By Mark Svoboda – Re-Blogged From International Man
Over the course of the last several months, we’ve followed the journeys of Mark Svoboda as he’s traveled from Singapore to Tanzania, Malaysia to Colombia. Today Mark stops off in Paraguay, where he and his wife traveled to start their residency process…
Paraguay – the Heart of America
In April of 2012, my wife and I traveled to Paraguay to start our residency process in the so-called “heart of America.” Our hope is to eventually receive a citizenship in the country without actively residing there. Since I suspect many International Man readers are, like me, interested in 1) obtaining Paraguayan residency in hopes of eventually receiving a citizenship, and 2) buying some of that cheap productive land, I thought it was high time I report on the country.
Here is some general information about Paraguay, the purpose of which is not to make you an expert in Paraguayan history, but rather, to give you some idea about the country…
Paraguay is one of the only two landlocked countries of South America (the other one being Bolivia). Due to its central location on the continent, it is sometime referred as “the heart of America.”
Indigenous people of Guarani lived in Paraguay long before the Spaniards came in the 16th century and have left a rich heritage even in present day-Paraguay. Most of the country’s population still speaks the language of Guarani, which bears the same name.
After Paraguay received its independence from Spain in 1811, it was ruled by a series of dictators. The last dictator, Alfredo Stroessner, ruled the country from 1954 to 1989 (the longest rule in Paraguay’s history) and was known for his use of torture and kidnappings to suppress the opposition. The Archives of Terror, discovered in Asuncion in 1992, show that Stroessner is was responsible for thousands of Paraguayan lives during his presidency.
Besides its dictators, the country has also been beset by additional miseries in the form of wars. First, there was the absolutely disastrous war fought against Brazil, Argentina and Uruguay in 1864-1870, from which Paraguay emerged economically ruined after it lost much of its territory and male population. Paraguay was also involved in what is considered to be the bloodiest war fought on South American soil in the 20th century – the Chaco war. Fought against Bolivia in the 1930s, this conflict emerged over the northern Chaco region, an area that was mistakenly believed to be rich with oil. This time they won.
Paraguay’s population is close to 6.5 million people, with 2.3 millions living in the Asuncion metro area, the largest city and capital of the country. Paraguay neighbors with Brazil, Bolivia and Argentina, and straddles the tropic of Capricorn – it is therefore home to both subtropical and tropical climates. Catholicism is, by far, the most practiced religion in the country.
Despite the periods of strong growth in its history, Paraguay remains one of the poorest countries of Latin America. Its PPP GDP/capita of USD 5,143 (IMF numbers) is one of the smallest in South America, ahead of only Bolivia. The country experienced its first period of rapid growth through the seventies, when the Itaipu dam was being constructed (world’s largest hydro facility in terms of annual capacity). Most of the 90s, however, were disastrous for the country but starting in 2002 Paraguay recovered with the GDP more than quadrupling to USD 22.3 billion (IMF) in the last 10 years (mainly due to historically high prices for agriculture commodities – Paraguay’s main export).
The main natural resource of Paraguay is without a doubt its fertile soil; most of the country’s land is arable and productive. Leading agriculture products are cotton, sugarcane, corn, soybeans, as well as a very important commodity that is not widely available outside of South America (but extremely popular in the Southern cone countries), yerba mate. Yerba mate is a plant used to obtain a caffeinated beverage: Tereré when consumed cold, and Mate when consumed hot. Also, while in Paraguay, I heard numerous times that the Chaco region in the north contains large amounts of natural gas. However, a simple check on the Internet does not support that data, meaning that most likely the reserves (if they exist at all) are still in the “unproven” category.
According to IMF data, Paraguay’s Debt to GDP is a modest 14%, very low in our world of ever-rising national debts. While on the ground, I got the positive impression that Paraguay was self-sufficient in most of its needs – abundant fertile soils will likely always be in high demand, and most of the electricity produced by its mega hydroelectric stations is sold to neighboring countries. And while, of course, the success or failure of an economy mostly depends on the economic policies of the rulers, I got the impression Paraguay was going in the right general economical direction. There was a visible and quite significant middle class in Asuncion and, while bureaucracy and corruption is abundant, I heard that slowly but surely the situation was getting better.
All told, despite the Paraguay economy’s impressive growth in recent years, the country is still incredibly poor. But because of this, it may be relatively easy for the country to keep growing at very high rates, especially if high commodity prices stick around.
Personal and Corporate Finance
Finance is probably not the country’s strong point, though Paraguay does have a number of local as well as international banks. Opening a bank account is not very easy, as residency is usually required (though, like many other rules in Paraguay and as you’ll soon see, this rule can be bent in your favor).
Generally, you have the option to keep your money in USD or the local currency, Guaraní. The last choice may make more sense if you agree with me that diversifying out of USD might not be a bad idea. Moreover, banks offer interest rates up to 13% for Guaranis, and up 6% in USD for long term CDs. I opened an account at Interfisa for the simple reason that that was where my residency lawyer had good contacts (so that I could open an account without having obtained my “cedula” or permanent residency card). But as always, do your due diligence in finding out which bank you feel more comfortable with.
Until very recently, Paraguay was one of those rare countries that did not tax income. Unfortunately, in 2010 a law was passed that allowed the taxation of personal income from Paraguayan sources. The law was suspended later the same year and now is expected to enter into force in 2013. The maximum tax rate is going to be 10%, and the country expects to start collecting a whopping USD 37 million a year in personal taxes. Corporate tax is a flat 10 %.
If you ask the average American on the street where Paraguay is located, I’m sure most of them will be totally lost. The country doesn’t seem to have any stigma (bad or good) attached to it and, in effect, it seems like nobody really cares about it at all. But that could be a serious advantage in the eyes of those seeking residency and eventual citizenship there.
Historical Asuncion, where my wife and I stayed, was very pretty. But it also felt abandoned, as most of the modern development as well as night activities are now happening outside of the city center. Streets in Asuncion (and outside of it) were surprisingly clean, with the historical district being the dirtiest (despite what common sense may advise us). I was told that even Paraguayans gave up on the city center and generally avoid it except for the occasional visit to Bolsi, perhaps one of the oldest and most well-known Paraguayan restaurants.
In my opinion, Paraguay could be an excellent place for people looking for some kind of retreat, because once you get out of Asuncion, life becomes slow and easy. All the small towns are home to a slow and peaceful lifestyle, and at the same time, you don’t have to go too far from Asuncion to get back to all big city’s amenities (frankly speaking, Asuncion itself isn’t that big of a city either). Land is generally cheap, even around Asuncion, and the area around Lake Ipakarai is very pretty. San Bernardino, for instance, a small town located on the lake’s shores, was so pretty and clean that I could have thought it was located somewhere in old Europe and not in one of the poorest countries in the Americas (it was, in fact, founded by German immigrants in the 19th century).
I didn’t see many tourists running around, probably because neighboring Argentina, Brazil, Chile and even Uruguay each have arguably much more to offer it terms of cultural activities and what nature has to offer. Nevertheless, we found Asuncion (and surroundings) pretty interesting with several great museums. For example, an old train station that was built by the English in 19th century was turned into a museum now lets people go back a century or more to see how wealthy Paraguayans used to travel through the country. (Side note: as I travel through the developing world, I am constantly fascinated at how much the English have done in the world.)
We found that Paraguay, in many ways, shares the culture of food with Argentina (of course with distinct local variations) – I had one of the best steaks in my life for the price I would have paid for a hot dog in Australia! We rarely paid more than 30 USD (for both of us) to eat dinners – even in the best restaurants of the country.
Other things were not as cheap as I would have wanted them to be in a “cheap country”. For instance, taxis were relatively expensive – we paid around 30 USD for about a half an hour ride (if it was in Manila it would have cost no more than 5-6 dollars). That being said, Paraguay still remains one of the cheapest places in Latin America and will definitely fit the bill of those expats who are looking to expatriate in order to lower their monthly bills.
When we traveled there in April, the weather was great at about 25 Celsius. However, since Asuncion is geographically located at about the same distance from the equator as Houston or New Orleans, I can surmise that temperatures during the summer could get very uncomfortable, with the winters being mild and without snow. In fact, summers in Paraguay get seriously hot and uncomfortable, and I was even told that Stroessner (the country’s last dictator) was especially cruel when the summer’s dry and hot northern winds arrived…
Crime is not a major concern in Paraguay, and the place seemed quite safe to us. However, exercising a bit of common sense will always help you as Paraguay is a poor country and venturing into some of the bad neighborhoods may spell trouble. The homicide rate is on par with that of Costa Rica, so beloved by North Americans. Interestingly, despite the country’s obvious and visible poverty, I didn’t see a single beggar on the street through our entire stay. (I guess they all moved to Buenos Aires, which was strikingly full of them back when I visited the city in 2010.)
Spanish is the prevailing language for all people living in cities, while Guarani is spoken mostly in the countryside. There is also a percentage of the population who don’t know any Spanish… and also a percentage who don’t speak any Guarani. English proficiency was at best marginal, even in Asuncion, so learning Spanish should be a priority if you plan to spend any significant time in the country (but, of course, that’s true for most of Latin America).
As for public transportation, the system in Asuncion consists predominantly of old buses that leave clouds of stinky exhaust behind. Sometimes, walking was so bad that we had to change streets to ones with less traffic on them.
TRANSPORTATION AND MEDICAL CARE
Asuncion’s airport was reasonably comfortable and developed, with almost all destinations being international (due to the country’s size). Buenos Aires and Sao Paulo are the most popular destinations, and most likely, you will need to fly to either of them first in order to eventually get to Asuncion. Interestingly enough, Paraguay is the only country in South America that I know of not to have a direct flight to either the US or Spain. The furthest available nonstop flight is to Panama City. Roundtrip from Miami to Asuncion via Sao Paulo cost us a little more than a 1,000 USD per person, and the Brazilian TAM flight attendants were very pleasant – and strikingly beautiful.
Medical care is reasonably developed in Asuncion, so that shouldn’t be a big concern. A number of private hospitals are available throughout the country, and because the process of getting permanent residency involves getting a health certificate from a Paraguayan hospital, we had a chance to visit one of them in person. While the check-up we had at the hospital was a mere formality, we left with the feeling that the doctor spent a sufficient amount of time with each of us, which is becoming a rarity in the US (and the doctor’s English was excellent, so that wasn’t a problem as well). So we left with a good feeling about the hospital.
Private insurances vary in cost and quality, but I was quoted a price of 100 USD per month for a family of two. Co-pay is minimal, even in serious cases like surgery. One person I spoke to said he prefers just to pay cash every time he needs a doctor. For example, he said he paid 5 million Guarani (1,170 USD) for the birth of his child in one of the best hospitals in Asuncion. The more complicated cases are typically treated in Sao Paolo, home to some of the best hospitals in Latin America.
Obviously, the relative isolation of the country could be a downside for many potential expats. Also, the cultural life is probably somewhat limited as well (e.g., I am not sure I would be able to find my favorite “Swan Lake” ballet in Asuncion this summer).
Abundant bureaucracy and corruption is also a big minus, though I have to say the bureaucrats in Paraguay I dealt with had “human faces,” for lack of a better word. (It is much less pleasant to deal with bureaucracy in Russia, for instance, where bureaucrats – according to resilient Soviet tradition – forcefully try to demonstrate their inexistent superiority over the “serfs.”) Also, if you are used to the North American efficiency of various business enterprises, you can forget about it in Paraguay – buying a simple cell phone’s SIM card turned out to be an adventure and I spent almost 3 hours trying to accomplish the task instead of the usual 5 minutes (although I have to admit lack of fluent Spanish probably didn’t help the process either!)
Here I will only offer brief pieces of information about how to obtain residency in Paraguay. I used the services of Jeronimo Finestra (of Finestra Group), who is an active contributor to a Paraguay thread in the forum, and so far I am very happy with his and his partner Edwin’s service. Here are his contacts if you decide to use him as well:
Telephone: +595 981 259 192
E-mail: jeronimo (at) finestragroup dot com
In short, in order to qualify for a Paraguayan cedula (permanent residency card) one needs to bring a list of documents translated to Spanish and legalized in the Paraguayan embassy in your country. Once in Paraguay, a deposit of 5,000 USD in a local bank is required, plus a whole bunch of other bureaucratic procedures to be completed (see above-mentioned report for details). All this is being done in about 5-6 workdays.
Three months or so later – when residency is granted – a second trip is required in order to apply for the cedula itself. This time 4 or 5 workdays should be sufficient in order to complete all the bureaucratic procedures.
From the moment permanent residency is granted, the clock starts ticking and after 3 years of holding a cedula, one has the right to apply for citizenship. According to Paraguayan law, you are not technically required to spend any time on the ground in order to qualify for naturalization. However, I was told that it is always a good idea to spend some time in Paraguay in order to prove your ties to the country to the Supreme Court, where decision will be made in your regards.
Dual citizenship in Paraguay is allowed (if your country of origin allows it), so no difficulties should occur if you are originally an American or Canadian, for instance.
Also, some people are concerned about the military draft in Paraguay, but according to Jeronimo, the military does not play any significant role in the country anymore… and a simple “letter of objection” to serving in the military will officially relieve you from such service.
This, again, was only a brief summary of the information.
Paraguay offers one of the easiest (and transparent) ways of getting permanent residency (stress is on permanent residency) in a foreign country. It also gives you a chance to receive citizenship in 4-5 years (however, the latter is not set in stone as Paraguay is not Canada, where some 150,000 people per year become citizens and the process of acquiring citizenship is crystal clear). In Paraguay, for citizenship, everything will depend on the discretional decision of some officials in the Supreme Court. And while hot northern winds are unlikely to affect their decisions nowadays due to widespread AC availability, I personally suspect that almost anything else may cause them to deny your application for citizenship. At that stage (3-4 years later when applying for citizenship), I further suspect that hiring a lawyer with excellent connections in Government is probably the most important thing you can do for yourself.
Buying land also makes a lot of sense, as Paraguay is home to one of the cheapest productive lands on the planet. That also should improve your chances of getting citizenship, according to Jeronimo, since it will prove your “ties” with Paraguay. And substantial ties with the country are exactly what the Supreme Court will be looking at when making decision.
All in all, my personal take is that the price I am paying (less than 2,000 USD for both of us, plus various government fees) for the process is definitely worth a shot. The worst-case scenario is that I will end up with Paraguayan permanent residency – and possibly land – as well as spending some time in the country. And I consider Paraguay far from the worst place on Earth to spend time in. Best-case scenario, I acquire a long-coveted second citizenship…
[PLEASE NOTE: The publishing of this article does not imply an endorsement of the services being offered. As always, please conduct your own due diligence before engaging in any business.]