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Why Paraguay? Exploring Unique Investment Opportunities For Savvy Investors

5 min read

Why Paraguay? Exploring Unique Investment Opportunities For Savvy Investors

Latin America is brimming with opportunities these days. From luxurious apartments in Panama to beachfront houses in Brazil, expats can tap into lucrative investments almost everywhere in the region.

Finding a country that ticks all the boxes, such as a strong rule of law, low taxes, and, of course, potentially high returns, is indeed a challenge. Frequently, you need to compromise on something to get what you want, but what if you could flip the script?

The good news is that Paraguay, a country located in South America, excels in these aspects. Although there is no Shangri-La, I admit that Paraguay has impressed me since I first began exploring opportunities in the country last year. In this article, you will discover just why this investment hot spot has got to be on every savvy international investor’s radar.

 

Paraguay's population has increased 2.5 times over approximately 40 years. Ciudad del Este has grown eightfold during the same period. This shortage of housing presents incredible opportunities...

Paraguay's population has increased 2.5 times over approximately 40 years. Ciudad del Este has grown eightfold during the same period. This shortage of housing presents incredible opportunities...

HOUSING SHORTAGE: AN INVESTOR’S DREAM

Paraguay is a tiny country of around 7.5 million people, with a population density of only 18 people per square kilometre as of April 2024. However, there’s still a housing shortage, as the supply does not meet the ever-growing demand. The country’s population has increased two and a half times in around 40 years; in particular, Ciudad del Este has grown eightfold during the same period. 

As more people move into urban areas seeking better employment and living conditions, the pressure on housing has skyrocketed. This is particularly evident in Ciudad del Este, which has evolved into a critical economic zone due to its proximity to the Brazilian border and significant commercial activity. The city is now a focal point for commerce and real estate development, drawing attention from international investors.

For decades, access to credit was a significant barrier to home ownership in Paraguay, with short loan terms and high interest rates limiting the ability of families to buy homes. However, with financial reforms and stabilizing Paraguay’s banking sector, long-term mortgages have become available for up to 20 or 30 years. This shift has not only made housing more accessible to Paraguayans but has also created a fertile environment for real estate development and investment. Therefore, it is possible to capitalize on the value appreciation of property or even rental income. 

 

STRATEGIC REAL ESTATE OPPORTUNITIES

Real estate is a profitable yet broad sector; making the right investments requires thorough due diligence, research, and risk tolerance. It is certainly not for everyone, but only for those willing to embrace opportunities. In this regard, there’s a particular problem that, if tackled, could yield high returns: student housing.

Perhaps the last thing you would expect is for a country like Paraguay to be like others renowned for their universities, such as the UK, France and the US. As a member of Mercosur, Paraguay allows medical students from other member states to pursue their studies within its borders, enabling them to practice in their home country or another member state upon passing a single exam. Brazilian students often resorted to Buenos Aires, but lately, they are discovering Paraguay, where they can study medical school at 10% of the cost. 

The rising influx of international students, particularly from Brazil and other Mercosur countries, creates a burgeoning demand for student accommodation. The need for quality, affordable student housing offers an opportunity for developing apartment complexes, shared housing, and dormitory-style residences close to university campuses. These developments serve the student population's immediate needs and provide long-term rental income streams for investors.

 

Related content: Explore Paraguay: The Best Hotspots For Expats

 

Paraguay generates surplus energy due to the Itaipu Dam. As a result, this small country holds an advantageous position in regional energy markets, becoming a hub for energy-intensive industries

Paraguay generates surplus energy due to the Itaipu Dam. As a result, this small country holds an advantageous position in regional energy markets, becoming a hub for energy-intensive industries

ENERGY

Paraguay is an energy powerhouse in South America and represents a foundational pillar of its economic structure. However, Paraguay's energy sector is the backbone of national revenue and presents substantial opportunities for savvy investors, particularly given the nation's renewable energy capabilities and strategic geopolitical positioning.

As a nation that generates a surplus of energy, Paraguay supplies 100% of its own needs while contributing significantly to its neighbours' energy requirements—exporting approximately 8.6% of Brazil’s. This remarkable feat is primarily due to the Itaipu Dam, one of the world’s largest hydroelectric facilities, which Paraguay co-owns with Brazil. The dam's output significantly exceeds the domestic consumption, allowing Paraguay to maintain an advantageous position in regional energy markets.

Moreover, Paraguay’s capability to generate excess energy has positioned it as a potential hub for energy-intensive industries. One such emerging sector is data centers, which require substantial continuous power supply, and the cryptocurrency mining industry, drawn by the country's low electricity costs and renewable energy sources. These industries offer new avenues for development and attract foreign direct investment, further stimulating local economic growth and infrastructure development.

 

FORESTRY

Paraguay is also allocating efforts to forestry investment, which may yield high returns and capital appreciation over time. They say that money does not grow on trees, but savvy investors know that this is, in a sense, possible by investing in teak and timber. 

This new economic opportunity is represented by two major projects, Paracel and Astarte. According to Fernando, a real estate developer in Paraguay and a dear friend of mine, these projects are channelling between $1.5 and $2 billion into the northern region of Paraguay. Paracel, already a few years into operation, and Astarte, announced recently, are set to transform vast tracts of land into productive forestry hubs. These investments are expected to bring many economic benefits, including job creation, infrastructure development, and increased export revenues.

Paraguay’s forestry industry is driven by the country’s favourable climate, friendly regulatory conditions, and the vast amount of suitable land. The involvement of Scandinavian investors highlights international confidence in Paraguay’s forestry potential. These investors bring capital and expertise in sustainable forestry management, which is crucial for ensuring the long-term viability and environmental compatibility of these projects.

 

Paraguay maintains its pro-market stance, promoting foreign investment. The current president has made it clear that taxes will not be increased, reinforcing the country's commitment to economic growth and business facilitation

Paraguay maintains its pro-market stance, promoting foreign investment. The current president has made it clear that taxes will not be increased, reinforcing the country's commitment to economic growth and business facilitation

FUTURE PROSPECTS

The Paraguayan economy traditionally relies on energy, trade, agriculture, and livestock. These four sectors represent a solid foundation for the country’s economy, which is further improved by forestry and, of course, real estate. 

The country’s prowess in hydroelectric power has already established it as a significant player in the regional energy market. Meanwhile, its strategic geographic location enhances its trade capabilities, particularly with other Mercosur countries. Agriculture and livestock continue to benefit from Paraguay’s fertile lands and favourable climate, supporting both domestic consumption and international exports—Paraguay is one of the top ten bovine meat exports in the world.

Apart from all these lucrative opportunities, the regulatory framework cannot be neglected. Low taxes, simple laws and a pro-business government facilitate and promote foreign investment. Santiago Peña, the former Minister of Finance and the current country’s president, claimed that he would not raise taxes, showcasing that Paraguay is serious about growing its economy and making things easy to conduct business. 

Just to put things in perspective, on an episode of the Expat Money Show where I interviewed business partner Fernando, we went through some property-related taxes:

  • 5% VAT on the lease of real estate.

  • 1.5% VAT in property acquisition, included in the property price. 

  • 2.4% personal income tax when selling the property.

Compared to Western countries, where capital gains can easily be over 20%, these taxes in Paraguay are minimal. Paired with its territorial tax system and no wealth or inheritance taxes, this country may be an excellent option for you to keep and multiply your money. 

 

Related content: Why Paraguay Is A Gateway Of Opportunities For Expats

 

Even though Paraguay is still an emerging country, I was surprised by its potential and could not have predicted how much it would climb up my personal list of countries for heavy investment

Even though Paraguay is still an emerging country, I was surprised by its potential and could not have predicted how much it would climb up my personal list of countries for heavy investment

CONCLUSION

Paraguay is still an emerging country. Given its current economic situation, it offers savvy investors a golden opportunity to tap into profitable sectors such as real estate, especially in the student housing market, energy and even forestry. I was certainly pleasantly surprised by the country’s potential and couldn’t have predicted how quickly it would rise on my short list of countries to invest heavily in.

Ciudad del Este, in particular, is a special place due to its shared border with Brazil and the university campuses there. The returns will likely be high for those with the vision to see the huge returns just over the horizon. Also, if you are interested in crypto mining or even forestry, Paraguay has you covered. 

As a bonus, you can also apply for permanent residency by investing $150,000 USD in property. A solid global strategy requires having backup residencies, and Paraguay makes it extremely easy for you. To stay up-to-date with these trends and get the best intel in the expat world, subscribe to our newsletter and get your free special report, ‘Plan-B Residencies and Instant Citizenships.’ Inside, you will find out how to get a new visa, a second passport, and even a country that suits your specific needs.

 

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Mikkel Thorup

Written by Mikkel Thorup

Mikkel Thorup is the world’s most sought-after expat consultant. He focuses on helping high-net-worth private clients to legally mitigate tax liabilities, obtain a second residency and citizenship, and assemble a portfolio of foreign investments including international real estate, timber plantations, agricultural land and other hard-money tangible assets. Mikkel is the Founder and CEO at Expat Money®, a private consulting firm started in 2017. He hosts the popular weekly podcast, the Expat Money Show, and wrote the definitive #1-Best Selling book Expat Secrets - How To Pay Zero Taxes, Live Overseas And Make Giant Piles Of Money, and his second book: Expats Guide On Moving To Mexico.

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