The global factory of the future is undergoing a radical transformation. The World Economic Forum’s research indicates that by 2026, leading-edge factories will be characterized by five megatrends: hybrid technologies (mass adoption of several technologies simultaneously), focus on human capital, sustainability-led value creation, data-intensive operations, and scalability from the design phase. Where does Paraguay fit in this new industrial world, and what role can the Paraguayan industry realistically play?

Information gathered by the Forum through its Global Lighthouse Network, an initiative that tracks the most advanced industrial plants turning innovative ideas into measurable impact, reveals that 94% of deployed solutions are hybrids, applying multiple technologies simultaneously and gaining productivity improvements of up to 60%. They are scaled platforms coordinated across functions—not isolated pilot projects—and combine artificial intelligence, automation, robotics, and data analytics, establishing standards that are increasingly setting expectations for Paraguayan industry.

Scale is our biggest bottleneck

UIP Joven president Francisco Martino identified scalability as the main barrier confronting Paraguayan industry in adopting this new paradigm. “The historic problem we have had with national industry is precisely the lack of absorption capacity of our market. We do not generate enough volume to justify investments of millions or hundreds of millions of dollars in technology for us alone,” he remarked.

Martino added that Paraguay already produces at international quality standards in several sectors where industries have already scaled production to Brazilian slaughterhouses or global supply chains, such as beef and pork production. However, in many cases, Paraguay’s lack of scale limits the profitability of investing in high-end machinery or taking the further step of producing inputs on an industrial scale. “It is not that there is no willingness to innovate, but it does not pay or does not make sense because of the scale,” he summarized.

Foreign companies can play an important role in that sense. “We welcome the installation of Brazilian industries willing to come and produce here. They arrive with their market, with their standards, with their knowledge, and they generate technology transfer. When you manufacture for international companies, you learn; you also start to earn capital and then you can reinvest and buy machinery on an industrial scale,” he added.

Technology and data: mixed improvements

Use of data and real-time visibility is another pillar for competitiveness, according to the World Economic Forum. Factories that exhibit these characteristics reduced time to market for new products by 50% compared to their traditional competitors, and were eight times better prepared to deal with crises resulting in severe revenue drops.

The advance in Paraguay has been mixed. Diego Peyrat, acting head of the National Council of the Maquila Export Industry (CNIME), indicated that from the maquila sector there is progressive implementation of automated machinery and digital management and administrative systems. “From the Executive Secretariat of CNIME we carried out an implementation of IT systems that brought down export times from close to 24 hours to less than one minute. It’s an automatic request processing system with artificial intelligence to recognize components, importers, and issuing online traceability,” he described. At the plant level, maquila companies have integrated automated machinery and management software for productive processes in sectors like auto parts, textiles, plastics, etc. This ranges from inventory control to real-time monitoring of productive processes, allowing year-by-year improvements that are renewing Paraguayan industry from within.

Training qualified human capital is another shared bottleneck. Seventy-five percent of top-performing factories consider skills and safety their number one investment focus. Factories taking these steps have seen performance levels increase by 16% above the average.

“It’s a double challenge because technological incorporation depends a lot on training qualified human capital, and that human capital depends on companies making the effort to invest in technological infrastructure,” said Peyrat.

Reducing emissions, water, or energy is not only key to improving environmental performance but, according to the World Economic Forum, can translate into between 25% and 40% savings in operating costs.

Paraguay needs to improve productivity

For Martino, all that “is true, but today, sustainability is a condition of the market. Some industries can make that profitable, but not many.” He gave the example of a jeans manufacturer exporting to the United States and Europe, which he knows, obtaining organic certifications. “That factory sells its jeans at double the price of others because it has a differentiated market niche that demands organic products,” he noted.

Martino, however, clarified that they cannot make the same request of small and medium enterprises. “We have SMEs in Paraguay that, if they bill US$100,000 a year, are already considered microbusinesses. Many are selling just to pay salaries. We cannot ask them for a circular economy when they are still struggling to make it to the end of the month,” he asserted.

Martino concluded that growth and scale must precede. In that sense, investment in sustainability will have to wait, a reality that appears acutely true for Paraguayan industry.

“In the maquila sector, we see conditions are ripe for the incorporation of technology, automation, and value added. We have macroeconomic stability, tax benefits, competitive energy cost and recently we strengthened the maquila legal framework with the passing of the new Maquila Law 7547 last year. This modernized the service maquila and allows us to recover VAT among other benefits that make the sector even more attractive,” said Peyrat referring to steps that will enable service maquila industries to incorporate more technology and leapfrog into higher value stages of production.

“The world is big and very diversified. Paraguayans have proven they can adapt to many different realities,” concluded Martino.

The summit between Dominican Republic President Luis Abinader and Chile President-elect José Antonio Kast signaled the beginning of cooperation in migration control, responsible mining, and infrastructure projects between the two Latin American nations. Meetings took place in Dajabón province, Dominican Republic, which served as the platform for talks centered on policies surrounding sustainable growth, social responsibility, and regional integration. After a weekend of official meetings and technical visits, the representatives of the Dominican Republic and Chile have agreed to strengthen bilateral relations moving forward by exchanging successful policy experiences.

“The activities developed during these days sought to promote exchanges of experiences and strengthen regional integration through meetings of officials and working visits to programs that serve as an example at the national level,” reads a press release issued by the Presidency of the Dominican Republic.

Dominican Republic: Chilean Visit Strengthens Bilateral Cooperation Like Never Before

Dominican President Luis Abinader hosted President-elect José Antonio Kast on Sunday as they began official talks, marking the first time the Dominican Republic and Chile have committed to working together on projects related to sustainability, economic management, and quality-of-life standards. For two days, officials met to discuss actionable takeaways concerning the economy, migration management, mining regulation, tourism, and education. In Dajabón province, the Dominican Republic and Chile signaled their intent to align policies focused on sustainability and social responsibility while also learning from one another.

Chile will adopt several migration control policies based on systems implemented by Abinader’s administration. Technical teams from Chile also requested knowledge on airport administration and the management of free trade zones.

Likewise, the Government of the Dominican Republic will share its procedural blueprint with Chilean counterparts in the areas of migration control, airport management, and free trade zones.

Migration Control and Responsible Mining in the Dominican Republic and Chile

The visit allowed officials to exchange perspectives on responsible mining techniques that wouldn’t compromise either country’s natural resources or the quality of life for its citizens living in mining regions. Kast stated that while mining is essential to Chile’s growth, it will not be expanded at the expense of natural resources or vulnerable communities. “There are mining value chains that do not necessarily affect a community negatively, but quite the opposite,” he said.

That said, he looks forward to using the visit with Dominican officials to both protect Chile’s most important ecosystems and uplift mining communities through just policy. Kast went on to reaffirm his commitment to what will be Chile’s new mining policies that center on workers and environmental protection.

Ahead of implementing stricter mining policies, Abinader explained that the Dominican Republic will not allow any mining exploitation in territories where communities have voiced their concerns or vulnerabilities. Going one step further, Argentina will provide Chile with regulatory procedures that adhere to international standards of innovation, quality control, and prevention.

Security and Border Control

Security was also discussed during meetings between the delegations from the Dominican Republic and Chile. Abinader and Kast toured the Beller Fortress and observed the binational wall that separates Dajabón province from Haiti. Touring the binational wall system allowed Kast to personally witness the technology and organization between institutions that allow for efficient border control.

“I hope that our team can study those technological systems because we don’t have that degree of control,” Kast said. He continued by saying that Chile will have to find a balance between managing migratory flow and humane treatment of migrants.

Speaking on migration specifically, Kast estimated that there are around 200,000 Haitians living in Chile and called for the country to reach a level of “full respect of migrant rights” while maintaining better-controlled borders. As such, he went on to announce that Chile will be implementing a “border shield” plan to help mitigate undocumented migration as soon as March of this year. Kast made it clear that Chile will be analyzing multiple international examples, as well as leaning on the success of the Dominican Republic model.

Investing in Economy and Trade

Dominican Republic officials have impressed Kast with the country’s ability to manage free trade zones and locally owned private airports. As Kast mentions, the Dominican state has managed to become a “reference of excellence regionally in the administration of its airports.”

In terms of the economy, Kast explained that Chile will be using similar systems to better compete in international markets, attract more investors, and diversify Chile’s economy. Trade between the Dominican Republic and Chile was also discussed with the view of expanding bilateral investment opportunities.

Dominican Republic officials took President-elect Kast on a tour of local projects that focused on infrastructure and water management. The projects shared with Kast include: La Vigía Canal waterway, which underwent $6 million in repairs to boost productivity for farmers and citizens who rely on the water source. Officials from Masacre, a nearby rural municipality, also explained the modernization of their river irrigation system. This project was previously funded by a $526 million grant and looks to improve Masacre’s agricultural growth and food security.

In the same manner, new social infrastructure was highlighted, including Ramón Matías Mella hospital and classrooms for the Francisco Javier Ureña Canela school.

Tourism was also brought to the table as Kast expressed interest in working with Dominican officials to reactivate bilateral committees. When speaking about the reactivation of said committees, Kast explained that tourism can act as a bilateral driver for economic development. Creating jobs in the tourism sector can also allow for better regional integration.

Additionally, Kast and officials spoke about the industry sector and the opportunity to share both nations’ knowledge on topics such as sustainability, attracting foreign investors, and technology transfer.

Education

Dominican president Luis Abinader also had the opportunity to speak to students from Colegio La Altagracia about regional integration, the visit with Chilean officials, and the importance of being informed about current affairs. Both students and teachers had the opportunity to interact with President Abinader and his delegation.

“I invite you to continue informing yourselves about sustainable development issues, because you are the great generators of change that our country needs,” said Abinader when addressing students.

Conclusion

The historic visit by Chilean President-elect José Antonio Kast to the Dominican Republic marks a new chapter in bilateral cooperation, emphasizing sustainable development, responsible mining, migration management, and economic growth. By exchanging policy experiences, touring key infrastructure projects, and engaging in discussions on trade, education, and tourism, both nations have laid the groundwork for stronger regional integration and mutually beneficial partnerships. This unprecedented agenda reflects a shared commitment to social responsibility, environmental protection, and inclusive economic progress.

After having mobilized more than COP 54.8 trillion in investment and generated over 169 thousand formal jobs, the free trade zone regimes in Colombia have positioned themselves as a locomotive for attracting new capital and promoting economic and social development throughout the country in 2026.

A strategic engine for growth and internationalization

Consolidating themselves as one of the most robust engines for economic growth, attraction of foreign direct investment (FDI), and internationalization of Colombia, free trade zones are multiplying their capabilities and results. In just two years, the sector has attracted COP 54.8 trillion in investments and supported more than 169 thousand formal jobs while promoting an active business ecosystem that is continuously expanding the country’s productive offer in sophisticated manufacturing, global services, agribusiness, life sciences, and enabling technologies.

Beyond investment figures, the regime is contributing to a structural change in the Colombian productive matrix. Businesses operating under this special scheme are increasingly moving up the value chain by incorporating automation and digitalization processes into their operations, as well as boosting value-added tasks that improve competitiveness and resilience. For this reason, free trade zones in Colombia are not only understood as hubs for production but also as business venues that contribute to research and development, training of talent, and export diversification.

Exports and productive positioning

In 2024, free trade zones exported USD 3.12 billion FOB, demonstrating once again their role as pivotal platforms for the production of goods and services destined for markets around the world. From processed foods to chemicals, metal-mechanics, pharmaceuticals, software, or shared services, exports carried out by companies operating in free trade zones reach dozens of countries each year.

Through October 2025, year-to-date exports stand at USD 2.28 billion FOB. Although affected by global volatility, changes in demand, and tighter financial conditions in some countries of destination, other metrics such as import volume, continued investment deployments, and productive transformation trends reveal that businesses are pivoting to modernize their facilities, re-design their supply chains, and adjust output toward new nearshoring and regionalization opportunities. In that way, free trade zones are not only cushioning the impact of external shocks in Colombia but also laying the foundations for lasting industrial development.

Reasons to set up in Free Trade Zones from the global investor’s perspective

“Free trade zones have become strategic levers for positioning Colombian industry in the global market: they provide regulatory certainty, offer competitive benefits, and establish clear guidelines to connect with local suppliers. From the perspective of an international investor, they are safe places to set up operations in Colombia, export products from the country, and create productive and commercial linkages that generate value for our regions,” affirms Carmen Caballero, President of ProColombia.

Additional benefits include reduced corporate income tax, customs incentives that allow companies to streamline costs and administrative times, and regulatory stability that facilitates long-term investment planning. Likewise, access to talented human capital —which is increasingly specialized— is backed by universities, technical institutions, and training projects tailored to investors’ needs.

Location, location, location

Colombia has 119 operational free trade zones located in 20 departments nationwide, with privileged access to port terminals on both the Caribbean and Pacific Ocean coastlines, and nearness to main cities and consumption centers. That geographic reach allows companies to optimize their logistics operations, save time on shipments, and connect efficiently with markets in North America, Latin America, Europe, and Asia.

Zones are located along strategic logistics corridors across Colombia and benefit from ongoing infrastructure projects related to ports, roads, airports, and digitization nationwide. All of the above make installation times faster and position free trade zones in Colombia as ideal destinations for operations sensitive to time and/or high value-added. Nearshoring, Reindustrialization, and Key Sectors

As the international economy experiences significant shifts in production localization and supply chain redesign, Colombia stands out as a safe haven to relocate operations that demand legal certainty, proximity to the United States market, and diversification of destinations. Colombia’s strategy for reindustrialization and promotion of investment clearly positions free trade zones as hubs for nearshoring projects.

Sectors of interest include data centers, multilingual BPO and shared services, health and medical devices, renewable energy equipment, and agribusiness, with greater levels of transformation among others. All of the previously mentioned not only create employment but also allow for knowledge, technology, and best practices spillovers to the local economy.

How Free Trade Zones Are Contributing to the Popular Economy and Regionalization

Another important feature that has distinguished the regime in recent years is its integration with the popular economy to widen the domestic productive base and strengthen its linkages with surrounding municipalities. Last April, the Minister of Trade, Industry, and Tourism, Diana Marcela Morales, launched the sector’s policy, which includes provisions that ease the participation of microenterprises and small productive units as providers of goods and services to operators installed in free trade zones.

By integrating these small players with global value chains, the measure seeks to promote formalization, productivity, and income generation at the local level. In that way, FDI attracted to Colombia through free trade zones has positive repercussions not only at the national level by increasing competitiveness, but also for the social and economic development of municipalities and departments.

A speeding tool

To speed up the arrival of capital, ProColombia – together with the ANDI Free Trade Zone Users’ Chamber– launched The Directory of Free Trade Zones of Colombia, a tool available in English and Spanish that consolidates strategic information to help locate projects in free trade zones nationwide.

The directory lists value propositions, sector specialization, infrastructure, connectivity, and key contacts of each of the country’s permanent free trade zones. By streamlining evaluation, comparison, and selection processes for global investors, the directory reduces information asymmetries and shortens lead times—a decisive factor in today’s accelerated nearshoring decisions.

Towards 2026

“Looking toward 2026, we expect to see the consolidation of a more sophisticated export platform that is able to capture projects that are intensive in both employment and technology, positioning Colombia as a key node for international trade, innovation, and productive integration in Latin America,” Caballero concludes.

As multinational companies rethink their investment destinations and strategies, the scale, maturity, and flexibility of free trade zones in Colombia will allow the country to seize new investment opportunities, upgrade its productive capabilities, and continue inclusive growth.

Year-on-Year Expansion of the Panamanian Service Economy Reaches Historic High

Panamanian exports continued to trend heavily toward services in 2025, as exports reached historic highs by total value. The Panamanian service economy has attracted attention not only because of its weight in the overall economy, but also due to its performance. During 2025, services exports outperformed the total and indicated Panama’s role as a platform for regional connectivity, logistics, and business services.

Data from Panama’s Ministry of Commerce and Industries (MICI) recorded a value of $1.48 billion in service exports between January and September of this year. This figure represents an annual increase of 9.2% and sets a new record, according to official statistics from Panama’s National Institute of Statistics and Census (INEC).MICI Data Shows Strong Quarterly Growth in Services

MICI published data compiled by its INTELCOM statistical arm

Data shows strong growth in Panama’s exports of services during the first three quarters of 2025, with particularly strong growth in Q3. Figures show that exports reached $5.08 billion during the third quarter, the highest of any quarter so far this year.

Total exports for the first half of 2025 added up to $9.8 billion, growing 8.4% from the first half of 2024 when service exports totaled $9.01 billion.

A monthly breakdown of INEC data also reveals a sustained growth trend in the Panamanian service economy going back several years. Service exports contracted abruptly in 2020 due to the COVID-19 pandemic, but began recovering in 2021. This recovery has picked up pace in subsequent years, with Panama exporting an ever-growing value of services that have become slightly more diversified.

Leading the Charge: Travel & Transport Services Lead Panama’s Export Economy

Panama leaned on its service sector once again to lead exports during the first three quarters of 2025, with international trade, travel, and logistics leading the way. Cumulative exports of transportation services from January to September reached $7.7 billion, followed by travel services at $4.9 billion.

As has been the case for years, Panama Canal-related services, along with port services and logistics, made up a large part of the country’s exportable services. Panama’s geographic location and existing infrastructure have long made it a natural crossroads for cargo entering or leaving the Americas by ship or plane. Meanwhile, tourism services rebounded as international tourism slowly returned to pre-pandemic levels, and Panama continues to be a regional air transit hub.

Panama has also seen growth in ancillary services related to its position as a hub for international travel, including financial services ($993.8 million), insurance and pension services ($407.3 million), telecommunications, computers, and information ($383.2 million), and other business services ($334.7 million).

Rise of “Modern Services” Adds Diversity to the Panamanian Service Economy

This year’s activity also highlights growth in the “financial services” category and growth in services related to information technologies. Both closely relate to the concept of “modern services,” a term used to refer to economic activities such as knowledge generation; intensive use of digital technologies; remote provision of services; and highly specialized services designed to meet the needs of international markets.

Panamanian authorities have identified modern services as key to reducing reliance on tourism and other traditional activities. Increasing the portfolio of services exports and promoting the growth of modern services industries would also help Panama climb the value chain and boost the average value-added of its service economy.

Services Sector Offers Promise for High-Value, Knowledge-Intensive Activities

A high-ranking MICI official commented on the performance of the services sector during a recent press conference, stating that Panama is working “with a strategy to attract investment and promote activities with higher value added that will generate quality employment.” He specifically called out progress made in exporting modern services and their internationalization.

This would allow Panama to play a role along the semiconductor value chain without having to directly participate in the manufacturing process. The country could then provide logistics services, specialized and complex services, maintenance, technical assistance, and other services with high barriers to entry that tend to have higher value added. MICI’s data shows that the economy is working toward this reality, with dynamic growth in these services year-on-year. Additionally, Panama’s services sector has continued trending positively since the pandemic, with 2025’s results “being consistent with what we have been seeing since the beginning of the recovery.”

Export Diversity Continued To Improve in 2025

Figures from INTELCOM’s dashboard for service exports paint a clear picture of both growth in total value and diversification of the services that Panama exports. Although sectors related to transportation and travel make up the lion’s share of services exports by value, sectors such as financial services, digital services, information services, and other business services have been slowly but surely gaining ground in the Panamanian service economy.

September Data Reinforces Services-Led Trend in Panama’s Export Economy

After nine months of data indicating strong momentum in Panama’s services sector, recent months have continued to paint Panama’s export economy as services-led. The Panamanian service economy appears to be gradually becoming more resilient, more diversified, and better able to cope with external shocks amid an upward trend in total value exported.

Focus on Adding Value and Participating in Global Production Networks

Overall, Panama appears to be shifting toward a services-led export economy that brings with it added-value activities related to the global production of goods. As Panama broadens the diversity of its exports and continues to support higher value-added activities, it will be better equipped to respond to external shocks, create better jobs for Panamanians, and attract smarter investment.

A study prepared by officials from the Central Reserve Bank of Peru (BCRP) examines the actual impact of special economic zones in Peru. Its conclusion: offering tax exemptions, on its own, is not enough.

Special economic zones are a powerful tool, but not an exhaustive solution

Created as spaces to attract private investment, promote foreign trade, and drive regional development, special economic zones (SEZs) could be more productive in Peru if structural obstacles were addressed. That’s according to a recently published study prepared by officials from the BCRP.

Presented by Carlos Mendiburu, Iván Cosavalente, and Rubén Lema from the BCRP’s Structural Policies and Fiscal Policy departments, the document analyzes the development of SEZs around the world and assesses their performance in the country.

Highlights from “Economic Results from Special Economic Zones: Lessons from International Experience”

Releases incentives for specific businesses. The most common incentives offered in SEZs around the world are tax exemptions or reductions in corporate income tax. This benefit is usually accompanied by special customs regimes, logistical facilities, and simplified foreign trade procedures.

Tax exemptions do not automatically lead to successful zones. While tax benefits contribute to improving the profitability of investment projects, countries with the highest impact of SEZs on exports and employment combine these tools with structural policies that promote long-term improvements in infrastructure, human capital, innovation or logistical connectivity.

Structural factors matter more than incentives. Regardless of the incentives offered, special economic zones tend to be more successful when they are located near to major markets, have good access to roads and other infrastructure, provide efficient basic services (energy, telecommunications) and are close to skilled labor forces. Legal stability and certainty are also key.

SEZs’ success depends largely on domestic conditions, not just tax exemptions.

Special economic zones cannot resolve structural problems alone. Even in successful cases, they do not generate immediate effects, and their contribution to exports and employment is generally noticeable only in the medium term (between 5 and 10 years).

Diversification trends in SEZs

Move towards services and higher-value sectors. Initially oriented towards manufacturing activities with high levels of labor intensity, nowadays SEZs are also diversifying into services (digital services, logistics) and sectors with greater technological depth, specialization or value addition (tourism, renewable energies).

Local capacities condition their viability. The diversification of productive projects in SEZs is positive but requires, in turn, qualified human capital and a favorable climate for innovation. Without prior investments in these areas, it will be difficult to attract and consolidate these activities.

The Performance of Special Economic Zones in Peru

Four special economic zones are currently operating in Peru. They are Zofratacna (Callao), ZED Ilo (Moquegua), ZED Matarani (Arequipa), and ZED Paita (Piura). There are also four more zones underway in implementation processes and two others that have been declared of national interest.

Impact remains low despite the potential benefits offered. Tax exemptions make SEZs an attractive option for businesses; however, according to the BCRP study, these four currently operating zones have not managed to position themselves as relevant poles of exports or employment generation. In 2024, they represented only 0.1% of Peru’s total goods exports, while their total trade balance was negative.

Only 10,000 direct and indirect jobs have been reported for all SEZs put together.

Lack of diversification and inefficient use of infrastructure

Greater diversification in exports from ZED Paita. The BCRP study observes that ZED Paita is responsible for most of the exports recorded in SEZs nationwide and presents greater productive diversification than the rest. However, activities carried out by companies in most SEZs are explained by the inward processing of goods imported with little transformation value added.

Available space goes mostly unused. In ZED Paita, only 43% of the available area is used, while in ZED Ilo, the occupancy rate falls to 16%. In addition to indicating the limited use being given to existing infrastructure, this data suggests that the incentives being offered are still not enough to attract more sizable or complex projects.

Weak productive links with the local economy

The study highlights that special economic zones in Peru present low levels of backward and forward linkages with the surrounding economy. This severely limits their potential to drive regional development through the generation of indirect jobs and productive spillovers.

A generous regulatory framework

They receive wide-ranging exemptions. In addition to total exemption from corporate income tax and VAT, companies installed in special economic zones are exempt from municipal taxes and port tariffs (in ports), charges and tariffs from OSINERGMIN (electricity), OSITRAN (transport), and SUNASS (potable water and sanitation).

Tax exemptions are manageable due to low operation levels. Although generous, tax exemptions granted to SEZs have not represented a significant fiscal cost due to low levels of operation. SUNAT estimates reviewed by the BCRP study calculate that total exemptions reach 97 million soles per year.

No minimum conditions for companies. Special economic zones in Peru do not require a minimum investment or employment generation, unlike in other countries like Colombia or Costa Rica. What’s more, granting total exemption from corporate income tax (renta) is particularly generous if we consider that other firms outside SEZs pay income tax at progressively higher rates, even if their activities imply less value addition.

What to expect from new private Special Economic Zones in Peru

New SEZs with private participation were approved by law last year. Recently approved Law 32449 allows for the creation of Private Special Economic Zones, introducing changes to the previous model, such as a private management scheme and graduated tax system for up to 25 years.

Model improvements, but with risks. While changes introduce improvements in terms of zone governance, their success will depend on other underlying conditions that go beyond legal frameworks. Considerations should include whether there is sufficient infrastructure, good logistical connectivity, efficient basic services, and an environment of legal certainty that generates predictability.

Private SEZs should consider productive and logistics realities

Otherwise, they will replicate problems seen with current SEZs. If these factors are not considered, there is a risk that private SEZs become, like those already operating in Peru, tax shelters used to relocate activities rather than true centers of production that contribute to exports and employment.

A good tool if used correctly

Economic zones can be effective if complemented with other policies. Special economic zones can contribute to the country’s productive development as long as they are used as one of several tools aligned with a long-term strategy. However, if they are not accompanied by other improvements in infrastructure, human capital, or competitiveness, their impact will be limited.

There is a risk of competing against local companies. Establishing special economic zones with substantial benefits but without significantly improving the country’s structural characteristics can end up generating competition (including fiscal competition) with companies operating outside these zones.

Results in countries like Chile and Uruguay show that territorial economies of scale, service corridors, and other forms of productive integration can be more effective solutions than special economic zones to stimulate productive investment and drive regional development.

The European Union and Ecuador completed negotiations on a Sustainable Investment Facilitation Agreement (SIFA) on Friday, January 23, 2026, as the European Union (EU) touts the deal as the first SIFA signed with a Latin American nation. News agency EFE reported Brussels and Ecuador concluded talks on the agreement designed to bolster investment ties between the European Union and Ecuador.

EU Ambassador concluded deal designed to ‘facilitate’ investment

Reached after months of talks, the accord was touted by officials as another step forward in reforming the EU’s approach to investment governance, while also helping Ecuador as it looks to court foreign capital.

Brussels says the investment agreement will lead to better governance, transparency, and sustainability

The EU Commission said that the new agreement between the European Union and Ecuador aims to help improve governance and promote transparency while making the nation more attractive for investment.

Deal with Ecuador advances EU investment policy agenda

In particular, SIFAS seeks to enhance “administrative transparency” and help address issues that “retard or discourage investment, such as lack of clarity, administrative hurdles, and red tape.”

Friday’s agreement reflects Brussels’ ongoing efforts to frame EU investment policy around sustainable development.

EU-SIFAS are designed to attract private sector investment by way of boosting ‘transparency’ and responsible business standards.

EU Says Deal is Crucial for Investment Promotion

“The agreement is important for facilitating investment and is key for promoting EU investment in Ecuador,” the European Commission said in a statement quoted by EFE.

What is a Sustainable Investment Facilitation Agreement?

SIFAS differ from traditional investment treaties in that they are not focused on investor protections, nor do they include Investor-State Dispute Settlement (ISDS) mechanisms. Instead, the agreements lay out legally-binding parameters for how the two parties (the EU and a partner country) will cooperate on issues related to facilitating FDI, including responsible business standards.

Support improved “regulatory transparency” and attract investment

Negotiators from the European Union and Ecuador agreed Friday their new pact would support efforts at improving “regulatory transparency” and encouraging investors through commitments to improve the “legal and institutional framework’s predictability.”

Elements of the SIFA outline a mechanism for quicker investment-related decisions, reducing red tape for investors

The agreements seek to simplify administrative procedures, improve regulatory transparency, and “strengthen legal and institutional predictability.” Key components of the SIFA underlined by officials include establishing specialized contact points within member countries’ administrations to deal with investor inquiries.

Key officials noted the European Union and Ecuador would cooperate to establish clear channels of communication between investors and public authorities

That way, officials said, investors would be ensured a direct channel to raise questions with government authorities during the lifetime of their investments.

EU signals continued support for sustainable investment around the world

A stated aim of SIFAS, officials added, is to mainstream sustainability and responsible business practices into the EU’s broader trade agenda.

European Parliament Describes Sustainability Pacts as “Promoting Transparency”

Referring to the bloc’s first-ever SIFA, which was finalized with Angola earlier this year, the EU Parliament wrote that these agreements are meant to “promote transparency, expedite administrative procedures and foster responsible business conduct.”

EU-SIFAS include entire chapters dedicated to issues of sustainability. The text of the EU’s agreement with Angola emphasizes the parties’ shared commitments to environmental protection, social issues like labor rights, and adherence to principles of responsible investment.

Agreements seek to prevent disputes, facilitating consultations between member nations

What’s more, unlike many traditional investment treaties, SIFAS do not include ISDS provisions. While they are not explicitly aimed at replacing traditional investment agreements, SIFAS place heavy emphasis on preventive diplomacy and include consultation mechanisms for member states to cooperate in addressing disputes.

Ecuador Deal Advances EU Agenda to Diversify Investments

EU’s successful conclusion of a SIFA with Ecuador advances the bloc’s agenda to develop deeper trade ties with countries around the world it deems politically aligned and stable.

The EU invested €4.5 billion into Ecuador between 2008 and 2022, ranking first for foreign direct investment (FDI)

As geopolitics have evolved in recent years, and the global economy continues to recover from supply chain shocks caused by the COVID-19 pandemic, Brussels has looked to strengthen relations with friendly nations in an effort to diversify supply chains and capture greater shares of investment projects around the world.

The EU is already Colombia’s largest investor, says the European Commission

Negotiations between the European Union and Ecuador began last year, with Brussels announcing the launch of talks with Ecuador in November 2022. At the time, the European Commission said the EU was already Ecuador’s largest foreign investor.

EU hopes SIFA will encourage faster, more streamlined investment activity in Ecuador

The Commission said the new agreement would update the legal framework for EU investors in Ecuador by “reducing bureaucracy” and increasing “legal certainty” for future investments in the country.

EU, Ecuador push past talks on Renewable Energy sector, Comprehensive Association Agreement

The two countries have maintained a trade agreement in goods and certain services since 2017, when Ecuador joined the EU’s preexisting Colombia-Peru Trade Deal.

A Comprehensive deal could lead to further investment down the road

Friday’s investment facilitation agreement complements the ongoing trade relationship between Ecuador and the EU by focusing specifically on investment and the promotion of it between the two.

Ecuador looks to EU investment to help fill financing gap, create jobs, and increase formal employment

The media in Ecuador has followed the administration’s efforts to court greater European investment. Sectors Ecuador has previously courted European investors in include renewable energy, infrastructure, logistics, and sectors with high export potential. Those requests have been made in the context of Ecuador’s need for financing, employment generation, and increased formalization of employment.