Japan and Paraguay Sign Landmark Investment Protection Agreement

Historic Agreement Signed in Asunción

On December 5, 2025, Japan and Paraguay officially signed the 'Mutual Promotion and Protection of Investments Agreement' in Asunción. This landmark accord, also known as the 'Agreement between Japan and the Republic of Paraguay for the Promotion and Protection of Investment,' aims to significantly enhance bilateral economic relations and foster a more robust investment environment between the two nations.

The agreement was formalized by H.E. Mr. Rubén Darío Ramírez Lezcano, Paraguay's Minister of Foreign Affairs, and H.E. Mr. Katsumi Itagaki, the Ambassador Extraordinary and Plenipotentiary of Japan to the Republic of Paraguay. This signing represents a crucial step in deepening economic cooperation, building on the recent elevation of Japan-Paraguay ties to a 'strategic partnership' in May 2025.

Key Provisions and Objectives

The newly signed agreement establishes a comprehensive legal framework designed to attract and safeguard investment flows. Its core objectives include:

• Further protecting and promoting investment between the Contracting Parties.
• Developing Paraguay's investment environment to encourage more Japanese company investments.
• Integrating Paraguay more effectively into global supply chains.
• Accelerating structural reforms and fostering innovative industries.

Specific stipulations within the agreement cover critical aspects of investment protection, such as:

• National treatment at the post-establishment phase of investments.
• Most-favoured-nation treatment at both pre-establishment and post-establishment phases.
• Ensuring fair and equitable treatment for investments.
• Establishing clear conditions for expropriation and compensation.
• Guaranteeing the freedom of transfers.
• Outlining procedures for dispute settlements.

Economic Significance and Future Outlook

Officials have emphasized that this agreement marks a significant turning point for Paraguay's economy, opening new avenues for strategic investments, particularly in high-impact industries such as technology, electronics, and the automotive sector, areas where Japan holds global leadership. Japan, recognized as the second-largest source of foreign direct investment globally, is expected to deepen its involvement in Paraguay, building on existing successful ventures by Japanese firms.

Paraguay's appeal to Japanese companies is bolstered by its political and social stability, its membership in the Mercosur trade bloc, and its strategic proximity to Brazil. The Paraguayan government has been actively working to promote foreign investment, and this agreement is anticipated to further enhance the country's attractiveness as an investment destination.

The agreement is expected to support Paraguay's economic transformation, generate employment opportunities, and contribute to raising living standards by enabling the country to participate more actively in international projects, including manufacturing, renewable energy, and technological innovation. The agreement will officially enter into force on the thirtieth day after both Japan and Paraguay complete their respective internal procedures and notify each other through diplomatic channels.