Paraguay Corruption Report

Businesses face a high corruption risk when dealing with the police in Paraguay. Corruption is widespread within the security apparatus, which lacks adequate funding and training, and several NGOs have reported on police involvement in extortion (HRR 2014). Citizens rank the police as the second-most corrupt institution in the country (GCB 2013), while companies report the police is unreliable in protecting business from crime and in enforcing the law (GCR 2015-2016).

National police authorities did investigate, punish and discharge some members of the police during 2014 with the aim of cracking down on crime and administrative violations within the institution (HRR 2014). In mid-2014, senior police officers Jose Dolores Amarilla, Osvaldo Ayala and Joni Diaz were found guilty for several crimes, including money laundering and extortion, and sentenced to 15 years’ imprisonment; five other police officers involved in the case were sentenced to 10 years in prison (HRR 2014). In another case, Francisco Alvarenga, the commander of Paraguay’s national police and several other police officers, including Alvarenga’s son, have been charged with the embezzlement of the agency’s gasoline funds amounting to USD 230,000. Paraguay’s President removed Francisco Alvarenga from his post (Insight Crime, May 2015). The case is ongoing at the time of review.

Paraguay’s public services sector carries a high corruption risk for business. Corrupt acts are common practice in the sector: Front-line civil servants take advantage of the time-consuming processes of administrative services to extract bribes in return for accelerating procedures (ICS 2015). Corruption is further exacerbated by the high levels of informality in the economy, which can be traced in, for instance, the low rate of formal registration of companies and employees (CATC 2011). Inefficient government bureaucracy is a major problem for investors and counts among the most problematic factors to doing business in Paraguay (GCR 2015-2016).

At the start of 2016, Paraguay’s government institutions implemented biometric control systems for their staff. The initiative is aimed at curbing corruption in public services and to ban the ‘planilleros’, people receiving a salary without filling a position at the given institution (Prensa Latina, Jan. 2016). Only forms, documents and reports registered in the biometric clocks will be recognized (Prensa Latina, Jan. 2016). Dealing with construction permits in Paraguay is less costly and less time-consuming than the regional average while starting a business is more costly and time-consuming (DB 2016). The government launched Portal Paraguay to provide several administrative services online as part of the country’s e-governance strategy for increased transparency.

Companies face a high corruption risk when operating in the Paraguayan public procurement sector. Businesses find both that public funds are often diverted to companies and individuals due to corruption and that favoritism is widespread among procurement officials (GCR 2015-2016). There is a lack of oversight and accountability in the administration of government procurement, and the failure to separate official actions from personal financial interests has heightened the risks of corruption in the sector (CATC 2011). Paraguay’s procurement sector suffers from a large-scale network of favoritism which is known as la patria contratista; companies involved in these schemes are attributed contracts by corrupt officials in return for bribes (Auriol, Straub & Flochel, Mar. 2015). The main means by which officials favor firms over others in government tenders is through the application of the exceptional purchase mechanism to annul the obligation to organize public tenders above certain amounts (Auriol, Straub & Flochel, Mar. 2015). Companies are recommended to set-up and strengthen compliance systems and conduct due diligence when investing or planning to invest in Paraguay.

Companies operating in Paraguay’s natural resources sector face a high risk of corruption. Regulatory agencies supervising the industry are inefficient and opaque (ICS 2015), and patronage networks play a major role in the distribution of resources (BTI 2014).