Archivos del autor: Berke Report

Managing partner Hugo Berkemeyer is skilled at steering the firm towards areas of opportunity in Paraguay’s growing economy. The calibre of multinational companies that turn to it for deal work underscore the firm’s transactional skills, while investment in its project finance and infrastructure capabilities have more than paid off, particularly for PPP work.

Partners specialising in tax, environment and labour law, as well as litigation, are on hand to ensure clients receive a complete service offer. BKM | Berkemeyer also has a deep knowledge of the country’s more traditional sectors. It has an agribusiness and real estate practice to assist local and foreign companies investing in each area, and advises foreign financial institutions lending to them.

BKM | Berkemeyer is taking advantage of Paraguay’s economic growth. It has increased its headcount and taken on new offices in Asunción’s business district. The firm is doing more real estate work as developers also take advantage of the country’s growing economy. It has hired associates to accommodate the growing demand for labour advice from Argentine companies and boosted its tax team in line with new regulations from the tax authority.

While the firm is an established player having been in the market for 60 years, it has a modern approach. The leadership fosters team-work and promotes an open working culture that encourages associates to get involved. As part of that, it has a new compensation system and career programme, as well as policies in place for international studies and to foster diversity and pro bono.

Clients praise the firm’s high-quality advice and business-minded approach. International names dominate the firm’s books, thanks to lawyers speaking a range of foreign languages (German is a strength here). For clients unfamiliar with Paraguay’s business climate, the corporate practice is a one-stop shop offering services from human resources to accounting. The firm also maintains ties to the business world through its involvement in the Paraguayan American Chamber of Commerce. This firm’s service offer is enhanced through the team’s links to the government and the assistance its lawyers have provided in drafting parts of the country’s legislation.

Source: https://latinlawyer.com/ll250/firms/1132076/bkm-berkemeyer

A number of specialized magazines from the Latin American legal market published articles regarding the advisory assistance provided by the firm BKM | Berkemeyer to Rutas del Este S.A.

Read More:

http://lexlatin.com/noticia/rutas-del-este-crea-fideicomiso-garantizar-credito-sindicado-paraguay/https://latinlawyer.com/article/1166323/berkemeyer-gross-brown-vouga-and-olmedo-in-landmark-paraguayan-ppp-financinghttp://www.abogados.com.ar/consorcio-rutas-del-este-obtiene-financiacion-de-bancos-locales-en-paraguay/21071

Last October 17th, Attorneys of the Firm BKM I BERKEMEYER, Federico Valinotti and Jorge Figueredo Klein, offered a dissertation before the Paraguayan-American Chamber of Commerce (PANCHAM) regarding Decree No. 359/18 “By which the legal provisions regulating the Personal Income Tax (IRP) are specified and unified” issued on Friday, October 5th, 2018, mere days before the beginning of the submissions of tax returns for the settlement of the tax due for the fiscal year 2017.

In this regard, upon being invited by the PANCHAM, and after a brief introduction regarding the history of the Personal Income Tax in Paraguay  offered by the heads of said Chamber, Mr. Roberto Chinan (President) and Dr. Daniel Elicetche,  the aforementioned attorneys explained the process of the negotiations between the business sectors and accountants in representation of the private sector and the current authorities of the National Government, that ended with the signature of Decree No. 359/18 (which regulates the aforementioned tax), and also compared the changes included and the matters that were not affected with regards to the Decree previously in force, No. 6.560/16, which was then rendered invalid by Decree No. 359/18.

It is important to note that the issuance of the aforementioned regulations put an end to nearly two years of discussions and negotiations on the different interpretations of the way to settle the mentioned tax, which included the submission of a Non-Binding Query signed by all business sectors in the country, and several Unconstitutionality Actions. These are procedures in which the aforementioned attorneys have advised the National Chamber of Commerce and Services of Paraguay (CNCSPy) and by extent, the FEPRINCO (Federación de la Producción, la Industria y el Comercio – Federation for the Production, Industry, and Commerce) along with other prominent attorneys and accountants.

The dissertation had a significant attendance of professional accountants and attorneys as well as tax payers affected by the mentioned tax. The dissertation was open to not only members of the Chamber but also the general public, and ended with a Q&A segment which helped to clarify the most concerning aspects of the settlement of the tax as per the new regulation. The importance of the agreement achieved between the parties involved towards the legal certainty of the country was also highlighted.

For further information on the existing changes in Decree No. 359/2018 and the modifications with regards to the previous regime, please reach out to Federico Valinotti (Federico.valinotti@berke.com.py) and Jorge Figueredo (Jorge.figueredo@berke.com.py).

Recently, economist Jorge Vergara, head of the Direction of Strategic Projects (DIPE) of the Ministry of Public Works and Communications (MOPC), announced a new pipeline of infrastructure projects to be tendered under the public-private partnership modality, governed by Law No. 5102/13 (PPP Law) and under the turnkey regime, governed by Law 5074/13 and amendments. He also announced expected investments of USD 370 million in PPP projects, and tender works that represent financing of approximately USD 1,140 million in turnkey projects.

It is important to note that under both contracting modalities the private party provides the financing of the project. Nevertheless, there are important distinctions between the two regimes. In contracts under public-private partnership modality, the private party, not only designs and builds the work, but is also in charge of the operation and maintenance of the works performed. Therefore these contracts are long term, and they are generally funded with the project’s cash flow and collateral under the non-recourse Project finance scheme .

In contracts of public works with private financing (Law 5074), the contractor designs and builds the works, but payment by the State is deferred to 10 years approximately after the completion of milestones. Once the works are completed, the State operates and maintains the works. Payment obligations by the State to the contractor are implemented through “Certificates of Recognition of Payment Obligation” (“Certificado de Reconocimiento de Obligación de Pago in Spanish), unconditional and irrevocable payment certificates, that once issued, are independent to the work’s contract, and are backed by sovereign guarantee of the Paraguayan State. These certificates can be assigned by the contractor to third parties prior authorization of the State .

As announced by DIPE’s representative, the bidding package consists of 7 projects that are to be tendered in the period between 2019 and 2021.
Projects to be tendered under the PPP modality:

• Implementation of a ferry system in the Paraguay River to transfer passengers from the capital to various cities in the metropolitan area. This is a private initiative presented by the company Somarco and is currently being analyzed by the Technical Secretariat for Planning. If the project is approved, its execution would be tendered during commencement of the following year. Estimated investment amount: USD 40 million
• Duplication of Ruta No. 1 in the section San Lorenzo – Itá – Quiindy, and the improvement of the southern access area until the connection to Ruta No. 1 (110 km). Foreseen to be tendered next year. Estimated investment amount: USD 200 million
• Duytu5 brplication and improvement of Ruta No. 6 from Encarnación until the cross with Pirapó (65 km). Currently in stage of project development. Estimated investment amount: USD 130 million
• Projects to be tendered under the turnkey regime:
• Duplication of the section Falcón – Cerrito and asphalt pavement Ruta No. 12 until General Bruguez (200 km). Foreseen to be tendered between July and August of this year. Estimated investment amount: USD 150 million
• Second and third stages of the Bioceanic Corridor, that will consist on asphalt pavement the section Cruce Centinela – Mariscal Estigarribia – Pozo Hondo (573 km that are to be divided in two parts). This work is in design stages and the call for tender is foreseen for the year 2021. Estimated investment amount: USD 800 million
• Asphalt pavement of the section Puerto Indio – Mbaracayú and connection to the superhighway (65 km). Foreseen to be tendered in the second semester of this year. Estimated investment amount: USD 80 million
• Costanera Sur construction and coastal defense for the city of Pilar. Estimated to be tendered next year. Although to be tendered under the turnkey regime, the government is still analyzing the contracting modality. Estimated investment amount: USD 110 million
• In the years 2017 and 2018 BKM|Berkemeyer has assisted the bidders that have been awarded and signed the first contracts under the PPP and turnkey modalities. To date, the firm counsels on financial closure, both in the PPP project of Ruta No. 2 and Ruta No. 7 (of USD 500 million approx.) and the bioceanic corridor (USD 445 million approx.). The contracts are in full execution, an explanation to the Paraguayan State’s decision to betting on tendering the largest infrastructure projects through these contracting regimes.

The use of bankruptcy proceedings as punitive sources for insolvent debtors has been left frozen in time. When enacted, Law No. 154/69 regarding Bankruptcy was one of the most modern in Latin America. However, to this date this law is rarely applied and the idea of «punishing» a debtor for reaching insolvency is gradually abandoned. Modern insolvency systems seek to recover the debtor’s business, by reorganizing or restructuring the debts rather than liquidating the assets, as this contributes to the development of the economy and is under the belief that it is preferable to maintain a business or company that once was feasible, despite the financial problems that the business or the company may have encountered on the way.

The truth is that, when facing financial problems in these days, insolvency and bankruptcy provided by Law No. 154/69 are not considered attractive for both debtors and creditors, so we express our total approval to the insolvency reform initiative in Paraguay. In fact, the Bill of Law on Insolvency Resolution was submitted to the Congress, intended to keep those effective provisions of the current law but, at the same time, adding some modern touches to our bankruptcy system through the incorporation of new institutions.

Extrajudicial reorganization agreement, preservation of business through a sale under way, cross-border insolvency and mixed model of receivership are some of the new additions.

Extrajudicial reorganization agreement is a preliminary step before filing for insolvency and allows the debtor in a state of insolvency or with financial problems to agree with an absolute majority of the creditors, namely representing two thirds of the accountable capital, a debt restructuring. The Bill provides for the approval of this agreement before a judge and such approval has the same effects as an approved composition of creditors in insolvency proceedings.

Furthermore, as a novelty, the bankruptcy process incorporates the sale of assets as a unit or the company in working order, which allows a more efficient settlement. In some cases, selling the unit or the company is more practical than liquidating the assets separately. This inclusion demonstrates the trend towards reorganization and recovery of a feasible business even in bankruptcy cases.

In addition, Model Law on Cross-Border Insolvency by the United Nations Commission on International Trade Law is adopted. This section of the project basically seeks to regulate cooperation between the Paraguayan authorities and those of foreign countries, create a mechanism that provides greater legal security to trade and investment, guarantee the protection of the debtor’s assets, optimize their value and protect the interests of creditors and other interested parties. 

Perhaps one of the most expected inclusions is the mixed system of receivers established by the bill. Currently, there are only six receivers in charge of all bankruptcy proceedings in the country. This deficiency also contributes to make the bankruptcy proceedings an unattractive solution for both debtors and creditors. This project is focused in appointing independent professionals with degrees in Laws or Economics, Accounting or Business Administration, as receivers; to that end, a registry or list under responsibility of the Judicial Council and the General Bankruptcy Receivership should be set. This list would be valid for five years. 

The interesting part of this is the procedure established for the selection and appointment of receivers in bankruptcy proceedings. The same will be drawn by lot and the appointed receiver shall not participate in future draws until the list is closed, which ensures a good and balanced distribution of the work for receivers.

Undoubtedly these inclusions will strengthen the system in regard to insolvency cases in the country. Promulgation thereof will contribute for developing the economy and attracting new businesses in the country.

The purpose of the new Bill is to create a new type of company that, as indicated by its name, establishes a smaller number of formalities for its incorporation and operation than the companies already existing according to our laws. A novel characteristic shown by the EAS would be that they may be incorporated by a single natural or legal person, with the only limitation that single EAS cannot constitute or participate in other single EAS.
If the law is enacted, the Ministry of Finance should create an exclusive unit that will record, control and monitor the EAS. The EAS will acquire legal status upon being registered at the Ministry of Finance, so registration before the Public Registries will not be required. In addition, it must be registered in the Unified System for Opening and Closing Companies (SUACE), with a website where a registration form and a model for articles of incorporation will be published.

Share capital of the EAS will be represented by nominative shares, whether endorsable or not, ordinary or preferred, and the capital may be paid up in cash or with other assets. When the contribution is in money, payment is authorized to be made by delivering 50% of the payable amount at the incorporation act and the remaining 50% within the 2 (two) years upon the incorporation, and on the other hand, contributions in assets should be made at the moment of incorporation.

It should be noted that no minimum or maximum amount is set as share capital for this new type of company. The EAS will meet their obligations only with their equity assets, meaning that all members of the EAS should respond up to the amount of their respective contributions.
Regarding the EAS organization, the organizational structure of the company can be freely determined. Anyhow, it is established that the governing body of the company will include the EAS members and that a legal representative must be appointed. Nevertheless, the creation of an administrative body, as well as an audit body, will be optional.

EAS are required to keep the following corporate books:

• Minutes book of the governing body;
• Stock registration book;
• Minutes book of the administrative body (in case it is created);
• Journal book; and
• Inventory book.

Should you want to know more about this Bill, do not hesitate to contact us.