A law passed in 2023 regulating the carbon market in Paraguay was promoted by a senator who, during the legislative process, acknowledged having received advice from his brother-in-law lawyer on the bill. His brother-in-law, in turn, has been an active promoter of this fledgling market and the law firm where he works has at least two companies seeking to enter the business as clients. Could there be a conflict of interest?

When on September 20, 2023 the Senate voted on a bill to regulate the voluntary carbon market in Paraguay, opening the door for national and international companies to offset their environmental footprint in the country by investing in forest conservation projects, everything seemed to indicate that it would be an express session without much debate. What happened was quite the opposite.

The bill, promoted by Senator Patrick Kemper and Environment Minister Rolando de Barros Barreto, sought to legislate on the ownership of the carbon stored in forests or reduced by renewable energy projects, to facilitate companies or countries to offset their greenhouse gas emissions driving climate change through mitigation initiatives in Paraguay, such as the development of agroforestry systems, the restoration of degraded ecosystems or the conservation of others. It also sought to enable the State to sell the environmental results of its national parks in international markets.

It was not a catchy issue for public opinion – it was limited to the most specialized climate policy circles. And the version of the bill to be voted on that day had been made public just two weeks earlier.

Under the promise of “millions of dollars for the country,” Senator Kemper began a brief defense of the bill. With the explicit support of the administration of Santiago Peña, whose Colorado Party holds a majority in both houses of Congress, the votes were assured.

What seemed to be a mere formality, however, turned into one of the most controversial sessions of the new parliamentary period that began in July 2023. Opposition Senator Celeste Amarilla publicly pointed out that behind the bill there were, in her words, “non-majority interests”. And she repeatedly cited a surname: Vouga.

Several of her colleagues added new questions. “I would like to know if it is true what we were all told, that this bill was drafted by a private law firm,” Senator Rafael Filizzola declared during the session. Esperanza Martínez pointed out that there had been “counsel from private companies”. Yolanda Paredes said that “this project was presented by a law firm that works with banks and international corporations”.

Their statements about possible private interests in the project, as well as the mention by some congressmen of an investigation published by this journalistic alliance about the absence in the bill that would regulate the carbon market in Paraguay of environmental safeguards and additionality (the requirement that any initiative should prove it would not have existed were it not for the money of the carbon market) led Senator Kemper to anger.

As ruling party senators returned to the session and the legal director of the Environment Ministry looked on from the hallway, Senator Kemper responded to his colleagues. The leaf in his hand became increasingly agitated: “There is in my view a great injustice that is being taken very lightly. I am going to cite some organizations that participated in the drafting of this law,” the senator said, going on to name eight government bodies, a United Nations agency, two universities, six trade industry groups, three companies with an interest in selling carbon credits and no indigenous organizations.

“Why did I mention a great injustice?” Kemper continued. “Consultants and law firms Vouga Abogados, Guanes, Heisecke y Piera, Livieres Guggiari, Ferrere Law Firm, Gross Brown Law Firm.”

“It was my mistake. I publicly apologize to my brother Rodolfo Vouga for asking him to advise me on something that I did not understand and that I am not still an expert on, of course,” said the senator who proposed the law, angrier by the minute. “And to have brought him here [to Congress] to tour many offices and tell many colleagues whom I met, to tell them ‘whatever doubts you have, he will explain to you, he knows the subject’. He is a lawyer of impeccable trajectory, an exemplary father and a devoted husband,” Kemper continued, adding that law firms were being ”demonized.”  “I apologize to this professional [Vouga] for exposing him. I am to blame for asking a lot of things from him,” he said.

What Kemper did not say in his fiery defense of the bill, which ended up being approved by Congress and made law by President Peña, is that Rodolfo Vouga is his brother-in-law.

Nor did he explain that his brother-in-law had been an alternate director of Swedish-Paraguayan company Paracel, one of the most interested in selling carbon credits in the voluntary market through its eucalyptus plantations, and that he is a partner in a law firm that – according to its own web page – advised Paracel, as well as another company from the Netherlands seeking to invest in properties and plantations to generate carbon credits in Paraguay.

The lack of transparency of Senator Kemper and the Paraguayan government about the role played by Vouga and his law firm in the drafting of the rule that will regulate the carbon market in Paraguay brings to light a possible conflict of interest.

On the one hand, because a person with an economic interest in this fledgling business was allowed to participate in the definition of the ground rules that will probably govern several of his clients. And, on the other hand, because the person who led the drafting and passing of the bill, with the support of the Peña government, never made the scope of that family relationship or that advice transparent.

These are some of the findings of the Opaque Carbon journalistic alliance, led by the Latin American Center for Investigative Journalism (CLIP) and bringing together 14 media outlets from eight countries to investigate how the carbon market is operating in Latin America. (Read here our first story on the concerns about the lack of socio-environmental safeguards and additionality in the Paraguayan regulation).

Vouga Abogados work on carbon markets in Paraguay

Rodolfo Guillermo Vouga Zuccolillo is a partner at Vouga Abogados, a law firm considered “one of the most important, largest and experienced in Paraguay” by legal publication Chambers & Partners, which describes its work on environmental, energy and natural resources issues as “truly unsurpassed in the country.” Another specialized publication, Legal500, highlights his knowledge of banking and finance, competition, mergers and acquisitions, dispute resolution, environmental and labor matters. Of Vouga Zuccollillo, a lawyer with a degree from the National University of Asunción and a master’s degree from Columbia University in the US, Legal500 says that he “leads on several key issues and is praised by clients”. He is also the husband of Stephanie Kemper, sister of Senator Patrick Kemper.

The law firm where he works has a strong family imprint. The visible head and senior partner is his father Rodolfo Vouga Müller. Partners include his brother Carlos Vouga Zuccolillo and uncle Siegfried Vouga.

The firm’s clients include, according to its website, banks such as Sudameris, fossil fuel companies such as Paraguay Energy and agribusiness companies like ADM.

There are also at least two companies that have expressed interest in entering the promising carbon market through forestry projects.

One of them is, according to the firm’s website, “a company from the Netherlands, leader in the development and implementation of carbon and biodiversity projects”, whose name is not disclosed. The website reports that Vouga Abogados advised on “the due diligence process for the potential acquisition of more than 50,000 hectares in the Paraguayan Chaco, with the objective of issuing carbon credits for conservation in international markets and the implementation of a project under REDD+ standards.”

Another client is the Swedish-Paraguayan company Paracel, which has been promoting a carbon credit project in eucalyptus plantations since 2022, which – as a previous investigation by this journalistic alliance reported – has encountered problems in its approval due to concerns about its possible “lack of additionality” – that is, that the project would have existed without the money from carbon credits – and because the company provided outdated data.

Paracel and “a leading carbon project company” listed among Vouga Abogados’s clients. Source: Vouga Abogados website

Paracel is a Swedish-Paraguayan capital company that, among other investments, has 185,000 hectares of eucalyptus plantations in northern Paraguay. These plantations are destined for the production of cellulose, in its own mill, which is still pending construction.

This is not Rodolfo Vouga Zuccolillo’s only link to Paracel. According to the company’s own sustainability report, in 2022 he appeared as an alternate director of the pulp and eucalyptus company. Additionally, he appears as part of the board of directors of Plub, a home delivery startup whose CEO is Agustín Alonso Zapag, who is Paracel’s representative before Verra in the management of the carbon credit project.

Paracel intends to monetize those same eucalyptus plantations in the voluntary carbon markets, according to a project called Paracel ARR Carbon Forestry Project that the company submitted to US-based certifier Verra, one of the world’s largest. Paracel took a keen interest in the carbon credit law, promoting discussions and participating in meetings where the passing of the law was debated. The company includes the sale of carbon credits as one of its three main products in its latest sustainability report published in 2022.

As reported by this journalistic alliance, Verra denied the registration of the carbon project project in September 2023, explaining in its letter of refusal –available on the certifier’s public platform– that “the request for approval in the registry was denied” because of “incorrect information” with “significant implications for the project’s additionality”.

The “significant implications” highlighted by Verra were that Paracel’s project argued that it needed the money from the carbon markets for its forestry plantations, but had received, according to the public letter, “a USD 200,000,000 loan from the Inter-American Development Bank (IDB) for the implementation of the pulp mill and eucalyptus plantations,” both of them included in the carbon credit project.

For Verra, the IDB loan to Paracel suggests that, even without the money from the carbon markets, the plantations would exist. Paracel’s emissions capture was not an additional climate change mitigation effort, but would have existed anyway.

This journalistic alliance contacted Paracel and Verra to find out the current status of the carbon credit project. 

Via mail, Paracel communications director Latifi Chelala responded on September 11, 2024 that the company had asked Verra for “an extension on the deadline we had been given to reapply for registration” of the carbon credit project. “This request was answered positively by this organization (Verra)” stated Cherala, adding that, ”at Paracel we are now finalizing details of the new project document (…) to start a new validation/verification process in September-October this year.” “Paracel will produce 35,000,000 carbon credits from forest plantations for commercial purposes and from native ecosystem restoration areas for conservation purposes,” said the representative.

On the certification side, Verra told this journalistic alliance in December 2023 that “it is not a final rejection, but that the projects have the opportunity to solve the problems pointed out”. Consulted again in September 2024, the US organization did not respond, but five days after our query was sent, it updated its registry file on the Paracel project. Since that moment, a letter dated September 9, 2024 to Per Olofsson and Agustín Alonso Zapag of Paracel appears, in which Verra confirms an extension of the deadline until September 20, 2025 for the Swedish-Paraguayan company to try to re-register the carbon credit project in the voluntary market. In the meantime, the status of the project is “on hold”.

Verra’s requirements include that the new Paracel registration process “must evaluate and report on the non-conformities of the previous validation/registration process,” referring to questions about the project’s additionality raised in 2023.

On the law firm’s website, Vouga Abogados highlights its long-standing working relationship with Paracel, which it says it has supported “in all legal aspects related to the project finance and implementation of the project” of the pulp mill, which it describes as “the largest private investment in the history of Paraguay.” Among the services it claims to have provided are “negotiation of contracts with the main investors”, “contracts with the general contractor, responsible for the engineering, procurement and construction of the mill”, “processing and obtaining permits and licenses of various kinds”, “assistance to the financiers with due diligence [and] capital raising”.

This journalistic alliance sought out both Senator Patrick Kemper and lawyer Rodolfo Vouga Zuccolillo. Both agreed to receive our written questionnaire, which was sent to them on August 23 and which included questions about the type of participation of the latter in the drafting, review or socialization of the Paraguayan carbon bill and whether the law firm he is a member of, Vouga Abogados, participated in any way. Senator Kemper was also asked about the potential he sees for Paraguay in the carbon market and the reasons that led him to push for such regulation. On September 3, we reiterated the importance of hearing their perspective. As of the publication date, none had responded (see full questionnaire in spanish here).

We also asked Vouga Zuccolillo if he could tell us more details about the Dutch company’s project, and whether Vouga Abogados’s consultancy with Paracel addressed the possibility of a project in the carbon market, but as of the date of publication he had not responded.

A market with up to US$20 billion in potential

Both Paracel and Rodolfo Vouga Zuccolillo have appeared at public events speaking precisely about the prospects of the nascent carbon market.

On June 22, 2023, three months before the vote on the bill pushed by his brother-in-law Patrick Kemper, Rodolfo Vouga Zuccolillo was a panelist at a carbon talk, along with Paracel’s then CEO Per Olofsson. The talk was called “Carbon markets: perspectives and projects in Paraguay” and was held at the headquarters of the Paraguayan-American Chamber of Commerce, of which his father and senior partner in the family firm, Rodolfo Vouga Müller, is a founding partner. 

“There are already projects in the country that are selling quite well in the international market,” said Olofsson. In his vision, “there is a potential in the country to (certify) in the next 10 years easily 200 million tons” of avoided or captured greenhouse gas emissions. 

“It really is a gigantic thing. If we multiply by four dollars, it’s 800 million (dollars), which is not bad. But which is not the same as multiplying it by 100 (dollars), which is 20 billion dollars,” said Paracel’s CEO, when asked by a member of the audience about the variation in the international market that prices have seen for a carbon credit, which is usually equivalent to a ton of carbon dioxide that no longer goes up into the atmosphere.

“This is one of the important reasons to have clear legislation. That makes the rules of the game clear,” Olofsson said.

“Being well advised by experts on this is very important because it helps to understand how to maximize the potential and how much it could be sold for,” Rodolfo Vouga Zuccolillo said in turn, before listing all the sectors that could benefit. In his words, “there is the agriculture, forestry and livestock sector, there is already a project on biodiesel in transportation, the energy sector is one that has tremendous potential in Paraguay, as industries that stop using coal and switch to using hydroelectric (energy) issue credits for that difference”. 

In this discussion they also talked about the concept of additionality, which Verra expressed concerns about in the Paracel project. Olofsson argued that, even if a natural or private reservation exists by legal obligation, carbon credits could be obtained by arguing “the risk of deforestation in the country, fires or illicit crops”. In turn, Vouga Zuccolillo defended that “if one proves that there is illegal deforestation, a reservation [mandatory by law] could also be certified” in the carbon market.

Kemper’s carbon bill

So far it is unclear what level of involvement Senator Patrick Kemper’s lawyer brother-in-law Rodolfo Vouga Zuccolillo or the law firm where he is a partner had in the bill.

Although in Congress the senator acknowledged that “my mistake was to ask my brother Rodolfo Vouga to advise me”, the scope of that advice is still unclear.

Consulted by this journalistic alliance about the involvement of Vouga Abogados in the carbon bill, Paracel’s communication coordinator, Marcelo Rojas, responded in November 2023 via email that “this firm (Vouga) has not had, to date, an active role in the development of (Paracel) carbon credit project.” 

However, the employee of the Swedish-Paraguayan company acknowledged that “we have consulted and had exchanges with it (referring to the Vouga law firm) about international carbon markets, the legal context and other issues that needed more clarity and understanding internally. It is a firm with experience in the carbon sector and we understand that it works with other companies in this sector”.

His brother-in-law Vouga is not Kemper’s only connection to Paracel. According to his sworn statement of assets, the senator is a shareholder of Banco Visión, part of the group of financial entities that – with the support of the Paraguayan state through its Development Finance Agency – lent Paracel US$100 million for its eucalyptus forestry plantations. (Another of the lending banks was Sudameris, which, according to an internal report from 2022, is itself a shareholder of Paracel).

Paracel’s legal advisors for the Paraguayan state-backed loan were Vouga Abogados, according to the law firm’s website.

When asked whether Paracel was aware of the family relationship between Senator Patrick Kemper and lawyer Rodolfo Vouga Zuccolillo, Rojas responded in November 2023 that “Paracel works with clear rules about conflicts of interest properly declared in its Code of Ethics.”

The Code of Ethics cited by the Paracel employee indicates that “in the event of conflicts of interest, whether real or presumed, in dealing with suppliers, customers, and other persons who have business relations with Paracel, the affected directors and collaborators must declare them expressly, timely and transparently to the Compliance Committee, so that the corresponding decisions can be adopted”.

This Code of Ethics was “reviewed” by Estudio Jurídico Vouga Abogados, according to the document itself.

When asked if this family relationship between Vouga Zuccolillo and Kemper could constitute a possible conflict of interest, Rojas answered that “for our company it categorically does not constitute a conflict of interest situation and much less influence peddling”.

This journalistic alliance asked both Senator Kemper and Vouga Zuccolillo if there could be a possible conflict of interest due to their family relationship, added to the fact that the senator had been one of the main drafters of the carbon law; that the lawyer had advised the elaboration of the regulatory framework for the carbon market; and that the law firm where he works has had a commercial relationship with a carbon credits project in the Chaco and with Paracel, a company interested in the sale of such credits. At the time of publication, none had responded.

A possible conflict of interest concealed by changes to the law

There is one reason that may help explain why the relationship between Senator Kemper and Vouga Zuccolillo was not publicized: a change to the conflict of interest law passed by the Paraguayan Congress in December 2023. These changes were supported by Kemper, both in the commissions in which he sits and with his vote in favor.

The original 2023 law on prevention and sanction of conflicts of interest in public office – which was in force when the carbon market bill was voted – obliged all Paraguayan congressmen to inform by means of a sworn statement the names and economic activities of their entire family group up to the second degree of consanguinity and affinity. That is to say, it reached siblings and brothers and sisters-in-law, as is the case of Kemper with Vouga Zuccolillo.

It also established a duty to abstain from intervening directly or indirectly in matters “in which he or any member of his family group has a personal, labor, economic, financial, professional or any other kind of interest”. This could be the case of the advice provided by the law firm in which his brother-in-law is a partner, Vouga Abogados, a firm that in turn, advises companies with publicly expressed expectations of entering the carbon market. The question would be whether the design of the law responded to Paraguay’s interest, or whether it was designed in a way that serves the interests of the private sector. 

While the original law was in effect, Senator Kemper did not file his sworn declaration of interests, according to the Paraguayan government’s sworn declarations portal.

In October 2023, two weeks after the carbon market regulatory framework was approved, a modification pushed by Kemper and other senators in the Senate Legislation Committee reduced the mandatory transparency standard for Paraguayan legislators. It eliminated the obligation to make public the data of the family group in the affidavit.

When the bill returned from the Chamber of Deputies in December 2023, Kemper also voted in favor of eliminating the obligation that existed for any congressman to consider his family group when weighing whether he could vote or give an opinion on a bill or apply his duty of abstention in the face of possible conflicts of interest.

These modifications were approved by both chambers of Congress with a pro-government majority and signed into law by President Santiago Peña in January 2024

The modifications were criticized by the Office of the Comptroller General of the Republic (CGR), the State entity in charge of receiving and analyzing the sworn statements of all public officials. According to a legal opinion that Comptroller Camilo Benítez himself sent to the Senate, the Office of the Comptroller General considered “that by reducing the members of the family group (…) it limits the field of investigation and control for the application of the regulations in order to determine the occurrence or not of a conflict of interest”. 

The report of the Comptroller’s Office also pointed out that “it reduces the scope to analyze decisions that favor the family group that would link the public official with non-transparent actions that seek a personal, labor, financial or any other kind of interest”.

This journalistic alliance asked Senator Kemper if he ever made public his family relationship with Vouga Zuccolillo in his sworn statement of interests. We also asked him why he supported the bill that eliminated the obligation to report the interests of his family group up to the second degree of consanguinity.  As of the date of publication of this report, he had not responded.

Since the carbon credit law, the closeness between Senator Kemper, formerly of the opposition party Hagamos, and the government has been increasingly evident. In December 2023, two months after the regulatory framework for the carbon market was approved, Kemper met with President Santiago Peña to “talk about the actions we can promote for the benefit of all Paraguayans”. Another four months later, in March 2024, Kemper confirmed his switch to the ruling party at the convention of the National Republican Association (ANR) by requesting the return of his previous membership after having been elected as an opposition congressman.

The Minister of the Environment, Rolando de Barros Barreto, was in charge of presenting his request to the party convention.

When Senator Patrick Kemper finally presented his sworn declaration of interests in April 2024, he did not mention his sister or her husband, Rodolfo Vouga Zuccolillo, his “brother” who advised him in the carbon credit bill and who at the same time was active in promoting this promising market.

Opaque Carbon is a project on how the carbon market is working in Latin America, in partnership with Agência Pública, Infoamazonia, Mongabay Brasil y Sumaúma (Brazil), Rutas del Conflicto and Mutante (Colombia), La Barra Espaciadora (Ecuador), Prensa Comunitaria (Guatemala), Contracorriente (Honduras), El Surtidor (Paraguay) and Consenso, La Mula (Perú) and Mongabay Latam, led by the Latin American Center for Investigative Journalism (CLIP). Legal review: El Veinte. Logo design: La Fábrica Memética.