the construction
D. International trade negotiations
Trade in service negotiations envisage commitments from trading partners towards the establishment of a predictable, transparent, and non-discriminatory business environment that facilitates international trade.
Paraguay has been involved in several negotiations on trade in services, including at multilateral level at the WTO, and at regional level in the MERCOSUR and with the European Union. Within the MERCOSUR, trade in services was negotiated in the Montevideo protocol. This instrument came into force in December 2005, when it was ratified by Argentina, Brazil, and Uruguay. Paraguay ratified the protocol in 2014, when compliance with the commitments became part of the national legal and regulatory framework.
Regarding professional services of architecture, engineering and others related, Paraguay has not made any market access or national treatment commitments in MERCOSUR. In construction services and related engineering services, for both market access and national treatment, while liberalizing mode 2, Paraguay has not made any commitments in mode 1 – by lack of technical feasibility –, mode 3 and 4. Conversely, Argentina, Brazil, and Uruguay have opened these categories.
On professional services of architecture, engineering, and others, for both market access and national treatment, the other MERCOSUR countries have no restrictions for all modes, subject to horizonal commitments in mode 4. For construction services and related engineering services, Argentina, Brazil, and Uruguay have not made any commitments in mode 1 – by lack of technical feasibility, but have opened modes 2, 3, and 4, subject to horizontal commitments in mode 4 (table 24).
Table 24. Southern Common Market: Restrictions within the seventh round of negotiations on selected professional services and selected construction and related engineering services
Sector and mode Argentina Brazil Paraguay Uruguay
Professional services – mode 1 None None Unbound None
Professional services – mode 2 None None Unbound None
Professional services – mode 3 None None Unbound None
Professional services – mode 4 Unbound, subject to Construction – mode 1 Unbound by
lack of technical
Construction – mode 2 None None None None
Construction – mode 3 None None Unbound None
Construction – mode 4 Unbound, subject to
Source: MERCOSUR, 2010, Seventh round of negotiations of services specific commitments.
Allowing and facilitating the temporary presence of natural persons is a main point in the liberalization of professional services. This should include inter alia larger durations of stay, more categories of natural persons, reduction of visa fees and barriers, reduction of divergence in legal requirements – for example on the responsibility of companies –, and portability of benefits. Defining and implementing the mechanisms to allow and facilitate the temporary presence of natural persons should be a parallel effort to the definition of community regulations for the mutual recognition of licenses, certifications, professional degrees, and accreditations. Furthermore, flexibilities in terms of the provision of copies, possibility of using on-line systems, and of prior publication, among others, could be envisaged. The Commission for the Integration of Surveying, Agronomy, Architecture, Geology and Engineering for MERCOSUR (CIAM) is the working group recognized under decree 25/2003 to focus on making professional legislation compatible.
Through its decision 25/2003, MERCOSUR has approved guidelines for the celebration of mutual recognition agreements among professional entities and the for the disciplines granting of temporary licenses. Still, the guidelines required that the national professional entities would be legally responsible for the granting of licenses for professional practice and for their control in their respective jurisdiction. This implies that Paraguay is currently impeded of accessing the regional market through mutual recognition as the mandatory registration schemes in the country are not with the professional associations.
This also reinforces the pertinence of assessing how to update law 979/1964 to have a revised law of professional practice with strengthened capacity to qualify, enable and control professional services linked to the construction sector by both domestic and foreign providers. Areas to be covered in the regulation of professional practice include the recognition of degrees; determination of professional responsibilities; control of professional practice; ensuring compliance with safety, quality of work, technical regulation of raw materials and responsibility issues; non-discriminatory market access and national treatment; and common standards on ethical performance and consumer protection.
This should contribute to a level-playing field for domestic and foreign providers in Paraguay and in foreign markets. In addition, regulatory proportionality, implying that smaller and simpler works can be subject to less demanding requirements, could be pursued to facilitate a higher participation of SMEs without discriminating by their origin.
Furthermore, once the decision 25/2003 is transposed for the Paraguayan legal framework, as it occurred in the other MERCOSUR countries, a mutual recognition agreement could be established to facilitate the reciprocal temporary presence of persons in other country to provide professional services linked to the construction sector. This would create more opportunities for Paraguayan professionals and would attend to issues related to the shortage of specialized professionals in the country.
The implementation of a revised law of professional practice, in compliance with the regional requirements, could contribute where appropriate to reduce regulatory divergence in the region, thus facilitating regulatory cooperation, mutual trust, trade, and cooperation on monitoring and enforcing compliance of services providers, regardless of their nationality, in all countries in the region.
More broadly, improving the transparency and predictability and strengthening the regulatory and institutional framework in Paraguay, in line with what was mentioned in the previous section, would leave the country better prepared to liberalize mode 3 and mode 4 in a similar manner to the other countries in the MERCOSUR. This would also be important to further attract investment in the sector.
Efforts to address regulatory divergence are particularly important due to different standards between countries in the region, for example regarding land use and environmental impact assessment, and also due to different practices within the different municipalities in Paraguay, especially in housing-related construction. Addressing the different practices in different municipalities should be without a cost to the current municipal autonomy in terms of land use. It should however be a part of a broader national policy of territorial planning encompassing technical assistance on professional services to address possible capacity shortcomings in some municipalities.