Paradise Lost, Paraguay Found

Emerging MarketsThe hit of the global economic crisis coupled with the harsh and extended drought has transformed the once-vulnerable Paraguay, with its rich agricultural industry and extensive hydro-electricity resources, into an attraction for foreign investors

Canadian entrepreneurs and investors Neal De Florio and Daniel Wang, Principals of Monarca Capital, are smitten with Paraguay’s stable economy, high incentives, low taxes and abundance of water, extensive arable land and clean electricity, oil and gas. “The strategic geographic location of Paraguay, nicknamed the ‘Heart of South America’ is at the ‘heart’ of the highest income region of the continent, which accounts for almost 50% of South America`s GDP,” say the investors.

Wang and De Florio are in for the long run. They have worked diligently to identify a number of investment opportunities in Paraguay in the banking, agricultural, real estate ,and infrastructure sectors. De Florio says, “Our first priority is to find the ‘right’ partners in Paraguay, then we focus on the opportunities that are available to us in each of the specific sectors we have earmarked. Doing business with honest and ethical people is paramount to long-term success in foreign markets.”

Monarca’s long-term aim is to develop funds for multiple sectors with foreign equity combined with traditional debt and/or fixed income securities. According to Wang, investments into Paraguay would be best suited for the mid-sized institutional investor or high net worth private investors. He says, “You won’t necessarily find deep discount opportunities as you would in the United States after the financial crisis, but you will find exceptional opportunities below their intrinsic value and at discounts compared to its neighbouring countries of Argentina and Brazil.”

The stigma of corruption in its banking sector can’t be easily dismissed, but Wang believes the Paraguayan banking sector is solid due to much improved and notably stricter regulations under the direction of the Central Bank. “The development of inter-banking systems has resulted in increased interest from international banks such as Banco Regional, which is 40% owned by Rabobank, HSBC, and Citbank,” he says. The entrepreneurs are also encouraged by a recent press release announcing Paraguay’s two largest banks—InterBanco, a unit of Brazil’s Itaú Unibanco (NYSE: ITUB), and the local subsidiary of Spain’s BBVA (NYSE: BBV)—both posting “the biggest profits in the system from January to August of this year.”

While Paraguay enjoys the backing of its international banking partners, it cannot be denied that only 20% of its population h.....




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