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The maquiladora industry in Paraguay: An interview with Natalia Cáceres Martínez

The maquiladora industry in Paraguay: An interview with Natalia Cáceres Martínez

by | Feb 3, 2024 | FDI Latin America

Abog. Natalia Cáceres Martínez
Executive Secretary
National Council of Maquiladora Export Industries
Asunción, Paraguay
natalia.caceres@mic.gov.py

 

LATAM FDI: In what year did the maquiladora industry in Paraguay start? What are the conditions that brought about its birth?

Natalia Cáceres Martínez: The maquiladora industry in Paraguay officially began in 1997 with the enactment of Law 1064/97, which establishes how the Maquiladora Export Industry has to function. Compared to regional competitors, Paraguay offered lower wages, which was attractive for companies seeking cost-effective production. Also, Paraguay’s young and growing population presented a readily available labor pool.

LATAM FDI: How many manufacturing companies operate in the maquiladora industry in Paraguay, and what trends have been observed in establishing new companies in recent years?

Natalia Cáceres Martínez: The maquila regime currently has over 270 companies with an approved program. The maquiladora industry in Paraguay has experienced steady growth in recent years, with several new companies establishing operations in the country. The average growth of the maquiladora industry in Paraguay in the last ten years has been around 20%. The industry has also diversified, evolving from producing mostly textile and plastic products to unconventional products such as dog chews and electric bicycles, auto parts, high voltage cables, and intangible services such as call centers and BPO.

The establishment of new companies is due mainly to tax breaks and other incentives contemplated in the current legislation, a key attraction for new investors. Competitive labor costs compared to developed or regional competitors, general political and economic stability, as well as Paraguay’s ́strategic location for those companies that want to export products to countries in the region, especially Brazil, are also aspects that contribute to making the country a good investment choice. On top of everything, the country’s government has firmly supported and promoted the maquiladora industry in Paraguay.

LATAM FDI: What is the current workforce size in Paraguay’s maquiladora sector, and how has it changed over the past decade?

Natalia Cáceres Martínez: The maquiladora industry in Paraguay currently employs more than 25,000 people directly and indirectly around 60,000. The employment growth generated by this industry is linked to the installation of large manufacturers in recent years.

In 2023, employment in the maquiladora industries sector has increased by 6%. Seventy-four percent of the jobs linked to the maquiladora industries are registered in the following categories: auto parts, clothing, intangible services, plastics, and pharmaceutical products.

Forty-five percent of jobs linked to these industries are held by women, making this a highly inclusive regime since it also encourages first employment and family employment.

The maquiladora industry in Paraguay generates formal employment and provides technical skills training to people, allowing professional growth and new job opportunities.

LATAM FDI: What are the primary products manufactured in Paraguay’s maquiladora industry, and have there been any notable shifts or expansions in the range of goods produced?

Natalia Cáceres Martínez: The maquiladora industry in Paraguay produces a wide range of products. Textiles, auto parts, and food are the main ones. There has been notable expansion and diversification in production, with new sectors, such as pharmaceuticals, and a greater variety of products manufactured. Several multinational companies have established maquiladoras to produce electrical components, wire harnesses, and other automotive parts. Since their installation in 2013, they have expanded their operation considerably, employing almost 7,000 people and exporting more than 280 million dollars in 2023.

Products such as jeans, t-shirts, sportswear, and underwear are also being produced in Paraguay within the textile sector, representing 19% of exports under the regime. Some companies manufacture plastic products such as furniture, bottles, packaging materials, toys, and disposable medical supplies. Chemical companies also produce fertilizers, pesticides, and other industrial chemicals. Companies dedicated to producing pet chews have also set up shop in the country.

In recent years, companies have been established to manufacture non-conventional products such as electric bicycles, scales, gelatin, and synthetic fibers to reinforce concrete structures, among others.

LATAM FDI: Regarding major exports from the maquiladora industry in Paraguay, which products contribute significantly to the country’s export economy, and how have export patterns evolved?

Natalia Cáceres Martínez: The main exports of Paraguay’s maquiladoras are textiles, auto parts, food products, plastics, and leather goods. Export patterns have evolved towards greater diversification, increased added value, and exploration of new markets.

The auto parts sector currently represents around 30% of maquiladora exports, becoming a reference sector for the maquila. These companies from Paraguay export automotive and electronic components to Brazil, Argentina, Europe, the United States, and Asia.

The second important sector is textiles and clothing, which represent 19% of maquiladora exports. Paraguay has become an essential supplier of textiles and apparel to countries such as Brazil, Argentina, the United States, and the European Union.

Likewise, the manufacturing of food products has expanded, representing 16% of exports at the end of 2023.

LATAM FDI: What have been the main advantages that the maquiladora industry in Paraguay has introduced?

Among the main benefits that the implementation of this special incentive regime has provided to Paraguay are the following:

  1. Foreign investment for the installation of large industries that have found in Paraguay a place that allows them to shorten their production chains, reduce their costs, and become more competitive in international markets.
  2. The generation of labor, the formalization of employment, and the transfer of technical knowledge.
  3. The diversification of export products, the increase in the productive chain, and the income of net foreign exchange to the country.

LATAM FDI: What are the main attractions for foreign investors? Why choose Paraguay?

Natalia Cáceres Martínez: Without a doubt, Paraguay offers international investors:

  1. The best investment and business climate in the region.
  2. The most competitive tax scheme in the region.
  3. Tax incentives for investment and importing inputs for industrial transformation.
  4. Demographic bonus
  5. Cheapest green energy in the region.
  6. Macroeconomic stability.
  7. Greater ease for opening and closing companies.
  8. Expanded market access with 100% tariff preferences to all MERCOSUR countries, Chile and Bolivia, as well as almost all South American countries. All this and more makes Paraguay one of the most attractive countries in the region for investors.

LATAM FDI: Thank you for answering our questions, and good luck in working to make the maquiladora industry in Paraguay grow and prosper.

Natalia Cáceres Martínez: You’re welcome.  Thank you for the opportunity to address your audience about Paraguay and its maquiladora industry.

 

Foreign Direct Investment in Honduras

Foreign Direct Investment in Honduras

by | Feb 1, 2024 | FDI Latin America, Podcast

Leonardo Morazán
Foreign Direct Investment Consultant
Tegucigalpa, Honduras

LATAM FDI: Today we have Leonardo Morazán with us. Leonardo is somebody who’s worked several years, quite a few, as a matter of fact, as an investment consultant to both private sector and public sector entities. Most recently, he’s done work to promote foreign direct investment in Honduras with the Consejo Nacional de Inversion and USAID. But I won’t say more. I’ll let you introduce yourself, Leonardo. Thank you for joining me.

Leonardo Morazán: Thank you, Steven. It’s a pleasure to be with you. As you say, for the last 10 years I have been a consultant with different entities promoting foreign direct investment in Honduras and advising companies in which industries to invest. I had previous experience as the CEO of an international Spanish company involved in software development that has a presence in Honduras. We began with the company here in 2014 and worked to make it grow. We had the chance to go public on the stock exchange in Madrid. So, it was a really interesting road to make a business grow and sell it. So that gave me a lot of insight into how Honduras could be a potential ally for investment worldwide, especially in Central America.

LATAM FDI: Well, that’s good that you have both private sector and public sector experience. It’ll help to orient the listeners to our discussion today about foreign investment in Honduras. With that, how would you describe the current investment climate in Honduras, and what factors make it attractive or provide challenges that people have to face?

Leonardo Morazán: Okay. One of the principal attractions of Honduras is its geographical position. We’re the heart of the Americas and have good opportunities in diverse sectors. We are used to working with American companies. There are a lot of nearshoring investments, and we are now open to various sources of investment. The Northern Triangle has been focused on different efforts to develop new economic opportunities and avoid migration. We have many people and a thriving workforce and are interested in attracting more foreign investment. Our national investors are aggressive. We have four or five groups that are expanding in the region. Currently, 90% of the investment comes from Honduran nationals, and only 10% comes from foreign investors. So, there’s an interesting opportunity to develop investments that take innovation, and new technologies to the region and use Honduras as a hub, a logistics hub, to distribute products and services through Latin America.

LATAM FDI: Those are the upsides. What are the challenges that companies face?

Leonardo Morazán: Okay. As in every country, we have a government that has to work on promoting investments. However, in recent history, most of our investments in the country face the challenge of how the laws and the rules of the game change. This happens when we shift politically from one spectrum of policy to another. This creates kind of a struggle. Projects with a return on investment over 10,15 or 20 years must have the same business conditions during the life of the investment. So, stability usually comes from two particular factors, how your market moves is the most important one. Now, we see a lot of movement in textiles and other types of manufacturing because of market shifts and the changes we are having from Asia to closer options near the markets for their products. This is the near-shoring effect. And the other factor is how the country gives stability to investors, to the employees, and the society as a whole.

LATAM FDI: Given what you just said, can you give any recent regulatory or economic developments in Honduras that have impacted the landscape for investors?

Leonardo Morazán: Yes. One of the principal attractions of our country is the free trade zones law. When we have a special regime to import goods, transform, and export them. It used to be a law specifically for exportation. Companies were not allowed to sell their products in the domestic market. It was a really strong motor for development. In the last three or four years before COVID, a regulation allowed those players to sell at least 50% of their production in the country. So that shifted a lot of the opportunities, and the players in the local market got upset because now they had to compete with industries with a lot of experience and technology.  Before this change, even though they were our neighbors, they didn’t have to compete with international investors. As a result, local investors had to seek other markets and try to compete.

LATAM FDI: So, just getting back to one of the things that you just said, people in special economic zones were allowed to sell into the domestic market. I would assume one of the issues that came up was that the people in the special economic zones were probably getting some tax incentives that were not enjoyed by the people who are domestic investors. Would that have been an issue?

Leonardo Morazán: Yes, they already had the tax incentives upon their establishment. So, once you have an open market, you already have most of the return on your investment. So, the prices could be competitive. However, the product has a tax on sales, which created some revenue for the government.

LATAM FDI: What sectors in Honduras are looking up these days? Where’s the activity?

Leonardo Morazán: Mostly, we have a really strong BPO service sector. People in Honduras have a really good English level and speak several languages. Our time zone is also appropriate for call centers and IT development, especially for America. That’s one of the industries where the most demand for workers is. The government finds these enterprises very attractive for the government because they usually create good jobs. And another industry is growing fast as well, manufacturing. Honduras is really powerful on textiles. We’re the number one selling socks, jerseys, and shirts to different markets. Then, the largest part of the country has an agribusiness industry. We are one of the top exporters of coffee. And in that line, most of the agribusiness industry has tried to diversify, and we’re exporting vegetables and fruits worldwide. However, it’s a primary product. I mean things such as bananas and coffee. We have to move forward to sell finished products and more value-added agriculture. That requires investment, knowledge, and access to markets. So, there is one big opportunity for international companies to see Honduras not only as a tropical country with no winter but only a rainy and dry season.

As a result, the agricultural business is really good because companies can produce twice or even three times a year. Additionally, our position is strategic to distribute these products all around the world.

LATAM FDI: How is the government working to promote investments? Are they doing anything actively to try to bring business to the country?

Leonardo Morazán: Yes. Five different institutions have promoted foreign direct investment in Honduras in the last four to five years. Foreign policy, the economic department, and the National Investment Council. It was a dispersed effort. In 2023, a new strategy focused all the investment attraction activities on the same organization. The National Investment Council right now has board members, a steering committee, the economy minister, the president,  and even the environmental head of state. The efforts to attract foreign direct investment in Honduras are more concentrated and focused. The new relationship with China has brought new opportunities to the country, especially from Asian companies, including Korea, Japan, and China. These companies seek to develop investments in the Americas, especially to access Honduras’s free trade agreements with South America, North America, and Europe. From the point of view of what the government is doing, the market, in some instances, is shifting away from Mexico. The government in Mexico has increased the minimum wage by over 20%. So that makes some of the production, both in agriculture and manufacturing, more competitive for those companies that seek to make foreign direct investment in Honduras.

LATAM FDI: Are there any notable success stories or case histories about foreign businesses that have thrived in the Honduran market? What lessons can others learn from their experience?

Leonardo Morazán: This is fresh information. Ten years ago, one company produced wooden car tables, especially for BMW and Mercedes Benz. It was a German company, and that was the only part of the car that we produced. In recent years, many electrical components were built in Honduras for Toyota, Nissan, and several other brands. Now, we even receive some companies interested in building leather seats. Slowly, we are transitioning from textile to automotive manufacturing, at least some of the components. That has become a new pole of development because now you need electrical engineers and electric technicians who are labor resources with many more skills. Luckily the country has a wide offer of higher education and technical education that has allowed companies to grow. One of them was a Canadian company, a really small company. It has grown because of access to adequately skilled labor. They had an interest. Our experience in textile factories gave us the infrastructure and the keys that other industries could use. Additionally, we have a really good port for shipping products in Puerto Cortes.

We have a US Customs office in the port. Companies have free clearance of any products that go to us. So, the US market is close, both in distance and ineffectiveness for exporters. So that was one of the best stories we have. It generated a lot of jobs and put another industry on the map that usually stays in Mexico or maybe in Brazil.

LATAM FDI: If you had to give one piece of advice to a foreign investor regarding what they should most look out for in terms of opportunities and a manner of doing business in Honduras, what would be the advice that you give them?

Leonardo Morazán: I’ll take the idea from agriculture, but it could be applied to most industries in Honduras. The country has all the components to generate innovation and value-added processes. We have a great workforce with several capabilities, both on the management side and in operations. Our people are really good workers. With the correct leadership, especially focusing on social and environmental issues, most companies grow and thrive because the communities are aware that the company not only generates profit but also jobs, economy, and social benefits. Overall, most companies build the roads to their factories and help the communities develop their infrastructure and electrical power. Our country has lots of sunshine. We have a lot of factories with solar panel systems to get not only green energy but also more cost-efficient energy. Honduras’ energy matrix is diversified. It has hydroelectric, wind and solar. As a result, the energy industry has grown a lot in recent years, and there’s a lot more room to grow. Our country is part of the Central American electric network, so we can also export energy to other countries.

All the issues that an energy company usually has are easy to tackle because of the potential that the country has because of its location. In any country, especially small countries, we need a lot of development, and there is a lot of red tape on most of the industries. But we have identified at least four to five profitable sectors. Tourism, manufacturing, agribusiness and energy. Even though there are some obstacles to overcome, companies will discover that the profits are really good. And there’s a lot of chance of growing in Honduras and the region. We have a connection, a customs connection, both with Guatemala and El Salvador. Many companies seeking foreign direct investment in Honduras see Central America as a block. They know all the alliances that can be built regionally and realize that it is a good commerce route to Mexico and North America.

LATAM FDI: As you know, we’ve had a pretty good discussion with an overview of the environment for foreign direct investment in Honduras. I’m sure that some of the listeners who sit through and listen to this conversation will have some questions, and maybe some of them will need someone to help orient them in their activities in Honduras. That being the case, Leonardo, how would people contact you? What we’ll do is, in the transcript section of the podcast page, we’ll put a link to your LinkedIn profile. But are there any other ways that people might get in touch with you?

Leonardo Morazán: I usually use my LinkedIn profile. I like networking and trying to understand the needs and views of the industries because transparency is one of the values that I think helps a lot of businesses. If you work with government entities, They typically highlight the opportunities and the good things. They often avoid discussing the negative, which usually causes problems because those making a foreign direct investment in Honduras want to focus on avoiding and solving problems. My recommendation usually is to work with someone who could have both views from the government and the private sector. You want to talk with the investors that are already here in Honduras and understand what are the benefits they perceive and what are the challenges that they have had. One of my biggest concerns is that there’s not enough information about our country available. Usually, the media and the news are about bad, negative things. If you want to know about minimum wage and the cost of electricity, there’s little information about it. That is where an experienced consultant is valuable.

Usually, you have to contact consultants with market knowledge or companies to get that information. That’s just preliminary information to make an accurate decision based on data. One of my focuses and our team usually focused on getting updated information online, both in English and Spanish, that will trigger questions and investigations about the potential of our country. I’ll be more than pleased to point anyone interested in making a foreign direct investment in Honduras in the right direction.

LATAM FDI: We will ensure that the link to your profile is there, and anybody with further questions on Honduras can seek you out as a source of good information. How would that be?

Leonardo Morazán: That would be great.

LATAM FDI: Well, thanks for joining me today. Have a good rest of the day.

 

 

 

Five benefits of EU investments in Latin America and the Caribbean

Five benefits of EU investments in Latin America and the Caribbean

by | Jan 28, 2024 | FDI Latin America

In July 2023, EU investments in Latin America and the Caribbean would total approximately 45 billion euros in projects ranging from producing clean hydrogen and critical raw materials and expanding the data-cabling network to producing more advanced mRNA vaccines.

Below are five benefits that this new investment agenda will have in Latin America and the Caribbean:

Attracting more EU investments to Latin America and the Caribbean

The European Union is the third largest trading partner of Latin America and the Caribbean. It is just behind China and the United States. European companies have invested more in Latin America and the Caribbean than China, Japan, Russia, and India combined. In parallel, the nations of Latin America and the Caribbean are the largest net exporters of food and agricultural goods globally, with 15% of global exports. This figure shows the potential to stabilize international food prices, which benefits European consumers.

The EU imports a wide variety of raw materials and agricultural products from Latin America while it exports machinery, pharmaceutical products, and technological services. The EU investments in Latin America and the Caribbean can be promoted through different mechanisms, such as financial and technical cooperation and facilitating access to the European market for Latin American companies.

Overcoming socioeconomic gaps

EU investments in Latin America and the Caribbean could help overcome historical gaps in poverty, inequality, gender, health, education, productivity, and infrastructure. These are just some of them:

  • Approximately 200 million people (32% of the population) are poor.
  • Gender: Women occupy only 15% of management positions; They own only 14% of the companies and earn 16% less.
  • Inequality: the poorest 50% of the population receives 10% of the income, while the wealthiest 10% receives 55%
  • Infrastructure: Until 2030, Latin America and the Caribbean must invest approximately 2.2 billion dollars in the water and sanitation, energy, transportation, and telecommunications sectors to expand and maintain the infrastructure necessary to meet the region’s needs.

Accelerate the green transition, digital transformation, and human development

Organized by Spain and the Development Bank of Latin America and the Caribbean (CAF), the first meeting of the European Union and the Community of Latin American and Caribbean States (CELAC) Finance Ministers, on September 15, 2023, in Santiago de Compostela created mechanisms that guarantee the viability of EU investments in Latin America and the Caribbean and accelerate cooperation agreements. This is especially true in areas such as the green transition, digital transformation, and human development. The CAF is preparing three sectoral notes to focus on the following issues:

  • Green transition: The region has great potential for renewable energy resources. Renewables account for 33% of the region’s total energy supply, compared to just 13% globally. European investments in these technologies can significantly reduce greenhouse gas (GHG) emissions, achieving, at the same time, a lower-cost energy supply and, in the case of some countries – in the region and Europe – a lower dependence on imported products derived from fossil fuels.
  • Digital transformation: Connectivity issues will be addressed, from 4G and satellite solutions for remote and rural areas to fiber and 5G deployment, as well as the role of digital education and training in preparing the Latin American and Caribbean workforce for the future of work to leave no one behind. Likewise, smart digital regulation initiatives will be included, specifically on data privacy, cybersecurity, artificial intelligence and ethics, and taxation of digital services.
  • Human development: This note will focus on human development through participation in education – especially vocational education and training – and research, social and health protection systems, decent work and labor formalization, gender equality, and policies leading to achieving the Sustainable Development Goals (SDGs).

Strengthen regional integration

Currently, the EU has association, free trade, or political cooperation agreements with 27 of the 33 countries in the region and is the largest source of foreign direct investment in Latin America and the Caribbean (LAC), with a total of 45% of LAC FDI inflows during 2015 -2019 and 36% in 2021. According to the European Commission, trade in goods between regions reached 212 billion euros in 2020.

The EU could support regional integration initiatives in Latin America, facilitating trade and cooperation between countries. This would help increase Latin America’s competitiveness on the international stage. Currently, the CAF supports integration projects, especially cross-border trade, logistics corridors, energy efficiency projects, and the digital agenda. The organization will also boost pre-investment funds for studies and projects.

Strengthen the voice of Latin America and the Caribbean in large global forums

To achieve a Latin American position with a global impact, there is a need to deepen synergies with strategic allies such as the United States, Europe, China, and the Middle East, and integrate more into global decision-making forums. The region must have global solutions for climate change, migratory flows, digital transformation, and the energy transition.

For various historical reasons (most related to complex domestic situations and poor regional integration), Latin America and the Caribbean have played a secondary role on the international stage and have not been able to take advantage of its competitive advantages, the most notable of which are linked to its rich biodiversity (LAC hosts 60% of the planet’s terrestrial and marine life); its vast natural resources (49% of silver reserves and 44% of copper, for example); and its agricultural potential (Latin America and the Caribbean has 28% of arable land).

The promotion of EU investments in Latin America should help the region make its global solutions visible and better integrate into major decision-making forums to influence the significant challenges that face humankind more actively in the coming decades.

In conclusion, the significant EU investments in Latin America and the Caribbean, totaling approximately 45 billion euros, promise to usher in a new era of collaboration and mutual benefit. These investments not only strengthen economic ties between the European Union and the region but also address critical challenges such as poverty, inequality, and infrastructure gaps. By accelerating the green transition, digital transformation, and human development, the partnership aims to create sustainable solutions for the future. Moreover, the support for regional integration initiatives and the elevation of Latin America’s voice in global forums demonstrate a commitment to shared prosperity and a more active role in addressing pressing global issues. As the EU invests in Latin America and the Caribbean in various sectors, from renewable energy to healthcare, it contributes not only to the development of the region but also to the creation of a more interconnected and resilient global community. This collaborative effort reflects a vision for a prosperous, inclusive, and environmentally sustainable future for both the European Union and Latin America and the Caribbean.

 

The Strengthening Commercial Relationship Between Brazil and Paraguay

The Strengthening Commercial Relationship Between Brazil and Paraguay

by | Jan 27, 2024 | FDI Latin America

The commercial relationship between Brazil and Paraguay is not just a geographical adjacency; it’s a dynamic economic alliance that has seen remarkable growth over the years. Brazilian investments in Paraguay have significantly fostered this partnership, extending beyond traditional economic ties. In this blog post, we will delve into the quantifiable aspects of this economic collaboration, exploring the numerical data behind the commercial relationship between Brazil and Paraguay, the key sectors involved, and the substantial impact on job creation in recent years.

Brazilian Investments in Paraguay

Brazil’s strategic investments in Paraguay have left an indelible mark across various sectors, from energy and agriculture to infrastructure and manufacturing. The collaboration between these two nations has been quantifiably robust, driving mutual growth and development.

The colossal Itaipu Dam stands out as a testament to their collaboration in the energy sector. The joint investment by Brazilian companies Eletrobras and Itaipu Binacional exceeds a staggering $19 billion. This hydroelectric power plant addresses a substantial portion of both countries’ electricity needs and exemplifies the success of cross-border partnerships in numerical terms.

Additionally, Brazilian agribusiness has made significant inroads into Paraguay, with investments from global giants like JBS and Amaggi. The value of these investments is substantial, contributing not only to Paraguay’s economic growth but also solidifying Brazil’s position as a significant player in the global agribusiness market.

Brazilian Companies Making Waves in Paraguay

Several Brazilian companies have strategically invested in Paraguay, making substantial contributions across various sectors. For example, Fibria’s investment of over $2 billion in a state-of-the-art pulp mill in Paraguay bolsters the economy and quantifiably strengthens ties between the two nations.

In the banking sector, the expansion of Banco do Brasil and Itaú Unibanco into Paraguay contributes quantifiably to the commercial relationship between Brazil and Paraguay and the financial stability and growth of the Paraguayan banking industry. These banking giants, leveraging their financial prowess, are crucial in supporting local businesses and stimulating economic activity with quantifiable impacts.

With the involvement of Brazilian companies like Odebrecht, the construction and infrastructure sector has seen significant projects in Paraguay. The numerical value of these initiatives not only enhances connectivity but also quantifiably creates job opportunities and stimulates economic development. Among the other companies that have invested significantly to expand the commercial relationship between Brazil and Paraguay are:

Agribusiness Sector

  • JBS: A global meat processing giant, JBS has made significant investments in the Paraguayan agribusiness sector. The company operates in various areas of the supply chain, contributing to the growth of the agricultural industry.

Banking Sector

  • Banco do Brasil: A major Brazilian bank, Banco do Brasil has expanded its operations into Paraguay, contributing to the financial stability and growth of the Paraguayan banking industry.
  • Itaú Unibanco: Another major Brazilian bank, Itaú Unibanco, has extended its presence into Paraguay, playing a role in the financial sector’s development and supporting local businesses.

Food and Beverage Sector

  • Cervecería Ambev: Brazilian brewing giant with operations in Paraguay, producing brands like Brahma and Skol.

Automotive Sector

  • THN Industria: Manufactures plastic and metal automotive parts in its Ciudad del Este plant.

Textile and Clothing Sector

  • Lupo: Leading Brazilian lingerie brand with a production facility in Hernandarias.
  • Dudatex is a clothing manufacturer with a factory in Villarrica.

Value of Brazilian Investments in Paraguay

The commercial relationship between Brazil and Paraguay consists of investments in Paraguay exceeding $30 billion, underscoring the depth of their economic partnership. This substantial financial injection has quantifiably catalyzed economic development, spurred innovation, and positioned both countries as significant players in regional and global markets.

Job Creation Impact

One of the most compelling quantitative aspects of Brazilian investment in Paraguay is its impact on job creation. As Brazilian companies expand operations and undertake new projects, many jobs are quantifiably generated across various sectors.

Brazilian companies’ construction and infrastructure projects have quantifiably provided employment opportunities to the local population. Skilled and unskilled labor alike have found new avenues for employment, contributing to a quantifiable reduction in unemployment rates and an overall improvement in living standards.

In the agricultural sector, the quantifiable impact of investments made by Brazilian agribusinesses is evident in increased productivity and job creation throughout the supply chain. From farm workers to transportation and logistics professionals, the agribusiness boom in Paraguay has quantifiably been a boon for the labor market.

With the Itaipu Dam at its forefront, the energy sector has not only provided a stable source of electricity but has quantifiably created jobs in maintenance, operation, and support services. The continued collaboration between Brazilian and Paraguayan professionals in the energy sector has quantifiably fostered a cross-cultural exchange of expertise, contributing to the professional growth of individuals on both sides of the border.

The commercial relationship between Brazil and Paraguay is flourishing, driven by substantial Brazilian investments that can be quantified across various sectors. Notable companies like JBS, Eletrobras, Banco do Brasil, and Odebrecht lead the way, injecting billions of dollars into the Paraguayan economy and creating a quantifiable ripple effect of positive economic outcomes.

As the economic ties between these two nations continue to strengthen, the quantifiable impact on job creation in Paraguay is undeniable. Brazilian investments have not only contributed to the development of critical industries but have also played a crucial role in quantifiably improving the livelihoods of the Paraguayan people.

This quantifiable symbiotic commercial relationship between Brazil and Paraguay is a shining example of how strategic partnerships can lead to mutual prosperity and growth. As both nations navigate the challenges and opportunities of the global economy, their shared commitment to economic cooperation, backed by quantifiable data, sets the stage for sustained development and shared success.

 

 

The importance of mining in Peru

The importance of mining in Peru

by | Jan 27, 2024 | FDI Latin America

Mining in Peru is a fundamental pillar of the nation’s economy. Its importance is reflected in various macroeconomic indicators. In this blog post, we will analyze in detail how mining impacts the country’s production, investment, employment, and exports.

Contribution of mining to national GDP

During the last ten years, mining activity has driven, on average, more than 8% of the national GDP. This places it as one of the most significant contributors to the nation’s economy and consolidates it as a critical sector.

At the end of 2022, the GDP of the metal mining sector reached S/ 47,039 million (US$ 12.5 billion), contributing 8.3%

It is essential to highlight that national copper mining production leads with 57.9% of the metal mining GDP. In addition, the national mining production of zinc and gold follows with 12.1% and 9.8%, respectively.

Production and reserves of metallic minerals

Peru remains one of the largest producers of minerals in the world, boasting significant volumes, seven of which are most traded: gold, copper, silver, zinc, lead, tin, and molybdenum.

Due to mining in Peru, we must highlight that the country remains the second-largest producer of copper and zinc globally. In addition, it is the first producer of zinc and tin in Latin America. No less important is that it has the largest silver reserves globally and the third-largest reserves of copper and molybdenum.

Mining exports

Mining exports are important to the country due to their notable participation in total national exports. In the last ten years, mining exports represented, on average, 60% of the total value of national exports.

At the end of 2022, the total value of national exports registered US$ 65.8 billion, of which US$ 38.8 billion represent mining exports (metallic and non-metallic), representing 57.3% and 1.7%, respectively. It should be noted that copper and gold exports are the most representative.

Mining investment

Mining investment in Peru for 2022 was US$ 5.4 billion, registering a positive variation of 2.1% compared to what was registered for 2021, where it reached US$ 5.2 billion. Of the latter, plant investment recorded US$ 1.4 billion in companies that included Anglo American, Quellaveco, Compañía Minera Antamina, and Minera Chinalco, which concentrated 52.8% of the investment in processing plants. In infrastructure, it recorded US$ 1.3 billion in the companies that included Anglo American Quellaveco, Minsur, and Southern Peru Copper Corporation, which concentrate 46.1% of the investment in infrastructure. In development and preparation, it is recorded that US$ 931 million was invested in mining companies. Among them were Yanacocha, Shougang Hierro Perú, and Volcan Compañía Minera, concentrating 65% of the investment in development and preparation.

The 2023 Mining Investment Project Portfolio comprises 47 mining projects with an investment of US$ 53.7 billion. This portfolio is made up of projects whose objective includes the execution of the investment through the construction of the necessary infrastructure to achieve operational start-up to carry out mining activities such as exploitation and/or benefit of minerals. All projects are owned by large and medium-sized private mining companies that cover metallic and non-metallic production.

Job creation

Mining in Peru positively impacts local communities by implementing support and job training programs. The sector also encourages the growth of local employment and services.

At the end of 2022, mining activity generated an annual average of 231,479 direct jobs, which represented an increase of 6.8% compared to the yearly average of 2021 and 21.7% higher than the average of 2019(before COVID-19). This is a historical record achieved in Peru.

It is essential to highlight that the mining sector generates direct jobs and represents a significant source of indirect employment for other sectors of the national economy. According to a Peruvian Institute of Economics (IPE) study, eight additional jobs are generated in the rest of the economy for every direct job generated in mining activity.

Mining canon

The mining canon consists of 50% of the income tax revenue the State receives for exploiting mineral, metallic, and non-metallic resources. It aims to finance projects and infrastructure works that impact the regional and local levels. In addition, an amount is allocated for scientific and technological research, which is transferred to the national universities of the regional government constituencies.

Mining royalties

In 2022, transfers for royalties from mining in Peru amounted to more than S/ 7,844 million (US $ 2.07 billion), marking a historical maximum value and experiencing a significant increase of 166.1% compared to the previous year. This incredible increase is due to the impressive collection obtained in 2021 thanks to the historic prices achieved by essential metals such as copper and gold.

The mining royalty is the economic consideration that the owners of the mining activity are obliged to pay the Peruvian State for exploiting metallic and non-metallic mineral resources. It comprises two types of income: mining royalties of legal origin and mining royalties of contractual origin.

At the end of 2022, national, regional, and local governments received more than S/ 2,953 million (US$ 779 million) in legal and contractual mining royalties, experiencing a reduction of 17.2% compared to 2021. This decrease is due to the drop in the prices of metals in the international market and the decrease in the volume of exports to the leading industrialized countries.

Mining in Peru stands as a cornerstone of the nation’s economic vitality, playing a pivotal role in shaping critical macroeconomic indicators. With mining consistently contributing over 8% to the national GDP, the sector has emerged as one of the primary drivers of economic growth. The production and reserves of metallic minerals, particularly gold, copper, silver, zinc, lead, tin, and molybdenum, underscore Peru’s global significance as a major player in the mining arena. Notably, the industry’s impact extends beyond economic metrics, fostering job creation with a historical record of over 231,000 direct jobs generated in 2022. Moreover, mining exports, accounting for a substantial portion of total national exports, have positioned Peru as a significant player in the global market. The sector’s economic contributions extend to regional development through the mining canon and royalties, which fund critical projects and infrastructure at local and national levels. With its impressive growth, strategic global positioning, and multifaceted contributions, Peru’s mining industry is vital to the nation’s progress and prosperity.