Paraguay does not have the strongest banking system in the region, but digging a little deeper, you’ll find that the Paraguayan financial system has a lot to offer expat investors.
Paraguayan banks today are still relatively unsophisticated. Paraguay has certainly never promoted itself as an offshore banking center, nor has it ever been thought of as one (which is, of course, a significant plus in these days of sanctions and blacklists.) It would never have occurred to most people to store money in a military dictatorship, and, back in the days when cash was king, banking just didn’t really develop.
In the early 1990s, following the return to democracy, the banking sector grew significantly, but it was almost unregulated, and bankers were inexperienced or opportunistic. This growth was quickly followed by a lot of bank failures in Paraguay in which depositors lost all their savings. These stories spread and no one trusted Paraguayan banks, so there was little demand. From 2000 onward saw consolidation of the banking sector in the hands of foreign players like Citibank, ABN-Amro, and BBVA, none of whom were the slightest bit interested in developing offshore banking services, due to political pressure in their home markets.
Even today, Paraguay is a mainly cash-based economy in which most locals don’t trust the banks. Wealthy Paraguayans traditionally keep their funds in places like Switzerland or the United States. Poor Paraguayans are simply not catered to by traditional banks. Banks therefore focus on providing limited services for local businesses and for the small middle-class.
The net result is that it’s very hard for a nonresident foreigner or offshore company to open a bank account in Paraguay at all—and there would be no particular attraction in doing so. On the other hand, once you’ve got a residency permit, you can walk into any bank, flash your cedula, and open an account without difficulty. Accounts can be denominated in the local currency, guarani, or in U.S. dollars, euros, or other currencies.
If you obtain residency, you’ll probably want to have local currency to pay a few local bills and for pocket money, but Paraguay is not yet the place for wealth management or sophisticated banking operations. You won’t be able to do much with this kind of bank account besides, perhaps, paying a local electricity bill using a pioneer online banking system.
There are, however, some changes going on in Paraguayan banking that are of interest to foreign investors, including nonresidents, such as:
- New entrants to the retail banking sector
- Investment banking (probably the most interesting area for nonresidents)
- High-return deposits in credit unions