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Paraguay pharma debt: Suppliers accept factoring despite interest burden
🇵🇾 Paraguay /Economy & Trade

Paraguay pharma debt: Suppliers accept factoring despite interest burden

From ABC Color · () Spanish

Translated from Spanish, summarized and contextualized by DistantNews.

At a glance

News Named sources Context piece
  • Paraguayan pharmaceutical suppliers have agreed to factor their receivables to collect a $1 billion state debt.
  • This agreement, proposed by the Ministry of Economy and Finance, requires suppliers to assume interest costs ranging from 11-12%.
  • The factoring covers only medication expenses, excluding services like dialysis, leaving some companies ineligible.

Pharmaceutical suppliers in Paraguay have agreed to a factoring arrangement to help settle a significant $1 billion debt owed by the state. This move, proposed by the Ministry of Economy and Finance (MEF), allows suppliers to cede their collection rights, amounting to approximately $360 million, to the Ministry of Public Health.

We will unfortunately have to assume the interest; in that sense, I must recognize that the Ministry of Economy has lent us a hand to negotiate interest rates with the banks so that we can assume them.

— Edgar VillalbaExplaining the suppliers' acceptance of factoring despite having to bear the interest costs.

While the suppliers have reluctantly accepted the proposal, they will be responsible for covering the associated interest rates, which range between 11% and 12%. Edgar Villalba, vice president of the Chamber of Representatives and Importers of Pharmaceutical Products, Toiletries, and Related Items (Cripfa), acknowledged that factoring is the most feasible method to begin reducing the substantial outstanding debt from 2025 and current expenditures.

According to the regulations of the norm, this cession of collection rights only includes the Object of Expenditure 350, which refers strictly to the item of medicines, something that the guild had already anticipated when the Ministry of Economy and Finance (MEF) presented the proposal.

— Edgar VillalbaClarifying the limitations of the factoring agreement, specifically that it only covers medication expenses.

Villalba noted that the factoring mechanism specifically covers "Object of Expenditure 350," which pertains strictly to medications. This means that expenses related to dialysis, legal injunctions (recursos de amparo), and other services are not included in this arrangement. Consequently, Villalba anticipates that "many companies will be left out" as they provide services beyond just medication.

Many companies will be left out.

— Edgar VillalbaExpressing concern that the limited scope of the factoring agreement will exclude certain companies.

According to Cripfa's calculations, even with the factoring of $360 million and ongoing monthly payments, the debt from 2025 is expected to be halved by the end of the year, leaving nearly $500 million still unpaid. The state currently disburses $40 million monthly, but Villalba stated this is insufficient given this year's purchases. The Ministry of Health procures between $15 to $20 million in medications monthly, aligning with its annual budget of $450 million. The situation at the Social Security Institute (IPS) is also described as complicated, though it reportedly has better prospects for debt settlement.

We believe that we will be left with a debt of almost 500 million dollars still from the year 2025 unpaid, since the 360 (million dollars) plus the monthly payments, we believe it will only amortize 50 percent.

— Edgar VillalbaEstimating the remaining debt after the factoring arrangement and current payments.
DistantNews Editorial

Originally published by ABC Color in Spanish. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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