Paraguay and the Special 301 Report

By Hugo Mendieta

1. Introduction

For decades, intellectual property (IP) has held a central position in contemporary society, functioning not only as a framework of technical regulations but also as a battleground for political dispute. In this arena, the annual Special 301 Report, prepared by the United States Trade Representative (USTR), has established itself as a key instrument of US trade policy. It serves as a multidimensional tool used to evaluate foreign countries based on the adequacy and effectiveness of their intellectual property rights protection and enforcement. Although the report is non-binding and operates outside traditional multilateral mechanisms, its influence remains substantial. It significantly shapes the regulatory agendas and bilateral relations of the countries placed on its various watch lists.

Paraguay has been included on these lists since 1992, a turning point where it became more visible in the USTR’s assessments due to a variety of factors. Its inclusion coincided with a period of institutional transformation, foreign policy reconfigurations, and shifting trade relations with the United States. It also aligned with an increasing emphasis by the Paraguayan state on demonstrating progress in combating piracy and counterfeiting, aiming to strengthen ties with US capital. However, the way these policies are designed and justified raises critical questions regarding the country’s policy autonomy in the face of external pressure, as well as the balance between IP protection and other public interest objectives.

This paper offers a brief overview of Paraguay’s inclusion in the Special 301 Report, the pressures surrounding it, its potential consequences, and other relevant considerations. Through a review of official reports, institutional documents, and critical literature, this study aims to provide perspective on the primary observations raised by the US government, examine competing arguments, and contribute to a broader reflection on the role of this political instrument in shaping national public policies.

2. The Special 301 Report

The Special 301 Report is an annual review prepared by the Office of the United States Trade Representative (USTR) pursuant to Section 301 of the Trade Act of 1974. Its political objective is to assess the level of intellectual property rights (IPR) protection and enforcement among US trading partners, categorizing them based on their compliance with the standards promoted by US trade policy. In this regard, Kenzie Lawrence and Néstor Morera Víquez (2024) note that the mandate of the annual Special 301 Report is to identify and classify foreign countries into three categories if they:

1. Deny adequate and effective protection of intellectual property rights, or
2. Deny fair and equitable market access to United States persons that rely upon intellectual property protection.

The Special 301 Report emerged alongside the global expansion of US cultural, pharmaceutical, biotechnological, and software industry interests. During the 1980s and 1990s, these sectors pushed an international agenda aimed at strengthening intellectual property standards to align with US interests, moving beyond the scope of existing multilateral agreements (Junco Villamizar, 2018). Along these lines, Joseph Stiglitz et al. (2017) argue that the intellectual property standards typically preferred by advanced economies are designed to maximize the profits of large pharmaceutical companies and other actors positioned to influence trade negotiations, rather than to maximize innovation and scientific progress.

Experts in the field (Busaniche, 2016; Info Justice, 2016) agree that the Special 301 Report is inherently unilateral, coercive, and driven by corporate interests, as it does not originate from a multilateral body nor does it follow binding international legal procedures. The drafting of the report relies heavily on submissions from US industry associations, such as the International Intellectual Property Alliance (IIPA) and the Pharmaceutical Research and Manufacturers of America (PhRMA), alongside multinational corporations operating within the evaluated countries, acting as lobby groups with privileged access to the drafting process (Delgado, 2013; Parra & Rangel, 2024).

The USTR classifies countries into three categories based on its own criteria of severity and compliance deficiencies. Ordered from lowest to highest priority or severity, the categories are:

1. Watch List
2. Priority Watch List
3. Priority Foreign Country

Consequently, the Special 301 Report is part of a broader trade policy strategy that combines leverage mechanisms—such as the threat of trade tariffs on specific products—with bilateral negotiations designed to promote regulatory frameworks favorable to US interests. As Lincicome et al. (2022) point out, Section 301 evolved from an exceptional remedy into a routine tool for economic disciplining, used to impose regulatory standards more stringent than those agreed upon in multilateral institutions and to respond to the demands of major US corporations.

Within this framework, international case studies demonstrate that placement on the Special 301 watch lists is frequently accompanied by diplomatic pressure, trade conditionalities, and expedited regulatory reforms. These changes are often pushed through without public debate or a comprehensive assessment of their social, cultural, or economic impacts (Lawrence & Víquez, 2024; Venturini, 2025). Latin America, in particular, has been a frequent target for this mechanism due to its peripheral position in the global economy and its commercial dependencies.

3. Paraguay and the Special 301 Report

3.1. Context and Background

Prior to its systematic inclusion in the Special 301 Report, Paraguay’s intellectual property regime was characterized by a fragmented regulatory framework—stretching from Law 1328/98 on “Copyright and Related Rights” to Law 4798/12, which established the National Directorate of Intellectual Property (DINAPI)—along with limited institutional capacity and uneven enforcement of existing laws. Since the beginning of its democratic transition in 1989, the country has gradually adapted its legislation to comply with international commitments made under the World Trade Organization (WTO) and other treaties, though always constrained by its internal economic and political context.

During the decades following the Stroessner dictatorship, the Intellectual Property Rights (IPR) agenda was not a core focus of Paraguayan public policy; historically, the state apparatus saw no pressing internal need to implement these extensive regulations. However, the growth of cross-border trade, the structural informality of the domestic economy, and the prominence of commercial hubs like Ciudad del Este placed the country under the radar of US agencies, which began labeling Paraguay as a problematic hotspot for piracy and counterfeiting (Última Hora, 2022).

The creation and subsequent strengthening of DINAPI marked an institutional turning point by centralizing previously scattered competencies and articulating a state narrative more closely aligned with international standards. While this process occurred alongside escalating external pressure—particularly from 2012 onward and intensifying over the following decade, driven by the specific commercial interests of growing US corporations—Paraguay was explicitly placed back on the Special 301 Watch List in 2022 (DINAPI, n.d.).

3.2. Regulatory Direction in Paraguay

Paraguay’s IPR legal framework consists of patent, trademark, and copyright laws, many of which have been reformed or updated in recent decades, as well as a dozen international treaties ratified into domestic law. Notable among these are the Universal Copyright Convention (Geneva) and various World Intellectual Property Organization (WIPO) treaties. These regulations aim to meet the minimum standards of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). In certain areas, domestic policies are shifting toward stricter standards that align with the demands of the Special 301 Report, despite its non-binding nature.

The National Intellectual Property Plan 2030, driven by DINAPI, stands as the primary strategic document in this field. This plan outlines a long-term project aimed at “strengthening compliance with international principles, modernizing administrative management, and promoting intellectual property as a tool for economic development” (DINAPI, n.d.). However, critical analyses warn that the framework promoted by the Special 301 Report privileges the interests of rights holders over public considerations such as access to knowledge, public health, and cultural diversity (Lessig, 2004; Doctorow & Giblin, 2023). This tension between regulatory flexibility and external pressure from major trading powers is particularly visible in pharmaceutical patenting. As Junco Villamizar (2018) points out, unilateral mechanisms like the Special 301 Report operate as indirect obstacles to utilizing internationally recognized flexibilities, thereby restricting state sovereignty in public health and development policies.

3.3. Paraguay’s Status in the Special 301 Report (1998–2025)

Paraguay has been consistently included in various sections of the Special 301 Report since the late 20th century. According to the report’s rationale, these classifications reflect “persistent concerns regarding the protection and enforcement of intellectual property rights (IPR), even when partial institutional progress is acknowledged.” They also reflect the scrutiny applied to commercial activity within Paraguayan territory from the perspective of US capital.

Table 1 summarizes the primary comments made by the USTR regarding Paraguay between 1998 and 2025, highlighting the core patterns of the US narrative. Initially, Paraguay was designated following an out-of-cycle review due to the growing interests of US multinational capital and potential threats to IPR enforcement. This pressure led to a Memorandum of Understanding (MoU) signed by the administration of Raúl Cubas Grau in November 1998. Moving into the 21st century, the reports consistently flagged issues related to piracy and illicit transit. However, this period also saw the formal expansion and extension of the 1998 memorandum through various bilateral agreements lasting until 2012. Driven by these reports, which intersect with the broader geopolitical alignment of successive Paraguayan administrations toward US trade policy, a series of IPR enforcement measures have been deployed over the last decade.

The reports routinely emphasize Paraguay’s failure to meet its bilateral commitments, frequently citing the 2015 Memorandum of Understanding signed during Horacio Cartes’ first executive term. They also point to structural weaknesses in the judiciary’s ability to issue deterrent penalties, as well as the ongoing transit of counterfeit goods. Repeated references to Ciudad del Este reinforce a narrative that associates the country with regional illicit trade dynamics, and at times, as a hub for international terrorist financing—allegations put forward by US authorities and echoed by the Paraguayan government.

In 2023, while Paraguay remained on the Watch List, the report introduced explicit recognition of DINAPI’s institutional strengthening and inter-agency cooperation; however, these positive mentions were tempered by repeated criticisms regarding the lack of sustained outcomes in judicial prosecutions and the low rate of effective sentencing. The 2024 report deepened this ambivalent trend. On one hand, it highlighted the continuity of the bilateral IP Work Plan and the operation of coordination mechanisms like the National Center for Intellectual Property Rights Coordination (CODEPI). On the other hand, it insisted on structural deficiencies in enforcement and ease of doing business for foreign firms, specifically targeting the lack of criminal prosecutions. Finally, in 2025, the report acknowledged concrete operational advances in the fight against piracy and counterfeiting, yet maintained Paraguay on the Watch List, confirming that institutional progress was still deemed insufficient for a status upgrade.

Table 1. Summary of USTR Special 301 Report Comments on Paraguay (1998–2025)

Year / Period	Report Category	Key Observations & Findings
1998	Priority Foreign Country	Designated as a Priority Foreign Country following an out-of-cycle review, triggering an investigation under Section 301 of the US Trade Act. The report explicitly highlights Ciudad del Este, applying pressure for a formal agreement. An MoU is concluded with the Raúl Cubas Grau administration in November 1998.
1999–2004	Monitoring (Section 306)	Monitoring of Paraguay’s compliance with the 1998 MoU regarding intellectual property protection and the security of US corporate interests.
2005–2014	Monitoring (Section 306) until 2012; Watch List from 2013 onward	Persistent concerns regarding piracy, counterfeiting, and border control (Ciudad del Este). The country remains subject to intense bilateral monitoring. Extensions of the 1998 agreement were negotiated until its final expiration in 2012. Following the expiration, US pressure increases to impose new measures, placing the country back on the Watch List in 2013.
2015	Removed from Watch List	Paraguay is removed from the list following the signature of a new MoU on intellectual property. This followed a shift toward domestic policies aligned with US interests, such as commitments to amend regulatory frameworks for agrochemical and pharmaceutical product patents that were previously unfavorable to foreign firms.
2019	Watch List	Re-included on the Watch List due to outstanding enforcement commitments from the 2015 MoU signed during the Horacio Cartes administration.
2020	Watch List	The report notes institutional progress but emphasizes structural weaknesses in issuing deterrent penalties and pursuing criminal prosecutions.
2021	Watch List	Ongoing concerns regarding the effective enforcement of domestic IPR legislation.
2022	Watch List	The report highlights the role of Ciudad del Este as a primary regional transit hub for counterfeit goods.
2023	Watch List	Acknowledges the operational efforts of DINAPI but flags persistent structural bottlenecks in criminal prosecution and sentencing.
2024	Watch List	The United States maintains strict monitoring over the Paraguayan intellectual property protection system.
2025	Watch List	No substantive changes; bilateral monitoring continues under the established IPR cooperation framework.

Source: Office of the United States Trade Representative (USTR) Special 301 Reports (1992–2025).

3.4. Future Outlook: Where is the Paraguayan State Heading?

An analysis of the 2012–2025 period reveals a clear trend toward the progressive alignment of the Paraguayan state with the standards promoted by the Special 301 Report, both legally and discursively. This persists despite arguments from several critical authors (Lawrence & Víquez, 2024) who characterize the report as a transactional mechanism used to impose arbitrary criteria that serve the commercial interests of the US government.

Officially, this alignment is framed as an institutional “modernization” and strengthening process. From a critical perspective, however, it can be interpreted as an asymmetric adaptation to superpower pressure, occurring during successive global crises ranging from the pandemic to current geopolitical conflicts. This interpretation is reinforced by the recent intensification of explicit US economic diplomacy internationally—spanning import tariffs against competing states to direct military actions in regions of commercial interest under various pretexts, such as actions involving Venezuela and Iran in 2026. Furthermore, this policy suite was expanded in 2025 via the executive order “Defending American Companies and Innovators From Overseas Extortion and Unfair Fines and Penalties,” which authorizes the federal government to impose retaliatory measures on states that fail to safeguard the interests of US companies.

The key findings suggest that Paraguay stands at a crossroads. On one hand, it seeks to bolster its international image through grand rhetoric to attract foreign investment and international funding. On the other hand, it faces the risk of consolidating an IP regime that is fundamentally detached from local realities—leaving little room for access to knowledge, restricting flexibility in the exercise of fundamental rights, and rendering the country highly dependent on US trade policies without alternative avenues for negotiation. Comparative experiences across Latin America show that the uncritical adoption of “TRIPS-plus” standards can generate significant social and economic costs without yielding clear benefits for local development (Lawrence & Víquez, 2024; Venturini, 2025).

Given this scenario, policy recommendations point toward strengthening state capacity to independently assess the domestic impacts of the Special 301 Report, fostering informed public debates that include civil society, and actively utilizing the flexibilities recognized under international law. Additionally, it is essential to diversify the sources of legitimacy for domestic IP policy by incorporating human rights, cultural preservation, and sustainable development perspectives.

Conclusions

The evidence reviewed indicates that the Paraguayan state has systematically aligned its IPR architecture with the commercial interests outlined in the Special 301 Report. This alignment is not an isolated regulatory phenomenon; rather, it reflects a broader structural dependency on the political and economic priorities of the United States. As demonstrated throughout this study, the Special 301 Report functions as a unilateral mechanism designed to exert leverage on countries whose regulatory frameworks do not conform to specific foreign corporate interests. This institutional submission highlights a dependent policy stance, particularly given that the report’s mandates are non-binding and lack justification under established multilateral frameworks.

International precedents further demonstrate the risks of tailoring domestic policies to the interests of a dominant power without considering IP flexibilities, which are vital instruments for safeguarding human rights and supporting local enterprise.

What appears evident remains a critical pending task for the Paraguayan state: it must move away from the automatic adoption of standards pushed by external instruments and transition toward an autonomous IP policy that addresses its own domestic needs and developmental priorities, guided by international conventions ratified within multilateral forums. Subordinating national public policies to the criteria of the Special 301 Report raises serious questions regarding the lack of transparency and rigor in its assessments, the corporate lobbying driving its creation, and the long-term consequences for sovereign national planning.

To counter this, it is fundamental to build transparent policy processes and open a broad dialogue with civil society regarding the social function and limits of intellectual property within the country. An indispensable first step requires public institutions to commission independent impact assessments. These studies would allow local authorities to cross-examine external diagnostics, accurately evaluate the real challenges that intellectual property poses to local development, and foster the collective construction of public policies that are sovereign, balanced, and inclusive.

Scope and Limitations of the Study

This study does not offer definitive conclusions regarding the entirety of public policies related to IPR in Paraguay. Its scope is limited to providing a political, regulatory, and institutional critique of the Special 301 Report’s implications for the country. Furthermore, the unilateral and industry-driven nature of the report, combined with domestic institutional opacity and a scarcity of systematic public data, present structural limitations to this study—posing hurdles that mirror those faced by any citizen attempting to scrutinize how the Paraguayan state formulates its public policies in this sector. Finally, the necessary reliance on alternative literature and media coverage introduces inevitable biases, which are nonetheless essential for contextualizing a policy instrument that operates largely outside traditional multilateral mechanisms.

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