Paving the way

Paraguay is working to feature more prominently on the map for international insurers as legislation governing public-private partnerships is expected to drive investment in the country.

A small market by South American standards, the land-locked country is regarded as one of the region’s most under-developed, with GDP per capita in 2012 reaching $3,800 – only lower in Bolivia, according to the World Bank. To date, the country has also suffered from an infrastructure deficit.

Paraguay has an obvious infrastructure problem,” says Carlos Vasconsellos, partner at local law firm FERRERE. “It is one of the countries that has invested the least in infrastructure – not only in public infrastructure, but also within companies.

To deal with this, the country is now betting on a public-private law to fill the long-standing gap in progress. The new PPP legislation (in the form of law 5.102) aims to encourage foreign investment in the country by facilitating government infrastructure deals – enabling the executive to sign off on projects without approval from congress – and establishing a fund to guarantee construction payments by the government.

While current infrastructure expenditure represents less than 2% of GDP – around $400m annually – the country’s new legislation would raise $30bn over the next ten years, according to the Paraguayan ministry of public works and communications, which is currently putting final touches on the law.

We predict that further development in the country’s infrastructure will undoubtedly take place in the near future, and naturally, the necessity for financial protection will run collateral to this expansion,” Ingrid Carlou, CO of reinsurer Patria Re says. Increased infrastructure spending should, therefore, create a more favorable environment for insurers, and international insurers are already taking note.

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