Paraguay’s New Law To Facilitate Assembling Products Domestically While Importing From China 

This law will allow companies which import fully assembled products into the country to import only the parts and assemble them in Paraguay and thus market these products as ‘Made in Paraguay.’ 

Paraguay is considering allowing companies to manufacture electronics and digital goods on domestic soil using the parts, which are primarily imported from China. This assembly law is being discussed at a time when Paraguay remains divided over whether it should end all diplomatic ties with Taiwan in favour of China. 

Economy Minister Carlos Fernandez Valdovinos and Javier Gimenez, Minister for Industry and Commerce, explained to parliamentarians that this law will allow companies which import fully assembled products into the country to import only the parts and assemble them in Paraguay and thus market these products as ‘Made in Paraguay.’ 

Manufacturing locally will result in reduced costs, create more jobs and expand the production base without reducing imports. Paraguay already has automotive policies in place that allow for nearly 90% of all motorcycles to be assembled domestically. Therefore, this is now being extended to electronics, with home appliances like televisions, refrigerators, air conditioners and microwave ovens coming under this purview. 

With the current global economic climate disrupting supply chains, this could be a good opportunity for Asunción to expand its manufacturing sector. According to Gimenez, with US President Donald Trump announcing 30% and 50% tariffs on Chinese and Brazilian imports, respectively, this assembly law could enable the country to position itself as an “attractive hub for assembly services.” 

This law is being introduced in the country’s parliament at a time when pressure is mounting on the country to review its position on Taiwan. China considers Taiwan to be part of its territory, and the Beijing authorities have never pledged against the use of military force to reunite the island with the mainland. 

Many states, including Taiwan’s biggest ally, the US, do not consider the island as an independent state but strongly condemn China’s attempt to use military might in the region. With the Democratic Progressive Party in power in Taipei, no official talks or negotiations have taken place between the island and Beijing since 2016. 

The Taiwan-China issue flared up in Paraguay after Hugo Meza, Vice-President of the Chamber of Deputies, the country’s lower house, returned from an official state visit to China. Meza, a member of the ruling Colorado Party, emphasised that Paraguay was ‘wasting time with Taiwan,’ and that even a small portion of China’s Latin American investments could transform Asunción’s economy. 

Paraguay is the only country in South America to maintain diplomatic ties with Taiwan instead of China. Meza said that Paraguay remains one of the few countries which do not recognise China, and the trade relations it shares with Taipei are skewed because it gives Taiwan more than what it receives from it. 

Asia’s largest economy welcomed this development, and Foreign Ministry Spokesperson Guo Jiakun also expressed that this could be the view of the majority in Asunción and urged the government to consider the long-term interests of Paraguayans. 

However, President Santiago Pena is not convinced to discard the 68-year-long friendship shared between Taiwan and Paraguay and has reaffirmed his support for the island. He also added that Asunción and Taipei share a strategic and value-based alliance and that he would be ready to defend this relationship at all costs. 

Last month, a Taiwan-Paraguay business forum was organised when Taiwanese leader Lai Ching-te visited the country. At the forum, Pena said that this partnership is built on the principles of sovereign foreign policy and commitment to democratic principles. Moreover, a senior Chinese diplomat was expelled last December, after being accused of trying to influence domestic politics to formally recognise Beijing. 

With growing divisiveness over the Taiwan issue in Paraguay’s Congress, this bill is further deepening the rift. Some businesses have accepted the initiative, although few changes have been suggested. The Paraguayan Importers Centre has suggested that the national value-added requirement be raised from 20% to 40% and the law be phased in to give companies adequate time to adjust to these new changes.