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Paraguay's economy grew at a scorching rate of 14% last year, driven by high commodity prices and growing demand for exports. "Paraguay has had a very solid and stable macroeconomic environment for the past eight years," says one partner....

Paraguay's economy grew at a scorching rate of 14% last year, driven by high commodity prices and growing demand for exports. "Paraguay has had a very solid and stable macroeconomic environment for the past eight years," says one partner. The country has traditionally been a leader in soy production, of which it is the fourth-largest exporter worldwide. It has also seen an investment uptick in other staples, including bio-fuels, ethanol, and sugar. One partner pointed out that the Japanese sesame seed market has also opened up for Paraguayan producers.

Global agribusiness firms, Archer Daniels Midland (ADM) and Monsanto both announced plans to expand in the country. ADM invested $23 million in the nation's first fertiliser plant, while Monsanto publicised, in April 2011, its intentions to invest $5 million over the next five years, according to Reuters. Monsanto recently opened an experimental crop station in the country.

Beyond companies looking to tap the country's most important cash crop, foreign investment is flowing from a diversified group. "A lot of foreign investment is coming from Brazil, the funds, and the multilaterals," says one partner. For example, in December 2010, the Inter-American Development Bank (IDB) closed a $40 million syndicated loan with Banco Continental to facilitate lending to small and mid-sized business. It was the first internationally syndicated loan in Paraguay.

One partner points out that the favourable investment climate has been reinforced by structural changes in the banking sector. "The banks have gotten their act together in the last couple of years and have become attractive to multilaterals," says one attorney. "The banks have controls in place that make multilaterals feel comfortable. Previously, the banks were not up-to-date with the requirements the international investors require."

Taxes remain comparatively low in the country. In February, the government proposed tax hikes in an effort to close the country's $400 million defecit. These included levies on soybean and beef exports."There was a draft of some new legislation, which did have an impact on our practice," explains one attorney. "[The new proposals] did not become law. They would have created new taxes. They would have affected major economic activities." However, attorneys suspect that taxes will ultimately be raised at some point in the future.

In addition to the deficit concerns, new infrastructure projects to move goods through the country to port will require new investment, either from the public or private sector. Nevertheless, the legal community remains confident about the country's economic prospects. "The country is doing fine," says one practitioner. "We have excellent news on the economic side, the legal profession in general." Paraguay and its southern neighbour Uruguay are both benefiting from the commodities boom. "The whole region is coming together," says another practitioner.