Brazil has vast natural resources, a diverse economy, and an expanding consumer market. It has become an attractive destination for foreign direct investment (FDI). World Bank Data: Reports USD 57.5 billion for the 12 months through October 2023.

In recent years, several states have emerged as crucial hubs for foreign direct investment in Brazil, driving economic growth and fostering development across various industries. In this blog post, we will delve into the top states for FDI in Brazil, explore their principal industries and economic activities, evaluate the quality of their workforce and educational infrastructure, analyze the companies driving foreign direct investment in Brazil, and discuss the prospects for Brazil’s economic growth up until 2030.

Ranking the Top States for Foreign Direct Investment in Brazil

São Paulo:

São Paulo is Brazil’s leading destination for FDI, boasting a diverse economy and robust infrastructure. Its principal industries include finance, technology, automotive, and agriculture. With a highly skilled workforce and top-notch educational institutions like the University of São Paulo and the Getulio Vargas Foundation, the state attracts investments from multinational corporations such as Toyota, Microsoft, and Unilever.

Other foreign companies with a presence in São Paulo include:

• Coca-Cola – An American multinational beverage corporation.
• IBM – An American multinational technology and consulting company.
• Microsoft – An American multinational technology company.
• Google – An American multinational technology company.
• Apple – An American multinational technology company.
• Nestlé – A Swiss multinational food and beverage company.
• Unilever – A British-Dutch multinational consumer goods company.
• Procter & Gamble (P&G) – An American multinational consumer goods corporation.
• General Motors (GM) – An American multinational automotive corporation.
• Ford – An American multinational automaker.

These are just a few examples, and there are many other foreign companies with operations, subsidiaries, or offices in São Paulo, covering sectors such as finance, pharmaceuticals, telecommunications, and more.

Rio de Janeiro:

Rio de Janeiro, known for its scenic beauty and cultural heritage, attracts significant foreign direct investment in Brazil, particularly in the oil and gas, tourism, and telecommunications sectors. The state hosts major companies like Petrobras and Vale, leveraging its strategic location and skilled workforce to drive economic growth.

Other companies that have a presence in Rio de Janeiro, Brazil, include:

• Shell – A British-Dutch multinational oil and gas company.
• Chevron – An American multinational energy corporation.
• Total – A French multinational integrated oil and gas company.
• BP – A British multinational oil and gas company..
• Glencore – A Swiss-based commodity trading and mining company.
• Schlumberger – An American multinational oilfield services company.
• Halliburton – An American multinational corporation providing products and services to the energy industry

Minas Gerais:

As Brazil’s second-largest industrial hub, Minas Gerais attracts FDI primarily in mining, agriculture, and manufacturing. With abundant mineral resources and a skilled labor force, the state continues to draw investments from companies like Anglo-American and Bunge, contributing to its economic development.

Several foreign companies have invested significantly in Minas Gerais, contributing to its economic development. Some of these companies include:

• Anglo-American is a multinational mining company in Minas Gerais primarily focused on iron ore extraction.
• Bunge – A global agribusiness and food company invested in Minas Gerais’ agricultural sector, particularly in soybean processing and trading.
• Fiat Chrysler Automobiles (FCA) – FCA operates a large manufacturing plant in Betim, Minas Gerais, producing vehicles for domestic and international markets.
• ArcelorMittal – One of the world’s leading steel and mining companies, ArcelorMittal operates in Minas Gerais and is involved in iron ore mining and steel production.
• Vallourec – A French multinational company specializing in steel tube manufacturing for the energy industry, Vallourec has a significant presence in Minas Gerais.
• Siemens – A global technology company, Siemens has invested in Minas Gerais’ energy and infrastructure sectors, providing power generation and transportation solutions.
• Cargill – An international producer and marketer of food, agricultural, financial, and industrial products and services, Cargill operates in Minas Gerais, particularly in the soybean and grain processing industry.

These companies represent various sectors, including mining, agriculture, automotive, steel, and technology, highlighting Minas Gerais’ attractiveness to foreign investors across multiple industries.

Bahia:

Bahia’s strategic location and natural resources make it a prime destination for FDI in the energy, automotive, and agriculture sectors. The state’s workforce benefits from institutions like the Federal University of Bahia, supporting its growing economy and attracting investments from companies like Ford and Siemens.

Some of the other companies located in Bahia include:

• Ford Motor Company (United States) – Ford has a manufacturing plant in Camaçari, Bahia, producing vehicles for the Brazilian market.
• Nestlé (Switzerland) – Nestlé operates a factory in Feira de Santana, Bahia, producing various food and beverage products.
• Siemens (Germany) – Siemens has operations in Bahia, particularly in the energy sector, providing various solutions and services.
• Braskem (Brazil, with foreign investment) – Braskem, a Brazilian petrochemical company with significant foreign investment, operates in Bahia, particularly in producing plastics and petrochemicals.
• Unilever (Netherlands/UK) – Unilever operates in Bahia, producing a range of consumer goods such as personal care products and food items.
• Bunge (United States) – Bunge, an agribusiness and food company based in the United States, has operations in Bahia, particularly in producing and processing agricultural commodities.
• Bayer (Germany) – Bayer operates in Bahia, particularly in the agricultural sector, providing seeds, crop protection products, and other agricultural solutions.
• Dow Chemical Company (United States) – Dow operates in Bahia, particularly in producing chemicals and plastics.
• Suzano (Brazil, with foreign investment) – Suzano, a Brazilian pulp and paper company with international investments, operates in Bahia, particularly in pulp production.

Santa Catarina:

Santa Catarina stands out for its thriving manufacturing and technology sectors, attracting foreign direct investment in Brazil from companies seeking a skilled workforce and favorable business environment. With renowned educational institutions like the Federal University of Santa Catarina, the state continues to foster innovation and economic growth, with companies like BMW and Whirlpool investing in its potential.

Some other companies with a presence in Santa Catarina include:

• WEG Industries (Brazil, with foreign investment) – WEG, a Brazilian electrical equipment manufacturer with significant foreign investment, has operations in Santa Catarina, particularly in Jaraguá do Sul, producing electric motors and other equipment.
• Robert Bosch GmbH (Germany) – Bosch operates manufacturing facilities in Campinas and Blumenau, Santa Catarina, producing automotive components, power tools, and other products.
• Tupy S.A. (Brazil, with foreign investment) – Tupy, a Brazilian foundry company with international investments, has operations in Joinville, Santa Catarina, producing automotive and industrial components.
• Saint-Gobain (France) – Saint-Gobain operates manufacturing facilities in São José, Santa Catarina, producing glass and construction materials.
• Cargill (United States) – Cargill has operations in Itaiópolis and Mairinque, Santa Catarina, particularly in the production and processing of agricultural commodities.
• BRF S.A. (Brazil, with foreign investment) – BRF, a Brazilian food company with international investments, has operations in Concórdia and Videira, Santa Catarina, producing meat and food products.
• JBS S.A. (Brazil, with foreign investment) – JBS, a Brazilian meat processing company with international investments, has operations in Itajaí, Santa Catarina, among other locations in the state.

Alcoa Corporation (United States) – Alcoa has operations in Tubarão, Santa Catarina, particularly in the production of aluminum.

Assessing Workforce Quality and Educational Infrastructure

Across its states, Brazil boasts a diverse and skilled workforce supported by a network of universities and technical institutions. São Paulo, in particular, benefits from the presence of leading universities such as USP and UNICAMP, supplying industries with highly educated professionals. Similarly, Rio de Janeiro’s educational infrastructure, including institutions like UFRJ, is crucial in developing a skilled workforce for sectors like oil and gas.

However, challenges remain in bridging the skills gap and improving educational access in rural areas and smaller cities. Investments in vocational training programs and educational reforms are essential to enhance workforce productivity and drive sustained long-term economic growth.

Overview of Companies Driving Foreign Direct Investment in Brazil

Multinational corporations play a pivotal role in driving FDI in Brazil, leveraging the country’s resources and market potential. Companies like Petrobras, Vale, and Embraer have invested significantly in infrastructure, energy, and aerospace, contributing to Brazil’s economic development.

Moreover, foreign firms across various sectors, including automotive (Toyota, BMW), technology (Microsoft, Google), and consumer goods (Unilever, Nestlé), have established a strong presence in Brazil, attracted by its large consumer market and favorable investment climate.

Prospects for Economic Growth Until 2030

The country’s economic outlook remains promising for companies considering foreign direct investment in Brazil, with several factors poised to drive growth until 2030.

Key drivers include:

Infrastructure Development: Continued investments in infrastructure projects, including transportation and energy, will enhance connectivity and productivity, unlocking new growth opportunities across regions.

Economic Reforms: Structural reforms to improve the business environment, reduce bureaucratic hurdles, and attract private investment will bolster competitiveness and foster innovation.

Recent notable reforms made in Brazil include:

• Social Security Reform: In 2019, Brazil approved a landmark pension reform addressing the country’s unsustainable pension system. The reform introduced changes such as increasing the minimum retirement age and adjusting contribution requirements to reduce the fiscal burden on the government.
• Labor Reform: In 2017, Brazil passed a significant labor reform to modernize the country’s labor laws and make the labor market more flexible. The reform included measures such as allowing greater flexibility in work hours, simplifying labor contracts, and facilitating outsourcing.
• Fiscal Responsibility Law: Brazil has implemented measures to strengthen fiscal discipline and control government spending. The Fiscal Responsibility Law limits public expenditures, establishes transparency requirements, and promotes responsible fiscal management at the federal, state, and municipal levels.
• Privatization and Infrastructure Investments: The Brazilian government has pursued privatization initiatives to attract private investment and improve infrastructure. This includes privatizing state-owned energy, transportation, and telecommunications enterprises to enhance efficiency and competitiveness.
• Tax Reform: Brazil has been discussing comprehensive tax reform to simplify the tax system, reduce bureaucracy, and improve the business environment. Proposals aim to consolidate various taxes into a single unified tax, streamline tax compliance procedures, and promote economic efficiency.
• Financial Sector Reform: Efforts have been made to modernize Brazil’s financial sector regulations to promote competition, enhance financial stability, and facilitate access to credit. Reforms include measures to improve the regulatory framework for banks, promote fintech innovation, and expand financial inclusion.
• Trade Liberalization: Brazil has pursued trade liberalization measures to enhance international competitiveness and stimulate economic growth. This includes negotiating trade agreements with key trading partners and participating in regional trade blocs to expand market access and promote exports.

These reforms represent ongoing efforts by the nation’s government to address structural challenges, promote economic growth, and attract foreign direct investment in Brazil. However, it’s essential to note that the effectiveness and impact of these reforms may vary, and further implementation and adjustments may be necessary to achieve desired outcomes.

Diversification of Industries: Brazil’s push towards diversifying its economy beyond traditional sectors like agriculture and mining will spur innovation and create new avenues for investment in technology, healthcare, and renewable energy.

Global Trade Integration: Brazil’s participation in international trade agreements and efforts to strengthen trade relations with key partners will expand market access and drive export-led growth.

Sustainable Development: Embracing sustainable practices in sectors like agriculture and energy will mitigate environmental risks, attract socially responsible investments, and enhance Brazil’s global competitiveness.

In conclusion, the top states for foreign direct investment in Brazil offer a compelling mix of opportunities for international investors. These circumstances are driven by diverse industries,  a skilled workforce, and a supportive business environment. By capitalizing on these strengths and addressing existing challenges, Brazil is well-positioned to achieve sustained economic growth and prosperity in the years to come.

Panama is renowned for its strategic location, stable economy, and robust banking sector. It has long been an attractive destination for investors seeking opportunities in the financial industry. However, like any country, it has specific rules and regulations governing investments in the Panamanian banking sector. Understanding these regulations is crucial for investors looking to capitalize on the opportunities in this dynamic market. This blog post delves into the rules and regulations that shape investment in Panama’s banking sector.

Overview of the Panamanian Banking Sector

The Panamanian banking sector is a vital component of its economy, characterized by a well-regulated environment, financial stability, and a wide range of services. The sector comprises domestic and international banks, offering corporate banking, wealth management, trade finance, and investment banking services. The presence of internationally renowned banks and favorable regulatory frameworks has made Panama a preferred destination for investors seeking to establish banking operations in Latin America.

Below is an overview of some of the prominent national and international financial institutions with a presence in the Panamanian banking sector:

National Banks:

Banco Nacional de Panamá (National Bank of Panama) – As one of the largest state-owned banks in Panama, Banco Nacional de Panamá plays a pivotal role in the country’s banking sector, offering a wide range of financial services to individuals and businesses.

Banco General – Established in 1955, Banco General is one of Panama’s largest privately-owned banks, known for its extensive branch network and comprehensive suite of banking products and services.

Banistmo – With a history of over a century, Banistmo is among Panama’s oldest and most respected banks, catering to a diverse clientele and providing innovative financial solutions.

Banco Panamá – Founded in 2015, Banco Panamá is a relatively new entrant in the banking sector, focusing on digital banking and technological innovation to meet customers’ evolving needs.

International Banks:

HSBC Panama – As a subsidiary of HSBC Holdings plc, one of the world’s largest banking and financial services organizations, HSBC Panama offers international banking services, including corporate banking, wealth management, and trade finance.

Citibank Panama – A part of Citigroup Inc., Citibank Panama provides a wide array of banking services to corporate clients, multinational corporations, and high-net-worth individuals, leveraging its global network and expertise.

Scotiabank Panama – Scotiabank, a leading financial institution in Canada, has a significant presence in Panama, offering customers retail banking, commercial banking, and wealth management services nationwide.

Banco Santander (Panama) – As part of Banco Santander, one of the largest banking groups in the world, Banco Santander (Panama) provides a comprehensive range of financial products and services, serving both retail and corporate clients.

Banco Internacional de Costa Rica (BICSA) – Although headquartered in Costa Rica, BICSA has a strong presence in Panama, offering corporate and commercial banking services, trade finance, and treasury solutions to businesses in the region.

These are just a few examples of the national and international banks operating in the dynamic Panamanian banking sector. With a mix of domestic stalwarts and globally recognized institutions, Panama’s banking industry continues to thrive, catering to the diverse needs of its clientele and contributing to the country’s economic growth and stability.

Regulatory Authorities

The Superintendency of Banks of Panama (SBP) is the primary regulatory authority overseeing the Panamanian banking sector. Established in 1998, the SBP supervises and regulates banks, ensuring compliance with local laws and international standards. The Ministry of Economy and Finance also plays a crucial role in formulating policies and regulations governing the financial industry, working with the SBP to maintain stability and promote growth.

Licensing and Registration

Before commencing operations in Panama’s banking sector, entities must obtain the necessary licenses and registrations from the SBP. This process thoroughly scrutinizes the applicant’s financial standing, operational capabilities, and compliance procedures. Banks are categorized into different classes based on their activities, each subject to specific regulatory requirements. International banks, for instance, are subject to additional regulations due to their cross-border operations.

Capital Requirements

Capital adequacy is a cornerstone of banking regulation in Panama, aimed at safeguarding depositors’ interests and maintaining financial stability. Banks must maintain minimum capital levels relative to their risk-weighted assets, as the Basel Committee on Banking Supervision prescribes. Compliance with these capital adequacy ratios is closely monitored by the SBP, with stringent penalties for non-compliance.

Risk Management and Compliance

Effective risk management and compliance are non-negotiable aspects of operating in the Panamanian banking sector. Banks must implement robust risk management frameworks encompassing credit, market, operational, and compliance risks. The SBP conducts regular audits and inspections to assess banks’ adherence to regulatory requirements and identify potential vulnerabilities.

Anti-Money Laundering (AML) and Know Your Customer (KYC) Regulations

Panama has implemented stringent AML and KYC regulations to combat money laundering and terrorist financing activities. Banks must conduct thorough due diligence on their customers, verify their identities, and monitor transactions for suspicious activities. Compliance with these regulations is paramount, with severe penalties for institutions breaching AML/KYC requirements.

Foreign Investment Restrictions in the Panamanian Banking Sector

While Panama maintains an open and welcoming environment for foreign investment, certain restrictions apply to foreign ownership of banks. The Banking Law limits local banks’ maximum percentage of foreign ownership to preserve domestic control and stability. However, these restrictions are relatively lenient compared to other jurisdictions, making the Panamanian banking sector an attractive destination for foreign investors.

Taxation

Panama offers a favorable tax regime for banks and financial institutions, with no taxes on foreign-source income and minimal taxation on domestic income. Additionally, the country has entered into numerous Double Taxation Treaties (DTTs) to prevent double taxation and promote international investment. These tax incentives, coupled with the country’s political stability and strategic location, make Panama an attractive destination for banking investment.

Dispute Resolution Mechanisms

In the event of disputes or disagreements between banks and their clients, Panama provides accessible and efficient dispute-resolution mechanisms. The SBP oversees resolving banking-related disputes through mediation, arbitration, or legal proceedings, ensuring impartiality and adherence to due process. Panama’s robust legal system and adherence to international legal standards also give investors confidence in resolving disputes.

Investing in the Panamanian banking sector offers lucrative opportunities for domestic and foreign investors alike, thanks to its stable economy, favorable regulatory environment, and strategic position in the global financial landscape. However, navigating the regulatory landscape requires a thorough understanding of the rules and regulations governing the sector. By adhering to licensing requirements, capital adequacy standards, risk management protocols, and compliance procedures, investors can capitalize on the growth potential of Panama’s dynamic banking sector while mitigating regulatory risks. With its commitment to financial stability, transparency, and investor protection, Panama continues to attract investment and emerge as a leading financial hub in Latin America.

The maquiladora industry on the northern border of Mexico has long been a cornerstone of the country’s economy. These manufacturing plants, known as maquiladoras, play a vital role in the global supply chain, particularly in sectors such as automotive, electronics, aerospace, and medical devices. In this comprehensive exploration, we’ll delve into the industrial mix, workforce, specific industries, and prominent companies within critical cities along the northern border of Mexico: Ciudad Juarez, Chihuahua, Tijuana, Baja California, Reynosa, Tamaulipas, Matamoros, Mexicali, Nuevo Laredo, Piedras Negras, Nogales, Ciudad Acuña, and San Luis Colorado.

Ciudad Juarez, Chihuahua

Ciudad Juarez is a beacon of the maquiladora industry on Mexico’s northern border. Situated across from El Paso, Texas, this city has a diverse industrial mix, ranging from electronics and automotive to textiles and aerospace. Notable companies like Foxconn, Bosch, and Lear Corporation have established a significant presence here. The workforce in Ciudad Juarez is highly skilled, with a strong emphasis on engineering and technical expertise. The city’s strategic location and robust infrastructure make it an attractive destination for foreign investment in the maquiladora sector.

Tijuana, Baja California

Tijuana, located in Baja California, is another hub of the maquiladora industry on Mexico’s northern border. With its proximity to San Diego, California, Tijuana has emerged as an essential manufacturing center for electronics, medical devices, and aerospace components. Companies like Samsung, Sony, and Honeywell operate large-scale production facilities in the region. Tijuana boasts a skilled and diverse workforce, drawing talent from Mexico and the United States. The city’s strategic location, coupled with favorable trade agreements like the US-Mexico-Canada Agreement (USMCA), positions it for continued growth in the maquiladora industry.

Reynosa, Tamaulipas

Reynosa, located in the state of Tamaulipas, is a vital player in the maquiladora industry on the northern border of Mexico. Situated across from McAllen, Texas, Reynosa has a robust industrial base focused on automotive, electronics, and metalworking. Prominent companies such as Delphi Technologies, Panasonic, and LG Electronics have established manufacturing operations in the city. Reynosa benefits from a skilled and cost-effective workforce, making it an attractive destination for foreign investors seeking to leverage Mexico’s manufacturing capabilities.

Matamoros, Tamaulipas

Matamoros, also located in Tamaulipas, is another key contributor to the maquiladora industry on the northern border of Mexico. With its proximity to Brownsville, Texas, Matamoros specializes in automotive manufacturing, with significant players like Aptiv, Lear Corporation, and Continental Automotive Systems operating in the region. The city’s skilled workforce and supportive government policies and infrastructure have fostered a conducive environment for manufacturing growth. Matamoros continues to attract foreign investment, driving economic development and job creation in the area.

Mexicali, Baja California

Mexicali, situated in Baja California, is renowned for its thriving maquiladora industry on the northern border of Mexico. With a focus on aerospace, electronics, and medical devices, Mexicali hosts major corporations such as UTC Aerospace Systems, Gulfstream Aerospace, and Rockwell Collins. The city’s skilled workforce and strategic location near the California market make it an ideal destination for companies seeking to establish manufacturing operations in Mexico. Mexicali’s robust infrastructure and supportive business environment further enhance its attractiveness to investors in the maquiladora sector.

Nuevo Laredo, Tamaulipas

Nuevo Laredo, located in Tamaulipas, is a significant player in the maquiladora industry on the northern border of Mexico. Positioned across from Laredo, Texas, Nuevo Laredo specializes in automotive, electronics, and consumer goods manufacturing. Notable companies like Panasonic, Electrolux, and Continental Automotive Systems have production facilities in the city. Nuevo Laredo benefits from a skilled and cost-competitive workforce and an efficient logistics infrastructure for cross-border trade. The city’s strategic location along major transportation corridors makes it attractive for companies looking to optimize their supply chains.

Piedras Negras, Coahuila

Piedras Negras, situated in Coahuila, is a burgeoning hub of the maquiladora industry on the northern border of Mexico. Adjacent to Eagle Pass, Texas, Piedras Negras specializes in automotive, electronics, and aerospace manufacturing. Companies like Aptiv, Electrolux, and GE Aviation have established regional operations. Piedras Negras boasts a skilled and productive workforce supported by training programs and educational institutions catering to the manufacturing sector’s needs. The city’s strategic location and favorable business climate make it an attractive destination for foreign investment in the maquiladora industry.

Nogales, Sonora

Nogales, located in Sonora, plays a significant role in the maquiladora industry on the northern border of Mexico. The city specializes in electronics, medical devices, and consumer goods manufacturing across from Nogales, Arizona. Jabil, Kimberly-Clark, and Flextronics have manufacturing facilities in the region. Nogales benefits from a skilled and bilingual workforce and efficient transportation infrastructure for cross-border trade. The city’s proximity to key markets in the United States and its competitive operating costs make it an attractive location for companies seeking to expand their manufacturing footprint in Mexico.

Ciudad Acuña, Coahuila

Ciudad Acuña, situated in Coahuila, is a rising star in the maquiladora industry on the northern border of Mexico. Across from Del Rio, Texas, Ciudad Acuña specializes in automotive, electronics, and aerospace manufacturing. Major companies like Bendix,  Cessna, Bosch, and LG Electronics have established manufacturing operations in the city. Ciudad Acuña benefits from a skilled and motivated workforce and supportive government policies that promote investment and economic development. The city’s strategic location and access to transportation networks position it for continued growth in the maquiladora sector.

San Luis Colorado, Sonora

San Luis Colorado, located in Sonora, is an emerging player in the maquiladora industry on the northern border of Mexico. Adjacent to San Luis, Arizona, the city focuses on manufacturing automotive, electronics, and consumer goods. Companies like Delphi Technologies, Honeywell, and Flextronics have regional production facilities. San Luis, Colorado, boasts a skilled and dedicated workforce supported by vocational training programs and educational institutions. The city’s strategic location and proximity to major markets make it an attractive destination for foreign investment in the maquiladora industry.

The maquiladora industry on the northern border of Mexico continues to thrive, driven by a diverse industrial mix, skilled workforce, and strategic location. Cities like Ciudad Juarez, Tijuana, Reynosa, Matamoros, Mexicali, Nuevo Laredo, Piedras Negras, Nogales, Ciudad Acuña, and San Luis Colorado serve as vital hubs for Mexican manufacturing activities, attracting investment from leading companies across various sectors.

This article summarizes, with examples, Bolivia’s main economic activities. Primary, secondary, and tertiary activities, as well as Bolivian exports and imports, are examined.

According to estimates by the International Monetary Fund for 2022, Bolivia’s economy is the ninety-sixth (96th) largest in the world with a nominal GDP of US$43.4 billion, behind other Latin American economies such as Ecuador 59th (US$107.6 billion) and Panama 70th (US$ 68.5 million).

Bolivia’s economy is dependent on natural resources like oil and gas. These have driven the country’s recent growth, although institutional deficiencies limit its development.

Composition of economic activities in Bolivia

A diverse mix of primary, secondary, and tertiary activities characterizes the economic activities of Bolivia. Primary activities, including agriculture, forestry, and mining, contribute 13% of the nation’s Gross Domestic Product (GDP). The secondary sector, encompassing manufacturing and industry, plays a more significant role, constituting 37% of Bolivia’s GDP. However, the backbone of Bolivia’s economy lies in tertiary activities, such as services and tourism, which account for a substantial 50% of the country’s economic output. This balance between the three sectors underscores Bolivia’s economic resilience and adaptability.

Primary economic activities of Bolivia

The country has one of the largest natural gas reserves in Latin America. It is currently Latin America’s fourth-largest natural gas producer after Mexico, Argentina, and Venezuela. It also stands out in producing other mining-oil goods such as tin (the fourth largest producer in the world), antimony, lead, silver, zinc, and gold.

In primary activities, Bolivia has a significant agribusiness participation with several sectors of great importance for the Bolivian economy. Agribusiness employs around 5% of the country’s workforce. Livestock farming and the production of soy, sugar, rice, chestnuts, cotton, sesame, wheat, coca leaf, banana, cassava, and quinoa stand out. It is currently the second largest producer of quinoa worldwide, after Peru.

Bolivia has technical agriculture developed by medium and large businesses. However, traditional agriculture is also common, with little technology and low yields. It is common for the land to be tilled with animals, natural fertilizers, and basic tools such as hoes and sickles.

Secondary economic activities of Bolivia

Bolivia is a non-industrialized country, and its production is primarily artisanal. It is characterized by low productivity and informality. Even so, it is very important due to its participation in the country’s GDP. With time, however, it has lost economic ground to the tertiary or services sector.

In Bolivia’s secondary sector, small and medium-sized light industries stand out. The most developed industries in Bolivia are manufacturing, sugar refining, leather goods, tobacco, cement, beer, dairy, textiles, chemicals, glass, jewelry, explosives, and paper.

Bolivia’s secondary economic activities are located mainly in La Paz, El Alto, Cochabamba, and Santa Cruz de la Sierra.

The largest company in Bolivia is the Cervecería Boliviana Nacional brewing company. It has eight plants in the country and has more than 1,700 direct and 6,200 indirect workers. This company controls almost the entire Bolivian beer market and has 11 registered beer brands.

Tertiary economic activities of Bolivia

Bolivia’s tertiary sector includes tourism, finance, health, education, commerce, restaurants, shopping centers, transportation, telecommunications, and entertainment. This sector employs 67% of the country’s workforce.

In Bolivia, tourism continues to grow, reaching more than 1.7 million travelers per year who visit to marvel at the peaks of the Andes and the rainforests in the Amazon. The most visited cities are Santa Cruz, La Paz, and Cochabamba.

Another important sector of these activities is telecommunications. Bolivia has 850 thousand landline telephone lines and 7 million mobile telephone subscribers. It also has 4.1 million Internet users.

Bolivian international trade

Bolivia’s main trading partners are Brazil, Chile, the United States, China, Argentina, Colombia and Peru.

Bolivia’s main exports

Bolivia mainly exports raw materials such as oil, zinc, gold, lead, and silver. It also exports soy flour, oil, coconuts, walnuts, and bananas.

The main destinations for Bolivia’s exports are Brazil (27%), Argentina (16%), the United States (12%), Colombia (5.5%) and China (5.1%).

Main imports of Bolivia

Bolivia mainly imports value-added goods such as automobiles, machinery, telephones, pesticides, computers, gasoline, rubber wheels, and automobile parts.

The main origins of Bolivia’s imports are China (17%), Brazil (16%), Chile (11%), the United States (10%), and Argentina (7.2%).

Bolivia’s economy is ranked 96th globally, with a nominal GDP of US$43.4 billion. Economic activities in Bolivia rely heavily on natural resources, particularly oil and gas, but face challenges due to institutional deficiencies. The nation’s economic activities are diverse, with primary, secondary, and tertiary sectors contributing 13%, 37%, and 50% to the GDP, respectively. Bolivia is a major producer of natural gas and mining-oil goods, and modern and traditional practices mark its agriculture sector. Despite being a non-industrialized country, small-scale industries thrive, particularly manufacturing and brewing. The tertiary sector, employing 67% of the workforce, encompasses tourism, telecommunications, and finance. Bolivia’s international trade, with key partners like Brazil and the United States, revolves around exporting raw materials and importing value-added goods.

Lithium production in Argentina broke another export record, and the prospects are encouraging. This is due to the expansion of capacity and the expectation of a recovery in carbonate prices.

The year 2023 would have ended with an export record for lithium in Argentina. The mineral is vital for the manufacture of batteries used in electric vehicles. Based on official data for the first ten months of the year, which showed external sales of lithium of USD 682 million in that period, a study by the Rosario Stock Exchange (BCR) projected that 2023 would close with external sales of almost USD 900 million. This represents a growth of 27% compared to the 2022 figures.

From January to October, the report states, “more than 28,000 tons of lithium carbonate were shipped as of October of 2023, a product that represents more than 80% of exports of lithium in Argentina,” The development of lithium production in Argentina has been exponential, as the country exported USD 28 million at the beginning of the century and only in 2016 did it surpass the USD 100 million barrier. In turn, the jump in export value from 2021 to 2022 was primarily influenced by the recently rising price of lithium.

Lithium production in Argentina will expand in 2024

As for the future, “With significant progress in many projects in 2023, it is expected that 2024 will begin with more production capacity and that lithium extraction in Argentina will continue to expand during the year. Towards the end of 2024, the productive capacity of Argentine lithium is expected to more than quadruple compared to the levels seen at the beginning of 2023,” the Rosario report projected.

The BCR also warned that the recent imposition of export duties for mining would impact the development of gold, silver, copper, and lithium projects in Argentina. As is observed in agribusiness, the imposition of this type of tax on productive activities affects development and production, slowing it down in many cases, the authors wrote.

The collapse of the price of lithium

On the other hand, it is worth highlighting the sharp drop that the price of a ton of lithium carbonate suffered in the last year: after bordering on USD 80,000 per ton at the end of 2022, in the spot markets, it was trading at the end of 2023 below 15,000 dollars, although it is more difficult to estimate the impact of this reduction on the value of exports, which in most cases is tied to contractual supply volumes and prices with buyers.

“The recent price declines are partly explained by the liquidation of stocks of battery cells, which has temporarily reduced the demand for lithium for their production,” explained the BCR.

According to the study, once the liquidation of stocks is over, the price outlook would become bullish again due to the cut in global supply. “China’s economic dynamics will be another key issue in the global lithium and battery markets. Any potential slowdown in the world’s leading battery market could act as a bearish factor for the global prices of lithium products,” says one passage in the report.

Still, global lithium demand is expected to increase 5-fold from 2022 to 2030, according to the IMF.

Projections for lithium production in Argentina are highly encouraging compared to other countries that supply the mineral globally. According to the consulting firm CRU Group, until 2027, lithium production is expected to grow 8% annually in Chile and 16% in Australia, while the average annual increase in Argentina aspires to be 50%.

Elon Musk is interested in lithium in Argentina

President Javier Milei assured that Elon Musk, co-founder and principal shareholder of Tesla, the world’s largest producer of electric vehicles, called him because he is interested in procuring lithium from  Argentina.

In this framework, the governor of Catamarca, Raúl Jalil, one of the three river provinces of Argentina (the others are Salta and Jujuy), considered “it is very good” that Musk wants to make investments, but as long as “the rules of the game of the province and economic and social environmental control standards are followed.”

“In Catamarca, there is a lot of legal security and, together with Salta and Jujuy, it has a significant investment boom not only from foreign capital but also from Argentine capital,” Jalil asserted.

He also pointed out that the three provinces, which formed the so-called “Lithium Mesa,” are working to establish “common rules of the game and regulations” for producing and selling lithium in Argentina.

In conclusion, Argentina’s lithium industry has demonstrated remarkable growth, breaking export records in 2023 and projecting substantial expansion in production capacity for 2024. Despite facing challenges such as the imposition of export duties and a sharp decline in lithium prices, the country remains optimistic about its position in the global market. With a concerted effort among provinces to establish common regulations and environmental standards, Argentina aims to maintain its competitiveness. The interest of industry leaders like Elon Musk further underscores the significance of Argentina’s lithium resources on the global stage. As the demand for lithium continues to surge worldwide, Argentina appears poised to play a pivotal role in meeting this demand and contributing significantly to the growing electric vehicle and battery industries.

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.