To mitigate the economic effects that may be caused by implementation of public and private COVID-19 preventive actions, various entities, in coordination, have taken extraordinary and temporary steps to aid the economy, credit and, in general, consumer spending. The most noteworthy are as follows: 

FINANCIAL MEASURES

- Exception from provision regime for renewals, refinancing or restructuring: the Board of Directors of the Central Bank of Paraguay (BCP) issued Resolution No. 9, Minutes No. 17, of March 16, 2020, providing for a transitory exceptional regime on this subject. Such measures are generally applied when specific sectors are in crisis, due to extraordinary circumstances, like the farm sector not long ago. What is new here is that this measure extends to all production sectors. Thus, it gives financial entities a tool for refinancing loans granted to individuals and to legal entities.   

  1. Computation of terms for default will be interrupted exceptionally, through December 1, 2020, upon formal renewal, refinancing or restriction of principal on loans granted for any purpose to individuals and legal entities whose income is affected by the risk of COVID-19 propagation, including interest accrued and other charges through the date of a new agreement or contract. 

For this purpose, financial entities must establish provisions on the balance of the portfolio benefitting from this exceptional measure, for a percentage equivalent to the minimum provision established in Resolution No. 1, Minutes No. 60 of September 28, 2007, for the client’s category at the date of the new contract.

Similarly, it authorizes deferment for a term not exceeding 36 months of charges generated for provisions, to be recognized gradually in the financial entity’s results. 

  1. For installment transactions the obligation to cancel the total transaction will not be applicable, and arrangements may be made for renewal, refinancing, partial restructuring of installments and grace periods of up to 1 year for payment of principal and interest, with any originally established guarantees being applied to the new agreement.   
  2. To classify the debtor, credit balances benefitted by this provision will not be taken into account with other credit transactions, either of like or different nature, granted to each client and that have not benefitted from these exceptional measures. 

- The Monetary Policy Committee (CPM) ordered reduction of the monetary policy interest rate by 50 basis points, bringing it to 3.25%. This reduction seeks to reduce the “cost of money,” and thereby lower the cost of credit for the real sector. Note that there is still room to relax the monetary policy profile with a view to mitigating negative impacts that may be caused by COVID-19, without implying a risk for meeting the 4% inflation target.

- Lengthening of term for sale of recovered assets: Resolution No. 10, Minutes No. 17, issued by the BCP Board of Directors on March 16,2020, extended the terms for financial entities to sell the real properties or assets obtained in payment or in enforcement of judicial decisions, with a view to avoiding sale below cost given the current circumstances. 

TAX MEASURES:

- Payment of individual income tax: On March 16, 2020, the President of the Republic issued Decree No.3457 establishing, until April 30, 2020, an exceptional and transitory regime providing facilities for payers of Personal Income Tax on Services (IRP) to pay or regularize this obligation for the fiscal year ended December 31, 2019 and previous years still pending payment, for which the following rules shall apply: 

  1. Initial payment of 20% of the debt, to be made within 2 calendar days as of the day following submission of the payment facility request.  
  2. 0% annual financing interest rate. 
  3. Up to 5 monthly installments. 

The decree also establishes that until June 30, 2020, no penalties will be applied for noncompliance with obligations. Similarly, through that date there shall be no application of the penalties provided in general Resolution No. 13/19 for those taxpayers who fulfill tax obligations late.

- Term of effectiveness of Tax Compliance Certificates: General Resolution No. 45 issued by the Under Secretary of Taxes (SET) on March 16, 2020, established that the Tax Compliance Certificates issued through Jun e 30, 2020 shall have a validity of 90 days. Normally the validity of these certificates is only 30 days. 

PUBLIC SERVICES

The National Electricity Administration (ANDE) established that for the duration of the health emergency:  

  1. There will be no electricity cuts due to nonpayment for low voltage household service. 
  2. The payment deadline for electricity bills will be extended for 15 days as of March 17.
  3. Payments may be made in installments, without interest.
  4. Electricity meters will not be read and the pertinent electricity bills will not be issued. Estimates for the last month and historical amounts for the 12 preceding months shall be taken to average current usage. 

The head of ANDE is still to meet with the Council of Government Corporations to analyze other benefit options, among which is the possibility of reducing electricity rates. 

MEASURES WHOSE APPLICATION IS UNDER STUDY

The National Economic Team announced:

  1. The possible issuance of a line of credit for Gs.100 billion through Banco Nacional de Fomento (BNF) at a rate of 7% at 180 days, geared to companies and SMEs in the production, commercial, industrial and services sectors, to face current difficulties.
  2. The possible injection of approximately Gs. 400 billion in the economy by  Agencia Financiera de Desarrollo (AFD), to refinance SME debts.