Inflation management is one of the best-evaluated areas within Uruguayan President Lacalle Pou’s management.

Businessmen’s expectations for a favorable business climate in Uruguay in 2024 remain steady. This is the case even within a scenario where, in recent months, several signs of a less favorable economic panorama have taken hold.

That is one of the main conclusions of the business expectations survey carried out by the Uruguayan consulting firm Exante, whose latest edition was recently released. The survey covered the opinions of 330 managers and senior executives of large and medium-sized companies operating in Uruguay. It was carried out between October 2 and October 31, 2023.

85% of the executives consulted consider that the business climate in Uruguay is “good” or “very good.”

Among the most positive aspects that currently contribute to the business climate in Uruguay are the legal security and stability of the country. The businessmen also mentioned straightforward rules, low inflation, economic openness, and political and legal stability.

Among the most negative aspects of the country’s business climate they mentioned were the exchange rate delay, high costs, bureaucracy, unions, labor conflict, market size, and the situation in

Economic Situation

In this new semi-annual survey, positive responses regarding the recent economic performance and the general situation of companies in the last year fell again. Nearly 25% of those surveyed consider the economic situation less favorable than a year ago.

Meanwhile, the growth expectations of the Gross Domestic Product (GDP), with a horizon of three or four years, moderated again and are barely above 2% annually (when in 2021 and until the beginning of 2022, they had risen on a 3% basis annually).

According to Exante, this is consistent with what the macroeconomic indicators indicate, with the shift towards more restrictive financial conditions in the international context and the fact that several sectors continue to be exposed to severe competitiveness difficulties within the region.

Fall in inflation and adjustment of expectations for the business climate in Uruguay

In Uruguay, inflation is currently approximately 4% and is within the target range set by government authorities, between 3% and 6%. The sharp drop in recent months has been reflected in an improvement in businessmen’s inflation expectations.

According to the survey, only 6% of respondents expect inflation to close 2024 above 8%, and half believe it will be within the target range.

Expectations over three or four years also fell, with an expected average inflation of 6.1%, contrasting with records systematically higher than 7% in the years before the pandemic.

In any case, the survey warns that inflation expectations are not fully anchored since, when assessing the business climate in Uruguay, half of executives continue to expect inflation to exceed the target range in that medium-term horizon.

On the other hand, almost 40% of those surveyed indicated that their companies must incorporate minor nominal price and cost adjustments in their budgets for 2024. This shows that inflationary inertia still represents an important challenge for economic policy, Exante highlighted.

What is expected about the dollar?

Most executives surveyed anticipate an exchange rate higher than the current value ($39.9), although lower than they estimated in previous surveys. A third of business owners foresee an exchange rate below $41 within a year.

The situation and prospects for companies

Despite the signs of a less optimistic situation, the businessmen consulted maintain a relatively positive vision of the business climate in Uruguay and the performance that their companies will have during the coming months.

In this sense, about half expect an increase in production and greater investment, while negative responses do not exceed 10% in either of the two areas.

In both cases, this is a more optimistic outlook than the one that prevailed in the years before the pandemic, when the economy was also relatively stagnant (at that time, positive responses were between 20% and 30%), notes Exante.

In addition, the proportion of those who expect a favorable business climate in Uruguay and an increase in profitability in 2024 remained at 35%. In any case, the net balance of responses “will increase” – and “will decrease” remains positive (23%).

Hiring of personnel and real salary

Regarding the decision to hire personnel, a cautious view continues to predominate. Only two in 10 executives indicate they expect to hire more workers next year.

The high real salary (49%) appears as the main element that, in the opinion of businessmen, determines the increase in employment. This is followed by low business volume (46%) and the availability of labor-saving technologies (40%), which are among the most mentioned.

In any case, the net balance of responses will “increase” vs. “will decrease” about employment in the company itself varied slightly and remains positive.

Main challenges in the business climate in Uruguay

Six out of 10 responses indicated that their companies’ main challenge is cost pressure. This is consistent with the situation of low competitiveness and growth that the economy is experiencing. Other factors, such as growing competition, human resource management, and lack of demand, also appear on the list. These conditions were noted by approximately one-third of those consulted.

How do you evaluate government management?

The evaluation of the management of Luis Lacalle Pou’s government continues to be “extremely favorable,” according to Exante. 79% approve of it, and only 2% disapprove of it.

The balance is favorable in almost all management areas. Still, on this occasion, there was an appreciable increase in positive assessments regarding the management of inflation and, on the contrary, a deterioration in the net balance of responses regarding international competitiveness.

The business climate in Uruguay offers considerable advantages

The business climate in Uruguay offers several distinct advantages. Firstly, Uruguay boasts a stable political environment with a strong rule of law, ensuring predictability and security for investors. Secondly, its strategic location between the larger economies of Brazil and Argentina provides access to a broader market and regional integration benefits. Thirdly, Uruguay has a highly literate and skilled workforce known for its proficiency in various sectors, particularly services and technology. Furthermore, the country’s robust infrastructure, including modern ports and efficient transportation networks, facilitates seamless trade operations. Additionally, Uruguay has established a favorable regulatory framework for foreign investments, offering incentives, tax breaks, and protection mechanisms to encourage business growth and innovation. Lastly, its commitment to sustainable practices and environmental stewardship positions Uruguay as a responsible and forward-thinking business destination, appealing to global partners and conscious investors alike.

US and European companies will invest their capital in the country, says Minister Álex Contreras.

Confidence in investing in Peru is at its highest level in recent years. It improved from fifth to first place as the most attractive country in the region for foreign capital in 2024. This assessment is according to a recent survey conducted by Apoyo Consultoría that was recently highlighted by the head of Peru’s Ministry of Economy and Finance (MEF), Álex Contreras.

The MEF expects numbers to indicate a recovery in the third and fourth quarters of 2023. The Peruvian economy shows signs of improvement going forward. Apoyo Consultoría, Peru’s leading business consulting firm in economic, financial, and strategic matters, notes that its investment confidence indicator is at 17 points, the highest level since March 2019.

The same results are indicated with the 12-month economic expectations published by the Central Reserve Bank (BCR), the highest level in recent years,  Contreras stated.

The Perception of Investing in Peru

The Apoyo Consultoría survey showed that Peru is positioned to date as the most attractive destination for investments in the region in 2024, commented the minister.

He maintained that this improvement in the confidence index in the country is also verified on an international scale. This was confirmed during the recent meetings with businessmen from Spain.

He said that many companies ratified their confidence in investing in Peru. Among those that stand out are those in the transportation, infrastructure, and energy sectors. “Something also important is that Peru has received the commitment of multilateral entities, both European and non-European, to support the financing of green projects in Peru. These include water and sanitation projects.”

Álex Contreras explained that he will meet in New York with risk agencies, international investors, and multilateral organizations to promote more interest in investing in Peru.

“Investments are already materializing. The worst capital outflow in Peru’s history was stopped, and record projects were awarded under the modality of public-private partnerships that will begin to be built. In addition, new business investment projects worth 12.5 billion dollars were recently announced. He stated that Peru will continue with the work to regain confidence and develop further foreign direct investment,” he stated.

The present months are crucial because companies prepare budgets and decide the projects they will develop in 2024, Contreras added.

An international tour

Furthermore, Minister Contreras highlighted that the international investors he met with in the United States are confident in continuing activities aimed at investing in Peru.

He said that as part of the tour he carried out in the United States, accompanying the President of the Republic, Dina Boluarte, he met with international business groups to discuss opportunities for investment in Peru, and the response was quite positive.

“Companies in the mining, infrastructure, and telecommunications sectors are interested in investing in Peru.” Many American companies that opted to invest in  Peru expressed their confidence and positive view of Peru before President Boluarte and the group of ministers who accompanied her. Contreras confirms that good winds are blowing towards Peru.

He highlighted that the tour of the United States was “very fruitful” because it allowed government officials to contact investors, who are “global players, companies that have investments on an international scale.”

“This ratification of trust in investing in Peru will be reflected in more private investment, which the country wants most now. Twenty percent of private investment is foreign. That is why being here and involved in Peru’s economy is important,” he stated.

A chance to capture investment

The President of the Central Reserve Bank (BCR), Julio Velarde, maintained that Latin American countries can attract new investments to their economies due to the confrontation the United States and Europe have had with China commercially.

“Mexico, which has a significant industrial base and exports to the United States, and Costa Rica have benefited from this movement to ‘nearshore’ operations. However, no country in the region has taken full advantage of this enormous potential,” he stressed while participating in the Budget and General Account Commission of the Republic of Congress.

Additionally, he warned of a possible impact of citizen insecurity on the atmosphere for foreign direct investment. “Some businessmen hesitate to send their families abroad and, because of security concerns, they invest less,” he commented. However, Peru’s Ministry of Economy and Finance recently announced that it will allocate more than 200 million soles (USD 54 million) to strengthen citizen security.

The benefits of investing in Peru

In 2024, investing in Peru will offer an unparalleled opportunity for forward-thinking companies seeking sustainable growth in a dynamic market landscape. Peru, endowed with rich natural resources including copper, gold, and silver, has positioned itself as a pivotal player in the global commodities market. Moreover, the country’s strategic location as a nexus between South American markets presents a gateway for companies aiming to capitalize on the continent’s burgeoning consumer base. Recent infrastructural advancements, such as expanding the transportation network and modernizing ports, have further enhanced Peru’s attractiveness for foreign investment. Furthermore, Peru’s commitment to economic reforms, fostering a conducive business environment, and promoting innovation through public-private partnerships underscores its dedication to fostering long-term economic stability and growth. By leveraging Peru’s unique advantages and aligning with its progressive policies, companies stand to benefit from enhanced market access, operational efficiencies, and robust returns on investment. In essence, Peru emerges as a pole of opportunity, offering foreign direct investors a strategic advantage in navigating the complexities of the global economy and securing a prosperous future.

The economy of the Dominican Republic has experienced significant economic growth over the past few decades, primarily driven by various industries and a diversified export base. This overview delves into the primary industries, the goods and services they produce, and the characteristics of the workforce, along with the country’s export profile and primary trade partners.

Main Industries and Their Products

Tourism

Description: The Dominican Republic boasts some of the Caribbean’s most popular tourist destinations, including Punta Cana and Puerto Plata. Tourism plays a pivotal role in the nation’s economy.

Goods and Services Produced: Hotels, resorts, restaurants, recreational activities, and related services are the primary outputs. The country also offers cultural and eco-tourism experiences. Below are some of the main tourist attractions in the country:

• Punta Cana & Bávaro: Located on the easternmost tip of the Dominican Republic, this area is famous for its pristine beaches, luxury resorts, and world-class golf courses.
• Santo Domingo: As the capital city, Santo Domingo is a blend of historical and modern attractions. The Zona Colonial, a UNESCO World Heritage site, features colonial-era buildings, the first cathedral in the New World, and the Alcázar de Colón, the former residence of Christopher Columbus’s son.
• Samana Peninsula: Known for its picturesque landscapes, waterfalls like El Limón, and the annual whale-watching season when humpback whales migrate to the area.
• Puerto Plata: Offers visitors a mix of beaches, the historic Fortaleza San Felipe, and the nearby Mount Isabel de Torres, accessible by a cable car, offering panoramic views.
• La Romana & Casa de Campo: This region is home to luxury resorts, the Altos de Chavón artists’ village, and the beautiful Isla Catalina.
• Jarabacoa & Constanza: Ideal for nature lovers, known for their mountainous landscapes, waterfalls, and opportunities for hiking, rafting, and birdwatching.
• Las Terrenas & Las Galeras: Coastal towns with beautiful beaches, water activities, and a laid-back atmosphere.

Contribution of Tourism to the GDP:

Tourism is a cornerstone of the economy of the Dominican Republic. While the exact percentage can vary slightly from year to year based on various factors, as of 2022, tourism contributed around 17-20% to the country’s GDP. This figure underscores the sector’s significance in driving economic growth, creating jobs, and fostering development across various industries, from hospitality and transport to entertainment and retail.

Agriculture

Description: Historically, agriculture was the backbone of the Dominican economy. While its relative contribution has diminished, it remains a significant sector.

Goods Produced: Sugar, coffee, cocoa, tobacco, bananas, and tropical fruits are the primary agricultural products.

As of 2022, the main countries importing agricultural products from the Dominican Republic include:

• United States: Given its proximity and historical ties, the U.S. is a significant market for Dominican agricultural exports. Products like organic bananas, cocoa, and coffee find substantial demand in the U.S. market.
• European Union: Countries within the EU, such as Spain, Germany, and the Netherlands, are vital markets for Dominican agricultural products, mainly organic cocoa and coffee.
• Haiti: The neighboring country is a notable importer of Dominican agricultural products, including rice, poultry, and dairy products.
• Other Caribbean Nations: Countries within the Caribbean region also import a range of Dominican agricultural goods, benefiting from regional trade agreements and proximity.

Contribution of Agriculture to GDP

As for the agricultural sector’s contribution to the Dominican Republic’s economy, while the exact percentage can fluctuate based on yearly performance and other economic factors, historically, the farm sector has contributed around 6-8% to the country’s GDP. However, it’s essential to note that while the percentage might seem modest compared to other sectors like tourism or manufacturing, agriculture plays a crucial role in employment, rural development, and food security in the Dominican.

Manufacturing

The Dominican Republic has attracted many foreign manufacturers, particularly in export-oriented industries, thanks to its strategic location, preferential trade agreements, and relatively skilled labor force. Some of the leading foreign manufacturers operating in the country produce:

• Textiles and Apparel: Numerous international clothing brands and manufacturers have set up operations in the Dominican Republic to take advantage of the country’s proximity to major markets like the United States and the European Union. Companies like Gildan Activewear, VF Corporation, and HanesBrands have significant operations in the country.
• Electronics: The electronics manufacturing sector has grown, with companies producing items such as televisions, components, and other electronic goods for export.
• Medical Devices and Pharmaceuticals: The country has become a hub for medical device manufacturing, with several multinational companies establishing production facilities. Additionally, pharmaceutical manufacturing, especially generic drugs, has also seen growth.
• Automotive and Components: Some international automotive companies and suppliers have established operations in the Dominican Republic, producing parts and components for the global market.
• Footwear and Leather Goods: Several international footwear brands and manufacturers have set up production units, capitalizing on the country’s skilled workforce and favorable trade agreements.

Contribution of Manufacturing to GDP

The manufacturing sector has experienced significant growth over the years and has become a principal contributor to the economy of the Dominican Republic. Both domestic and foreign investment drives it. As for its contribution to the country’s GDP, while the exact percentage can vary based on economic conditions and other factors, the manufacturing sector has historically accounted for approximately 16-19% of the Dominican Republic’s GDP. This figure underscores the importance of manufacturing in the country’s economic landscape, generating employment, promoting exports, and fostering industrial development.

Mining

Description: The Dominican Republic possesses significant mineral resources, with gold being the most notable.

Goods Produced: Gold, silver, nickel, and other minerals. Some of the major mining companies operating in the Dominican Republic include:

• Barrick Gold Corporation: One of the world’s largest gold mining companies, Barrick Gold has a significant presence in the Dominican Republic through its Pueblo Viejo mine, one of the largest gold mines in the Americas. The mine is a joint venture between Barrick (60%) and Newmont Corporation (40%).
• GoldQuest Mining Corp.: A Canadian-based company involved in exploration and development activities in the Dominican Republic, primarily focusing on its Romero gold-copper project.
• Precipitate Gold Corporation: Another Canadian exploration company with projects in the Dominican Republic, including the Pueblo Grande project.
• Unigold Inc.: A Canadian exploration company focusing on its Neita property in the Dominican Republic, which has significant gold and copper potential.
• Hemisphere Energy Corporation: This company has exploration projects in the Dominican Republic, including the Cerro de Maimón copper-gold-silver mine.

Contribution of Mining to GDP

In terms of its contribution to the overall GDP of the economy of the Dominican Republic, the mining sector, including gold and other minerals, has historically represented a smaller percentage compared to sectors like tourism, manufacturing, and agriculture. Its contribution is typically 1-2% of the country’s GDP.

Characteristics of the Workforce

The Dominican workforce is diverse, with a mix of skilled, semi-skilled, and unskilled labor. A significant portion of the labor force is employed in the service sector, especially in tourism-related activities. However, the manufacturing and agricultural sectors also employ many workers. The workforce is relatively young, with a significant portion of the population below 30. While Spanish is the official language, English proficiency is growing, especially among the younger generation.

Exports and Trade Partners

The Dominican Republic has a diversified export base, with the United States being its primary trading partner. The main customers for Dominican Republic exports include:

United States: The U.S. is the Dominican Republic’s largest trading partner, absorbing a considerable portion of its exports, especially textiles, apparel, and agricultural products.

European Union: EU countries, particularly Spain and the Netherlands, are significant markets for Dominican exports, including agricultural products and manufactured goods.

Neighboring Caribbean Countries: Countries within the Caribbean region also serve as essential markets for Dominican products, especially in tourism.

The economy of the Dominican Republic has evolved over the years, with a shift from traditional sectors like agriculture to more diversified industries such as tourism and manufacturing. While challenges remain, including infrastructure, education, and income inequality, the country’s economic trajectory remains positive. With continued investment in critical sectors and a focus on sustainable development, the Dominican Republic is poised to strengthen its position in the global economy further.

The USMCA has opened new doors for the automotive industry in Mexico

The  United States-Mexico-Canada Free Trade Agreement (USMCA) is a trade accord that is in force between the United States, Mexico, and Canada. It became operational on July 1, 2020. The agreement replaces the North American Free Trade Agreement (NAFTA).

The USMCA has the potential to bring significant benefits to the automotive industry in Mexico, which is an important contributor to the nation’s economy. In 2021, the industry represented 18% of Mexico’s manufacturing production and 22% of its exports. The automotive industry in Mexico employs more than 1 million workers.

Benefits of the USMCA for the automotive industry in Mexico

Greater access to international markets:

Thanks to eliminating tariff barriers and facilitating trade between member countries, Mexican automobile manufacturers can export their products more efficiently and competitively.

This has allowed Mexico to increase its share in the global market and strengthen its position as one of the main vehicle exporters in the world. Mexico is the world’s third leading automotive exporter. The country has positioned itself as a major manufacturing hub for the industry, thanks to its proximity to the United States and competitive labor costs. In 2022, Mexican automotive producers exported 3.1 million vehicles.

Growth of foreign direct investment:

The USMCA has generated an environment of greater certainty and confidence for foreign investors, which has led to an increase in the arrival of capital and technology to the automotive sector in Mexico.

The development of new production plants, the modernization of existing facilities, and the creation of jobs in the industry have been promoted. Mexico boasts an impressive lineup of leading automotive manufacturers, playing a crucial role in the global car industry. Here are some of the top players:

General Motors (GM): A dominant force, GM operates assembly plants in Toluca, Silao, and Ramos Arizpe, producing popular models like the Chevrolet Equinox, Cruze, and Silverado.

Ford: Another major American automaker, Ford has plants in Chihuahua, Hermosillo, and Cuautitlán Izcalli, churning out vehicles like the Ford Mustang, Bronco Sport, and Escape.

Nissan: A Japanese powerhouse, Nissan has a strong presence in Aguascalientes with three assembly plants, manufacturing the Nissan Sentra, Versa, and Kicks, along with the Mercedes-Benz CLA and GLA, and Infiniti Q30.

Volkswagen Group: This German giant encompasses multiple brands, with Volkswagen plants in Puebla producing the Jetta, Golf, and Tiguan, while Audi manufactures the Q5 and the SEAT Ateca.

Stellantis: Formed by the merger of Fiat Chrysler Automobiles (FCA) and PSA Group, Stellantis operates plants in Toluca and Saltillo, producing several Jeep models, the Chrysler Pacifica minivan, and the Fiat Mobi.

Honda: The Japanese carmaker has a plant in Celaya, Guanajuato, which manufactures the Honda HR-V, CR-V, and the Acura RDX.

Toyota: The renowned Japanese brand operates a Tijuana, Baja California plant, producing the Tacoma pickup truck and the Sienna minivan.

BMW: The German luxury car manufacturer has a plant in San Luis Potosí, producing the BMW 3 Series, 5 Series, and X3.

Kia: The South Korean automaker has a Pesquería, Nuevo León plant producing the Kia Forte and Rio models.

Mazda: Completing the picture, Mazda has a plant in Salamanca, Guanajuato, producing the Mazda2, Mazda3, and CX-3.

Stronger labor and environmental standards in the automotive industry in Mexico:

Aiming to ensure fair working conditions and promote sustainability, the USMCA establishes stricter requirements in terms of labor rights, fair wages, and environmental protection.

The standards contribute to improving workers’ conditions and reducing the environmental impact of the automotive industry, promoting more equitable and sustainable development.

Promotion of innovation and competitiveness:

By promoting the protection of intellectual property and facilitating the transfer of technology, the treaty has stimulated the creation and adoption of new solutions and processes in the sector, allowing Mexican companies to improve their production capacity, raise the quality of their products, and compete more effectively in the global market.

Regional supply chain integration:

The USMCA (United States-Mexico-Canada Agreement) implemented significant changes to the Rules of Origin (ROO) for the automotive industry compared to its predecessor, NAFTA. Here’s a breakdown of the key elements:

Regional Value Content (RVC):

Increased threshold: Vehicles and light trucks need a minimum RVC of 75% to qualify for duty-free trade, compared to 62.5% under NAFTA.

Heavy trucks: A slightly lower threshold of 70% RVC applies to heavy trucks.

Phased implementation: A three-year transition period (until July 1, 2023) allowed gradual adjustment to the higher RVC requirements. Some companies obtained extended transition periods through “Alternative Staging Plans.”

Core Parts:

Specific RVC levels: Key automotive components, like engines, transmissions, and electronics, must have an RVC of 75% or higher using the “net cost method.” This method calculates RVC based on the value of the materials from North America as a proportion of the total cost of the part.

Steel and Aluminum: Domestic sourcing requirement: At least 70% of the steel and aluminum used in a vehicle must originate from North America to qualify for duty-free treatment.

High-Wage Labor Content: Minimum threshold: For a passenger vehicle to be considered originating, 40% of the net cost of its production must be attributable to high-wage labor (wages exceeding $16 per hour). This provision aims to incentivize production in countries with higher wages.

Other significant changes:

Deeming rules eliminated: USMCA removed NAFTA’s “deeming rules” that allowed non-North American content to be counted as originating under certain conditions. This aims to prevent “free riding” and ensure genuine regional production.

New origin procedures: Streamlined procedures were introduced to make compliance with ROO requirements less burdensome for producers.

This has led to increased demand for components and parts manufactured in the US, Canada, and Mexico, generating new business opportunities and strengthening collaboration between the different actors in the regional supply chain.

Challenges and opportunities of the USMCA for the automotive industry in Mexico

While the USMCA has the potential to provide significant benefits to the Mexican automotive industry, there are also some challenges that Mexico will need to address to take full advantage of these benefits. These challenges include:

Increased competition:

With opening markets and eliminating certain trade barriers, Mexican manufacturers face greater competitive pressure from their American and Canadian counterparts. This has required Mexican companies to improve their efficiency, quality, and innovation capacity to stay competitive in the new environment.

Need to adapt to more demanding standards:

Although this represents an opportunity to raise national production and meet the demands of international markets, it also implies a challenge for companies that must adapt and meet these requirements.

The implementation of more sophisticated processes and systems, as well as the training of workers, are fundamental aspects to overcome this challenge.

Changes in the global supply chain:

With the renegotiation of rules of origin and the introduction of stricter requirements, companies have had to reevaluate their sourcing strategies and look for new ways to optimize their operations.

The USMCA has created opportunities to strengthen collaboration with local suppliers and diversify supply sources, but it has also required adjustments to existing business models.

Sustainability challenges:

To meet the environmental standards established by the treaty, companies in the automotive industry in Mexico must implement cleaner manufacturing practices, reduce their carbon footprint, and promote the adoption of more sustainable technologies.

While this involves additional investments and changes in production processes, it also represents an opportunity to lead the transition of the Mexican automotive industry towards a greener manner of production.

Additionally, the USMCA will  lead to increased investment in Mexico’s automotive industry, likely coming from both foreign and domestic sources. Foreign investors are attracted to Mexico’s low labor costs and proximity to the United States.

Also, domestic investors are attracted to the opportunities created by the USMCA, such as higher content requirements for vehicles that qualify for tax-free treatment.

Paraguay is in the heart of South America and presents an increasingly attractive proposition for foreign direct investors (FDIs). Boasting a dynamic economy, strategic location, and a supportive business environment, it offers compelling reasons to establish or expand operations in the land of “eternal spring.” This overview delves into the advantages of foreign direct investment in Paraguay, highlighting the benefits of investing in three key sectors: manufacturing through the maquiladora program, agriculture, and the burgeoning service sector.

Investing in Manufacturing: The Maquiladora Advantage

Paraguay’s thriving maquiladora industry offers a unique gateway to regional and global markets. This export-oriented system allows companies engaged in foreign direct investment in Paraguay to establish factories under special regulations that attract investment through simplified import-export procedures, tax exemptions, and competitive labor costs. According to the Observatory of Economic Complexity (OEC), Paraguayan maquiladoras exported around $510 million worth of goods in 2021.

Key Advantages of Maquiladoras:

Duty-free raw materials and equipment imports significantly reduce production costs and enhance international competitiveness.

Tax exemptions on reinvested profits: Retaining funds for internal expansion incentivizes long-term commitment and boosts reinvestment.

Favorable labor costs: Paraguay boasts one of the lowest minimum wages in the region, making it a cost-effective location for labor-intensive manufacturing. The official minimum wage in Paraguay as of December 2023 is ₲ 2,289,322 per month (approximately USD 318). However, maquiladora workers don’t necessarily earn the minimum wage.

Strategic location: Access to both MERCOSUR and other South American markets provides access to a vast consumer base. As of 2023, the Mercosur trade zone boasts an estimated 260 million consumers. This figure combines the populations of its full member states:

Modern infrastructure: Investment in transportation and logistics facilitates efficient movement of goods and materials. Paraguay has seen several exciting infrastructure investments in recent years to boost various sectors and improve connectivity. Below are some noteworthy examples:

Corredor Bioceánico Ruta PY11: This $750 million project involves paving and upgrading a key road connecting Paraguay to the Atlantic Ocean through Brazil.

Río Paraguay-Paraná Waterway: Ongoing dredging and modernization efforts aim to improve navigability on this vital waterway for cargo transportation.

Silvio Pettirossi International Airport Expansion: Expansion plans include new terminal and runway upgrades, enhancing passenger capacity and air cargo handling.

Sectors Thriving in Paraguayan Maquiladoras:

Textiles and apparel: Paraguay’s established textile industry, coupled with maquiladora benefits, presents attractive garment production and export opportunities.

Auto parts and electronics: As regional demand for these products grows, Paraguay’s maquiladora regime positions it as a potential hub for assembly and production.

Food processing: With agricultural abundance and skilled labor, Paraguay can leverage its maquiladora system to add value and export processed food products.

Investing in Agriculture: Where Fertile Land Meets Opportunity

Foreign direct investment in Paraguay is also advantageous because its vast plains and fertile soil make it an agricultural powerhouse. With a focus on sustainable practices and organic production, the sector presents lucrative opportunities for investors seeking exposure to global food markets.

Key Advantages of Investing in Agriculture:

Abundant arable land: Paraguay boasts some of the region’s cheapest and most fertile land, ideal for large-scale agro-industrial ventures.

Diverse production: From soybeans and corn to yerba mate and stevia, Foreign direct investment in Paraguay offers a variety of high-demand agricultural products. Paraguay is the world’s fourth-largest exporter of soybeans, supplying these versatile legumes for food, animal feed, and numerous industrial uses.

Government support: The Paraguayan government actively promotes agricultural development through infrastructure investment and financial incentives.

Emerging technologies: Adopting precision agriculture practices and sustainable farming techniques creates valuable opportunities for innovation and investment.

Growing organic market: Paraguay’s commitment to organic farming positions it as a critical player in the global organic food market, offering premium market access.

Investing in Services: A Dynamic Economic Engine

As Paraguay’s economy diversifies, the service sector is experiencing an upward trajectory. From financial services and tourism to IT and logistics, the country’s services sector offers promising avenues for investment.

Key Advantages of Investing in Services in Paraguay:

Fast-growing sector: The services sector’s contribution to Paraguay’s GDP steadily increases, presenting robust growth potential. As of 2022, the service sector accounts for 48.31% of Paraguay’s Gross Domestic Product (GDP). This represents the most significant contributor to the country’s economy, surpassing agriculture (11.33%) and industry (33.21%).

Skilled workforce: Paraguay boasts a young and educated population, offering a readily available talent pool for various service businesses. The economically active population of Paraguay represents around 64.43% of the total population aged 15 and over. This means about two-thirds of the adult population are employed or actively searching for work.

Supportive legal framework: The government is actively streamlining regulations and improving the legal environment to attract FDI in services. Paraguay stands out for its open economy and competitive tax regime compared to other South American countries.

Strategic location: Paraguay’s central location in South America is a logistical hub for regional service providers. Although the country is landlocked, it is strategically linked. Paraguay borders major regional economies like Brazil, Argentina, and Bolivia, giving it access to vital trade routes and markets.

Emerging opportunities: Untapped potential exists in areas like fintech, renewable energy consultancy, and e-commerce, offering niche market opportunities.

Additional Considerations for Foreign Direct Investment in Paraguay

Paraguay’s vibrant economy and favorable investment climate present a unique opportunity for foreign investors seeking growth and diversification. Paraguay offers various possibilities across several industries, from manufacturing through the maquiladora program to agriculture and the burgeoning service sector. Paraguay is poised to become a key player in the South American market and beyond by leveraging its fertile land, skilled workforce, and strategic location. For discerning investors seeking sustainable and profitable ventures, Foreign direct investment in Paraguay offers a fertile ground for economic growth and a gateway to future success.