REPUBLIC OF PARAGUAY ROADSHOW PRESENTATION April 2015 Disclaimer

THIS PRESENTATION HAS BEEN PREPARED BY OR ON BEHALF OF THE REPUBLIC OF PARAGUAY (THE "REPUBLIC"). THIS PRESENTATION IS NOT AN OFFER OR SOLICITATION OF AN OFFER TO BUY OR SELL SECURITIES OR AN INDUCEMENT TO ENTER INTO INVESTMENT ACTIVITY. SECURITIES MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR FOR THE ACCOUNT OR THE BENEFIT OF U.S. PERSONAS (AS DEFINED UNDER REGULATION S OR UNDER U.S. SECURITIES ACT OF 1933 AS AMENDED) ABSENT REGISTRATION OR AN EXEMPTION FROM THE REGISTRATION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED. THE REPUBLIC DOES NOT INTEND TO REGISTER ANY POSITION OF THE OFFERING IN THE UNITED STATES OR TO CONDUCT ANY POSSIBLE OFFERING OF THE SECURITIES IN THE UNITED STATES.

IT IS SOLELY FOR USE AT THIS ROADSHOW PRESENTATION AND IS PROVIDED FOR INFORMATION ONLY. THIS PRESENTATION DOES NOT CONTAIN ALL THE INFORMATION THAT IS MATERIAL TO AN INVESTOR. NO PART OF THIS PRESENTATION, NOR THE FACT OF ITS DISTRIBUTION, SHOULD FORM THE BASIS OF, OR BE RELIED ON IN CONNECTION WITH, ANY CONTRACT OR COMMITMENT OR INVESTMENT DECISION WHATSOEVER. THIS PRESENTATION IS NOT FINANCIAL, LEGAL, TAX OR OTHER PRODUCT ADVICE. BY ATTENDING THE PRESENTATION OR BY READING THE PRESENTATION SLIDES YOU AGREE TO BE BOUND AS FOLLOWS:

THIS PRESENTATION IS CONFIDENTIAL AND DOES NOT CONSTITUTE OR FORM PART OF, AND SHOULD NOT BE CONSTRUED AS, AN OFFER OR INVITATION, TO SUBSCRIBE FOR, UNDERWRITE OR OTHERWISE ACQUIRE, OR A RECOMMENDATION REGARDING, ANYSECURITIES OF THE REPUBLIC NOR SHOULD IT OR ANY PART OF IT FORM THE BASIS OF OR BE RELIED ON IN CONNECTION WITH (I) ANY CONTRACT TO PURCHASE OR SUBSCRIBEFOR ANY SECURITIES OF THE REPUBLIC, OR (II) ANY OTHER CONTRACT OR COMMITMENT WHATSOEVER. ANY PERSON CONSIDERING THE PURCHASE OF ANY SUCH SECURITIES MUST INFORM HIMSELF INDEPENDENTLY BASED SOLELY ON A FINAL OFFERING CIRCULAR BEFORE TAKING ANY INVESTMENT DECISION. THIS PRESENTATION HAS BEEN MADE TO YOU SOLELY FOR YOUR INFORMATION AND BACKGROUND FOR DISCUSSION PURPOSES ONLY AND MAY BE AMENDED AND SUPPLEMENTED AND MAY NOT BE RELIED UPON FOR THE PURPOSE OF ENTERING INTO ANY TRANSACTION. THIS PRESENTATION AND ITS CONTENTS ARE CONFIDENTIAL AND PROPRIETARY TO THE REPUBLIC, AND NO PART OF IT OR ITS SUBJECT MATTER MAY BE REPRODUCED, REDISTRIBUTED, PASSED ON, OR THE CONTENTS OTHERWISE DIVULGED, DIRECTLY OR INDIRECTLY, TO ANY OTHER PERSON OR PUBLISHED IN WHOLE OR IN PART FOR ANY PURPOSE WITHOUT THE PRIOR WRITTEN CONSENT OF THE REPUBLIC. IF THIS PRESENTATION HAS BEEN RECEIVED IN ERROR, IT MUST BE RETURNED IMMEDIATELY TO THE REPUBLIC. THIS PRESENTATION IS NOT DIRECTED TO, OR INTENDED FOR DISTRIBUTION TO OR USE BY ANY PERSON OR ENTITY THAT IS A CITIZEN OR RESIDENT OR LOCATED IN ANY LOCALITY, STATE, COUNTRY OR JURISDICTION WHERE SUCH DISTRIBUTION, PUBLICATION, AVAILABILITY OR USE WOULD BE CONTRARY TO LAW OR REGULATION OR WHICH WOULD REQUIRE ANY REGISTRATION OR LICENSING WITHIN SUCH JURISDICTION. THIS PRESENTATION IS ONLY BEING PROVIDED TO PERSONS THAT ARE (I) "QUALIFIED INSTITUTIONAL BUYERS" AS DEFINED IN RULE 144A UNDER THE U.S. SECURITIES ACT OF 1933 AS AMENDED ("QIBS") OR (II) PERSONS THAT ARE NOT U.S. PERSONS IN OFFSHORE TRANSACTIONS. IN ACCORDANCE WITH REGULATION S OF TEH U.S. SECURITIES ACT OR 1933 AS AMENDED. BY ACCEPTING DELIVERY OF THIS PRESENTATION THE RECIPIENT WARRANTS AND ACKNOWLEDGES THAT IT FALLS WITHIN THE CATEGORY OF PERSONS UNDER (I) OR (II) ABOVE.

THIS PRESENTATION CONTAINS FORWARD-LOOKING STATEMENTS. THE WORDS "BELIEVE", "EXPECT", "ANTICIPATE"', "INTEND", "PLAN"," MATE", "EXPECT", "PROJECT'', “FORECAST”, “WILL” AND “MAY” AND SIMILAR EXPRESSIONS AS WELL AS STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDING, WITHOUT LIMITATION, THOSE REGARDING FINANCIAL POSITION, STRATEGY, PLANS AND OBJECTIVES OF THE GOVERNMENT OF THE REPUBLIC FOR FUTURE OPERATIONS (INCLUDING DEVELOPMENT PLANS AND OBJECTIVES) IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER IMPORTANT FACTORS WHICH MAY AFFECT THE REPUBLIC'S ABILITY TO IMPLEMENT AND ACHIEVE THE ECONOMIC AND MONETARY POLICIES, BUDGETARY PLANS, FISCAL GUIDELINES AND OTHER DEVELOPMENT BENCHMARKS SET OUT IN SUCH FORWARD-LOOKING STATEMENTS AND WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON NUMEROUS ASSUMPTIONS REGARDING THE REPUBLIC'S PRESENT AND FUTURE POLICIES AND PLANS AND THE ENVIRONMENT IN WHICH THE REPUBLIC WILL OPERATE IN THE FUTURE: FURTHERMORE, CERTAIN FORWARD-LOOKING STATEMENTS ARE BASED ON ASSUMPTIONS OR FUTURE EVENTS WHICH MAY NOT PROVE TO BE ACCURATE. THE FORWARD-LOOKING STATEMENTS IN THIS PRESENTATION SPEAK ONLY AS OF THE DATE OF THIS PRESENTATION AND THE REPUBLIC EXPRESSLY DISCLAIMS TO THE FULLEST EXTENT PERMITTED BY LAW ANY OBLIGATION OR UNDERTAKING TO DISSEMINATE ANY UPDATES OR REVISIONS TO ANY FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO REFLECT ANY CHANGE IN EXPECTATIONS WITH REGARD THERETO OR ANY CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENT IS BASED. NOTHING IN THE FOREGOING IS INTENDED OR SHALL EXCLUDE ANY LIABILITY FOR, OR REMEDY IN RESPECT OF, FRAUDULENT MISREPRESENTATION. THE INFORMATION IN THIS PRESENTATION HAS NOT BEEN INDEPENDENTLY VERIFIED. NO REPRESENTATION, WARRANTY OR UNDERTAKING, EXPRESS OR IMPLIED, IS MADE AS TO THE FAIRNESS, ACCURACY OR COMPLETENESS OF THE PRESENTATION AND THE INFORMATION CONTAINED HEREIN AND NO RELIANCE SHOULD BE PLACED ON IT. INFORMATION OTHER THAN INDICATIVE TERMS (INCLUDING MARKET DATA AND STATISTICAL INFORMATION) HAS BEEN OBTAINED FROM VARIOUS SOURCES. ALL PROJECTIONS, VALUATIONS AND STATISTICAL ANALYSES ARE PROVIDED TO ASSIST THE RECIPIENT IN THE EVALUATION OF MATTERS DESCRIBED HEREIN. THEY MAY BE BASED ON SUBJECTIVE ASSESSMENTS AND ASSUMPTIONS AND MAY USE ONE AMONG ALTERNATIVE METHODOLOGIES THAT PRODUCE DIFFERENT RESULTS AND TO THE EXTENT THEY ARE BASED ON HISTORICAL INFORMATION, THEY SHOULD NOT BE RELIED UPON AS AN ACCURATE PREDICTION OF FUTURE PERFORMANCE. NONE OF THE REPUBLIC, ITS ADVISERS, REPRESENTATIVES, CONNECTED PERSONS OR ANY OTHER PERSON ACCEPTS ANY LIABILITY WHATSOEVER FOR ANY LOSS HOWSOEVER ARISING, DIRECTLY OR INDIRECTLY, FROM THIS PRESENTATION OR ITS CONTENTS. THE INFORMATION CONTAINED HEREIN lS SUBJECT TO CHANGE WITHOUT NOTICE.

2 Transaction Overview

Issuer The Republic of Paraguay

Transaction Reopening of 2023 Senior Unsecured USD Bonds

Ratings Ba1 (stable) / BB (stable) / BB (stable)

Offering Size USD 280 Million

Format 144A / Reg S

Amortization Bullet

Use of proceeds Finance infrastructure and capital expenditure and to refinance a portion of its outstanding debt

Governing Law / New York / Luxembourg Listing

Joint Bookrunners

3 Paraguay at a Glance Paraguay: A Bright Spot in the Region…

Strategically Located at the Centre of South America...... Boasting A Solid Performance... 1

Capital Asunción Presidential, directly elected for a five-year term, Government with a Bicameral Congress Population 6.9 million Size 406,752 km2 Nominal GDP (2014) 1 US$30.8 billion GDP/Capita (2014) 1 US$4,462 Real growth rate (2014) 1 4.4% Public debt / GDP 1 17.6% Reserves / GDP 1 21.8% 1 Asunción Unemployment Rate 6.0% Paraguay Inflation rate 1 4.2%

...With Increasingly Relevant Global Presence... …And a Solid Upward Trend in Credit Ratings

Sovereign Ratings: Ba1/BB/BB 2 Global Relevance: Ba1/BB+ Ba2/BB #1 Largest exporter of electricity in South America Ba3/BB B1/B+

B2/B #4 Exporter of soybeans #5 Exporter of beef

B3/B-

Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15

Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14

Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14

Moody's S&P Fitch Source: Ministry of Finance of Paraguay, Central Bank of Paraguay, United States Department of Agriculture, Fitch Ratings, Moody’s and Standard & Poor’s 1 As of December 31st, 2014, preliminary data 2 Based on LT Foreign Currency Debt; A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time

5 …Setting Itself Apart from its Regional Peers

Real GDP ‘10 – '14E Average Growth Rate (%) Total Public Debt / GDP (2014E) 8% 70% 7,0% 60,8% 7% 60% 56,0% 5,8% 5,4% 5,5% 6% Average: 5.0% 50% 5,0% 4,8% 5% 4,6% 38,3% 4,2% 40% 35,2% 35,5% Average: 33.6% 4% 2,8% 30% 27,3% 3% 17,6% 19,1% 20% 2% 12,9% 1% 10% 0% 0% PAR PER URU BOL ECU COL CHI ARG BRZ CHI PAR PER ECU BOL COL ARG BRZ URU

International Reserves / GDP (2014E) Inflation 2014E (annual average %)

50% 45,4% 37.7% 12%40% 40% 10% 24.4% 8,9% 30,8% Average: 8.5% 30% 8% 6,3% 21,8% 15.7% 5,8% 15,6% Average: 20.5% 6% 20% 4,2% 2.9% 3,6% 12,2% 4% 2,9% 3,2% 10% 6,0% 3,9% 2%

0% 0% BOL URU PER PAR BRZ CHI COL ARG ECU COL PER ECU PAR CHI BOL BRZ URU ARG

Source: The Economist Intelligence Unit as of April 2015 Note: Paraguay figures are based on Ministry of Finance data

6 Investment Highlights

1 Paraguay’s economy continues to show strong growth with increasing diversification under a solid and stable environment

2 Open and dynamic external sector

3 Paraguay continues to promote and capitalize on attractive fundamentals for foreign investment

Continued surplus in the balance of payments has resulted in growing 4 international reserves and a net creditor position

Investment programs will accelerate Paraguay’s growth 5 trend mainly targeting infrastructure projects aimed at enhancing productivity

6 Disciplined fiscal policy promoting sustainable growth

7 Increasingly diversified debt profile with low rollover risk

Economic growth and government social programs have contributed to 8 improve social welfare

Monetary stability and low domestic interest rates supporting a solid and well 9 capitalized financial system

7 Paraguay’s Economy Continues to Show Strong Growth With 1 Increasing Diversification…

Highlights Diversified Economy Across Sectors..

 High growth economy, with an average 5 year growth rate of more GDP 2014 Itaipú & Yacyreta Agriculture than ~6.9% US$30.8bn Taxes on 6.5% 12% Products 10%  In 2014, real GDP grew by 4.4% primarily driven by growth in service Manufacturing and goods sector, while binational dams suffered due to the drought 11% Other Services in Brazil 11% Construction  Agriculture and livestock, and commerce sectors are the main Finance 7% economic drivers representing ~17.0% and ~14.0% of GDP in 2014, 5% Livestock respectively Household 5% Services Other Goods  Consistent expansion in services enables greater resiliency to cyclical 5% General 1% Government Commerce fluctuations Goods Sector 12% 14% Service Sector

…With Sustained Growth… ...Translating into Welfare Creation

Real GDP growth Contribution by Segment GDP per Capita (US$) 48,0 13.1 14.2 6,9 38,0 12,0 0,3 9,0 5.000 28,0 8,9 4.252 4.462 3.833 4.3 4.4 4.000 3.700 18,0 3,0 3.405 (1.2) 27,5 6,0 23,2 7,1 8,0 0.9 5,9 3.000 5,9 6,1 6,0 2,1 2.000 (2,0) (0,6) (11,5) (9,0) (12,0) (0,3) 1.000 2010 2011 2012 2013 2014 0 Goods Sector Service Sector Binationals Taxes on Products 2010 2011 2012 2013E 2014E

Source: Ministry of Finance of Paraguay and Central Bank of Paraguay

8 1 ... Under a Solid and Stable Environment

Highlights Successfully Anchored Inflation Levels

 Paraguay has effectively managed to implement a stabilization 10,00% monetary policy reducing inflation and maintaining a relatively stable foreign exchange 8,00% 7,2%  Through the implementation of a target band inflation Paraguay has established a predictable monetary policy and adequately managed 6,00% 4,9% local price expectations 4,0% 4,2% 3,7% 4,00%  During the last 5 years regional peers have experienced strong devaluations while Paraguayan currency has remained relatively 2,00% stable

0,00% 2010 2011 2012 2013 2014E

Stable Foreign Exchange Rate Levels.. ...Outperforming the Region

(1) Guaraníes / US$ Peers Foreign Exchange (Indexed 100 = Jan 1st 2010)

5.000 4.740 2,50 4.422 4.304 4.462 4.196 2.33 2,25 4.000 2,00 3.000 1,75 1.75

2.000 1,50 1,25 1.22 1.000 1.06 1,00 0 0,75 2010 2011 2012 2013 2014 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15

Source: Ministry of Finance of Paraguay and Central Bank of Paraguay Chile Argentina Brazil Paraguay (1) Annual arithmetic average of monthly average bid/offer exchange rates.

9 2 Open and Dynamic External Sector

Highlights Consistent Surplus in the Country’s Trade Balance... US$bn  Consistently, year after year Paraguay has been able to report a trade surplus, mainly explained by large agriculture and electricity exports Trade Surplus: 0.9 0.9 0.6 1.7 1.0 15  Investments in soybean crushing facilities have enabled the country to increase the share of value added products in its total exports 10 13,6 13,1 5 10,5 12,6 11,6  In addition, flour exports have increased from 4.9% to 11.5% of total 0 exports from 2010 to 2014 -5 (9,6) (11,8) (11,1) (11,9) (12,1) -10 -15 2010 2011 2012 2013 2014 Exports Imports

…With Increasing Value Added Exports… ...And Imports Distributed Among Various Growth Factors

2010(1) 2014(1) Breakdown of Imports – 2014

Other Others Soy Total Imports: US$11.3bn 12.7% Soy 15,7% beans 36.7% of GDP beans 23,9% Consumer goods 24,4% 32% Capital goods Vegetable Oils Electricity Vegetable Oils 33% Electricity 5.0% 5.0% Flour 22,6% ; 30,5% 4,9% Flour Cereal Wood 11,5% Meat Wood 8,4% 0,8% Meat Cereal 1,6% 14,1% 14,2% 6,4% Intermediate Total Exports US$6.5bn Total Exports US$9.7bn goods 32.5% of GDP 32.1% of GDP 35%

Source: Ministry of Finance of Paraguay and Central Bank of Paraguay (1) Excludes re-exports of US$3.9bn and US$3.5bn in 2010 and 2014, respectively

10 Paraguay Continues to Promote and Capitalize on Attractive 3 Fundamentals for Foreign Investment

Highlights Foreign Direct Investment US$bn  As a result of effective macroeconomic policies since 2010 Paraguay has achieved a positive inflow of foreign investment of ~US$1.9bn 5 year total of US$1,820mm 800 738  The country has benefited from good quality investments from 700 619 developed top tier countries and growing interest from Brazilian 600 corporate 500  Brazilian companies have relevant comparative cost advantages to 400 236 produce in Paraguay 300 201 200 72 100 0 2010 2011 2012 2013 2014

Attracting Relevant Counterparties Paraguay’s Comparative Advantage vs. Brazil

Main Countries Accumulated 5 years FDI (in US$bn) Item Paraguay Brazil Difference1 United States 681 Brazil 514 Energy Cost (US$/MWh) $40 $110 (63%) The Netherlands 232 United Kingdom 148 VAT Tax 10% 27% (63%) Italy 102 Income Tax 10% 25% (60%) Chile 82 Spain 80 Avg. Monthly Salary (US$) 679 879 (23%) Germany 64

0 100 200 300 400 500 600 700 800

Source: Ministry of Finance of Paraguay and Central Bank of Paraguay 1 Calculated as Paraguay divided by Brazilian values less 1

11 4 Continued Surplus in the Balance of Payments …

Highlights Balance of Payments US$bn  Consistent trade surpluses and positive inflows of capitals have resulted in a sustained balance of payment surplus Balance of 0.3 0.8 (0.0) 1.0 1.2 Payments 1  Binationals have played an important role in maintaining a continued 1,2 inflow of capital and strengthening the country’s credit position 1,0 0,8 0,6 0.0  Capital inflows in 2014 has been partially affected due to a severe 0.9 1,0 0,4 0,5 drought in Brazil, which has limited the available funds to transfer 0,2 0,5 0,2 0,0 (0,1) 0,1 (0,1) (0,2) (0,5) (0,4) (0,6) 2010 2011 2012 2013 2014 Current Account Capital and Financial Account

Sustained Foreign Currency Inflows from Binationals … … Provide Stable External Debt Coverage 2

US$mm 30,0 800,0 749 760 25,6 700,0 125 25,0 22,2 22,9 619 183 565 18,7 600,0 545 20,0 500,0 233 14,5 14,6 15,0 11,8 11,5 12,6 400,0 229 11,1 635 10,0 300,0 566 565 200,0 386 5,0 316 100,0 0,0 3 0,0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 3 External Debt Coverage (%) GDP Contribution (%) Itaipú Yacyretá

Source: Ministry of Finance of Paraguay and Central Bank of Paraguay 1 Includes errors and omissions 2 Capital inflow calculated as a percentage of external debt and GDP 3 Excludes Yacyretá 12 …Has Resulted in Growing International Reserves and a Net 4 Creditor Position

Highlights Significant Cushion Provided by International Reserves…

 A continued surplus in the balance of payments has enabled Paraguay 8,0 to increase its international reserves 6,9 7,0 5,9  During the last 5 years the international reserves to GDP ratio has 6,0 5,0 5,0 grown in 1.6% of GDP, while external debt as a percentage of GDP 5,0 4,2 has remained relatively flat 4,0 3,0  A continued surplus in the balance of payments has enabled Paraguay 20.8% 19.8% 20.2% 20.4% 22.4% 2,0 to increase its international reserves 1,0 0,0 2010 2011 2012 2013 2014

IR in US$bn IR % of GDP 1

...While Maintaining a Stable Leverage... …Result in a Continued Net Creditor Position 2

1 US$bn 14,0% External Debt (Total Debt / GDP) 11,7% 12,0% 2,0 1,5 12,0% 1,2 1,0 9,1% 9,1% 9,3% 0,5 10,0% 1,0 8,0% 0,0 (1,0) (0,3) 6,0% (0,6) 4,0% (2,0) (1,6) (1,8) 2,0% (3,0) (2,7) (2,8) 0,0% (4,0) (3,2) (3,2)

2010 2011 2012 2013 2014

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: Ministry of Finance of Paraguay and Central Bank of Paraguay 1 Calculated according to preliminary estimate of GDP 2 Calculated as total external debt less international reserves

13 Investments Will Accelerate Paraguay’s Growth Trend Mainly 5 Targeting Infrastructure Aimed at Enhancing Productivity

4 key APP Projects will Further Strengthen Paraguay’s Geostrategic Position within the Region

Duplication of Rehabilitation, Improvement and Routes 2 & 7 Expansion of Routes 1 & 6  $400mm  $685mm  Entered feasibility stage  Pre-feasibility stage  Purpose of project: 140km  Purpose of project: 140km of national highway of national highway duplication duplication linking 2  Route 6 connects the 2nd (Ciudad del Este) and Asuncion to Ciudad del Este 7 3rd (Encarnation) most populated cities in  Route 2 is one of the most Paraguay important highways in Paraguay linking Asuncion to coronel Oviedo  Route 7 links the departmental capitals of Caaguazú and Alto Paraná, 1 6 Coronel Oviedo and Ciudad del Este crossing a total of 10 districts of both departments

Airport Dredging and Maintenance of Rio Paraguay between Rio Apa and Rio Parana  $250mm  Entered pre-feasibility stage  $104mm  Purpose of project: Construction or regional hub for passengers  Pre-feasibility stage and cargo within boundaries of current Silvio Pettirossi airport  Purpose of project: dredging, signaling, operation and maintenance of Paraguay River between Apa River and the confluence with the Paraná River

Source: Central Bank of Paraguay and Ministry of Finance

14 6 Disciplined Fiscal Policy Promoting Sustainable Growth

Fiscal Policy Overview Central Government Fiscal Balance(1)

400  The Central Government has substantially increased investment levels 248 188 in health and education infrastructure 200 1.2% 0.7%  Recently approved Fiscal Responsibility Law (FRL) will prevent 0 (1.1)% discretionary increases in expenditures and sets targets for Central (200) (1.7)% (1.7)% Government deficit (1.8)% (400) (2.0)% (344) (445) (411) (2.3)%  Additionally, a number of measures have been undertaken to increase (600) (491) revenues (e.g.: new tax laws) (572) (800) (702) 2010 2011 2012 2013 2014

Surplus (deficit) US$mm Surplus (deficit) US$mm Surplus (deficit) according to GFSM 1986(1) according to GFSM 2001(1) % of GDP

Central Government Revenues (% GDP) Central Government Expenditures (% GDP) Strong growth in revenue will assist 25 in achieving budget targets 30 21,0 24,4 19,0 18,0 18,4 25 20,8 20,7 20 17,1 17,2 19,2 0,5 17,3 6,7 6,2 8,4 20 15,9 0.1 0,7 15 5,1 5,5 5,3 4,5 4,8 4,1 4,2 15 3,4 4,0 10 6,4 5,7 6,6 8,3 10 5,2 5,6 13,0 5 12,0 12,6 12,7 11,8 12,6 5 7,3 7,6 9,6 9,4 9,2 8,9 0 0 2010 2011 2012 2013 2014 PGN 2010 2011 2012 2013 2014 PGN 2 2 Tax revenues Non-tax revenues 2015 2015 Wages and salaries Other current Capital Grants/Loans

Source: Central Bank of Paraguay and Ministry of Finance 1 In 2015 the Ministry of Finance through resolution 125/2015 determined to update its statistics methodology for 2015 in accordance with IMF’s Government Financial Statistics Manual 2001 (“GFSM 2001). Previously, the ministry used IMF’s Government Financial Statistics Manual 1986 standards. 2 Approved 2015 budget 15 6 Disciplined Fiscal Policy Promoting Sustainable Growth

Potential for Continued Revenue Expansion Budgeted vs. Realized Fiscal Deficit (% GDP) 6,0  New tax laws and improved collection initiatives have generated 4,0 increases in tax revenue 2,0 3,9 3,4 2,6  In 2013 Paraguay incorporated the agricultural activities income 0,0 (2,0) (4,2) tax and extended the VAT to agricultural products at a rate of (5,6) 5.0% (4,0) (6,9) (0,7) (6,0) (0,7)  Approved budget for 2015 complies with the FRL, however the CG is (8,0) (2.3) (0,5) determined to implement a fiscal plan to comply with the targets set (2.9) (10,0) (3.5) forth in the FRL (12,0) PGN 14 Recorded 2014 PGN 15

Borrowing Minus Repayment Net Capital Expenditures Current Balance

Estimated Impact of Tax Reform (% GDP) VAT Collection (PGY bn)

Budgeted VAT growth subject to upside 1,0% 0.85% 0.86% 0.88% 0.90% 12.000 potential given strong momentum 9.298 9.839 0,8% 0,11% 0,12% 0,12% 0,12% 10.000 7.884 8.000 6.786 7.079 0,6% 0,33% 0,33% 0,34% 0,35% 5.908 +5.8% 0.43% 6.000 +17.9% 0,4% 0,12% +11.4% 4.000 +4.3% +14.9% 0,2% 0,41% 0,41% 0,42% 0,43% 0,32% 2.000 0,0% 0 2014 2015E 2016E 2017E 2018E 2010 2011 2012 2013 2014 PGN 2015 IRP IVA Agro IRAGRO

Source: Central Bank of Paraguay and Ministry of Finance 1 Central Government

16 7 Increasingly Diversified Debt Profile with Low Rollover Risk

Larger Domestic Debt Portion Mitigates Currency Risk… …With a Conservative External Debt Profile

Public sector debt excl. Central Bank bills (% total) Public sector external debt Public sector external debt by interest by currency rate type 100% Others 80% JPY 2% 6% 60% Variable 35% 40%

20% USD Fixed 92% 65% 0% 2009 2010 2011 2012 2013 2014E 2015F  Large percentage of debt with fixed interest rates External Domestic  External debt currency aligned with USD exports Comfortable Debt Maturity Profile… …And Diversified Funding Sources

Total Debt: US$3,399 Public sector external debt by creditor, as of Dec-14

1.200 1,001 1.000 Multilateral 800 599 542 Bonds 48% IADB 600 44% 31% 400 182 179 166 159 154 200 119 97 97 81 22 World Bank 10% 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2044 2045+ Others to Bilateral 7% 2043 8%

Source: Central Bank of Paraguay and Ministry of Finance

17 Economic Growth and Government Social Programs have 8 Contributed to Improve Social Welfare

Highlights Wage Increases Above Inflation Levels...1

 Equitable growth, combined with a stable job market and low inflation, have resulted in an increase in income for the poorest 10,0% 8,7% sectors of the economy 7,5% 8,0% 6,7%  Reduction in poverty and inequality is explained by both a low 6,0% 5,0% unemployment rate and a rise in wages for the lowest income 4,4% segment 4,0%

 The government has successfully implemented “Tekopora”, a cash 2,0% transfer program for poor families, and the “Seniors in Poverty” law, which establishes the Government’s obligation to support those over 0,0% 2009 2010 2011 2012 2013 65 years who do not count with a state pension or retirement plan

...With Controlled Unemployment Rate...... Leading to A Reduction of Poverty and Inequality

Poverty Headcount Ratio (% of total population) 7,0% 6,4% 5,7% 6,0% GINI Coefficient (%), RHS 6,0% 5,6% 50 0,58 4,9% 5,0% 5,0% 0,53 4,0% 40 3,0% 0,48 2,0% 30 0,43 1,0% 0,0% 20 0,38

2009 2010 2011 2012 2013 2014E

2014

2012 2006 2013

2003 2004 2005 2007 2008 2009 2010 2011

Source: Ministry of Finance of Paraguay, Central Bank of Paraguay and Economic Commission for Latin America and the Caribbean 1 Wage index based on survey conducted by the Central Bank of Paraguay

18 9 Monetary Stability and Low Domestic Interest Rates…

Overview Consumer Price Index (% chg, y/y)

 Domestically generated inflation has been anchored by inflation 12,0 target band while imported inflation has been limited by a stable Current inflation target band: 4.5% +/- 2.0% foreign exchange regime 10,0

 In Jan-15 the Central bank reduced the target inflation midpoint 8,0 to 4.5% 6,0

 In addition, a low domestic interest rate program has enabled a 4,0 healthy economic growth on the back of limited monetary growth 2,0  Strong and growing international reserves are a guarantee for 0,0 Central Bank policy action Jan-11 Sep-11 May-12 Jan-13 Sep-13 May-14 Jan-15

Low Domestic Interest Rates (IRM)¹ Monetary Base and International Reserves

US$mm 2010 2011 2012 2013 2014 10,0% 8,1% 8,0% Currency in Circulation² 1.440 1.636 2.037 2.125 2.293 6,1% 6,0% 6,2% 6,0% Banks’ Reserves at the Central 814 955 1.180 746 859 4,0% 2,6% Bank

2,0% Monetary Base 2.254 2.590 3.218 2.871 3.152 0,0% 2010 2011 2012 2013 2014 International Reserves 4.168 4.984 4.994 5.871 5.872 Source: Central Bank of Paraguay and Ministry of Finance 1 Monetary policy rate 2 Includes cash in vaults at banks in US$

19 …Supporting a Solid and Well Capitalized Financial 9 System

Highlights Loans Evolution (US$bn) and Return on Equity (%)

 Significant expansion in recent years, on the back of the country’s ROE (%) 22.3% 31.5% 28.5% 29.4% 28.3% economic growth, financial inclusion and longer term loans  As of Dec-14, total assets of banks amounted to US$20bn, 16,0 equivalent to around 65% of 2014 GDP, and bank deposits to 14,2 14,0 US$14bn 11,7 12,0  The system’s expansion, combined with the increased presence in 10,0 8,6 8,5 higher margin sectors such as retail banking, have resulted in 8,0 6,3 consistently high profitability 6,0  Paraguay continues to strengthen its regulatory framework and 4,0 supervision of the financial sector 2,0 0,0 2010 2011 2012 2013 2014

NPLs/Total Assets and Efficiency Ratio (%)¹ Capital Adequacy Ratio (%)²

NPLs/Total Loans Efficiency ratio 20,0% 16,2% 15,4% 15,2% 5,0% 50,5% 60,0% 14,9% 14,6% 15,0% 41,9% 50,0% 4,0% 32,5% 29,3% 30,9% 40,0% 10,0% 3,0% 30,0% 2,1% 2,0% 1,7% 1,8% 20,0% 5,0% 2,0% 1,6% 10,0% 1,0% 0,0% 0,0% 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Source: Central Bank of Paraguay 1 Efficiency ratio calculated as Operating Expenses/Total Assets 2 Capital adequacy ratio calculated as Regulatory capital to risk weighted assets

20 Thank You