Paraguay Central Bank Sets August Usury Interest Rate Caps

The Central Bank of Paraguay (BCP) has updated its usury interest rate thresholds for August, establishing new limits for loans in both local and foreign currencies. For loans denominated in Paraguayan guaranies, the maximum interest rate considered usurious will be 27.26%. This represents a modest increase from the current month's threshold of 27.04%, though it remains below the 27.62% limit seen a year ago.

In parallel, the monetary authority set the cap for operations in foreign currency at 11.25%. This rate is virtually identical to the 11.24% observed in July. These limits are not recommended rates but legal boundaries defining when an interest rate enters the usury category.

The BCP defines usurious rates as those exceeding the average market rates by 30%. This average is calculated based on the effective annual rates charged by banks and financial institutions for consumer loans, differentiated by term and currency. The relative stability of these caps coincides with the normalization of the Monetary Policy Rate (TPM), which currently stands at 5.50% after two consecutive cuts earlier in the year. While the usury thresholds are stable, the BCP anticipates that the TPM reductions may eventually translate into lower market rates, making financing more accessible.

Notably, the average active rates in the financial system remain significantly below these published ceilings. In guaranies, the average active rate hovers around 16%, and in dollars, it is approximately 7.62%. This indicates that, despite the legal limits, current lending rates are well within them.