The South American nation emerged as a candidate to host the WRC earlier this year as the championship aims to form a 14-round 2025 calendar, including two events in the South America region.
The championship currently has a deal in place with Chile which expires at the end of the year, although discussions surrounding a possible renewal are ongoing.
The WRC has also been fielding interest from Paraguay and Argentina, and it is understood that the preference is to select two countries from three South American bids to feature on next year's schedule.
This week the WRC's event director Simon Larkin met with the Paraguay president Santiago Pena to discuss the country's WRC bid.
"We are working for our country to host one of the dates of the World Rally Championship. We spoke with Simon Larkin, promoter of the World Rally Championship, about the country's potential to host important world-class sporting events," read a post on the president's Instagram page.
While a deal is yet to be reached, Larkin confirmed to Motorsport.com that Paraguay is among the championship's options for next year.
"We have always said that we would like to have two events in South America in the coming years and we are going through a renewal with Chile as their contract runs out at the end of 2024," said Larkin.
"We are in long-standing discussions with Argentina but without contracts in place, we have to explore every possible option. Paraguay has a thriving national championship and I believe there are around 30 Rally2 cars there and you can see from the number of drivers from Paraguay competing in the WRC itself with drivers like Diego Dominguez and others, it is a relevant market for rallying.
"Rallying is a high-profile sport in Paraguay and of course the president is interested in investigating having a pinnacle event there. The opportunity to present to him was given.
"It is absolutely in the mix to be one of two South American events next year. There would need to be a test event for sure and that is something we would want to have.
"There are contingency plans for that within the national championship, so I think the number of required steps are in place, there just needs to be a bit more discussions and negotiation over a potential deal. We can lay out the options to our board and then we can make a decision."
The 2025 WRC calendar is likely to feature a new look with the championship already announcing plans to return to Spain, courtesy of an asphalt round in the Canary Islands.
It is likely the championship will include a return to the Middle East with a round in Saudi Arabia as an option, an announcement is expected in the near future.
Ireland has also launched a bid for a three-year deal beginning next year subject to funding with an announcement from the Irish government expected in due course.
"I am in daily contact with the president of Motorsport Ireland [Aidan Harper] and the signs look positive however it just takes a final decision from the government and we are all waiting with bated breath for that," Larkin added.
