Paraguay and Germany Strengthen Economic and Strategic Ties

Paraguayan President Santiago Peña’s recent visit to Germany highlighted a growing partnership between the two nations, focusing on trade, investment, and sustainability.

In a meeting with German President Frank-Walter Steinmeier, Peña underscored Paraguay’s position as a strategic destination for foreign investment, supported by its low taxes, competitive energy costs, and access to regional markets through Mercosur.

Bilateral trade between Paraguay and Germany reached €145.9 million in 2023. Germany exports machinery, chemicals, and vehicles to Paraguay while importing food products and raw materials.

As negotiations for a Mercosur-European Union free trade agreement progress, this partnership could unlock significant opportunities for both economies. Paraguay’s investment-friendly policies, including Law 60/90 and the Maquila Industry Law 1064/97, have attracted foreign direct investment (FDI).

The country’s stable democracy and investment-grade credit rating from Moody’s (Baa3) further enhance its appeal. Initiatives such as free trade zones (FTZs) and projects in green hydrogen and biofuels align with global trends in renewable energy and sustainable development.

Sustainability remains central to the partnership. Paraguay generates nearly 100% of its electricity from hydropower and is a major agricultural exporter, contributing to global food security.

Germany has supported conservation efforts in Paraguay’s Chaco region through funding from KfW Development Bank, using satellite technology to combat deforestation and protect biodiversity.

The upcoming EU-Paraguay Investment Forum 2025 will spotlight opportunities in renewable energy, sustainable forestry, and digital services. This aligns with the EU’s Global Gateway strategy, which aims to strengthen public-private partnerships in emerging markets like Paraguay.

In short, this collaboration reflects shared goals in sustainability, innovation, and economic growth. For Germany, it offers access to South America’s dynamic markets. For Paraguay, it reinforces its role as a key player in global trade and development.