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What are the tax benefits for foreigners in Uruguay?

What are the tax benefits for foreigners in Uruguay?

In recent years, the small South American nation has attracted many business people and citizens searching for stability, security, and tax benefits for foreigners in Uruguay.

The president of Uruguay, Luis Lacalle Pou, has announced plans to attract foreign residents, including business people, to increase the country’s population.

Uruguay followed a trajectory similar to that of Argentina in the 19th century in terms of attracting immigrants. Significant emigration to Uruguay has been an interesting phenomenon in recent years and is expected to continue.

Uruguay’s current political and economic stability and favorable tax system make it an attractive destination for foreign entrepreneurs seeking tax benefits.

Furthermore, Uruguay offers a high quality of life and a favorable business environment for foreign investors.

In recent years, a fascinating phenomenon has captured the attention of those who closely follow the business landscape in Latin America: the emigration of businessmen seeking to take advantage of tax benefits for foreigners in Uruguay.

Uruguay offers stability, security, and tax benefits

This displacement is not simply an exodus but a strategic movement seeking stability, security, and tax benefits, fundamental elements for companies flourishing in a favorable environment.

Uruguay has emerged as a beacon of opportunity for foreign entrepreneurs seeking a haven and an environment conducive to the growth of their businesses.

With its well-established political and economic stability, Uruguay has proven to be an attractive and welcoming destination for those seeking more than just a change of location.

It is essential to highlight that the tax benefits for foreigners in Uruguay apply to businessmen and women from many nations.

The breadth of tax advantages and legal security is generously extended to all foreigners who choose to reside or invest in this corner of Latin America.

This openness to the diversity of foreign investors enriches local Uruguayan business dynamics and encourages the construction of a globalized and collaborative business environment.

The migratory stream of foreign people in business has found a home in various locations in Uruguay, each with its economic potential.

In Carrasco (Montevideo), Colonia, and, of course, Uruguay’s prestigious resort, Punta del Este, the installation of most foreign nationals has been observed, creating a diverse and enriching business fabric.

This flow of emigration has not only strengthened economic ties between Argentina and Uruguay but has also contributed to creating business synergies that transcend national borders.

Tax benefits for foreigners in Uruguay have made Uruguay a strategic investment destination

Diversification and the exchange of business experiences have raised Uruguay’s profile as a strategic investment destination in the region.

The choice of Uruguay as a destination for foreign business emigration is not made on a whim. Still, it is a decision based on the search for stability and opportunities and the possibility of taking advantage of tax benefits for foreigners in Uruguay.

This phenomenon benefits entrepreneurs seeking a new horizon and strengthens the foundations of economic collaboration in Latin America.

Uruguay is a beacon of security, stability, and growth, attracting an international community of business visionaries.

This phenomenon, without a doubt, is an intriguing chapter in the history of business in Latin America.

A Decade of Transformation

Over the last decade, a phenomenon beyond mere relocation has been present: the practically exponential doubling of foreign individuals and families,  in particular,  who have found a suitable refuge for their life and business projects in Uruguay.

This growth has tangibly manifested itself, even going beyond the limits of the educational capacity of Punta del Este, where a lack of space in schools has become a palpable indicator of this migratory phenomenon.

At the heart of this influx of new immigrants is a vital component that has attracted business people and citizens from other countries: the Uruguayan tax system.

Uruguay has based its attractiveness as an investment and residence destination on the tax benefits and the unique approach of its tax regime based on the source principle.

This principle of territoriality has been a beacon of stability and predictability for those seeking to settle and benefit from tax benefits for foreigners in Uruguay.

The essence of this policy lies in taxing only income of Uruguayan origin, regardless of the nationality, domicile, or residence of the participants in the transactions.

This approach has created a clear and favorable tax environment, providing residents and business owners with the security of knowing exactly what income will be subject to tax.

Choosing Uruguay as a home for business and personal life, rather than being a simple matter of geography, has become a strategic act backed by the tangible advantages offered by its tax regime.

This progressive approach has been fundamental in consolidating Uruguay as a beacon of regional fiscal stability.

The magnitude of this migratory and business flow to Uruguay underlines the country’s quality of life and the trust placed in its tax system.

As the foreign business community continues to opt for Uruguay as a destination, new opportunities for collaboration and exchange are emerging that promise a solid and prosperous business future in the region.

The recent multiplication of foreign residents in Uruguay is not only an indication of the country’s stability but also a testimony to the solidity and attractiveness of its tax regime, thus consolidating its position as a desired refuge for those seeking a promising future. in Latin America.

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The Clear Tax Horizon of Uruguay: Principles and Exceptions in Law 18083

The attractiveness of Uruguay as a destination for companies and individuals seeking tax benefits for foreigners in Uruguay lies in its advantageous geography and the clarity and coherence of its tax regime.

At the core of this structure is Law 18083, which precisely defines the limits and exceptions of the tax burden. This is the fundamental principle that guides the Uruguayan tax system.

In other words, taxes are applicable when the activities are carried out in Uruguayan territory, the services are provided in the country, or the goods are physically located in the exterior.

This territorial approach provides clear guidance for residents and business owners, eliminating uncertainties and ensuring fair application of tax obligations.

Law 18083 firmly establishes that income considered Uruguayan sourced comes from activities carried out on Uruguayan soil, assets located within the country, or rights used economically in this territory.

A distinctive and relevant aspect of this law is that these provisions are independent of the nationality, domicile, or residence of the parties involved in the operations and where the legal transactions are held.

However, in the tax sphere, as in any legal system, there are holes in this principle. Law 18083 establishes specific exceptions that deserve attention.

These carefully outlined exceptions allow for a flexible and adaptive interpretation of the tax regime, thus promoting attracting foreign investments and encouraging economic diversification.

Uruguayan tax legislation, anchored in Law 18083, offers residents and entrepreneurs a transparent and equitable framework.

By adopting the source principle, Uruguay emerges as an attractive destination not only for its natural beauty but also for the transparency and predictability of its tax system and the tax benefits for foreigners in Uruguay.

With these solid foundations, the country is positioned as a beacon of stability and certainty in the region, attracting those who seek an environment conducive to business development and a full life.

Tax Residency in Uruguay: A Journey of International Requirements and Considerations

On the journey to tax residency in Uruguay, foreign individuals face a path marked by specific requirements. However, the complexity of this journey becomes more acute when considering international perspectives on tax residency.

Complying with the requirements established by the Uruguayan authorities is the first step to obtaining the desired tax residence in this South American country.

However, it is crucial to highlight that obtaining tax residency in Uruguay only sometimes automatically translates into a change in tax status in the immigrant’s country of origin.

Uruguay, respectful of the tax sovereignty of each individual, establishes precise requirements for tax residence in its territory.

These requirements may include minimum periods of stay, substantial investments, or active participation in the local economy.

However, the reality is that the tax status in the country of origin may not necessarily reflect the tax residence obtained in Uruguay.

In some cases, international tax laws may consider an individual as a tax resident in their country of origin, even if they meet all the requirements established by Uruguay.

This duality can create complexities and requires careful consideration of the tax legislation in the country of origin and Uruguay.

Those embarking on this path must be fully aware of the international tax implications and seek specialist advice to navigate this intricate landscape.

Obtaining tax residency in Uruguay is valuable, but careful coordination with international tax matters is critical to avoiding unpleasant surprises.

Obtaining tax residency in Uruguay for foreign individuals carries specific requirements, but other countries’ interpretations of tax status can add additional complexity.

In this context, professional guidance becomes invaluable, ensuring that every step taken is aligned with local and international regulations, thus allowing individuals to enjoy the benefits of their new tax residence without setbacks.

In conclusion, Uruguay has firmly established itself as a beacon of stability, security, and opportunity for foreign entrepreneurs and residents seeking a favorable environment for personal and business growth. Based on the principle of territoriality, the country’s unique tax regime offers significant tax benefits for foreigners in Uruguay by taxing only income sourced within its borders. This transparent and predictable tax structure and the country’s political and economic stability have made Uruguay an attractive destination for international business people and citizens from diverse nations.

Uruguay’s openness to foreign investment and its strategic emphasis on creating a globalized and collaborative business environment have resulted in a notable influx of foreign residents, significantly enriching the local business landscape. Prominent areas like Carrasco, Colonia, and Punta del Este have become vibrant hubs of international business activity, highlighting the country’s appeal.

However, navigating the path to tax residency requires careful consideration of Uruguayan and international tax regulations. The complexities of tax status in an individual’s country of origin necessitate professional guidance to fully leverage the tax benefits for foreigners in Uruguay without encountering unforeseen complications.

Ultimately, the influx of foreign entrepreneurs and residents underscores Uruguay’s position as a desirable refuge in Latin America, offering a combination of quality of life, business opportunities, and tax benefits for foreigners in Uruguay. This growing trend enhances Uruguay’s economic fabric and fosters regional collaboration, promising a prosperous future for all who choose to make this nation their home.

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The  IMF will extend 1 billion dollars of credit  to Ecuador

The  IMF will extend 1 billion dollars of credit  to Ecuador

The Ministry of Economy reported on May 31, 2024, that the International Monetary Fund (IMF) would disburse the first $1 billion credit to Ecuador as part of a total line of credit of $4 billion.

The agreement will last 48 months, according to a statement that asserts that the IMF “supports Ecuador’s economic program.”

Credit to Ecuador will also come from other organizations

According to the minister of economy, Juan Carlos Vega, this line of credit will allow the country to access financing from multilateral organizations such as the World Bank and the Inter-American Development Bank.

This first disbursement from the IMF will materialize the agreement with Ecuador, announced in April by Varapat Chensavasdijai, head of the IMF mission. On a visit to this country, Chensavasdijai indicated that the resources are provided to improve the standard of living of Ecuadorians, especially the most vulnerable societal sectors, and promote sustainable growth.

In the statement, the IMF identifies the purpose of the credit to Ecuador as “building fiscal and debt sustainability, expanding the social safety net, improving the financial sector’s resilience, and further strengthening transparency and governance.”

The economic analyst and professor at the Andina University, Carlos Larrea, in statements to the Associated Press, assured that this credit to Ecuador is tied to a series of requirements” that if not met, the rest of the disbursements will not arrive” Larrea went on to say that among the main requests of the IMF are the reduction of the fiscal deficit and the elimination of subsidies to fuels that are being extended in the country.

“It is not certain that Ecuador can comply with such adjustments, especially the elimination of subsidies for gasoline and diesel,” Larrea warned. He also said that “although (these fuels) are very harmful to the country,” their elimination is unpopular.

The rate of interest is considered to be high

This IMF credit to Ecuador has been granted at an interest rate of 5.1%. Larrea explained and specified that the country needed liquidity despite a high-interest rate. “If the country did not obtain this credit to Ecuador, the fiscal situation would have become unmanageable.” He recalled that a few years ago, the interest rate of that organization was around 1%.

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Presidents Lenín Moreno (2017-2021) and Guillermo Lasso (2021-2023) tried, during their governments, to raise fuel prices. Both rulers had to backtrack on their intentions after violent popular uprisings were called. They were led by the Indigenous movement and put the continuity of those administrations at risk.

For this year, the government of President Daniel Noboa estimates that the country will have a fiscal deficit of 5.7 billion dollars. Some of the amounts would be covered with credits, such as the one from the IMF and another recently announced with the Andean Development Corporation, which will be for 800 million dollars. In addition, the government seeks to raise revenue by increasing the value-added tax, which rose in April from 12% to 15%.

Economic analyst Carlos Larrea maintains a positive outlook

The IMF’s extension of a $1 billion credit to Ecuador, part of a more extensive $4 billion line of creit, marks a critical juncture for the country’s economic stability and growth. This financial lifeline, set to span 48 months, underscores the IMF’s commitment to supporting Ecuador’s economic program. It opens doors for further financing from key international institutions like the World Bank and the Inter-American Development Bank. The credit to Ecuador is designed to enhance fiscal and debt sustainability, expand social safety nets, bolster financial sector resilience, and promote transparency and governance. Despite the positive outlook, economic analyst Carlos Larrea cautions that this credit is contingent on stringent conditions, including reducing the fiscal deficit and phasing out fuel subsidies. While essential for long-term stability, these conditions pose significant challenges given their unpopularity and past civil unrest triggered by similar measures. Although higher than past rates, the 5.1% interest rate on this credit to Ecuador reflects the urgent need for liquidity in a country grappling with a projected fiscal deficit of $5.7 billion. The government’s efforts to address this deficit include the IMF credit, an $800 million loan from the Andean Development Corporation, and tax revenue enhancements, such as the recent VAT increase from 12% to 15%. Historically, attempts to adjust fuel prices have faced strong opposition, leading to political instability, as seen during the administrations of Lenín Moreno and Guillermo Lasso. President Daniel Noboa’s administration must navigate these turbulent waters carefully to maintain economic progress and social harmony. The success of the credit to Ecuador hinges on striking a delicate balance between necessary fiscal reforms and maintaining public support, ensuring the intended benefits reach the most vulnerable and foster sustainable growth.

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Advances in the Mexican aerospace sector in 2024

Advances in the Mexican aerospace sector in 2024

The Mexican aerospace sector embraces innovations and sustainability, promising a promising future in 2024

In 2024, the Mexican aerospace sector will significantly benefit from adopting advanced automation and digitalization technologies. This advancement will enable more efficient production and improved product quality, significantly reducing downtime and manufacturing errors.

Sustainability and environmental responsibility

Aerospace manufacturers in Mexico are intensifying their efforts to incorporate sustainable practices. The focus is on utilizing renewable energy and advanced recycling systems, which comply with environmental regulations and improve companies’ public image.

Adopting lightweight materials and optimized design processes will contribute to producing more efficient and eco-friendly components. In parallel, the Mexican aerospace sector will expand skills development initiatives in its workforce, preparing employees to handle new technologies and fostering the growth of specialized talent in technical and engineering areas.

Development of new skills and job training

The demand for advanced technical skills in the Mexican aerospace sector is growing with the increase in technology in manufacturing processes. Training and professional development programs are in full swing, preparing the workforce for future challenges.

The Mexican aerospace sector continues evolving with the accelerated integration of advanced technologies. The adoption of collaborative robots, machine learning, and digital twins will mark the next year, boosting productivity and safety in production plants. Additionally, implementing data-driven systems and connectivity will advance, enabling unprecedented process optimizations through AI simulations and smart sensors for real-time adjustments.

International connectivity and collaboration in the Mexican aerospace sector

The collaboration between Mexican companies and global aerospace leaders strengthens Mexico’s international market position. The alliances foster innovation and the exchange of technical knowledge, benefiting the entire industry.

Using lighter materials and efficient production techniques is transforming the manufacturing of aerospace components in Mexico. These improvements contribute significantly to the reduction of fuel consumption and carbon emissions.

Proactive government policies and free trade agreements position Mexico as a competitive leader in the aerospace industry. The combination of strategic location, skilled workforce, and government support is attracting more foreign investments.

Technological innovation

The Mexican aerospace industry shows robust and sustained growth, with optimistic projections for the coming years. The combination of innovation, sustainability, and talent development is critical to its success.

The aerospace sector is becoming an essential engine for the Mexican economy, generating thousands of jobs and contributing significantly to the country’s GDP. This economic impact is helping to improve living standards and financial stability in key regions.

Where  are the most significant Mexican aerospace sector clusters and what do they produce

The Mexican aerospace industry has experienced significant growth over the past few decades, becoming one of the critical sectors in the country’s economy. According to the latest data, over 300 aerospace manufacturers operate in Mexico. These manufacturers employ over 60,000 workers, contributing significantly to the country’s industrial workforce and economic output.

The aerospace industry in Mexico is geographically concentrated in several major clusters, each with specialization and strengths. The primary clusters are Baja California, Sonora, Chihuahua, Querétaro, and Nuevo León.

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Baja California

Baja California, particularly Tijuana and Mexicali, hosts a significant portion of companies in the Mexican aerospace sector. This region is known for its focus on manufacturing aircraft components, such as turbine components, landing gear, and wiring systems. Companies like Honeywell, Gulfstream, and UTC Aerospace Systems have substantial operations in this area. The proximity to the U.S. border provides logistical advantages, facilitating easier export and import processes.

Sonora

Sonora, with the communities of Guaymas and Empalme as its central aerospace manufacturing hub, is another crucial player in Mexico’s aerospace sector. This cluster is particularly noted for its expertise in producing aerostructures and precision machining for aerospace engine parts. The presence of companies such as Hughes Aerospace and the Parker Hannifin Corporation highlights the region’s specialization in producing complex metal parts and assemblies for aircraft. The focus on high-quality machining processes supports the global supply chain for major aerospace manufacturers.

Chihuahua

The state of Chihuahua, with its capital city of the same name, is an important center for the Mexican aerospace sector, especially in manufacturing wire harnesses, electrical systems, and aerospace plastics. This region is home to major players like Safran and Honeywell, which have extensive operations in the area. Chihuahua’s aerospace industry benefits from its skilled labor force and robust educational institutions, which provide specialized training in aerospace technologies.

Querétaro

Querétaro stands out as one of the most dynamic aerospace clusters in Mexico. The region has attracted numerous international companies, including Bombardier, Airbus, and Safran. Querétaro is known for its advanced manufacturing capabilities in aerostructures, engine components, and maintenance, repair, and overhaul (MRO) services. The National Aeronautics University in Querétaro (UNAQ) fosters a strong connection between industry and academia, ensuring a steady supply of highly trained aerospace engineers and technicians.

Nuevo León

Nuevo León, with Monterrey as its industrial heart, also plays a significant role in the Mexican aerospace sector. The cluster here is renowned for producing advanced materials, composite parts, and high-tech machining. Companies like General Electric (GE) and Rolls-Royce have established operations in Nuevo León, leveraging the region’s industrial infrastructure and skilled workforce. Monterrey’s strategic location and developed logistics network support its aerospace manufacturing and distribution activities.

In conclusion, the Mexican aerospace sector is poised for a transformative year in 2024, characterized by remarkable advancements in automation, digitalization, and sustainability. This sector embraces cutting-edge technologies and prioritizes environmental responsibility by adopting renewable energy sources and advanced recycling systems. The shift towards lightweight materials and optimized design processes is set to enhance efficiency and reduce carbon emissions, aligning with global environmental standards.

The commitment to skills development and job training is evident as the sector gears up to meet the increasing demand for advanced technical skills. Training programs are preparing the workforce for the integration of collaborative robots, machine learning, digital twins, and data-driven systems, all of which are expected to boost productivity and safety in manufacturing plants. This technological evolution, combined with a focus on real-time adjustments and AI simulations, underscores the sector’s forward-looking approach.

Geographically, the Mexican aerospace sector is robustly supported by several vital clusters, each contributing to the industry’s diverse capabilities. Baja California excels in manufacturing turbine components and landing gear, while Sonora is renowned for precision machining of aerostructures and engine parts. Chihuahua stands out for its expertise in wire harnesses and aerospace plastics, and Querétaro is a hub for advanced aerostructures, engine components, and MRO services. Nuevo León complements these strengths by producing advanced materials and composite parts.

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A conversation about foreign investment in Guatemala with Luis Velasquez

A conversation about foreign investment in Guatemala with Luis Velasquez

Luis Velasquez Quiroa
President
Consultoría Internacional
Guatemala City, Guatemala
luis.velasquez@consuinter.com

 

LATAM FDI: Today we have Luis Velasquez Quiroa with us. He’s the President of Consultoría Internacional, a firm located in Guatemala City. Today, we are going to discuss foreign investment in Guatemala. Hello, Luis. How are you doing today?

Luis Velasquez: I am doing excellent in Guatemala City, Central America. Thank you for this opportunity to speak with you and your thousands or millions of followers worldwide.

LATAM FDI: Well, that’s great. I hope you’re right about the millions. Let’s start by talking about your background. You have a very interesting resume. You can give the audience a taste of what you’ve done in your career.

Luis Velasquez: Well, I am a member of the fifth generation of a family that came to Guatemala in the 18th century. I have been in different business. My father and mother always told us how to create jobs, how to create opportunities, and how to attract foreign investment in Guatemala. That’s what we have been doing all our life. I am also teaching my grandchildren that the economy is vital worldwide, specifically for Guatemala, Central America, and Latin America. I have experience in agriculture and industrial services. I have been to many different countries around the world. I was also the Minister of the Economy of Guatemala. I was Secretary of State and a candidate for President of Guatemala. I have my TV program. It has existed for 16 years and produced 740 programs. I am also promoting different foreign investments in Guatemala and Latin America.

LATAM FDI: Thank you for providing us with that informational background. It’ll help contextualize some of the answers to the questions I’ll be asking you over the next 20 or 25 minutes. How does Guatemala’s geographic location impact its attractiveness for manufacturing investments, considering its proximity to key markets and transportation routes compared to other countries?

Luis Velasquez: Do you remember the experts say location, location, and location? We are here located in the center of the American continent. God has blessed us to be in this part of the American continent. We are strategically situated because we have the Pacific and Atlantic Oceans. We are a country that is close to the most significant market all over the world. I mean the NAFTA region. Also, the proximity to the United States is by ship, two days and a half from Guatemala to Miami for the Atlantic Ocean. We are only four and a half days from Guatemala to Los Angeles for the Pacific Ocean. If you go by plane, we will be in Miami in 2 hours and 20 minutes, 2 hours and 45 minutes in Houston, Texas, and Dallas if we can go to Panama in less than 2 hours. We are a very strategic location for attracting businesses. It doesn’t matter if they will be installed on the Pacific or the Atlantic coasts. I will give you an example. The Korean companies, the cluster in textiles and clothing, chose Guatemala. They generate over 100,000 direct jobs or over 5,000, I’m sorry, 500,000 indirect workers. They have invested millions and billions of dollars in Guatemala starting 30 years ago. They chose Guatemala as their operational hub to export to the United States, Central American countries, Canada, and Europe.

LATAM FDI: For companies interested in engaging in foreign investment in Guatemala, can you give us an idea of cost costs regarding industrial real estate prices and worker salaries and how those two things compare to neighboring countries?

Luis Velasquez: Yes. This is a critical issue because to be very competitive, you have to take care of the cost related to each product and industry. Here in Guatemala, a square meter costs $4, an excellent price. In other countries, it’s more expensive. To give you an idea, this is the real estate. I give you the actual cost. Worker salaries here are close to $450 per person per month. But most companies are coming here to pay the minimum wage and invest in Guatemala because we are excellent workers. You are living in the United States. You have seen many Guatemalan people and know we like to work. Companies engaged in foreign investment in Guatemala give incentives based on production. They are going to be more competitive here with Guatemala workers. In terms of electricity, we have a lot. Also, we produce our electricity. We are 100% very competitive. Also, we export electricity to Mexico, Honduras, El Salvador, Costa Rica, and sometimes until Panama.

The cost, if you are going to have a big company, you are going to pay seven or five or four cents per kilowatt per hour. It depends on how much you consume. You can sign a big contract for many years. For example, if you are going to have industrial production and need water, there is a lot of water everywhere. When considering foreign investment in Guatemala, you can be very competitive in all the costs necessary to produce your product or service. For example, in the services industry, we have significant, huge investments from TELUS, a company from Canada. They have facilities here with 8,000 people answering the phone, and they provide customer service. Transactel, for example, is from India and is another company that has chosen to make a foreign investment in Guatemala. We have investments from different countries; I am entirely sure that they are also considering the cost of moving to Guatemala.

LATAM FDI: Regarding Guatemala’s transportation infrastructure, What connectivity does the country offer to global markets, particularly concerning ports, airports, and road networks?

Luis Velasquez: We have excellent connectivity by plane. Every day here, we have flights from Guatemala to 10 different cities in the United States. Also, we have connections with Europe, Panama, Mexico, and South America. We have an excellent connection in terms of airports. We are also developing a network of regional airports in the different departments of Guatemala. Another airport will be for cargo in the Pacific Ocean, which will give more competitiveness to companies engaged in foreign investment in Guatemala. We have around 35 other airlines that are coming to Guatemala. Regarding business travel, Guatemala has the highest number of people in Central America and the Caribbean. Also, in terms of ports, we have ports in the Pacific and Atlantic Oceans. We are ready to expand those ports in the Pacific and the Atlantic Ocean to be more competitive, grow the economy, and be part of the global markets. There is a project to recover the railroads we have had since the 18th century from the south border of Mexico through Guatemala. Then, we are recovering rail service from Guatemala to El Salvador to Honduras, the Pacific Ocean, and the Atlantic Ocean.

Regarding the trucks on the roads, we are using an APP system, and we expect this new government to develop more roads because it’s essential for competitiveness and attracting more foreign investment in Guatemala.

LATAM FDI: What are the dynamics of the country’s labor market in Guatemala? Talk about unemployment rates, the presence and influence of labor unions, and the overall market conditions for manufacturing industries in Guatemala if you could.

Luis Velasquez: We have less than a 5% unemployment official rate, but we have close to 70%, 75% of the people that are in informal production, which means that they have their own business. The relationship with the labor unions is excellent. Guatemala respects all the rights of the workers. There is no problem. Also, companies and business people always try to take care of their teams. They have good policies to invest in the people, not only talking about money but also about training, career development, and a good work climate at the companies. We have excellent relationships with the labor people. With the unions, we are fine. Of course, we are not perfect. You know, some people are pushing sometimes. But talking about it in general, the companies don’t have big problems with the workers, and they don’t have big problems with the unions. The excellent issue for foreign investment in Guatemala is that the people here like to work a lot. Of course, they want money. They want to be better, but we don’t see any problem with the unions.

LATAM FDI: Well, how does Guatemala fare in terms of proximity to suppliers, especially concerning access to raw materials, components, and intermediate goods? Additionally, what is the quality of the suppliers found in the country?

Luis Velasquez: The suppliers in Guatemala understand that they are competing in the global market, so they have excellent quality. They are very committed to the contracts that they sign. Of course, the prices are a significant factor. The suppliers in Guatemala don’t think only of the Guatemalan market. They supply some goods to the United States and Latin American countries. We call these companies Multilatinas, which means that they are not only companies for Guatemala but are not only for Central America. They think they must compete, at least in the American continent. Also, we have excellent access to raw materials from the United States, Colombia, Brazil, and Chile, as well as from different countries. For every dollar we import all over the world, 38 cents we import from the United States, which means outstanding quality and reasonable prices. We import 16% from China, and almost 50% comes from Germany, Spain, France, South Korea, and Japan. In terms of the companies that are working here, they have an excellent relationship with the suppliers worldwide.

Honestly, I don’t remember having a problem because of the quality or because the suppliers needed to give the products at the right time. Even when we experienced the coronavirus, it was challenging worldwide. But thanks to God, we have a stable relationship with the suppliers, the local suppliers, and the international suppliers. The excellent issue is that all the companies, nationally and internationally, use the system of the banking system in Guatemala and all over the world. At present, we don’t have claims, we don’t have problems, we don’t have lawsuits. I cannot say everything is perfect, but the average situation with Guatemala’s suppliers and foreign investment is generally good.

LATAM FDI: Regarding political stability, what certainty can foreign investors expect? Are there any incentives the Guatemalan government offers to attract foreign direct investment?

Luis Velasquez: Okay. Guatemala has different systems for the free zones, which we call Zonas de Desarrollo Económico Especial Público Privada. These offer ten years of tax exemption for all the machines and all the equipment you bring to your factory. You do not have to pay any taxes for ten years if you are going to export everything. Can you imagine what that means? That’s an excellent incentive. If you sell to the Guatemala market, of course, you have to pay the sales tax, which is 12%. You will have to pay the income tax for the revenues, which could be 7% of the total gross that you are going to manufacture, or there is another option: you will pay only 25% of the net income. Knowing about those different regimes is essential when considering foreign investments in Guatemala. Also, we recommend that companies investing here in Guatemala take advantage of the CEDEP’s regime to have tax exemptions for ten years. But the most important is that they are going to use all the benefits that we have with the United States because we have the CAFTA-DR, Central American Free Trade Agreement, which means all Central American countries with the United States have a free trade agreement with Mexico also, with Colombia, Chile, Peru, Ecuador.

We are the only CAFTA member with a free trade agreement with Europe. That’s the great news. No other country has this excellent opportunity in Latin America. If you are making a foreign investment in Guatemala, you should have the vision to export to the American continent and Europe. It depends on the product you can export also to Japan or India. For example, one of the biggest companies worldwide that manufactures industrial gloves is based in Guatemala, the American continent. It’s a company with capital from Japan, and they chose Guatemala. They are inside one of the Zonas de Desarrollo Economico, Especial Publico Privada, and they are taking advantage of the fact that we are one of the biggest exporters of rubber and latex in the American continent. They use that as raw material and export it all over the world.

LATAM FDI: I know that you’re involved in a new development in one of the free zones, and it’s called Zona Franca Quetzal, or the Quetzal Free Zone. Can you tell us about that and what it offers to investors?

Luis Velasquez: Well, Free Zone Quetzal, or Zona Libre Quetzal, has an excellent location in the Pacific Ocean. We are only 5 kilometers from Puerto Quetzal in the Pacific Ocean, 5 km from the international airport for cargo, and 2 kilometers from the main highway. Also, the government is rescuing a railroad almost three kilometers from the free zone. Also, there is a lot of infrastructure for a new highway between the south of Mexico and El Salvador, located only 100 kilometers from Guatemala City. That gives us a great opportunity. It’s an excellent location to bring industrial and service company investors. The industrial zone is over 1 million square meters. That’s the first phase, and it can grow. The plans are to develop more Zonas de Desarrollo Economico-Especial, Público-Privado; you can call them free zones. We plan to develop in the Pacific Ocean, the Atlantic Ocean, and other sections of the country. This is still significant because we want to cooperate with people looking for the best job opportunities for foreign investment in Guatemala. There will not be more migration to the United States because we offer excellent facilities for companies investing in Guatemala.

We have been receiving calls from India, Taiwan, Korea, Japan, China, 12 or 11 different countries in the European Union, of course, the United States, Canada, Mexico, and other countries in South America. That is good news, and it is very well-located. We are very well-located, and we have the vision to develop Zona Libre Quetzal and to have, let’s say, 100 customers. We expect to create more than 50,000 jobs in that location only. Still, there are more free zones in Guatemala because companies are looking to our country, and we want to take the opportunity for relocation for nearshoring. We understand very well what this means for companies in the United States and Canada and what this means for companies in Asia that want to sell on the American continent.

LATAM FDI: We’ve covered some ground over the last few minutes. If somebody wants to contact you to ask a question related to foreign investment in Guatemala, can anybody who’s a listener with a question get in contact with you?

Luis Velasquez: Yes, Steve. I can give you my email address, which is luis.velasquez@consuinter.com. I will gladly answer all the questions, and we expect to still receive many questions. Thank you for your interview today.

LATAM FDI: Also, if you don’t mind, at the top of the transcript section of the podcast, would you allow us to put a link built into your name on your LinkedIn page? That way, it would be another direct conduit for people to communicate with you. Would that be okay?

Luis Velasquez: Yes, Steve. I appreciate all your help. Remember that we should work as a team. We love to work as a team, especially with you and many people from your company and, of course, more companies worldwide. Now, we should understand that we need each other and that for Guatemala, in this case, each new job means a new opportunity. The people need more opportunities.

LATAM FDI: That’s correct, and we can all agree. I wish you good luck, and thank you for participating. I look forward to communicating with you and hearing how your development at Zona Franca Quetzal is progressing.

Luis Velasquez: Thank you, Steve. We will keep in touch with you. Remember, anytime you are welcome to come to Guatemala to visit Zona Libre Quetzal, if you want to bring your clients and different companies worldwide, we will take care of you and your associates. We will be glad to give you a special tour. This is your country. The eternal spring of Guatemala is open to do business with you and your colleagues.

LATAM FDI: Thank you very much, and have a great day

The Ministry of Industry of Commerce and Purdue have signed an agreement to promote the semiconductor industry in the Dominican Republic

The Ministry of Industry of Commerce and Purdue have signed an agreement to promote the semiconductor industry in the Dominican Republic

The recently signed agreement between the Ministry of Industry and Commerce and Purdue University seeks to position the semiconductor industry in the Dominican Republic as an attractive destination for investment.

The Dominican Minister of Industry, Commerce, and MSMEs, Víctor “Ito” Bisonó; Alyssa Wilcox, Senior Vice President of Partnerships, and Vijay Raghunathan, vice president of Global Partnerships and Programs at Purdue University, signed a memorandum of understanding on Wednesday, May 22, 2024, to foster cooperation in critical areas of education and research.

A collaboration with Purdue is key to developing the semiconductor industry in the Dominican Republic

This agreement focuses on developing the semiconductor industry in the Dominican Republic.

Bisonó stressed the relevance of the collaboration with Purdue University for the future of his country, according to a press release.

“This agreement represents a significant milestone in our efforts to strengthen human capital and promote national development, especially in the semiconductor industry. We are convinced that this strategic alliance will allow us to promote research, foster innovation, and prepare the Dominican Republic for the challenges of the 21st century in key sectors,” he said. Further, he added: “The collaboration between the Ministry and Purdue University is a crucial step toward a more prosperous and technologically advanced future for our nation.”

During the event, Minister Bisonó announced that together with the Ministry of Economy, Planning and Development (Mepyd), he would carry out a report on human resources in the Dominican Republic, with particular emphasis on STEM careers (Science, Technology, Engineering, and Mathematics) and its links with strategic sectors such as medical devices, pharmaceutical products, electrical and electronic devices, semiconductors and ICT.

Developing STEM talent is essential

The document indicates that the report mentioned above, supported by allies from the public and academic spheres, promises to reveal encouraging data about the availability of professionals in STEM areas (Science, Technology, Engineering, and Mathematics) to work in the semiconductor industry in the Dominican Republic.

“This strategic approach will position the country as an attractive destination for investments in key sectors,” he highlighted.

The presence of STEM-trained talent is essential for economic and technological development, and this report could be an important step in that direction.

Raghunathan,  a representative of the academia, expressed his enthusiasm for the collaboration and stated that “Purdue University is pleased to join forces with the Ministry of Industry, Commerce and MSMEs of the Dominican Republic to foster academic exchange and collaborative research. “We hope this partnership will provide significant opportunities for Dominican students, teachers, and researchers to be involved in developing the semiconductor industry in the Dominican Republic.”

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Purdue will implement various collaborative activities, including online educational programs, professors, researchers, student exchanges, and joint research projects, all focused on promoting the development of the semiconductor industry in the Dominican Republic and other areas of high-added value.

The announcement was attended by government authorities and the educational and private sector, including Pável Isa Contreras, Minister of Economy, Planning and Development; Franklin García Fermín, Minister of Higher Education, Science and Technology; Rafael Santos Badía, general director of the National Institute of Vocational Technical Training; Omar Méndez Lluberes, rector of the Technological Institute of the Americas; Vijay Raghunathan, from Purdue University, among other representatives of educational institutions.

Minister Isa Contreras highlighted the importance of taking advantage of the current opportunity to promote the country’s reindustrialization and the Dominican Republic’s semiconductor industry. In his speech, he emphasized that this is a crucial moment to revitalize the national industry and create an enabling environment for sustainable economic development. Reindustrialization will strengthen the local economy and position the country as a key competitor in the global market.

Minister García Fermín expressed his gratitude for the opportunity to participate in the recent joint follow-up meeting. He congratulated the organizers and reaffirmed his commitment to the national priority of attracting semiconductor investment.

“This effort will not only satisfy domestic needs but will also boost exports abroad, which is essential for technological advancement and economic diversification of the country,” he noted.

With a functioning semiconductor industry the DR can play a critical global role

The recent agreement between the Ministry of Industry and Commerce of the Dominican Republic and Purdue University marks a pivotal step toward establishing the semiconductor industry in the Dominican Republic as a critical player in the global market. Minister Bisonó’s emphasis on strengthening human capital through education and innovation highlights the strategic importance of this partnership. The collaborative initiatives, including academic exchanges and joint research projects, are designed to cultivate a robust talent pool in STEM fields, which is essential for the semiconductor industry’s growth. By leveraging Purdue’s expertise and resources, the Dominican Republic aims to attract significant investment, fostering a technologically advanced and economically vibrant future. The forthcoming report on human resources, underscored by its focus on STEM careers, is expected to provide a comprehensive overview of the country’s readiness to support this high-value industry. This concerted effort aligns with the broader vision of reindustrializing the nation, enhancing its competitive edge in strategic sectors such as medical devices, pharmaceuticals, and ICT. As the Dominican Republic positions itself as an attractive destination for semiconductor investment, this alliance with Purdue University will be instrumental in driving sustainable economic development and technological advancement, propelling the nation onto the global stage.

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