REPUBLIC OF PARAGUAY Investors Presentation

March 2016

2

Disclaimer

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...And One of the Lowest Leverages in the Region …Supported By The Highest Degree of Openness In The Region…

Solid Track Record and Decoupling from its Closest Neighbours…

A Bright Spot in the Region

3

Source: Ministry of Finance of Paraguay, Central Bank of Paraguay and United States Department of Agriculture (1) As of December 31st, 2015, preliminary data for Paraguay provided by the BCP. EIU estimates as of March 2016 for other countries (2) Measured as (Exports + Imports) / GDP. As of December 31st, 2015, preliminary data for Paraguay provided by the BCP. EIU estimates for 2015 as of March 2016 for countries other than Paraguay (3) As of December 31st, 2015, preliminary data for Paraguay provided by the BCP. EIU estimates for 2015 as of March 2016 for countries other than Paraguay

Economic Openness (2015E; %)(2)

#1

#3 #6

Clean electricity net exporter in South America

Soy crushing capacity in LatAm Beef exporter

Relevant Global Presence Real GDP Growth (2015E; %)(1)

#4 Soy exporter

Public Debt (% of GDP)(3)

17,5% 19,7% 21,0%

31,0% 37,5%

46,2% 47,2%

65,9% 68,6% 75,6%

55,1% 47,4%

38,3% 36,8% 36,1% 32,2%

20,7% 20,3%

4,4%

3,0% 2,9% 2,7% 2,6% 2,1% 1,8%

0,2%

(3.7%)

5.4% 5.0% 4.6% 4.7% 4.0% 3.9% 2.9% 4.4% 1.1%

Real GDP Growth 5 Years Avg.

Median: 2.6%

Median: 37.5% Median: 36.8%

Paraguay

Asunción

Investment Highlights

4

Resilient Economy to Adverse Conditions Proved Through Sustained

Growth, a Strong Export Sector and Capacity to Buffer External Shocks

Positive Economic Performance has Resulted in

Improved International Perception and Favorable Foreign Investment

Prudent Fiscal Balance and Institutional Framework

Committed to Infrastructure Improvements

Across the Country and Key Sectors

Balanced Debt Profile and Low Rollover Risk

Sound Monetary Policy Supported by an Adequately Capitalized and

Expanding Financial Sector

Improving Social Indicators Backed by Social Policies

Firm Commitment to Enhance Governance Standards

2 1

3

6

4

5

7

8

Resilient Economy to Adverse Conditions Proved Through Sustained Growth, a Strong Export

Sector and Capacity to Buffer External Shocks

Resilient Economy to Adverse Conditions….

6

1

Despite Steadily Declining Commodity Prices… …Paraguay Maintains a Positive Trade Balance...

…A Relatively Stable Currency... ...And Lowest in the Region Inflationary Levels

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

(1) Source: IMF commodity prices (2) Preliminary data for Paraguay and EIU estimates as of March 2016 for countries other than Paraguay (3) Source: Bloomberg

Median: (1.3%)

Trade Balance (2015E; % of GDP)(2)

Inflation (2015E; %)(2)

USD/Tn2 (1)

1,8% 1,8% 1,0% 0,6%

(1,3%) (1,9%) (2,1%) (2,2%)

(4,7%)

Median: (1.3%)

3,1% 3,5% 4,3% 4,4% 4,4% 6,8%

9,3% 10,7%

26,4%

90

31

76 76 62

20

40

60

80

100

120

140

160

Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Meat Crude Oil - WTI Aluminum Soybean Soybean Oil

Median: 4.4% 21,6% 24,5% 50,3% 51,4%

65,3%

138,3%

225,9%

5 Year - Foreign Exchange Devaluation(3)

Average: 82.5%

Agriculture 19%

Manufacturing 11%

Livestock 5%

Construction 4%

Other Goods 1%

Commerce 15%

Government 9%

Household 5%

Communications 4%

Transportation 4%

Other Services 9%

Binationals 9%

Taxes 6%

…Proved Through Sustained Growth…

7

1

Significant Track Record of Economic Expansion…

Source: Ministry of Finance of Paraguay, Central Bank of Paraguay, and World Bank (1) Growth ranking excludes Government (9.5% average 5 year growth) (2) As of Jan-14. Source: Comisión de Integración Energética Regional

2,1 (11,5)

27,5

6,8 3,4 5,9 6,1

8,6

6,0 3,2

7,1 4,8

0,3

(9,0) (0,3)

3,0

(0,3)

6,9

6,0

3,8

2011 2012 2013 2014 2015

Goods Sector Service Sector Binationals Taxes on Products

Real GDP growth breakdown by sector contribution (%)

...And Attractive Competitive Advantages...

Item

Energy Cost (US$/MWh)(2) 55 117 53 116

VAT Tax 10% 25% 21% 19%

Income Tax 10% 28% 35% 40%

Avg. Monthly Salary (US$)(3) 1,097 720 1,162 1,056

Population aged 20-34(4) 26% 25% 23% 23%

...Supported by a Gradually Diversified Economy... 2015 Real GDP Breakdown by Segment (%)

Goods Sector Service Sector

4.3

(1.2)

14.0

4.7 3.0

...Strong Growth Across Diverse Sectors of the Economy

12,5%

8,7% 8,0% 7,5% 7,0% 6,4% 6,3% 5,5%

4,5%

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

14,0%

Fina

nce

Agric

ultu

re

Com

mun

icat

ions

Elec

tric

ity &

Wat

er

Tran

spor

tatio

n

Cons

truc

tion

Rest

aura

nts

& H

otel

s

Hou

seho

ld S

ervi

ces

Man

ufac

turin

g

Average 5-year Growth (%)(1)

(3) Sources: Paraguay: EPH 2014, Brazil: Instituto Brasileiro de Geografie e Estatistica (Dec-14); Argentina: Ministerio de Trabajo, Empleo y Seguridad Social (Dec-14); Chile: Instituto Nacional de Estadísticas (Dec-14). All figures converted from local currency to US$ at Dec-14 official average exchange rate

(4) As of 2013 for Paraguay, and Oct-15 for other countries

…A Strong Export Sector…

8

1

...With Consistent Positive Surplus Over the Last 5 Years…

…And an Increasingly Diversified Export Matrix

One of the Strongest Trade Balances in the Region…

Soy beans 30%

Electricity 29%

Meat 10%

Cereal 8%

Flour 5%

Vegetable Oils 3%

Wood 1%

Other 14% Soy beans

19%

Electricity 25%

Meat 14%

Cereals 9%

Flour 11%

Vegetable Oils 5%

Wood 1%

Other 16%

Total Exports: US$7.8bn 30.9% of GDP

Total Exports: US$8.4bn 30.2% of GDP

2011(2) 2015(2)

Source: Ministry of Finance of Paraguay and Central Bank of Paraguay (1) Preliminary data for Paraguay and EIU estimates as of March 2016 for countries other than Paraguay (2) Excludes re-exports of US$4.9bn and US$2.6bn in 2011 and 2015, respectively

12,6 11,6 13,6 13,1 10,9

(11,8) (11,1) (11,9) (12,1) (10,3)

(15,0)

(10,0)

(5,0)

0,0

5,0

10,0

15,0

2011 2012 2013 2014 2015

Exports Imports

US$bn

Trade Balance

0.8 0.6 1.7 1.0 0.6

Trade Balance (2015E; % of GDP)(1)

1,8% 1,8% 1,0% 0,6%

(1,3%) (1,9%) (2,1%) (2,2%)

(4,7%)

Median: (1.3%)

… And Capacity to Buffer External Shocks

9

1

...With Low Levels of Balance of Payment Deficit...

…Sustained Foreign Currency Inflows from Binationals …

Source: Ministry of Finance of Paraguay and Central Bank of Paraguay, EIU (1) Regional Peers Average includes Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Peru, Uruguay. Source: EIU estimates as of March 2016 for countries other than Paraguay (2) Includes errors and omissions

387 553 604 572

611

229

233 183 125 108

2011 2012 2013 2014 2015 Itaipú Yacyretá

Income from Binational (US$ mm)

616

786 787 697

0,1 (0,5)

0,5

(0,1) (0,5)

0,5 0,9 0,1

1.7

0,2

2011 2012 2013 2014 2015

Current Account Capital and Financial Account

US$bn Balance of Payments (2) 0.8 (0.0) 1.0 1.1 (0.5)

719

… And a Significant Cushion Provided by International Reserves

5,0 5,0 5,9

6,9 6,2

19,8% 20,2% 20,3%

22,5% 22,4%

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

2011 2012 2013 2014 2015

International Reserves

Below Regional Average Current Account Deficit...

IR (US$bn) IR as % of GDP

(1)

Current Account (% of GDP)

0,4%

(2,0%)

1,7%

0,3%

(1,8%) (1,3%) (1,3%)

(2,2%) (2,6%)

(3,5%) 2011 2012 2013 2014 2015

Paraguay Regional Peers Average

Positive Economic Performance has Resulted in Improved International Perception and

Favorable Foreign Investment

Solid Upward Trend in Credit Ratings

Positive Economic Performance has Resulted in Improved International Perception…

11

2

Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15

Moody's S&P Fitch

B3/B-

B2/B

B1/B+

Ba3/BB-

Ba2/BB

Ba1/BB+

Baa3/BBB-

Source: Ministry of Finance of Paraguay, Central Bank of Paraguay, Fitch Ratings, Moody’s and Standard & Poor’s (1) 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

(1) (1) (1)

Favorable Credit Rating Agency Perceptions

Baa2/BBB Paraguay is one of the few Latin American countries with an overall

optimistic outlook for 2016, based on:

“There are ongoing positive developments in the realm of diversification, particularly as they relate to developing the maquila industry, raising the value-added of agriculture products, and upgrading infrastructure. Fiscal metrics are favorable compared to both Ba and Baa peer medians, and recent efforts to contain current spending will create room for capital and infrastructure spending to boost potential growth…”

-Moody’s, 25 Sep-15

“Paraguay has shown increasing resilience to negative economic trends in the region… expectation for prudent macroeconomic policy implementation, continuous support for greater economic institutionalization (for example, in the debt management office), and gradual improvements in economic diversification that could increasingly limit Paraguay's vulnerability to external shocks.”

-S&P, 16 Jun-15

“Paraguay has demonstrated improved capacity to manage external shocks without destabilizing effects for external accounts or macroeconomic stability. Adequate international reserves, increased exchange rate flexibility and improved credibility of monetary policy allow Paraguay to absorb multiple external pressures…”

-Fitch, 27 Jan-16

Top Regional Rating Improvement

Dec-10 Mar-16 Notches Upgraded

S&P Moody's Fitch S&P Moody's Fitch S&P Moody's Fitch

B B1 NR BB Ba1 BB 3 3 -

BB+ Ba1 BB+ BBB Baa2 BBB 2 2 2

BBB- Baa3 BBB- BB Ba2 BB+ (2) (2) (1)

BBB- Baa3 BBB- BBB+ A3 BBB+ 2 3 2

B- Caa3 B- B B3 B 1 3 1

12

…And Favorable Foreign Investment

Track Record of Foreign Direct Investment Flows…

557

738

72

346 368

2011 2012 2013 2014 2015

5 year total of US$2.1bn

Annual FDI Flows (US$mm)

(1)

Source: Ministry of Finance of Paraguay, Central Bank of Paraguay, Doing Business Organization of World Bank Group (1) Decrease is mainly explained by larger remittances of profits and amounts of loan payments (2) World Bank Doing Business Indicator as of June 2015

Ease of Doing Business Indicators(2)

48 50 54

92 100

116 117 121

157

…Supported by Positive Business Environment Indicators...

2

Committed to Infrastructure Improvements Across the Country and Key Sectors

…Partially Funded Through International Offerings … …And a Clear Framework for New Projects

Committed to Infrastructure Improvements…

14

3

PPP Law

Law designed to encourage public-private associations for infrastructure projects

₋ Private participants selection is held by a competitive procedure such as a public tender

The program requires a concession contract per project with specific terms and conditions

Each project will require a special purpose vehicle and shareholders will have to comply with equity contributions and structuring of financing, among other

585

652

679

738 720

2011 2012 2013 2014 2015

Net Acquisition of Non-Financial Assets (US$mm)

Source: Central Bank of Paraguay and Ministry of Finance (1) Source: Ministry of Finance as of February 29th, 2016

Successful Implementation of Public Investments…

Infrastructure 43%

Debt Repayment

30%

Energy 18%

Cement Industry

4% Social

Welfare 3%

Other 2%

94% of total net proceeds from international bond issuances have already been deployed ₋ 61% of deployed funds

have been used to improve Paraguay’s infrastructure and energy sectors

Use of Funds by Purpose(1) (%)

Total Net Proceeds: US$1.7bn

Historically, Paraguay’s infrastructure projects were funded with its own resources

However, recent regulatory initiatives, such as the PPP Law, have been implemented to increase private sector participation in public works projects

…Across the Country and Key Sectors

15

Size US$430 mm

Description

Double carriageway over a 143km segment from Road 2 (Ypacaraí) to Road 7 (Km 183)

Includes construction of 5 ring roads, 3 viaducts and a crossroad Awarded contract includes design, construction, financing and operation

for a 30 year period

3

Highway Roads 2 & 7

Size US$150 mm

Description

Silvio Petirossi is Paraguay’s largest airport in terms of activity and connections

Construction of a new 40,000km2 passenger terminal and a 78,000km2

platform Passenger traffic is expected to reach ~3mm passengers / year once

works are completed

Awarded contract includes design, construction, financing and operation for a 30 year period

Stage Master Plan soon to be started in association with US Army Corps of Engineers (USACE)

Description

Currently, navigation between Asunción and Apa River is restricted from Oct – Feb due to poor dredging and maintenance

Size, financing and timing considerations to be confirmed, based on Master Plan’s output and recommendations

Project includes dredging, signage, beaconing and electronic navigation chart

Design will be environmentally-friendly Hydroway will also decrease risk of flooding

Road 7

Road 2 Asunción

Ciudad del Este

Segment 1 672 Km

Segment 2 603 Km

Segment 3 537 Km

Segment 4 1.940 Km

Segment 5 590 Km

Segment 6 420 Km

BOLIVIA BRASIL

URUGUAY

ARGENTINA

PARAGUAY ASUNCIÓN

São Paulo

Pto. Murtinho M.C. Peralta

Resistencia

Santa Fe

Rosario

Rio

Para

guay

Asunción

Waterway

Silvio Pettirossi Airport

Main Infrastructure Projects

Prudent Fiscal Balance and Institutional Framework

3,3%

1,0% 0,7% 1,3%

0,9% 1,0%

(1,7%) (1,7%) (1,1%)

(0,5%)

(3,0%)

(2,0%)

(1,0%)

0,0%

1,0%

2,0%

3,0%

4,0%

2011 2012 2013 2014 2015

Balance (Excl. Acquisition of Nonfinancial Assets) Balance

Prudent Fiscal Balance and Institutional Framework

17

4

…Have Resulted in a Flexible Central Government Balance in Compliance With Regulatory Limits(1)

Stable Tax Revenue Policies…

% of GDP

7,5% 9,4% 9,1% 8,8% 9,2%

4,3%

5,6% 5,1% 5,2% 5,8% 2,9%

3,0% 2,3% 2,6%

2,6% 14,7%

18,0% 16,5% 16,6%

17,6%

2011 2012 2013 2014 2015

Wages & Salaries Grants / Social Benefits Other

Source: Central Bank of Paraguay and Ministry of Finance (1) For 2015 overall balance’s limit was set at (1.5%) of GDP, excluding infrastructure expenditures by international bond issuances

Expenditures Breakdown (% of GDP)

(1.3%)

Infrastructure Expenditures Financed by International Bond Issuances

12,6% 12,7% 11,8% 12,7% 12,6%

5,4% 6,3% 5,3% 5,2% 5,9%

18,0% 19,0%

17,1% 17,9% 18,5%

2011 2012 2013 2014 2015

Tax Revenues Non-Tax Revenues

Revenues Breakdown (% of GDP)

…And Central Government Expenditure Levels…

(0.8%)

(1.8%)

Balanced Debt Profile and Low Rollover Risk

Balanced Debt Profile And Low Rollover Risk

19

5

… Comfortable Public External Debt Maturity Profile… …And Diversified Funding Sources

190 180 167 163 128

3.167

2016 2017 2018 2019 2020 2021+ Bilateral

6%

Bonds 47%

Banks 1%

IADB 27%

World Bank 11%

Other 8%

Multilateral 46%

Source: Central Bank of Paraguay and Ministry of Finance

Maturing Debt by Year (US$mm) Public sector external debt by creditor (as of Dec-15)

...And a One of the Lowest Leverages in the Region Public Debt (% of GDP)(2)

17,5% 19,7% 21,0%

31,0% 37,5%

46,2% 47,2%

65,9% 68,6%

Median: 37.5%

Conservative External Debt Composition...

Fixed 65%

Variable 35%

USD 93%

JPY 5%

Others 2%

External debt currency aligned with USD exports

By Currency By Interest Rate Type

Large percentage of debt with fixed interest rates

Sound Monetary Policy Supported by an Adequately Capitalized and

Expanding Financial Sector

8,1%

6,1% 6,0% 6,2% 6,2%

3,2% 2,1% 2,3% 2,0%

3,1%

2011 2012 2013 2014 2015 IRM Real Interest Rate

Sound Monetary Policy….

21

… With Low Domestic Interest Rates…

Source: Ministry of Finance of Paraguay, Central Bank of Paraguay, United States Department of Agriculture (1) Nominal Interest rate is the IRM; Real interest rate estimated as IRM less inflation

6

Controlled Inflationary Levels...

Current inflation target band: 4.5% +/- 2.0% Nominal and Real Interest Rates(1) (%)

21,6% 24,5% 50,3% 51,4%

65,3%

138,3%

225,9%

5 Year - Foreign Exchange Devaluation(3)

4.9%

End of Year :

4.0% 3.7% 4.2% 3.1%

Average: 82.5%

…And a Strong Foreign Exchange Policy

Target

Inflation

5.0% 5.0% 5.0% 5.0% 4.5%

(3) Variation of local foreign currency vs. US dollar between December 31st, 2010 and 2015 (4) Basket of main US trading partners. Source: Bloomberg

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Feb-16

...Supported by an Adequately Capitalized and Expanding Financial Sector

22

6

Growth Potential from Further Credit Expansion

… On the Back of a Healthy and Efficient System… ...With Solid Capital Ratios

Source: Central Bank of Paraguay and Ministry of Finance (1) Efficiency ratio calculated as Operating Expenses/Total Assets (2) Capital adequacy ratio calculated as Regulatory capital to risk weighted assets

Consistent Growth and Profitability Over the Years… Loans Evolution (US$bn) and Return on Equity (%)

14,6% 15,2% 16,2%

15,2% 16,2%

2011 2012 2013 2014 2015

2,0% 1,8%

2,5%

1,8%

2,5%

30,9% 32,5%

43,1%

32,5%

43,1%

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

1,0%

2,0%

3,0%

4,0%

5,0%

2011 2012 2013 2014 2015

NPLs/Total Loans Efficiency ratio

9 10

13 15 16

0

5

10

15

20

2011 2012 2013 2014 2015

ROE (%) 29.4% 28.3% 27.8% 28.3% 27.8%

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

Credit to Private Sector (% of GDP)

15,7%

20,1% 20,7% 23,0%

28,0%

2011 2012 2013 2014 2015

US$bn

Improving Social Indicators Backed by Social Policies

…And Poverty and Inequality Indices

Improving Social Indicators Backed by Social Policies

24 Source: Central Bank of Paraguay, Ministry of Finance, Social Progress Imperative Organization

7

35%

40%

45%

50%

55%

60%

65%

70%

20%

30%

40%

50%

60%

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

Poverty Headcount Ratio (% of total population) GINI Coefficient (%), RHS

… With Inflation Levels Below Minimum Wage Increases... Controlled Unemployment…

8,7%

4,4% 5,0%

6,9%

3,6% 4,9%

4,0% 3,7% 4,2%

3,1%

2011 2012 2013 2014 2015 Wage Increase Inflation

5,6% 4,9% 5,0%

6,0%

2011 2012 2013 2014

Firm Commitment To Enhance Governance Standards

Firm Commitment To Enhance Governance Standards

26

8

...Leading to a Positive International Reputation

Paraguay adheres to Article IV of IMF Standards for Data Dissemination

IMF’s press release regarding its 2016 mission to Paraguay in Feb-16 stated:

“The authorities are moving forward with welcome reforms

to enhance financial supervision (…) With the introduction

and implementation of the Law of Free Access to Public

Information, the authorities have begun to establish much

greater transparency in public processes to increase public

accountability and strengthen governance. This is an

important step to improve the quality of institutions in

Paraguay on a lasting basis.”

Source: Transparency Organization, Ministry of Finance and IMF

Evidenced Commitment To Transparency…

By strengthening the rule of law and decreasing corruption levels, Paraguay aims to improve its business environment conditions

Freedom of Access Information Law

Anti-Money Laundering Policies

Regulated Licensing and Registration Requirements

…Reflected in Improving Anti-Corruption Indicators…

20

11

4 3

0 0

(2) (3)

(7)

Transparency International Corruption Ranking (Ranking improvement 2015 vs. 2014)