This update addresses various issues regarding the legal status and enforceability of security documents and promissory notes when provided by a Paraguayan borrower in favour of foreign lenders.
How effective a given type of security instrument is and what are the legal actions available to the creditor to enforce a given security instrument or promissory note are the two major issues a foreign lender must address when financing projects or operations in Paraguay.
Guarantees are classified in two major groups: real guarantees (on property) and personal guarantees.
A. Real Guarantees
Real guarantees, mainly mortgages and chattel mortgages, are considered the most reliable and secure guarantees, for they create a privileged security interest over the mortgaged or pledged property in favour of the creditor. Furthermore, procedural law prescribes an expedited enforcement procedure for this type of guarantees, not available with respect to personal guarantees.
