Forging privileges: The impact of agribusiness on Paraguayan tax policy
The agricultural and agro-industrial sector is the most profitable in Paraguay, and constitutes approximately 30% of its GDP, but it is also the one that contributes the least to the State in terms of taxes, representing less than 4% of the annual collection.
In recent years, various legislative proposals aimed at correcting the inequity of the system have been rejected due to the lobbying power of large agribusinesses. This research analyzes the mechanisms used to perpetuate state capture and maintain their economic privileges, examining five bills that have been proposed and debated in the Paraguayan Congress. The current tax system in Paraguay reflects the marked asymmetry in power relations, with large agribusinesses at the top.
This study is part of the research series “Elites, State Capture and Inequality”, promoted by CLACSO and Oxfam, and observes that what has happened in the last 15 years in Paraguay makes visible the capture of tax policy that favors small groups and prevents reducing the high levels of socioeconomic inequality in the country, despite the great economic growth of recent years.
The need arises for creative proposals aimed at tax equity, limiting the excessive influence of some groups in the different phases of tax policy with strengthened participation mechanisms.
Mechanisms of state capture
Among the capture mechanisms identified, the practice of “delaying legislative processes” stands out. We found that each proposal to tax grain exports took at least a year for review by special committees and more than a year (up to almost 10) for official consideration in the plenary session. This practice is used for both new bills and laws that have already been passed. In the latter cases, what happens is that, due to pressure from interest groups, the implementation of the new law is postponed, or its application is made more flexible through regulatory decrees (which include, for example, a series of exceptional measures).
Another mechanism found is the partial modification of regulations; that is, superficial changes are made. This was the case with Law 5061/13, which broadened the taxpayer base without affecting the special treatment for large taxpayers, among whom are businesses in the agricultural and livestock sector.
At the discursive level, opponents of the reforms have not changed their arguments. They insist that an export tax on raw grains would harm the country's competitiveness and that small agricultural producers would be the most affected, often disregarding technically sound arguments, including those from international experts. Finally, other more subtle and difficult-to-control mechanisms are identified, given that specific regulations have not yet been developed, such as lobbying and partisan financing.
