By Nabimara Benson
Abu Dhabi becomes the stage for a significant diplomatic and economic milestone as UAE President Sheikh Mohamed bin Zayed Al Nahyan welcomes Paraguayan President Santiago Peña for a high-level bilateral meeting. The visit, marked by mutual respect and a shared vision for sustainable development, underscored the growing economic ties between the United Arab Emirates (UAE) and Paraguay, two nations geographically distant but increasingly aligned in their pursuit of strategic partnerships. This article explores the burgeoning economic relationship between the UAE and Paraguay, highlighting key developments, agreements, and opportunities for future collaboration.
In recent years, the UAE and Paraguay have witnessed remarkable growth in their bilateral relations, with trade and investment ties expanding by 180% over a short period. This surge is driven by a mutual interest in leveraging each nation’s strengths to foster economic development. The UAE, a global hub for trade, logistics, and innovation, sees Paraguay as a strategic partner in South America, particularly within the Mercosur bloc (comprising Brazil, Argentina, Paraguay, and Uruguay). Paraguay, with its macroeconomic stability, competitive tax environment, and strategic location as a logistics hub, offers the UAE a gateway to South American markets.
The UAE’s economic diversification efforts, moving beyond its traditional reliance on oil and gas, have spurred its interest in expanding trade and investment in regions like South America. Paraguay, with its abundant natural resources, young population, and stable economic policies, has emerged as an attractive destination for Emirati investments. The 2025 state visit by President Peña to Abu Dhabi marked a pivotal moment in consolidating these ties, with both leaders emphasizing collaboration in trade, energy, technology, and sustainability.
During the visit, Presidents Peña and Sheikh Mohamed bin Zayed explored a range of cooperative initiatives aimed at deepening economic ties. Earlier in 2025, Paraguay’s Vice Minister of Rediex, Javier Viveros, met with UAE Minister of State for Foreign Trade, Dr. Thani Al Zeyoudi, and Deputy Minister of Investment, Mohammad Abdulrahman Alhawi, to promote Paraguay as a destination for investment and trade. These discussions laid the groundwork for the agreements formalized during Peña’s visit, which included nine memorandums of understanding covering taxation, investments, and air services.
A key focus of the talks was the potential for Paraguay to serve as a logistics hub for Emirati exports to South America. Paraguay’s strategic location, with access to the Paraguay-Paraná waterway and the Bioceanic Route, positions it as a critical link for regional trade. The UAE, with its expertise in logistics and global trade networks, expressed interest in developing infrastructure for export corridors to facilitate the distribution of Paraguayan food products and other goods to Gulf markets.
Energy and technology were also central themes. Paraguay’s abundant clean energy resources, particularly from hydropower, caught the attention of Emirati leaders. Discussions with UAE authorities and executives from G42, a leading Middle Eastern technology and AI firm, focused on leveraging Paraguay’s renewable energy to develop data centers, aligning with the UAE’s push for digital transformation and sustainable technology solutions. These initiatives could position Paraguay as a regional leader in green energy and technology, while offering the UAE a foothold in South America’s digital economy.
Paraguay’s competitive tax regime and growing economy make it an appealing destination for foreign direct investment (FDI). During the Abu Dhabi meetings, President Peña highlighted Paraguay’s role as a leader in food production and its potential as a logistics hub connecting Mercosur markets to the world. The UAE, with its substantial sovereign wealth funds and strategic investments in sectors like energy, technology, and infrastructure, is well-positioned to capitalize on these opportunities.
The UAE’s interest in Paraguay aligns with its broader strategy to secure a Comprehensive Economic Partnership Agreement (CEPA) with Mercosur. While Brazil has historically been the UAE’s primary trading partner in South America, with $4 billion in bilateral trade in 2022, Paraguay’s growing economic clout and strategic positioning make it an increasingly important partner. The UAE’s planned embassy in Paraguay, announced in July 2024, further signals its commitment to deepening commercial and diplomatic ties.
Paraguay, in turn, benefits from access to the UAE’s dynamic economy and its role as a global trade hub. Emirati investments in Paraguayan infrastructure, such as data centers and logistics networks, could enhance the country’s connectivity and competitiveness. Additionally, Paraguay’s focus on sustainability, exemplified by its recent agreement with Singapore on carbon capture and green industry development, resonates with the UAE’s ambitions to lead in climate-smart solutions, as seen in its co-leadership of the Agriculture Innovation Mission for Climate (AIM for Climate) with the United States.
Beyond economics, the visit reinforced the mutual respect underpinning UAE-Paraguay relations. A poignant moment occurred at Wahat Al Karama, a monument honoring the UAE’s fallen heroes, where President Peña was received by Sheikh Theyab bin Mohamed bin Zayed Al Nahyan. This gesture symbolized the deep cultural and patriotic values shared by both nations, further strengthening their bond.
The UAE’s non-aligned foreign policy, balancing relations with Western and BRICS+ economies, complements Paraguay’s efforts to connect with global markets. The UAE’s membership in BRICS+ since January 2024 and its historical engagement with South America through the Summit of South American-Arab Countries (ASPA) since 2005 provide a multilateral framework for enhanced cooperation. These platforms enable Paraguay to tap into the UAE’s extensive trade networks, particularly in Asia and Africa, while offering the UAE access to South America’s growing markets.
Despite the positive momentum, challenges remain. The UAE’s less-developed ties with Paraguay compared to Brazil could complicate negotiations for a Mercosur CEPA, especially as Paraguay assumes the bloc’s leadership in 2024. However, the UAE’s proactive diplomacy, including plans for Emirati representatives to visit Paraguay, suggests a commitment to overcoming these hurdles.
Looking ahead, the UAE and Paraguay are poised to deepen their economic partnership. Potential areas for growth include agricultural exports, renewable energy projects, and technology-driven initiatives like AI and data centers. The UAE’s expertise in logistics and finance, combined with Paraguay’s natural resources and strategic location, creates a synergy that could drive mutual prosperity.
The state visit of President Santiago Peña to Abu Dhabi on May 26, 2025, marked a turning point in UAE-Paraguay relations, cementing their commitment to a strategic partnership rooted in trade, investment, and sustainability. As the UAE continues to diversify its economy and expand its global reach, and Paraguay positions itself as a logistics and energy hub in South America, the economic ties between these two nations are set to flourish. With shared values and complementary strengths, the UAE and Paraguay are building a bridge between continents, promising a future of collaboration and mutual growth.
