New Securities and Commodities Market Law: The Beginning of a New Era for Real Estate Financing in Paraguay

Modernizing the Paraguayan capital market could transform the way real estate projects are financed, promoting new funds, investment mechanisms, and greater access to institutional capital.

The recent parliamentary approval of the Securities and Commodities Market Bill, currently submitted to the Executive Branch for enactment, marks a turning point in Paraguay's financial history. This legislation seeks to fundamentally modernize the legal framework of the capital market, replacing dispersed, outdated structures that are poorly adapted to contemporary economic dynamics. Its scope, however, goes beyond the financial system: the new law could redefine the way real estate projects are financed, structured, and managed in the country.

For years, the Paraguayan real estate market relied almost exclusively on bank loans, equity capital contributions, and pre-sale mechanisms as its primary sources of funding. While these instruments were effective in the initial phase of the sector's expansion, their reach proved limited given the growing scale and complexity of urban developments. The lack of a solid financial infrastructure had restricted the participation of institutional and foreign investors, preventing local real estate from evolving toward more sophisticated and sustainable structures.

The new Securities and Commodities Market Law seeks to fill this gap by creating a comprehensive framework for the issuance, public offering, trading, and administration of securities, investment funds, and financial products, under the supervision of the Central Bank of Paraguay (BCP) and its Securities Superintendency.

The legal text proposes a modern architecture aligned with international financial regulatory standards. Its central pillars include the creation of public and private investment funds, comprehensive regulation of securitization companies, and the incorporation of hybrid instruments, such as convertible bonds, which offer new capitalization alternatives for companies and developers.

The central objective is to strengthen the institutional architecture of the capital market, providing it with greater breadth, transparency, and competitiveness. Along these lines, the law reconfigures the roles and responsibilities of issuers, intermediaries, risk rating agencies, trustees, agents, and fund managers, incorporating corporate governance principles and investor protection mechanisms.

One of the most important points is the review of the regulations applicable to publicly traded corporations, adjusting voting rules, shareholder rights, external audits, and procedures for withdrawing from the public offering regime. This aspect is key to ensuring market confidence and attracting long-term capital to structured instruments.

Among the mechanisms with the greatest potential impact on the real estate sector are investment funds and securitization companies.

The former constitute a legal vehicle through which various investors—whether individuals, companies, or institutions—can contribute capital to finance specific projects, with returns associated with the income or appreciation of the underlying assets. Until now, Paraguayan regulations offered a limited and unattractive structure for this type of fund, restricting its use to a small group of financial operators.

The new law introduces two distinct categories that substantially expand the options available to the market. On the one hand, publicly offered investment funds, aimed at retail investors, must operate under high standards of transparency, liquidity, and oversight. On the other hand, private equity funds, designed for institutional capital or larger-scale projects, will have more flexible operating and confidentiality rules, allowing for the structuring of more sophisticated instruments tailored to the needs of developers.

At the same time, securitization companies are taking on a central role. These companies will be able to transform illiquid assets, such as mortgage loan portfolios, rental income, or rights to real estate projects, into securities tradable on the stock market, allowing developers to finance their projects through the placement of securities backed by real assets.

This mechanism, widely used in countries such as Chile, Colombia, and the United States, opens up the possibility of structuring professionalized real estate investment vehicles, such as income trusts, local REITs, or even mixed development and operating funds.

The implementation of this law could redefine the landscape of Paraguayan real estate development in three key dimensions:

1. Democratization of access to capital.

By establishing a robust regulatory framework for the issuance and marketing of real estate asset-backed securities, the law lowers barriers to entry in the financial market. Medium- and large-scale developers will be able to access institutional capital without relying on traditional banking channels, which are often more restrictive or expensive.

2. Transparency and formalization.

The new regime will require higher standards of reporting, auditing, and risk rating. This will not only boost investor confidence but will also contribute to formalizing a sector where many transactions are still carried out in closed or informal circuits.

3. Attracting foreign investment.

Alignment with international standards will facilitate the entry of regional funds and foreign investment vehicles interested in Paraguayan assets. The country could position itself as a new financial and real estate investment hub in the Southern Cone, taking advantage of its macroeconomic stability, relatively low costs, and the growing urban dynamism of Asunción, Encarnación, and Ciudad del Este.

In practical terms, the law will allow large-scale projects, such as mixed-use complexes, integrated urban developments, or industrial parks, to be financed through collective investment structures or specific bond issues, backed by the project's future cash flows.

It also opens the door for the expansion of publicly offered real estate trusts, already established in more mature markets. In Paraguay, recent experiences such as the Link Center Real Estate Investment Fund and the AFD's structured instruments demonstrated the viability of this model, albeit within limited regulatory frameworks. With the new law, these schemes could multiply and diversify.

Another relevant point is the possibility of issuing bonds convertible into shares, a tool that allows debt and equity to be combined into a single instrument. In the real estate sector, this could translate into more balanced partnerships between developers and investment funds, aligning incentives and reducing financial risk.

The approval of the Securities and Commodities Market Law represents much more than a technical reform: it is the creation of a financial ecosystem capable of supporting Paraguay's urban growth. By offering a modern and transparent legal framework, the legislation lays the foundation for a new stage of professionalization in the real estate market, where financing ceases to be a constraint and becomes a strategic tool for the country's expansion.

When the Executive Branch enacts the law in the coming weeks, Paraguay could begin a decade marked by the integration of real estate, finance, and institutional investment, with direct impacts on the scale, quality, and competitiveness of national urban development.