Privatization Law In Paraguay

The purpose of this update is to provide an overview and description of the most relevant provisions of the new privatization law in Paraguay. Since previous privatizations processes were implemented through specific laws and were not of relevance for they did not involve the main state-owned enterprises (telecoms, water), the new general legislation shall be considered the basis for the present and future privatization processes in Paraguay in the major sectors of the economy.

A. In General

The 1992 Constitution expressly provides for the transfer of state owned enterprises ("SOE") and other forms of private sector participation in such public companies. Another constitutional provision guarantees competition in the marketplace and the prohibits monopolies.

B. The Privatization Law

Law 1615/2000 "On the Reorganization and Transformation of Public Entities and Reform and Modernization of Agencies of the Central Administration" (hereinafter "Law 1615") constitutes the principal legal framework for the transformation of SOEs. Law 1615 establishes a regime prepared to be applicable to all sectors where the private participation is possible. However, to this date privatization has only been authorized with respect to the telephone service company (Antelco), water and sewage company (Corposana) and the national railroad company (Fccal). The inclusion of other SOE's to the Law 1615 regime requires a law declaring the SOE "privatizable".

Pursuant to Law 1615, the Executive Branch is empowered to privatize the authorized SOEs through the issuance of Decrees during the process. The entity in charge of the privatization is the National Secretariat for the State Reform (SNRE) with rank of a Ministry dependant on the Executive.

1. Reorganization and Transformation Process. Steps.

Law 1615 establishes the sequence in the steps that must be performed to accomplish the privatization of the SOE: They are, as follows:

Intervention of the SOE. The process starts with the declaration of intervention of the SOE, and the appointment of an "intervener".

Selection of consultants. After the intervention has been effected the SNRE must select through an international bid the legal consultants (international law firm) that will organize the new enterprise and its transfer to the private sector and the investment bank that will assist the government in the sale or capitalization of the SOE.

Initiation of the process. Definition of the legal nature of the new entity. With the assistance of the legal and financial consultants the legal nature of the new entity shall be determined. Various provisions of Law 1615 establish that the new entity shall be one...