impact of Soaring Prices (As of 15 percent in 2009, respectively. December 2008).� FAO, New York, NY. Paraguay’s major exports are soybeans, feed, cotton, International Monetary Fund (IMF). August 2009. meat, and edible oils. As a result of rising international International Financial Statistics (Country Tables). prices for these goods in early 2008, Paraguay’s IMF, Washington, DC. exports rose considerably, boosting its trade balance Paraguay Central Bank. 2007. “Economic Statistics: more than any other country’s according to the IMF. External Sector.� Over 2007 and 2008, its production of soybeans Paraguay Central Bank: International Economy doubled, boosting its exports by 77 percent in 2007. Department (GEE), International Trade Division. Production of corn, sunflower, and canola nearly March 31, 2009. “Paraguay Country Note: tripled in the two years following the 2005 harvest, Workshop for Developing Countries on the while wheat production also rose.8 These agricultural Revision of the International Recommendations for exports led the rise in total nominal exports of 37.2 International Merchandise Trade Statistics (IMTS).� percent in 2008. However, international price declines Presidente de la Republica: Ministerio de Industria y contributed to the fall in exports of 8.2 percent in Comercio. Feb. 5, 2009. Decreto N.1421. nominal U.S. dollar terms in the last quarter of 2008.9 Presidente de la Republica: Ministerio de Haciendas. Exports are expected to fall by 16.2 percent in 2009, March 2009. Decreto N.1731. but in the first quarter, they have only fallen by 6.8 Economist, The. April 30, 2009. “Paternity Claims Distract percent. Nominal imports grew by 44.8 percent in from a Struggle for Reform; The Boy and The 2008, but are expected to fall by 14.5 percent in 2009. Bishop.� Remittances, which have grown considerably in recent World Bank PREM Trade Group. 21 April 2009. years, accounted for 4 percent of GDP in 2007, but “Update on Trade Measures and Sector-Specific dropped to 3.2 percent in 2008. FDI inflows Support (Note for Mr. Zoellick).� World Bank, accounted for 2 percent of GDP in 2008. Washington, DC. Webber, Jude, and Benedict Mander. August 23, 2008. Notes “Paraguay Moves Up Food Chain.� The Financial Times. 1. The Economist, 2009 World Trade Organization (WTO). 15 July 2009. “Report 2. TTRI calculates the equivalent uniform tariff that to the TPRB from the Director-General on the would keep domestic welfare constant. It is weighted by Financial and Economic Crisis and Trade-Related import shares and import demand elasticity. Developments.� WTO, Geneva. 3. Presidente de la Republica: Ministerio de Industria y Comercio, Decreto N. 1731. 4. Presidente de la Republica: Ministerio de Industria y Comercio, Decreto N.1421.