REPUBLIC of PARAGUAY Citigroup
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OFFERING CIRCULAR REPUBLIC OF PARAGUAY US $500,000,000 4.625% Bonds due 2023 :HDUHRIIHULQJ86DJJUHJDWHSULQFLSDODPRXQWRIERQGVGXH WKH³%RQGV´ RIthe Republic of Paraguay ³3DUDJXD\´ WKDWZLOOEHDULQWHUHVWRQWKHLURXWVWDQGLQJSULQFLSDODPRXQWIURPWKHGDWHRILVVXDQFHH[SHFWHGWREH-DQXDU\25, 2013 WKH³6HWWOHPHQW'DWH´ DWDUDWHRISD\DEOHVHPL-annually in arrears on January 25 and July 25 of each year (each, an ³,QWHUHVW3D\PHQW'DWH´ FRPPHQFLQJRQ-XO\DQGHQGLQJRQ-DQXDU\ WKH³0DWXULW\'DWH´ 7KH%RQGVZLOOEH general, direct, unconditional, unsubordinated and unsecured External Debt of Paraguay and will be backed by the full faith and credit of Paraguay. The Bonds will rank equally in right of payment with all existing and future unsubordinated and unsecured External Debt of Paraguay (as defined herein). The Bonds will be backed by the full faith and credit of Paraguay. Principal and interest payments on the Bonds will be made without withholding or deduction for or on account of taxes imposed by Paraguay. All Bonds will be issued in book-entry form only. The Bonds contain collective action clauses with provisions regarding future modifications to the terms of Bonds issued under the LQGHQWXUH 8QGHU WKRVH SURYLVLRQV ZKLFK DUH GHVFULEHG KHUHLQ LQ ³'HVFULSWLRQ RI WKH %RQGV²Meetings, Amendments and :DLYHUV´ PRGLILFDWLRQV DIIHFWLQJ WKH UHVHUYH PDWWHUV OLVWHG LQ WKH indenture, including modifications to payment and other important terms, may be made to a single series of Bonds issued under the indenture with the consent of the holders of 75% of the aggregate principal amount outstanding of that series, and to multiple series of Bonds issued under the indenture with the consent of the holders of 85% of the aggregate principal amount outstanding of all series that would be affected and 66 2/3% in aggregate principal amount outstanding of each affected series. Application has been made to list the Bonds on the Official List of the Luxembourg Stock Exchange and to have the global bonds trade on the Euro MTF Market of the Luxembourg Stock Exchange. 6HH³5LVN)DFWRUV´EHJLQQLQJRQSDJH 9 to read about important factors you should consider before investing in the Bonds. 7KH%RQGVKDYHQRWEHHQDQGZLOOQRWEHUHJLVWHUHGXQGHUWKH6HFXULWLHV$FWRIDVDPHQGHG WKH³6HFXULWLHV$FW´ RUZLWh any securities regulatory authority of any state or other jurisdiction of the United States, and may not be offered or sold in the United 6WDWHVWRRUIRUWKHDFFRXQWRUEHQHILWRI86SHUVRQV DVGHILQHGLQ5HJXODWLRQ6XQGHUWKH6HFXULWLHV$FW ³5HJXODWLRQ6´ XQOHVV the Bonds are registered under the Securities Act or an exemption from the registration requirements of the Securities Act and applicable state securities laws is available. The Bonds are being offered and sold in the United States only to qualified institutional buyers in reliance on Rule 144A under the Securities Act ³5XOH$´ DQGRXWVLGHWKH8QLWHG6WDWHVWRSHUVRQVWKDWDUHQRW86 SHUVRQVLQDFFRUGDQFHZLWK5HJXODWLRQ6)RUDGHVFULSWLRQRIFHUWDLQUHVWULFWLRQVRQWUDQVIHURIWKH%RQGVVHH³1RWLFHWR,QYHVWRUV´ DQG³7UDQVIHU5HVWULFWLRQV´ *** Public Price: 100% plus interest, if any, from January 25, 2013 Delivery of the Bonds in book-HQWU\IRUPZLOO EHPDGHWKURXJK 7KH'HSRVLWRU\7UXVW&RPSDQ\ ³'7&´ DQG LWVGLUHFW SDUWLFLSDQWVLQFOXGLQJ(XURFOHDU%DQN6$19 ³(XURFOHDU´ DQG&OHDUVWUHDP%DQNLQJ/X[Hmbourg, société anonyme ³&OHDUVWUHDP´ RQRUDERXW-DQXDU\ Global Coordinator: Citigroup Joint Book-Runners: Citigroup BofA Merrill Lynch The date of this Offering Circular is January 17, 2013. -ii- Paraguay has provided you only with the information contained in this Offering Circular. Paraguay has not authorized anyone to provide you with different information. Paraguay is not, and the Initial Purchasers (as deILQHGXQGHU³3ODQRI'LVWULEXWLRQ´ DUHQRWPDNLQJDQRIIHURIWKHVHVHFXULWLHVLQDQ\ jurisdiction where the offer is not permitted. You should not assume that the information contained in this Offering Circular is accurate as of any date other than the date on the front of this Offering Circular. TABLE OF CONTENTS OFFERING CIRCULAR SUMMARY ......................................................................................................................... 1 RISK FACTORS ........................................................................................................................................................... 9 USE OF PROCEEDS .................................................................................................................................................. 19 REPUBLIC OF PARAGUAY ..................................................................................................................................... 20 THE PARAGUAYAN ECONOMY ........................................................................................................................... 28 BALANCE OF PAYMENTS AND FOREIGN TRADE ............................................................................................ 54 MONETARY SYSTEM .............................................................................................................................................. 67 PUBLIC SECTOR FINANCES .................................................................................................................................. 83 PUBLIC SECTOR DEBT ........................................................................................................................................... 95 DESCRIPTION OF THE BONDS ............................................................................................................................ 107 BOOK-ENTRY, DELIVERY AND FORM ............................................................................................................. 118 TAX CONSIDERATIONS ....................................................................................................................................... 123 PLAN OF DISTRIBUTION ...................................................................................................................................... 127 TRANSFER RESTRICTIONS .................................................................................................................................. 133 SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES ......................................................... 136 OFFICIAL STATEMENTS AND DOCUMENTS ................................................................................................... 137 VALIDITY OF THE BONDS ................................................................................................................................... 138 AUTHORIZED AGENT ........................................................................................................................................... 139 GENERAL INFORMATION .................................................................................................................................... 140 APPENDIX ............................................................................................................................................................... A-1 -iii- NOTICE TO INVESTORS The Bonds will be available in book-entry form only. Paraguay expects that the Bonds sold pursuant to this Offering Circular will be issued in the form of one or more global certificates, which will be deposited with, or on behalf of, DTC and registered in its name or in the name of Cede & Co., its nominee. Beneficial interests in the global certificates will be shown on, and transfers of the global certificates will be effected only through, records maintained by DTC and its participants, including Euroclear and Clearstream. After the initial issuance of the global certificates, Bonds in certificated form will be issued in exchange for the global certificates only as set forth in the LQGHQWXUHJRYHUQLQJWKH%RQGV6HH³%RRN-(QWU\'HOLYHU\DQG)RUP´ This Offering Circular does not constitute an offer of or an invitation by or on behalf of Paraguay or the ,QLWLDO3XUFKDVHUV DVGHILQHGXQGHU³3ODQRI'LVWULEXWLRQ´ WRVXEVFULEHRUSXUFKDVHDQ\RIWKH%RQGVLQDQ\ jurisdiction where the offer or sale would not be permitted or is not authorized. The distribution of this Offering Circular and the offering of the Bonds in certain jurisdictions may be restricted by law. People in possession of this Offering Circular are required by Paraguay and the Initial Purchasers to inform themselves about and to observe any such restrictions. The Bonds offered in this Offering Circular are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act and applicable state securities laws pursuant to registration or exemption from such laws. You should be aware that you may be required to bear the financial risk RIWKLVLQYHVWPHQWIRUDQLQGHILQLWHSHULRGRIWLPH6HH³7UDQVIHU5HVWULFWLRQV´ The information contained in this Offering Circular is provided by Paraguay in connection with an offering exempt from registration under the Securities Act solely for the purpose of enabling a prospective investor to consider a purchase of the Bonds, as described herein. No representation or warranty, express or implied, is made by the Initial Purchasers as to the accuracy or completeness of such information and nothing contained in this Offering Circular is, or shall be relied upon as, a promise or representation by the Initial Purchasers. Neither the Initial Purchasers nor any of their agents has independently verified any of such information and assumes no responsibility for the accuracy or completeness of the information contained in this Offering Circular.