VZCZCXYZ0000
OO RUEHWEB

DE RUEHAC #0847 3541645
ZNR UUUUU ZZH
O 191645Z DEC 08
FM AMEMBASSY ASUNCION
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7464
INFO RUCNMER/MERCOSUR COLLECTIVE PRIORITY

UNCLAS ASUNCION 000847 
 
SIPDIS 
 
PASS TO MCC MLONGI AND MKARBELING, STATE FOR WHA/BSC 
MDASCHBACH 
 
E.O. 12958: N/A 
TAGS: PGOV PREL EAID ECON PA
SUBJECT: PARAGUAY'S THRESHOLD PROGRAM WORKING TO FORMALIZE 
CIUDAD DEL ESTE 
 
¶1.  (U) Ambassador and Paraguayan Minister of Industry and 
Commerce Martin Heisecke visited December 10 manufacturers in 
Ciudad del Este (CDE) supported by USAID's Millennium 
Challenge Corporation (MCC) Threshold Program.  Ambassador 
and Heisecke visited Qin Yi America and Cortinerias del 
Paraguay, two manufacturers that exemplify the success of 
phase one of the Threshold Program in formalizing Ciudad del 
Este's economy and creating local job opportunities.  Qin Yi 
America's owners -- who previously imported goods from China 
and re-exported to Brazil via commercial brokers -- legally 
registered the company this year, and opened a new facility 
that will employ over 200 workers and export up to USD eight 
million in bedcovers to Argentina and Brazil next year. 
Cortinerias, a Brazilian curtain manufacturer that registered 
with the government this year, will employ 120 workers and 
export approximately USD two million to Brazil next year. 
 
¶2.  (U) The Threshold Program helped Paraguay promote 
economic formalization by streamlining its business 
registration process and strengthening the Paraguayan Maquila 
Council's (CNIME) ability to attract foreign investment. 
(NOTE:  CNIME, part of the Ministry of Industry and Commerce, 
governs the "Maquila" system.  The "Maquila" system is a 
Mercosur-recognized tax incentive regime that stimulates 
domestic job growth through the value-added production of 
goods for export.  END NOTE.)  Qin Yi America and Cortinerias 
incorporated this year under Paraguay's One-Stop Shop for 
Business Registration (SUAE), and obtained approval from 
CNIME to operate under Paraguay's "Maquila" system. 
Component 9 of the Threshold Program helped the Paraguayan 
government establish SUAE, an inter-governmental agency that 
reduced the cost and number of days (from 74 days in 2006 to 
less than 15 this year) required to establish a business. 
Paraguay's increased ease of doing business gives informal 
businesses an incentive to formalize.  (NOTE:  Paraguay rose 
from 138th in 2006 to 66th this year in the World Bank's 
Doing Business Report's "Ease of Starting a Business" 
indicator.  END NOTE.)  Component 10 enhanced Paraguay's 
capacity to export by contributing to the establishment of 23 
new manufacturing facilities (maquiladoras), increasing the 
total value of maquiladora exports from USD 68 million in 
2006 to USD 178 million this year (an increase of 260 
percent), and creating as many as 4,000 new jobs.  The 
Threshold Program also provided the CNIME with training, 
promotional materials, and computing resources needed to 
assist new manufacturers.  (NOTE:  Threshold Program spending 
on components 9 and 10 was USD 3.1 million, less than 10 
percent of total funding for the program.  END NOTE.) 
 
¶3.  (U) COMMENT:  Ambassador's visits to Qin Yi America and 
Cortinerias demonstrated the USG's continued support for 
Paraguay in its efforts to formalize its economy.  These 
manufacturers illustrate that Paraguay can convert informal 
enterprises into legal businesses, stimulate job growth, 
increase exports, and shrink the informal economy.  The 
Paraguayan government has made strides in formalizing CDE's 
economy with the help of the Threshold Program.  However, it 
still faces immense challenges formalizing the area's large 
informal economy.  Alto Parana Governor Nelson Aguinagalde, 
CDE Mayor Sandra McLeod, and Javier Zacarias Irun, CDE's 
previous mayor, told Ambassador during her December 9-10 
visit that economic formalization is a top priority for their 
governments but that businesses often face disincentives to 
formalize such as bureaucratic red tape, corruption, and 
insufficient infrastructure.  The Threshold Program is 
helping to formalize CDE's economy, but the Paraguayan 
government still needs to tackle many issues in this area. 
END COMMENT. 
 
Please visit us at     http://www.state.sgov.gov/p/wha/asuncion 
 
AYALDE