In June 2022, the Government of Paraguay sanctioned the bill “Incentives and promotion of electric transport in Paraguay” with the aim of establishing a regulatory framework to promote and incentivise the use of electric transport in the public sector. Currently, there are 1,400 diesel buses in operation, of which 50 per cent are conventional buses. The government plans to acquire an average of 200 electric buses each year over the next five years, that is approximately 1,000 buses, to replace the existing fleet. To accelerate the transition in a financially sustainable manner, the Government of Paraguay has entered into agreements with other countries for the exchange of technology and knowledge relating to electromobility.
Rationale for electromobility
The push for electromobility is due to factors such as:
- Dependency on imported fuel: Since Paraguay does not have its own sources of fuel, it is dependent on imports to meet its energy needs. It spends more than USD2 billion annually on importing petroleum-derived fuels, which accounts for a major proportion of the country’s expenditure in foreign currency. The operating costs of diesel have also recently risen due to a spike in fuel prices. Furthermore, Paraguay’s electrical system is based on electrical energy generated from hydropower, which is a renewable and clean power source. Approximately 90 per cent of this generated energy is exported to other countries, with Argentina and Brazil being the top importers. The government aims to replace fossil fuels with this domestically produced clean and renewable energy to maintain sovereignty over Paraguay’s internal affairs.
- Urban congestion and pollution: Unplanned urban expansion has led to increasing pollution, congestion, and overburdened public utilities. About 62.5 per cent of Paraguay’s population currently resides in urban areas. The introduction of an electric and efficient public transport system is expected to reduce traffic and pollution caused by diesel engines.
- Saturated public transportation system: Many municipalities have reported high demand for bus services which cannot be met with their current fleets. The introduction of electric buses will help operators increase their fleet size while lowering their carbon emissions.
National Electromobility Plan
In April 2021, the Ministry of Environment and Sustainable Development (MADES) announced plans to develop a sustainable national mobility plan.
The plan has been developed with the help of EUROCLIMA+, a European Union (EU) cooperation programme to reduce the impact of climate change in Latin America. Under this programme, Colombia, Argentina, Paraguay, and Panama have been collaborating to develop their respective National Strategies for Electric Mobility. The countries have been preparing their strategies based on an iterative multi-stakeholder consultation process involving both the public and private sectors. The programme was implemented in phases, that is, the organisation of a launch workshop, the development of a baseline diagnosis, the writing of a draft, and the holding of consultations with relevant stakeholders. The final stage is the adoption and publication of the national strategies.
During the workshop stage, technical and technological barriers to, and opportunities for, the implementation of electromobility in public transportation in the metropolitan areas of Asunción, Ciudad del Este, and Encarnación were identified. Specific projects were also proposed in regard to the implementation of national, urban, and interurban policies.
The Government of Paraguay is expected to publish its National Electromobility Plan in the fourth quarter of 2022.
The transition to electric vehicles (EVs) in Paraguay has attracted significant international attention from countries such as Taiwan, South Korea, and from the EU. Through various agreements, these countries have committed to helping Paraguay develop technology and prepare policies to accelerate and promote the introduction of EVs in the country.
Paraguay is one of Taiwan’s 15 diplomatic allies. Hence, the governments have been working closely together to develop electromobility in Paraguay.
In May 2021, the US and Taiwan hosted a trilateral virtual meeting to identify private-sector opportunities to bolster the renewable energy and EV sector. Business leaders from the three countries discussed Paraguay’s hydroelectric energy surplus and potential opportunities for collaboration in the areas of green hydrogen, solar energy, smart electricity distribution and storage systems, and EV components.
In May 2022, the Government of Taiwan announced plans to donate electric buses to Paraguay. As specified by the Embassy of Taiwan, the Government of Paraguay identified and designed four corridors for the operation of the buses. The number of electric buses to be donated was not specified. The governments have begun collaborating to identify a bus model that would be suitable for sustainable operations in Paraguay. The Government of Paraguay has also yet to decide whether the buses will be managed by the state government or the private sector.
In July 2022, the Embassy of Taiwan hosted a visit by a business delegation of 11 companies from Taiwan. During the delegation’s visit, two agreements were signed between companies from Taiwan and Paraguay to cooperate in the development of electromobility. Taiwan-based Tangeng Advanced Vehicles Company Limited and Paraguay-based Grupo Bene SA signed a letter of intent to collaborate in the development of electric buses. Taiwan-based E Formula Technologies Incorporated and Paraguay-based Quimfa SA signed a memorandum of understanding (MoU) to cooperate in the areas of energy storage, renewable energy, and hydrogen power.
In July 2022, the Ministry of Industry and Commerce (MIC), in cooperation with the Government of South Korea, launched the first technology centre for the automobile parts industry in Paraguay as part of the “TASK Centre for the Technological Advancement of the Auto Parts Industries and Pilot Plan for Electric Mobility” project. With the aid of the Korea Automotive Technology Institute (KATECH), the technology centre is expected to develop technology for electromobility in Paraguay. The project has received USD16 million from the Government of South Korea. Through this project, South Korea will transfer its technical knowledge of and expertise on EVs.
The pilot project will have stages that will be ordered towards the realisation of specific objectives. The first phase of the project will cover the development of electric buses and vans. One of the objectives of the project is to help Paraguay establish an automotive industry of EVs by training a specialised workforce, structuring a permanent training system, and by providing recommendations for policies.
Through the project, South Korea is expected to expand its market in Paraguay.
The Government of Paraguay has ambitious plans to accelerate the adoption of electromobility in the country. Aside from converting its existing bus fleet to EVs, the government also aims to become a manufacturer of EVs.
However, despite the significant steps taken to advance electromobility, Paraguay lacks a conducive regulatory landscape to incentivise private operators to acquire electric buses. Currently, only tax exemptions are provided to operators who deploy electric buses. The main barrier is the absence of a special technical rate for electric buses. Without the involvement of the private sector, it will be difficult for the government to procure an average of 200 electric buses annually. Additionally, operators are confused about which standard for electric charging stations they should adopt since a regulation on standardising the charging infrastructure has not been introduced. Even though most of the vehicles have been purchased from Asian countries, they have been adapted to North American charging standards. Hence, the government will need to lay down the required regulatory framework to provide incentives to public transport operators in the private sector to achieve its plans to support electromobility in Paraguay.