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  • Writer's pictureCreimerman Product Team

How the Paraguayan Maquila regime benefit the Mercosur region

The Southern Common Market, commonly known as MERCOSUR (Mercado Común del Sur), is a regional trade bloc that has played a significant role in shaping economic and political dynamics in South America. Founded in 1991, MERCOSUR aims to promote economic integration, foster cooperation, and strengthen ties among its member countries: Argentina, Brazil, Paraguay, and Uruguay. Over the years, the bloc has brought about numerous benefits, positively impacting trade, investment, and development in the region.

Trade and Market Access One of the primary benefits of MERCOSUR lies in the facilitation of trade among its member countries. The elimination of tariffs and non-tariff barriers within the bloc has created a larger and more accessible market for goods and services. This has encouraged intra-bloc trade, allowing member nations to specialize in their areas of comparative advantage, thereby enhancing productivity and efficiency.

By reducing trade barriers, MERCOSUR has boosted exports and imports among its member countries, stimulating economic growth and diversification. Additionally, the bloc’s unified approach in negotiations with external partners has given it greater bargaining power on the global stage, leading to enhanced market access for its products and services.

Economic Growth and Investment MERCOSUR’s commitment to economic integration has attracted foreign investment to the region. The larger market created by the bloc offers investors more opportunities and a broader consumer base, thereby incentivizing foreign direct investment (FDI) flows. A stable and integrated economic environment has allowed member countries to attract investments in various sectors, including manufacturing, agriculture, energy, and infrastructure.

Infrastructure Development Infrastructure development is crucial for the efficient movement of goods, services, and people. MERCOSUR has facilitated collaboration among member nations in areas such as transportation, energy, and telecommunications. Joint projects and investments have been undertaken to improve cross-border connectivity, reducing bottlenecks and facilitating the flow of trade and investment.

Paraguay’s Maquila Regime Through this regime, investors can introduce goods, products, or services to the country in order to be assembled, repaired, improved, worked, or processed for subsequent export, once the added value is made.

Tax aspects and benefits Maquila Unique Tribute consists of a Single Tax regime of 1% on the value-added in the national territory. With the exception of the Single Maquila Tax and the tax treatment established by the Law for sales in the domestic market, the Maquila Contract and the activities carried out in its execution are exempt from any other tax, such as Value Added Tax (VAT), suspension on import duties, and exemption from paying any tax on dividend remittances abroad.

Any product with between 40% and 60% of Mercosur value is exported with Paraguayan origin labeling, and tariffs for these products in the United States range from 0% to 6.5%, depending on the product

Labour matters Paraguay, as part of the Mercosur region has access to installed infrastructure, an excellent entrepreneurial ecosystem, and a much cheaper skilled workforce compared to China. If we were to compare salary ranges with another country, the most accurate comparison would be with Vietnam.

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