Paraguay - Using an Agent to Sell US Products and Services Paraguay - Using an Agent
Under Paraguayan Law 194 from 1993, foreign companies must demonstrate “just cause” to terminate, modify, or not renew contracts with Paraguayan distributors. Severe penalties and high fines may result if a court determines that the foreign company ended the relationship with its distributor without first having established that just cause exists. This requirement often leads to expensive out-of-court settlements. In a few cases, the courts have upheld the rights of foreign companies to terminate representation agreements after finding the requisite showing of just cause. However, the effect of the law is to discourage foreign investment, given concerns about potential lawsuits and contractual interference.
Because Paraguay is a relatively small market compared to its neighbors, some unscrupulous local representatives of foreign products have reportedly accepted side payments from smugglers in return for ignoring shipments of pirated or gray market versions of those products destined for Brazil and Argentina. Other representatives have re-exported large volumes of luxury items to distant, third-country markets in direct violation of their distribution agreements. These examples underscore the importance of independently monitoring the activities of representatives and licensees.
Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.