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Main aspects of PPP Law’s new regulatory decree in Paraguay

Paraguay’s new regulation for PPP Projects was published in November under Decree No. 4183/2020, superseding the previous Decree No. 1350/14 as regulation for the PPP Law (5102/2013).

Among other issues, the new regulation seeks to introduce improvements in regard to the previous one, in light of the experience in 2016 PPP projects such as the Asunción Airport (canceled before being awarded) and Routes 2 and 7 (investment of USD 550 million, 30-year term, with financial closing in October/2019). For instance, the introduction of the “competitive dialogue” between prequalified individuals intends to focus on the market and the parties specialized in these matters to obtain an efficient distribution of risks for all stakeholders, generation of social and economic profitability, and above all project funding from its conception, in order to avoid further renegotiations and/or a bankability addenda that would modify the PPP contract.

On the other hand, the new regulation seeks to simplify interjurisdictional steps and approvals to facilitate the structuring of projects from the public sector, also bringing a greater intervention by the Ministry of Finance at the different stages of PPP projects life cycle originated as public or private initiative, through the General Directorate of Public Investment and the Directorate of Credit and Public Debt in order to keep a record of future, steady and contingent payments assumed as commitment by the Paraguayan State, among other issues.

The following is a brief description of the main features incorporated under the new regulatory framework:

First of all, new definitions were added in order to clarify certain concepts that make up the structuring and implementation of these projects, such as «Financial Closing«, meaning the signing of all financial agreements or contracts entered between the Specific-Purpose Company (the “SOE”) and its financiers, by virtue of which the conditions for the funding or total financing granted to the SOE to ensure compliance with the PPP Contract are stipulated

The concept of «Competitive Dialogue» is incorporated as an interaction mechanism between the Contracting Administration and the selected prequalified entities, through which a consultation procedure and reception of proposals for technical, economic and financial improvements, additions, adjustments and harmonization is carried out in regard to bidding documents such as draft of the PBC, Proforma of the PPP Contract and any other particular related to the project that is considered pertinent. These may or may not be incorporated at the discretion of the Contracting Administration, attending to the best practices related to technical, economic and financial aspects, as well as other relevant aspects of the PPP Project. This procedure is mandatory and is taken as a stage after the prequalification call and prior to the publication of the tender.

Among the definitions, the concept of «Variable Term» is incorporated. It refers to the duration of the contract subject to the fulfillment of certain variables that are related to economic-financial issues, such as the lower present value of income (VPI), as established in the Bidding Terms and Conditions, provided that they occur before the deadline set by Law. Being long-term PPP Contracts, the incorporation of this concept gives flexibility to the project and reduces the risk profile as sponsors ensure the expected profitability with the Contract in force until the total amount offered (at NPV) is met. In times of uncertainty such as the present days, this type of variable-term concessions mitigates the risk of renegotiations by extending the project life beyond the expected due to unforeseen events that reduced revenues for a certain period.

Also, milestones marking the beginning and end of each stage are clarified, establishing that the «Construction Phase» is the period between the order to start the works and the beginning of the operation phase, with the possibility of having the Transitory Operation phase within this one due to the functional sections put into service during the construction phase. A “Preparation Phase” is added, being the period between the signing of the PPP Contract and the start of the construction phase.

Regarding the role of the institutions, a much more active role is given to the Ministry of Finance since it is established that the General Directorate of Public Investment, dependent on the Under Secretariat of Economy from said Ministry, will be in charge of evaluating PPP projects at their different stages, as well as performing other relevant evaluations (risk analysis, evaluation of the economic offer, review of the Value for Money study and the economic-financial model, among others); in addition to coordinating the functions and tasks related to this matter with its different offices, according to their respective competencies. Furthermore, this Ministry is given the power to regulate those aspects that were not anticipated in the new regulation.

On the other hand, it provides for the creation of the Executive Committee of PPP Project Authorities, comprised by Authorities from the Ministry of Finance, the Ministry of Public Works and Communications and the Technical Planning Secretariat (on which the PPP Unit depends), that must issue its own operating regulations and may require the participation of other authorities when so required

Regarding the procedure for selecting the private participant, a prequalification stage was incorporated in mandatory manner for selecting the list of participants that would be entitled to participate in the competitive dialogue and the tender; also establishing that consortia is only allowed until the prequalification stage. Additionally, the participation of potential financiers is allowed, who can follow the process during the period between the prequalification call and the tender, which is very positive to have in practice market tests and fundability of projects, avoiding further empty renegotiations or non-awarded bids as in the past.

Finally, it should be noted that, in general, the articles of the revoked Decree 1350/2014 were replicated, except for those items modified or added by this new and only regulatory Decree of the PPP law

For more information, please contact Martín Carlevaro – martin.carlevaro@berke.com.py and/or Sofía Suárez – sofia.suarez@berke.com.py

FRIGORÍFICO CONCEPCIÓN DE PARAGUAY EMITE BONOS POR UN TOTAL DE USD 161.000.000 DURANTE EL 2020

A fines de diciembre del 2020, Frigorífico Concepción emitió bonos internacionales bajo ley de Nueva York (144A/Reg S) por USD 21 millones, lo que significó una nueva reapertura, luego de la emisión de USD 100 millones de enero y el primer retap de octubre del 2020 por USD 40 millones todas con vencimiento 2025 e interés del 11%. BKM Berkemeyer fue nuevamente asesor legal de Wilmington Trust, National Association, quien actúa en calidad de Indenture Trustee (bajo ley NY) y de beneficiario de un fideicomiso de garantía constituido bajo ley de Paraguay.

Con el producido de las dos últimas emisiones, Frigorífico apunta a aumentar la producción en sus instalaciones de producción de carne en Paraguay, así como a pagar deudas existentes y fondear el capital de trabajo necesario para la construcción de una nueva planta en Bolivia.

Una subsidiaria constituida en Bolivia, de propiedad de Frigorífico Concepción actuó como garante de la deuda y el colateral esta representado por bienes inmuebles y cuentas por cobrar.

La participación de BKM Berkemeyer consistió en la revisión de todos los documentos de la reapertura desde la perspectiva de la legislación local, en especial el contrato de fideicomiso de garantía constituido en el país, cuyo patrimonio autónomo sirve de colateral a toda la operación así como también la revisión de los demás documentos de la transacción, como el offering memorándum, el indenture y acknowledgements.

Frigorífico Concepción se encuentra entre los cinco principales exportadores de productos cárnicos de América Latina. Sus instalaciones pueden albergar hasta 40.000 cabezas de ganado. La marca de empresa más amplia, Grupo Concepción, exporta productos cárnicos a más de 30 países a través de ocho subsidiarias que opera dentro de la industria de procesamiento.

Por parte de BKM participaron en esta transacción la asociada senior Milena Sljivich y el socio Martín Carlevaro.

Martín Carlevaro | Information and Analysis PM | 5 days TV

Our partner Martin Carlevaro, specialist in charge of the infrastructure and APPs practice, is interviewed on 12/18/2020 by Horacio Ferraro of 5 Días TV about the infrastructure projects that are currently in the pipeline in Paraguay.

Modification of the credit information system

As part of the post-pandemic economic reactivation, the national government enacted Law No. 6534/20 which, on the one hand, ensures the full protection of personal and credit information and, on the other hand, expands and modernizes the regulatory framework in a timely manner for its treatment and use in the market.

In general, the law enters into force immediately, and Law 1682/01 and its two subsequent amendments, known in common language as the «Informconf Law», were derogated.

The new law provides that, within a maximum period of two years (until October 2022), companies involved in processing information must rearrange their statutes, organization and operation to be renamed «Credit Bureaus». These new companies will become companies supervised by the Central Bank of Paraguay (“BCP”), with minimum capital requirements. However, the regulation of said law by the two enforcement authorities is still pending: the Central Bank of Paraguay and the Office for Defense of Consumers (“SEDECO”), so it would be reasonable to count on some specific issues to be expanded or even become enforceable in the very short term.

The following new facts can be mentioned:

a) The «right to be forgotten» is created: credit data that may affect a person should not be kept on record for more than 5 years. After that period of time, it must be eliminated or disassociated from the person.
b) Breach of the «duty of secrecy» is expanded: previously as exclusive power of judges, now is extended to the Comptroller General of the Republic, the BCP, the Tax Administration, Customs, the Attorney General’s Office and the Financial Intelligence Unit (“Seprelad”).
c) «Information consent» is expanded: companies that collect information must report the destination and purpose of the same and obtain prior express authorization from individuals.
d) The use of credit information for decision-making related to human resources, as well as for the provision of medical services, is prohibited

With regard to overdue obligations and delinquency in general, the new law provides that:

e) Delinquency for alimony becomes part of and affects a person’s credit information from the moment the claim begins;
f) Cancellation of liabilities by debtors must be reported within a maximum period of 24 hours; and,
g) Publication of overdue debts that have exceeded 3 years since their registration and not legally claimed is prohibited

Other important aspects to be considered:

h) The law establishes the obligation to inform in advance to those individuals whose credit information will be consulted, about the company that will provide the data, the use that will be given to the accessed data, and deliver a copy of the provided report in the event that the owner of the data requires it.
i) In case of rejection for entering into a contract, request for work, service, commercial or financial credit, based on a credit report, such circumstance must be reported, and the report must be shown, delivering a copy of it.
j) The sale or assignment of credit portfolios must be reported to the credit bureaus

The main positive aspect worth to be mentioned is that adjustment to the new legal obligations will be minimal for those companies whose daily business involves granting commercial loans. However, it must be noted that sanctions are more serious than in the previous legislation, with higher fines that can even include the closure of operations and disqualification within the financial system. Therefore, it is BKM|Berkemeyer suggestion to review all processes and documents related to credits, including collections, and take advantage of the opportunity to detect other opportunities for savings and efficiency.

This newsletter comprises a fast reading summary, of general interest, and in no case the same may be understood as a legal opinion or recommendation or a transcription of the text of the law. For further information, please contact juan.guerra@berke.com.py and mauro.mascareno@berke.com.py.

Frigorífico Concepción issues bonds in NY for US$ 40 million

Frigorífico Concepción from Paraguay issued bonds in NY under Rule 144A / Regulation S for a value of USD 40 million. The Bolivian subsidiary of said issuer established guarantees on the debt, in addition to a number of properties in Paraguay and receivables from activities in Bolivia and Paraguay that were set as guarantees on behalf of the investors. To this end, a guarantee trust was created in Paraguay with Finexpar as trustee and Wilmington Trust acting as beneficiary. Wilmington Trust was also the Trustee in the Indenture under New York law.

The bonds expire in 2025 and accrue an interest rate of 11%. Oppenheimer acted as underwriter for the operation

Although issuances in international capital markets are not common for companies incorporated in Paraguay, this is the second debt offering from Frigorífico Concepción this year, being a “retap” of the USD 100 million issuance in January 2020.

With the proceeds from the last issuance, Frigorífico Concepción aims to increase production at its meat production facilities in Paraguay, as well as cancelling existing debts and funding the expansion of the meat production facilities in Bolivia.

Frigorífico Concepción ranks among the top five exporters of meat products in Latin America. Its facilities can accommodate up to 40,000 head of cattle. The Concepción Group exports meat products to more than 30 countries through eight subsidiaries that operate in the processing industry.

Wilmington Trust Advisor

BKM | Berkemeyer

ugo Berkemeyer and Martín Carlevaro, Partners, and Milena Sljivich, Associat, in Asunción

TAX REGULATION ON DIVIDENDS AND PROFITS

On Saturday, November 7th, the Tax Administration published General Resolution No. 70/2020 in order to set regulations for certain aspects of Taxes on Dividends and Profits (IDU), specifically the obligation to file Informative Statements (DJI).

The Tax Administration «construes» Law No. 6380/2019 and defines the scope according to their criteria, addressing issues such as: i) filing of DJI by the «EDGUR» within the sixth month following the closing of the fiscal year, ii) information required to be provided to SET (date of meeting or the like, reported fiscal year, total amount of profits, amount to be distributed, etc.).

We emphasize on the importance of clarity when drafting the minutes regarding meetings of shareholders or stakeholders, as these documents must be attached to the DJI, and ambiguous or unclear drafting could give rise to IDU’s claims.

For more information, please contact:

federico.valinotti@berke.com.py

carlos.vargas@berke.com.py

mauro.mascareno@berke.com.py

BKM | BERKEMEYER

The MIC regulated the EAS opening process

Recently, the Ministry of Industry and Commerce issued the long-awaited regulation for opening Simplified Joint Stock Companies or “EAS” (according to its initials in Spanish) through the Unified System for Opening and Closing Companies – SUACE

This way, the process for opening an EAS will be performed by registering the electronic file in the SUACE System, which is complete when the USER (founder shareholder/s of an EAS) creates an electronic identity on www.paraguay.gov.py, validates the same through SUACE and fills the single registration form.

Finally, the User must upload this document and the Articles of Incorporation, once they are printed / signed / scanned, as well as all the required supporting documentation, and “register” the “EAS” opening electronic file. Electronic or digital signature may be used.

The electronic file will be sent to the General Directorate of Legal Entities and Final Beneficiaries for analysis, approval and registration.

The Regulation establishes minimum deadlines for notices, which shall not exceed 3 business days in any case, so the process for opening an EAS is currently the fastest in the Paraguayan legal system

Said Resolution does not include transformation, closure, dissolution and liquidation processes of EAS, which will be regulated in specific resolutions to be issued by the same Office.

For more information, contact us at

– carla.sosa@berke.com.py

– federico.valinotti@berke.com.py

BKM|BERKEMEYER

REGLAMENTACIÓN IMPUESTO A LA RENTA PERSONAL

La Subsecretaría de Tributación, por Resolución SET Nro. 69/2020 publicada el sábado 7 de noviembre, reglamentó ciertos aspectos del Impuesto a la Renta Personal al tiempo de publicar los nuevos formularios (DD.JJ) correspondientes para la realización de la liquidación impositiva correspondiente.

La Administración Tributaria por este documento “interpreta” la Ley No. 6380/2019 y precisa los alcances de ella según su criterio, el mismo se divide en dos capítulos generales de: i) las rentas de Capital y, ii) las rentas derivadas de la presentación de servicios personal, así como también aborda el tema de la documentación y registros pertinentes.

En lo que hace a las rentas de capital, especifica su alcance en asuntos tales como: anticipo de herencia, arrendamiento de inmuebles, retenciones, dividendos, alta/baja de la obligación, etc.

Por otro lado, en lo atinente a las rentas provenientes de servicios personales trata acerca de asuntos tales como: rentas en especie, familiares a cargo, rentas de menores de edad, prestación alimentaria, subsidios, esparcimiento, medicina prepaga, vivienda, construcciones/remodelaciones/refacciones, documentación/comprobantes válidos, retenciones.

Una novedad de esta reglamentación, es que aclara que la venta de inmuebles por parte de personas fìsicas, se documenta solamente con los comprobantes de retención y no con la emisión de facturas exentas. Ello resulta de suma importancia, pues implica que el precio de venta como el de adquisición, al no estar alcanzados por el IVA, no deben ser declarados en la liquidación de dicho impuesto.

Para mayor información contactar con:

federico.valinotti@berke.com.py

carlos.vargas@berke.com.py

mauro@mascareno@berke.com.py

BKM | BERKEMEYER

REGLAMENTACIÓN IMPUESTO A LOS DIVIDENDOS Y UTILIDADES

La Subsecretaría de Tributación, por Resolución General SET Nro. 70/2020 publicada el sábado 7 de noviembre, reglamentó ciertos aspectos del Impuesto a los Dividendos y Utilidades (IDU), específicamente la obligación de presentar una Declaración Jurada Informativa (DJI).

La Administración Tributaria por este documento “interpreta” la Ley No. 6380/2019 y precisa los alcances de ella según su criterio, abordando temas tales como: i) presentación DJI por parte de las “EDGUR” dentro del sexto mes posterior al del cierre del ejercicio fiscal, ii) información a suministrar a la SET (fecha de asamblea o equivalente, ejercicio informado, monto total de las utilidades, monto a distribuir, etc.).

Destacamos la importancia de la claridad de la redacción de las actas de las Asambleas de acciones o reuniones de socios cuotistas, pues estos documentos deben adjuntarse a la DJI, y las redacciones ambiguas o poco claras podrían justificar el reclamo del IDU.

Para mayor información contactar con:

federico.valinotti@berke.com.py

carlos.vargas@berke.com.py

mauro.mascareno@berke.com.py

BKM | BERKEMEYER

Modificación al régimen de información crediticia

En el marco de la reactivación económica pospandemia, el gobierno nacional promulgó la Ley N° 6534/20 que, por un lado, garantiza la protección integral de información personal y crediticia y, por el otro, amplía y moderniza muy oportunamente el marco regulatorio para su tratamiento y uso en el mercado.

En general, la vigencia de la ley es inmediata, y quedaron derogadas la Ley 1682/01 y sus dos modificatorias posteriores, conocidas coloquialmente como “Ley de Informconf”.

La nueva ley dispone que en un plazo máximo de dos años (hasta octubre 2022), las empresas que se dedican al tratamiento de datos deben reacomodar sus estatutos, organización y funcionamiento para pasar a llamarse “Burós de Crédito”. Estas nuevas sociedades pasarán a ser empresas supervisadas por el Banco Central del Paraguay (“BCP”), con obligaciones de capital mínimo inclusive. No obstante, aún está pendiente la reglamentación de la ley por parte de las dos autoridades de aplicación: el BCP y la Secretaría de la Defensa del Consumidor (“SEDECO”), por lo que sería razonable esperar que algunas cuestiones específicas puedan ampliarse o incluso tornarse exigibles a muy corto plazo.

Entre las principales novedades encontramos que:

Se crea el «derecho al olvido»: la conservación de datos crediticios que puedan afectar a una persona no deberá exceder el plazo de 5 años. Luego deberá ser eliminada, o en todo caso, desasociada de la persona.
Se amplía el quebrantamiento del “deber del secreto”: lo que anteriormente era potestad exclusiva de jueces, queda extendido a la Contraloría General de la República, el BCP, la Administración Tributaria, la Aduana, la Fiscalía General y la Unidad de Inteligencia Financiera (“Seprelad”).
Se amplía el “consentimiento informado”: las empresas que recaben información deben informar el destino y objetivo de los datos, y obtener autorización expresa previa de las personas.
Se prohíbe el uso de información crediticia para la toma de decisiones relacionadas a recursos humanos, así como para la prestación de servicios médicos.

Con respecto a obligaciones vencidas y morosidad en general, la nueva ley dispone que:

La morosidad por prestación alimenticia, desde el momento el inicio de la demanda, pasan a integrar y afectar la información crediticia de una persona;
La cancelación de obligaciones por parte de los deudores deberá informarse en un plazo máximo de 24 horas; y,
Quedó prohibida la publicación de deudas vencidas no reclamadas judicialmente que hayan superado 3 años desde su inscripción.

Otros puntos relevantes para tener en cuenta son:

Se crea la obligación de informar previamente a las personas que se consultará su información crediticia, la empresa que proveerá los datos, el uso que se dará a los datos accedidos, y entregar una copia del informe accedido en caso de que el titular de los datos lo requiera.
En caso de denegación para la celebración de un contrato, solicitud de trabajo, servicio, crédito comercial o financiero, basado en un informe crediticio, se deberá informar tal circunstancia y proveer el informe accedido, entregando copia de éste.
La venta o cesión de carteras de crédito deberá informarse a los burós de crédito.

Como principal aspecto positivo a destacar se encuentra que la adaptación a las nuevas obligaciones legales será mínima para aquellas empresas cuyo giro comercial cotidiano conlleve otorgar créditos comerciales. No obstante, vale notar que las sanciones son más graves que en la legislación anterior, previéndose multas más elevadas que pueden escalar inclusive hasta el cierre de operaciones y la inhabilitación dentro del sistema financiero. Por lo tanto, desde BKM|Berkemeyer recomendamos revisar todos aquellos procesos y documentación relacionados con créditos, incluyendo cobranzas, y aprovechar la oportunidad para detectar otras oportunidades de ahorro y eficiencia.

Este boletín comprende un resumen de lectura rápida, para interés general, y en ningún caso puede entenderse como un dictamen o recomendación legal o una transcripción del texto de la ley. Para más información, favor contactar con juan.guerra@berke.com.py y mauro.mascareno@berke.com.py.