Paraguay may be the most underestimated country in Latam to invest in…when it has it all sorted out!
Have you ever heard about the Maquila regime?
If you haven’t, this is about to blow your mind. The Paraguayan Maquila regime allows a foreign company (matrix) to stablish itself in the country or to operate in the country by outsourcing part of their operations to existing Paraguayan companies (maquiladora), with the purpose of processing or finishing goods or offering services to re-export them with value added in Paraguay. Place, it allows the company to import raw materials, machinery, equipment and all the necessary inputs to get the business going under a “temporary admission” system, meaning no duty payments required. It is basically an international contract between a foreign company and a local company (which could be created by the foreign company) to produce goods or services and export them.
It does not seem good enough for you? Here goes the good stuff: the businesses that take their operations to Paraguay through this regime are exempt from any taxes or fees that would normally be applied to import or export operations or manufacturing of products, including VAT and taxes on remittances of income and dividends abroad. It only stablishes a single tax worth the 1% of the value added in Paraguay, and that’s all folks!
But there are many other reasons that make of Paraguay a great investment target:
FREE TRADE. Paraguay has had a free trade mindset for years, which means that export possibilities are endless. What is more, if the good, product or service to export has a national content of 40%, it can be labeled as Paraguayan, and access the market of any of the other MERCOSUR members free of tariffs and taxes. This is a potential market of 280 million people.
ENERGY. Paraguay consumes only about 10% of the energy it produces, so it counts with a large amount of electricity at very low cost.
WORK FORCE COST. Labor costs are highly competitive, with the lowest social burdens in the region (25% of the salary of employees and a regime of 13 salaries per year), and an average base salary of USD 360 (one of the most competitive in the region!).
With this regime, Paraguay does not only have products “made in Paraguay” around the world, but it also has encouraged the creation of 18.000 jobs for its people!
In exchange 218 industries are taking advantage of the opportunity and have exported for more than USD 672 million in 2020. And in 2021 it is expected to grow between 10% and 15%, according to the director of Paraguay's National Export Maquiladora Industry (Cnime) Council, Ernesto Paredes. And what is more, the National Government is working on the digitalization and simplification of the procedures, with the use of technological tools.
It seems like Paraguay knows what it’s doing, doesn’t it?