Paraguay’s maquila regime has historically been governed by Law No. 1064/97. The country’s maquila law established the rules regarding processing or assembly activities using inputs temporarily imported for processing, assembly, or transformation destined for export.

During its nearly 30-year lifespan, Paraguay’s maquila regime allowed the country to become a competitive export platform offering:

• 1% single tax rate on value-added generated locally
• Duty-free access to imported raw materials and capital equipment
• Market access throughout MERCOSUR member nations
• Competitive labor and energy costs

This policy has successfully attracted export manufacturing projects into apparel, auto parts, plastics, and consumer goods operations.

Much has changed over the last three decades. The proliferation of digital services, nearshoring trends, and the demand for more knowledge-intensive exports have accelerated pressure to institute a new maquila law in Paraguay. Signed into law on August 27th, Law No. 7547/25 initiates a structural reform of Paraguay’s export processing regime, widening its scope and reinforcing its underlying institutions.

“Paraguay is positioning itself as more than a low-cost assembly platform, but rather as a services-enabled hub for exports.”

Outlined below are some of the notable updates to Paraguay’s maquila law.

Software Services Included Under the New Maquila Law in Paraguay

Perhaps the biggest change coming to Paraguay’s maquila regime is its extension into tradable services.

Under Law 7547/25, activities such as software development, call center operations, and business process outsourcing can qualify for maquila treatment.

Specific services include:

• Software development and IT services
• Business Process Outsourcing (“BPO“)
• Information Technology Outsourcing (“ITO“)
• Engineering
• Technical design services
• Call Centers / Shared Service Centers
• Financial Services
• Research and development services

Traditionally, Paraguay’s maquila incentives had been restricted to the production of goods. Law No. 7547/25 allows service-industry exports to benefit from preferential tax treatment under the maquila regime.

Among other implications, the change is expected to allow Paraguay to:

• Attract regional shared service centers (“SSC”)
• Play a larger role in digital services value chains
• Create additional bilingual and technical jobs
• Diversify its economy beyond low-cost assembly activities

The global economy does not revolve around factory jobs anymore. Services exports are critical to Paraguay’s future.

Digitalization & Agility

Another significant piece of the new maquila law in Paraguay is recognition of the importance to digitalize customs and compliance procedures.

Efforts will be made to:

• Digitize the submission and processing of maquila projects
• Digitize maquila compliance filings
• Coordinate customs more efficiently
• Streamline approval timelines for permits
• Ensure proper traceability of goods imported and exported under the maquila regime

Digital filing and track-keeping go both ways. The introduction of digital reporting requirements will increase transparency throughout the lifecycle of maquila projects. To reduce friction at the start of projects, customs authorities are expected to transition towards risk-based inspections.

These changes are the result of Paraguay modeling its customs regime after international standards promoted by multinational organizations. Recommended best practices encourage governments to:

• Reduce red tape
• Ensure regulatory certainty
• Implement digital transparency in its customs and reporting requirements
• Accelerate approvals
• Offer Regulatory Stability

Traditionally maquila projects have been offered tax incentives indefinitely. Law No. 7547/25 changes this by setting a 20-year maximum term for maquila projects. This term can be renewed assuming the applicant meets certain requirements.

Renewable conditions include:

• Jobs created
• Volume of exports
• Investment delivered
• Focus on nationally determined industrial sectors
• Ongoing regulatory and fiscal compliance

Offering a maximum 20-year term at the onset of investment is hoped to balance the need for investor confidence with project accountability.

“Investors need long-term stability. No one is going to start a capital-intensive project if they don’t know whether the regime will still be in power in 15 years. Twenty years allows companies to model their investments.” – Multinational Corp CEO

Opening Up Opportunities for Services Creates High-Quality Jobs

Paraguay’s maquila regime has created approximately 30,000 to 33,000 direct formal jobs since its implementation.

Recent maquila job counts include:

• November 2024 – just under 28,771 direct formal employees
• Mid-2025 – expected to surpass 33,000 direct formal employees
• Growth rates nearing 18% YoY growth
• Increase in women and youth employed under maquila regime

Jobs coming as the result of inclusion of services in new maquila law in Paraguay are expected to include:

• Software engineers
• IT analysts and developers
• Financial analysts
• Multilingual customer support reps
• Computer engineers/designers
• Data entry operators

Additional ways services could expand Paraguay’s labor force:

• Increase in need for STEM graduates
• Encourage bilingual education
• Higher wages than traditional maquila jobs
• Better university-industry coordination

Global value chains for services will require continuous up-skilling of Paraguay’s labor force if the country is to maintain its competitiveness.

Billions in Paraguayan Exports Supported by Maquila Regime

Over time, Paraguay’s maquila regime has become an increasingly important contributor to the country’s exports.

Notably:

• Maquila exports have grown by over 300% since 2016
• The maquila regime accounted for close to USD $927 million of total exports as of October 2024
• Top sectors: auto parts, textiles & apparel, food & beverages, aluminum
• Represents significant portion of Paraguay’s exported manufactured goods. Contributes towards trade balance.

While goods produced under the maquila regime have primarily gone to China and other regional partners, the addition of service industries can open the door to exporting:

• Services to North America
• Services to Europe
• Regional services to other MERCOSUR nations

“As goods are subjected to dock fees, shipping distances impact profit margins. Services provide a layer of resilience because they aren’t subject to the same variables.”

Sectors that rely on agriculture, such as soybeans and beef cattle, could benefit from increased diversification of exports.

Attraction of FDI Into Paraguay

Foreign direct investment in processing or assembly operations has gone into sectors such as:

• Apparel
• Automotive components
• Electronics assembly
• Plastics
• Packaging
• Consumer goods
• Food and beverage

Looking forward, the reform of Paraguay’s maquila law opens the doors for FDI into:

• Technology firms
• Shared Service Centers (“SSCs”)
• Engineering firms
• High-tech manufacturing
• Industrial Parks

Paraguay remains competitive due to:

• Abundant cheap electricity from its binational hydroelectric dams
• Strategic location in Latin America’s South Cone
• Pre-established trade agreements throughout MERCOSUR
• Low labor costs
• Single tax rate

Also expected as a result of the new maquila law in Paraguay:

• Less red tape due to digital filing requirements
• Longer stable terms to model investment against
• Digital platforms to streamline submissions and approvals

These will complement Paraguay’s push to modernize its maquila regime in line with international industrial policy standards.

Summary

Law No. 7547/25 updates Paraguay’s longstanding maquila regime. Responding to calls for increased diversification and digitization of global supply chains, Paraguay has:

• Modernized its customs procedures
• Digitalized its tracking and compliance mechanisms
• Included services within the benefits of the maquila regime
• Added regulatory certainty for investors
• Enabled value-added production in Paraguay

Paraguay is no longer merely a low-cost assembly operation. Through services and knowledge-enabled activities, Paraguay is laying the foundation to become a sophisticated exporter.

Bolivia is planning to showcase seven “world-class” mining projects in Toronto, Canada, at PDAC 2026, the Prospectors & Developers Association of Canada’s 2026 Annual Convention. The move is intended to court foreign direct investment (FDI), seek public-private partnerships, and rebrand Bolivia as a destination for responsible mineral exploration and mining development.

Reintroducing Bolivia to Capital Markets

Country representatives will exhibit these prospective Bolivian mining projects during the PDAC convention, considered by many to be the premier mining event of the year. Scheduled for March 1–4, 2026, in Toronto, the PDAC attracts company executives, investors, government officials, Indigenous leaders, researchers, and service providers from across the mineral exploration and mining sector for four days of investment meetings, technical presentations, and networking.

Showcasing these Bolivian mining projects is part of a renewed effort by the country’s government to become a dependable link in global mineral supply chains, especially those tied to the energy transition. The initiative will also aim to strengthen Bolivia’s standing among international mining investors.

Putting Bolivian Mining Back on the Map

At a press conference on Thursday, Bolivia’s Minister of Mining and Metallurgy, Marco Antonio Calderón de la Barca, said the government had narrowed down a list of 28 prospective projects to seven “high priority” opportunities.

“This is an opportunity to put Bolivia back on the mining map,” Calderón said. “There will be eyes from all over the world on us. We have attracted significant international interest in Bolivia’s current political transition and what credibility investors are giving Rodrigo’s administration.”

Minister Calderon used the phrase “asking for money” three times to emphasize that the Bolivian government wants partnering companies to see Bolivia as a serious contender for investment dollars, not just another country simply begging for donations.

“We are going to Canada to offer Bolivia,” he said. “We are going there as partners to offer responsible mining investment in Bolivia. We want to promote public-private partnerships. We want access to financing. We want technology transfers to the Bolivian mining sector.”

Calderon said representatives from the Bolivian-Canadian Chamber of Commerce would be assisting Bolivia’s delegation and have already scheduled meetings with mining companies and investors interested in learning more about Bolivia. Due to high demand, the organizers of Bolivia Day had to increase capacity at the last minute.

The Projects

Minister Calderon said the Bolivian mining projects were chosen based on geological potential, early exploration results, economic impact, and importance to worldwide demand for critical minerals and strategic resources. Here are seven of Bolivia’s priority projects:

Two of Bolivia’s Priority Projects Are in Santa Cruz

Both Bolivian mining projects are located in Santa Cruz and have reportedly generated “spectacular” results to date. Cerro Manomó and Rincón del Tigre are known to contain base metals. Early assessments also indicate the potential presence of strategic minerals that many Western nations require more secure access to.

Speaking on background, a senior official with Bolivia’s state mining company said:”

What minerals? Tin, Silver, Antimony, and Tungsten are just a few examples.

“It is no secret that decarbonization policies, electric vehicle mandates, renewable energy targets, and the desire to ‘friend-shore’ critical mineral supply chains have pushed demand for these minerals to record highs.

A mining industry analyst from Canada with expertise in Latin America said:

“We’re seeing renewed interest in countries that have stable political systems and undeveloped mineral prospects. Bolivia falls into that category. Compared to its neighbors, Bolivia has been significantly underexplored by international companies.”

Bolivia Wants Responsible Mining Investment

Minister Calderón highlighted another important criteria: responsible Bolivian mining investment.

“We want investment —but responsibly. With care for our people and our beautiful countryside. Mining cannot damage our environment. It has to bring prosperity to local communities, and it has to operate within the full framework of our laws.”

In particular, Bolivia will promote:

• Mitigation of Bolivia’s historical environmental legacy
• Transparency in permitting processes
• Free, prior, and informed consultation with affected communities
• Water stewardship
• Industry best practices on worker and industrial safety

Government officials say future Bolivian mining contracts will also have built-in mechanisms to ensure communities see the benefits of extractive projects. Such provisions have historically been absent from mining contracts in Bolivia, contributing to tensions between miners and local communities.

Canada’s Exploration Industry Open for Business

Canadian mining executives and analysts have also noted Bolivia’s efforts to strengthen ties with Canada and other mining nations.

Canada hosts thousands of the world’s mineral exploration and mining finance companies. By proactively reaching out to Canadian firms, Bolivia also hopes to:

• Attract investment from new FDI sources
• Decrease dependence on traditional extraction and export markets
• Access world-leading exploration tech
• Upgrade Bolivia’s geological mapping and data

Bolivia is also working to embed itself in Western governments’ plans to build resilient global supply chains. Due to geopolitical instability and macroeconomic shocks over the past two years, many Western nations have scrambled to identify alternative sources of critical minerals.

A Foreign Ministry official said:

“We see PDAC as one pillar of a multilateral strategy to re-engage with Bolivia’s traditional partners and open new doors. We want the world to see Bolivian mining as a historical producer of minerals, but we also want to position Bolivia as a country with important mining projects for the future.”

Showcasing seven priority projects is just one way Bolivia hopes to generate interest. In the coming years, Bolivia could stand to gain:

• Export revenues
• Jobs
• Regional development, especially in energy-rich Santa Cruz
• Tax revenues and mining royalties
• Infrastructure investment

Mining accounted for more than 13% of Bolivia’s exports last year. However, officials believe more can be done to attract investment and modernize the Bolivian mining industry. Part of that plan includes continuing to explore Bolivia’s vast and historically underexplored territory.

Building for the Future

Bolivia’s Ministry of Mining and Metallurgy has said it wants to:

• Update Bolivia’s national geological surveys
• Promote joint ventures with private investors
• Build domestic capacity for mineral processing

Officials have made it clear they plan to encourage investors to operate mines in Bolivia and add value before export. Currently, many mines in Bolivia export concentrates abroad for processing. Adding mineral processing facilities in Bolivia would keep more capital in the country and further diversify the industrial sector.

Look Ahead: Investment Momentum

Calderon closed his remarks by saying mining investors are slowly taking notice of Bolivia and its political shift.

“Bolivia has been renewed,” Calderón said. “Investors can see that. They understand Bolivia is serious about working with them. That is going to make a big difference.”

Chinese brands are on track to become the fastest-growing auto segment in South America in terms of market share. The impact they’re having locally not only affects sales but also production levels and jobs, as governments balance opening markets with protecting the automotive industry in South America. Industry leaders are pressuring public officials for policies that better support domestic industry.

Chinese Imports Reach Record Levels in South America

Argentine automakers are sounding the alarm over losing ground to imported cars, many from China. Chinese brand presence has been expanding throughout South America, but seems to be impacting production and sales the most in Brazil and Argentina. Industry experts say records will be broken this year for Chinese car imports in Latin America.

What’s Driving Growth of Chinese Brands in South America?

The automotive industry in South America is facing increasing challenges to its market share from foreign competitors who offer cheaper, perk-filled vehicles to the public. Chinese brands have had enormous success in South America, selling electric and hybrid cars at low prices, thanks to exemptions from import tariffs. Chinese auto brands have expanded rapidly in South America, quadrupling their sales in Argentina last year, thanks to quotas exempting a certain number of imported electric vehicles from import taxes.

Regional industry analysts are also pointing out:

“The automotive industry in South America is already focused on how it will react to the arrival of Chinese brands, which are sure to enter the market.”

The pressure that Chinese brands are bringing to the South American automobile industry

Chinese brands such as BYD, Chery, and GWM are moving aggressively to gain market share in South America. Some companies are also making direct investments in production facilities in Brazil. Chinese investments have plans to:

• Create permanent Chinese production in Brazil
• Decrease China’s reliance on importing cars to Brazil
• Export Chinese-made cars to other South American markets
• Facilitate closer supply chain ties between China and Mercosur

The automotive industry in South America is facing stiff competition from imported brands that are able to offer lower prices and more features. China’s pricing strength comes from both low margins on new cars and selling high quantities of EVs.

Why Local Production Struggles to Compete With Imports

Domestic automobile production in Argentina and elsewhere in South America is losing ground to cheap imports due to multiple issues with its current business model:

• Labor, tax, and input costs are higher than in other countries like China (or even Brazil).
• Countries like Argentina and Brazil have signed agreements within Mercosur to promote trade with one another, but haven’t yet eliminated tariffs on automobiles & parts.
• Argentina exports almost two-thirds of the vehicles it produces to Brazil. Automakers sold fewer cars in January of 2023 versus the year prior, despite Brazil being its top customer.

Auto Parts Shortfall

The auto parts industry also suffers from a large shortfall. South American factories simply can’t produce enough parts to meet demand without importing them. All of the above factors make it difficult for Argentine automakers to match the prices of imported vehicles.

The Effects of Imports on the Argentine Economy

In Argentina, China has replaced Brazil as the primary source of imported cars. Chile’s market is already dominated by Asian brands. Local producers are concerned about how they will be able to compete with the influx of cheap automobiles.

How will increasing import rates affect the overall economy with regard to:

• Local industry job security
• Foreign investment in production facilities
• Parts suppliers who previously exported to Brazil may see dwindling sales
• Automotive industry planning for the future

What can automobile manufacturers do? Responses to the challenges that the automotive industry in South America faces include:

• Investing in improving productivity & efficiency
• Moving into higher-end automobile market segments
• Forming alliances with foreign companies
• Embracing tech transitions like electric vehicles

If automobile manufacturers can improve their operations and reduce their cost structure, they may be able to stave off further losses. Chinese companies are leaning heavily into the electric vehicle market and will likely pull further ahead in that market segment if left uncontested.

Industry lobbyists active in the automotive industry of South America are pressuring the government to take action to protect the domestic industry.

Chinese competitors have an upper hand in terms of production cost, which allows them to sell products at lower prices. The problem is compounded by policy shifts in the industry towards electromobility. China also has large manufacturing economies of scale when it comes to electric vehicles.

Current Policies vs Public Demand

Government officials are under pressure to balance support of domestic industry while not inundating the public with higher prices & fewer choices. Consumers want:

• More models to choose from
• Lower prices
• Better tech

Chinese manufacturers offer consumers all of the above. Electromobility is quickly gaining traction in the automobile industry:

• Governments are encouraging buyers to purchase electric cars and hybrids with tax incentives and exemptions
• Producers need to plan for a future where internal combustion engines aren’t the standard
• Building supply chains for electric vehicles, charging stations, batteries, etc.
• Transitioning the workforce for high-tech manufacturing

While it’s important for governments to support local industry, they can’t restrict consumer access to what the public wants. Industry representatives are lobbying the government to enact policies that would better position Argentine automotive businesses against imports.

Global Automotive Industry Shifts Towards Electromobility

Electromobility is the next bubble that’s about to burst. The auto industry globally is shifting towards manufacturing electric vehicles. Imports are putting pressure on the automotive industry in South America, but none of the solutions mentioned above will fix the root cause issue at hand.

The industry’s reliance on combustion engine cars. Automobile manufacturers need to transition towards a new production model that supports electric vehicles and electrified components. The policies that protected the industry in the past are no longer compatible with what consumers want or where the industry is going. Consumers can buy electric vehicles from China at a low price point because they produce them at massive scales and control the entire supply chain.

South America’s automotive industry is at a crossroads. Industry leaders and policymakers need to act now to protect industry jobs, ensure South America remains competitive in the electric vehicle market, and manage trade relationships with China. The status quo of opening markets and leveraging tariffs to protect industry is no longer tenable in the era of electric vehicles.

With almost 13% accumulated appreciation at the end of January 2022, the Colombian peso continues to be on par with currencies like the Mexican peso, the Chilean peso, and the Brazilian real as one of the strongest currencies in Latin America.

“The main driver of dollar behavior against the Colombian peso has been the generalized weakening of the dollar against most major emerging economies around the world. In that sense, key messages that have taken strength during this scenario are dollarizing to take advantage of the environment to diversify portfolios as well as having a long-term view,” are the keys for investors seeking to invest wisely in currencies in Latin America.

Within this context and during the last year, while the Mexican peso posted close to 15% appreciation according to the Skandia report quoted by El Nuevo Siglo newspaper, the Chilean peso and Colombian peso posted gains of around 13%, and the Brazilian real just over 10%. On the other hand, the DXY index, which measures the dollar’s value against currencies such as the euro, Swiss franc, British pound, and Japanese yen, depreciated around 10.7% during the same period due to low US interest rate expectations, fiscal conditions, and decreasing international appetite for the greenback. As a result, safe-haven investments such as gold and currencies with strong economic fundamentals have increased worldwide demand from central banks and retail investors, reshuffling capital flows towards currencies in Latin America.

The report further points out that the Colombian peso has been additionally boosted by:

• Remittances growth
• The growth of coffee and other commodities
• Foreign currency inflows due to an increase in tourism, among other factors
• Foreign direct investment flows into Colombian public debt and equity markets
• Central Bank monetization of external government debt to cover liquidity requirements

Expectations of future dollar inflows from pension funds (resulting from the announcement of plans to repatriate these resources, which are currently under regulatory review) have also contributed to market expectations.

What should investors do?

From a financial education perspective, dollar depreciation could be seen as an opportunity to improve the global diversification of their portfolios. By reaching levels near COP 3,600 per dollar, international assets become cheaper, allowing investors to strengthen long-term investment strategies.

“We invite investors not to focus on dollar levels per se, but rather to take scenarios like these as an opportunity to diversify portfolios and make decisions aligned with long term financial goals,” says Catalina Tobón, Investment Strategy Manager at Skandia Colombia. “That is, not to let short-term market movements cause them to take impulsive actions that go against their financial plans.”

However, one of the most frequent errors is to make decisions based on short-term market noise, acting emotionally, and abandoning their medium and long-term financial goals.

If we think about investment decisions, in the short term, a weaker dollar could lead investors to:

• Purchase imported goods
• Travel more abroad
• Allocate more capital towards foreign assets

The recommendation would be not to adjust structured savings or investment financial plans based on what could be merely temporary movements. In addition, analysts highlight that when looking to take advantage of dollar depreciation, investment decisions should go beyond FX levels. For instance, they mention that during periods of a weak dollar, emerging market equities, commodities, and local currency debt tend to perform well since investors have more appetite for risk and capital tends to flow into emerging markets.

However, above and beyond identifying assets that could have relative outperformance during periods of dollar depreciation, investors should focus on how these moves fit within their well-diversified and coherent investment plans. By diversifying across different markets, currencies, and asset classes, investors can also help smooth out FX volatility and not have all their eggs in one basket.

Imports

Thinking long-term is perhaps the key message once more. Dollar appreciation and depreciation cycles are usually cyclical, but financial decisions with a longer horizon, such as diversification and financial discipline, are what really make a difference for wealth accumulation.

On the other hand, analysts remark that peso appreciation is positive for consumers and importers since they can buy more with less money. However, it also hurts exporters since they receive fewer pesos for every dollar sold, leaving them with less money to cover costs.

If the Colombian peso appreciated almost 15% in the last year, every box of flowers and every container of coffee sold internationally in dollars translates into fewer pesos in the companies’ cash flows. This is known as the deterioration of the peso’s real effective exchange rate, and it is an underlying dilemma that affects more than those two sectors. Together they represent around one-fifth of total Colombian exports (17.9%). “Colombia exports a lot, and a large portion of our exports come from companies that are price takers,” says Hernando Zuleta, Dean of the Faculty of Economics at the University of the Andes.

Impact

This means that they do not have the power to set prices and are obliged to accept the market prices.

Coffee exporters, for example, have been affected by the exchange rate movement against the dollar. “Each load of coffee (cup on the coffee market is a 125 kilogram container) sold at the international level lost somewhere between 500 thousand and 550 thousand pesos just due to the effect of the exchange rate.”

The international price of coffee is influenced by more than the exchange rate against the dollar. High-quality Colombian coffee (Arabica type, Colombia’s most produced variety) trades on the New York Exchange (dependent on futures contracts), where prices have actually gone up more than 16% in the last 6 months.

Flowers, on the other hand, have a direct link with peso appreciation. They are not traded on international markets, and roughly 95% to 98% of flowers produced in Colombia are exported. Thus, the impact of the exchange rate movement is fully transmitted to the producer.

In any case, Colombia’s peso appreciation has fueled conversation about hedging foreign exchange exposure. Currency hedging is similar to insurance, where exporters can lock in today the dollar price they would receive in a couple of months. If the peso continues to appreciate and they sell dollars that were “sold” months ago, they will have to cover the difference. On the contrary, if the peso depreciates, the company profits from the difference. The main reason why few exporters use this tool is due to the additional cost.

Costa Rica has stopped being known worldwide only for ecotourism. Throughout its recent history as a nation, Costa Rica has made great progress as an exporter of technology and services. The latest figures published by COEXPHAL regarding foreign trade celebrate a historic high: $21.846 billion in exports was never achieved before. But this is not a number out of the ordinary. Costa Rica’s trade evolution represents the concrete result of decades of national planning aimed at specialization, the attraction of foreign investment, and trade liberalization.

With facts like this, Costa Rica’s export-led development strategy is far from being just another technological hub in Latin America. Instead, we witness how an economy formerly dependent on agriculture managed to transform itself into a knowledge-based economy, one where microchips and medical equipment weigh more than coffee or bananas. If there is any doubt about the country’s competitiveness, regardless of size, just take a look at Costa Rica.

Medical Equipment and Precision Tools Lead the Way

One of the most relevant sectors for Costa Rica’s export economy is precision and medical equipment manufacturing. Costa Rica houses operations for some of the most important multinationals active in the Life Sciences sector. Let’s call it what it really is: Costa Rica is one of the main links of the medical technology supply chain around the world.

The Export Powerhouse

This sector is currently the most exported category of goods in the country. The fact that Costa Rica can design, assemble, test, pack, and ship heart valves and precision medical equipment that ends up anywhere in the world has allowed exports in this sector to grow in double digits year over year. Multinational corporations (MNCs) use Costa Rica as a competitive platform to manufacture, assemble, quality check, and approve devices for the market, not only because of the favorable supply of labor but also because of institutional strength.

“Costa Rica exports tons of things that you cannot easily find labeled ‘Made in Costa Rica’. Costa Ricans have gained a reputation for precision, high-quality control standards, and adherence to regulations. If you’re making medical devices, Costa Rica is one of the safest countries to manufacture in.” Jorge Castro, President of AMS Mexico and Latin America

Semiconductors Matter

Semiconductors were also decisive during the global shortage that affected supply chains during the past few years. The recent election cycle proved once again why Costa Rica is strategically important in the semiconductor ecosystem.

The country has hardware from large technology companies operating throughout the year, fulfilling requests from the U.S. market. The Costa Rican tech hub has been especially attractive for electronics assembly, semiconductor testing, and high-tech manufacturing thanks to decades of investment in electrical manufacturing, technical education, infrastructure, and industrial parks. As demand for more complex electronics continues to grow, opportunities arise for greater foreign direct investment in these areas.

“Semiconductors are much more than an export sector. It is a cornerstone of our national competitiveness.”-Virginia McLean, Costa Rican Ambassador to the U.S.

Services: The Other Side of the Coin

Costa Rica has also become a corporate services hub for many knowledge-intensive sectors. Services such as information technology, business process outsourcing, business management, engineering, and design represent an important portion of national income in the form of services.

The country has shared services centers and R&D centers from global technology companies attracted not only by political stability but by human capital. This additional sector complements the manufacture and export of goods, making the economy more resilient to external shocks such as volatility in commodity prices.

The Costa Rican tech hub association is often linked with innovation centers, digital transformation, and BPO. Many companies operate regional headquarters for Latin America in Costa Rica or nearshore services to the United States and Europe.

Factors of Success: Talent and Foreign Trade Zones

If you were thinking, “Why Costa Rica?” when companies could locate to other countries with lower labor costs. The reason is that Costa Rica checked three very important boxes:

1. Trained Workforce

Costa Rica has invested for years in its education system, creating a technical and bilingual workforce. The country’s talent pool is known for having good technical skills and for adapting to multinational firms’ corporate cultures. Universities have established relations with companies to provide courses that respond to labor market needs.

2. Foreign Trade Zone Regime

The certainty of the legal framework governing companies operating in Costa Rica’s free trade zone regime has been key. Coupled with tax incentives, this offsets higher operating costs relative to the rest of Central America. This regime has become the flagship of FDI policy and industrial clusters.

3. Free Trade Agreements

Costa Rica has over ten free trade agreements in place with countries that represent approximately two-thirds of the world’s GDP. Costa Rican products and services labeled “Made in Costa Rica” benefit from preferential access to the largest markets in the world.

Why Costa Rica’s Free Trade Zone regime?

There are a number of key benefits for companies operating under this regime:

• No Corporate Income Tax or Reduced Rates
• Importation of Raw Materials and Capital Equipment without Duty
• Expedited Customs Processing
• Stability of the legal framework

The Next Step: Nearshoring Costa Rica

The recent nearshoring boom presents another opportunity for Costa Rica to consolidate itself as a manufacturing and technology hub for North America. Cost increases in Asia, concern over supply chain concentration, and geopolitical tensions are prompting companies to diversify production geographically.

Amongst Latin American countries, Costa Rica presents many advantages: political stability, rule of law, and a proven track record of success in attracting FDI. Any company looking for a stable, politically safe destination to produce high-value goods and services will soon think of Costa Rica.

Companies considering investments in Costa Rica are from the following sectors:

• Electronics
• Semiconductor Assembly and Packaging
• Medical Devices
• Biotechnology
• Cloud Computing
• Software as a Service (SAAS)
• Engineering Design
• Research and Development
• Business Process Outsourcing

When Thinking About Building a Sustainable, Knowledge-Based Economy

Years of developing a knowledge-based economy have positioned Costa Rica in a place few countries in Latin America can: the “Silicon Valley” of the Caribbean. Costa Rica achieved $21.846 billion dollars in exports because it chose not to specialize in “nothing.” History shows that if little Costa Rica can do it, any country can do it if they want to.

The Costa Rican tech hub is not just factories and MNCs: it represents an entire national vision based on exports, education, trade agreements, and strong institutions. If Costa Rica wants to continue riding this wave of success in the years to come, it will have to address certain challenges before they become bigger obstacles.

“Attracting multinationals to Costa Rica is one thing. But how can we promote the development of local suppliers to increase the value added of Costa Rican goods and services? That is the question.” States Carlos Valverde, Industrial Sector Specialist at CINDE Costa Rica.

The Central American nation has assets such as the Panama Canal, ports, and the banking system that give it a privileged place in global supply chains and reinforce the competitive advantages of Panama in international trade and logistics.

Panamanian-American relations are currently positive. They mark a phase of convergence after the diplomatic distancing registered in previous months and reported exactly one year ago. At that time, repeated statements from the government of Donald Trump questioned China’s commercial and technological footprint in Panama through infrastructure projects and operations in strategic sectors such as the Panama Canal and logistics platforms.

Panama responded politically and commercially to those opinions with statements defending the neutrality of the Canal and the sovereignty of local companies in conducting their business. Now, diplomatic dialogue channels seem to point to agreement on issues of mutual interest and the deepening of economic cooperation, strengthening the competitive advantages of Panama as a trusted partner for the United States.

Kevin Marino Cabrera, U.S. Ambassador to Panama, endorsed this perspective, highlighting that Panama continues to count on Washington as its main commercial partner and largest investor in terms of foreign direct investment (FDI) in the local economy.

The envoy made the declarations in a note published by the Adrienne Arsht Latin America Center (AALAC) based on excerpts of his participation at the Atlantic Council’s U.S.–Panama Economic Security Working Group event.

“The Panama Canal, ports, banking, and regional connectivity provide U.S. firms and their Panamanian counterparts unique competitive advantages as trusted nodes in global supply chains,” Kevin Marino Cabrera said.

The ambassador explained that Panama has several national assets that strategically position it to take advantage of the diversification of supply chains, consolidating the competitive advantages of Panama in multimodal logistics and international commerce.

The strength of its logistics infrastructure was mentioned by Marino Cabrera. In this regard, he explained that Panama’s geographical location makes it a natural junction point between the Atlantic and Pacific oceans through the Panama Canal.

The Americas’ Financial Hub

He also stated that Panama’s banking services and financial ecosystem have earned the country’s reputation as one of the most open and efficient in Latin America, making it the financial hub of the Americas and reinforcing the competitive advantages of Panama in finance and trade facilitation.

“In this regard, the embassy welcomes Panama’s efforts to attract new investments to grow the economy, boost innovation, and create quality jobs for Panamanians,” Cabrera added.

Kevin Marino Cabrera’s intervention was part of the activities developed by the Adrienne Arsht Latin America Center, which has fostered increased dialogue with regional governments on economic and security issues.

What Does AALAC Do?

The Adrienne Arsht Latin America Center (AALAC) is the Atlantic Council’s project dedicated to promoting political, economic, and security cooperation between the United States and Latin American nations. Through research reports, leader forums, and strategic partnerships, AALAC works to advance democracy, prosperity, and regional stability through integrated economic relations.

Within this framework, AALAC promotes working groups such as the U.S.–Panama Economic Security Working Group mentioned above, dedicated to the following:

• Supply chain security
• Resilience in infrastructure
• Transparency standards in supply chains
• Cybersecurity and digital trade platforms

Kevin Marino Cabrera also pointed out that Panama’s diplomatic position allows it to facilitate conversations between nations. The diplomat cited Panama’s hosting of events such as the CAF International Economic Forum for Latin America and the Caribbean as an example of the role it plays regionally.

Panama’s Economic Importance

In his opinion, Panama’s trade position complements its logistics capacity, leading the country to consolidate itself as a regional trade and investment platform, further expanding the competitive advantages of Panama in global commerce.

“I think Panama’s unique ability to convene the region and its commitment to dialogue enhance its economic and logistical advantages by providing diplomatic credibility as a convening platform,” Kevin Marino Cabrera said.

Finally, Cabrera Marino highlighted the importance of increasing security and control standards in Panama’s strategic infrastructure.

The ambassador called for greater transparency in ports, logistics platforms, financial transactions, and cybersecurity.

He went on to state, “I remind you that technological competition, supply chain interruptions, cybersecurity breaches, and geopolitical tensions are challenges that have shaken global commerce in recent years.”

Digitalization of international trade is advancing, so secure logistics hubs will become even more valuable as businesses seek alternatives to concentrate their supply chains.

With that in mind, Panama has redoubled its investments in updating its logistics infrastructure and compliance with international standards. These factors make Panama attractive to multinational companies looking for regional hubs or distribution centers in the continent.

Panama Has Big Competitive Advantages in the Trade War

In his speech, Kevin Marino Cabrera mentioned specific projects that Panama is developing to modernize its logistics and financial hub. They include:

• Modernization and expansion plans for the ports
• Expansion of airport infrastructure
• Deployment of digital platforms for foreign trade and customs
• Development of smart logistics corridors and multimodal transportation

At the geographic level, the entrance to the Panama Canal ranks first in Panama’s trade advantages. The waterway is one of the busiest in the world in terms of cargo transit and is strategically located, joining two oceans.

In addition to the Canal, Panama has other competitive advantages in logistics and transportation that integrate its intermodal system:

• Ports with direct access to deep waters on both oceans
• The railway that crosses the isthmus
• Free trade zones and logistics parks
• International banking network and financial services

He also cited Tocumen International Airport as the largest airport hub in Latin America regarding passenger traffic and connections between North America, South America, and the Caribbean.

That multimodal connectivity in maritime, air, rail, and digital infrastructure is another of Panama’s key strengths.

China and the Panama Canal: Economic Security

Panama is making these announcements during a global race for supply chain control and trade routes exacerbated by the COVID-19 pandemic.

Countries located in strategic geographic positions with multimodal connectivity and infrastructure capacity are positioning themselves as privileged nodes in diversified supply chains.

Panama has readjusted its relationship with Washington after having felt the pressure of Trump’s accusations of a lack of controls and transparency in Panamanian ports and finance in favor of Chinese interests.

Despite previous warnings issued by Washington regarding the presence of Chinese companies such as Huawei in the Panamanian market, the interest in cooperating with Panama is now focused on investment, innovation, and diversifying economic security.

For Kevin Marino Cabrera, Panama plays a vital role in guaranteeing supply chain security between the two countries.

Panama’s alliances with China undoubtedly positioned it within President Trump’s foreign policy priorities. However, currently, the country seeks to unify its views with the United States and diversify its partnerships to continue positioning itself as a regional powerhouse.