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The Dominican economy expanded by 5.0% in 2024

The Dominican economy expanded by 5.0% in 2024

According to the preliminary report by the Central Bank of the Dominican Republic (BCRD), the Dominican economy experienced a solid expansion of 5.0% in 2024, reaffirming its position as one of the most dynamic in Latin America. This growth aligns with official projections and highlights the strength of the country’s macroeconomic fundamentals despite ongoing global challenges.

Outstanding Economic Performance

The Dominican Republic’s real Gross Domestic Product (GDP) grew by 5.0% compared to 2023, exceeding national and international expectations. This growth underscores the Dominican economy’s resilience and positions it as a leader in the region, standing out among the 17 largest economies in Latin America. This achievement is particularly significant given the global economic uncertainty caused by fluctuating commodity prices, geopolitical tensions, and shifts in international trade dynamics.

Controlled inflation further bolstered the macroeconomic outlook, which closed 2024 at a remarkably low 3.35%, the lowest in six years. This figure fell comfortably within the Central Bank’s target range of 4.0% ± 1.0%, demonstrating a stable price environment. The controlled inflation provided much-needed relief to households and businesses, enhancing purchasing power and fostering economic confidence.

Tourism and Remittances Drive Growth

A key driver of this robust growth was the remarkable performance of the tourism sector, a cornerstone of the Dominican economy. In 2024, the country welcomed a record-breaking 11.2 million tourists, including 8.5 million who arrived by air and 2.6 million via cruise ships. This surge in tourism significantly boosted the hospitality industry, with the hotels, bars, and restaurants sector achieving an impressive growth rate of 9.6%. The record visitor numbers were attributed to strategic marketing campaigns, expanded airline connectivity, and a focus on diversifying tourist offerings to appeal to a broader demographic.

In addition to tourism, remittances played a crucial role in sustaining the Dominican economy. The country received a historic US$10.76 billion in remittances, reflecting a 5.9% increase compared to the previous year. These funds, sent predominantly by the Dominican diaspora in the United States, Europe, and other parts of the world, were instrumental in supporting household consumption, funding education, and driving investments in small businesses. The consistent rise in remittances underlines the strength of the country’s ties to its diaspora and its continued commitment to the nation’s economic well-being.

Foreign Investment and a Robust External Sector

The Dominican Republic also demonstrated its ability to attract foreign investment, a key component of its economic strategy. In 2024, foreign direct Investment (FDI) reached an impressive US$4.51 billion, surpassing the US$4 billion mark for the third consecutive year. This level of investment underscores the confidence of international investors in the Dominican economy, given its stability, economic potential, and business-friendly environment. FDI inflows were primarily directed toward key sectors such as tourism infrastructure, real estate, renewable energy, and manufacturing, further diversifying the economic base.

The export sector also posted strong results, with total exports rising by 7.0% year-on-year. National exports, particularly gold and cacao, contributed significantly to this growth. The expansion of free trade zones played a pivotal role in this success, enabling Dominican manufacturers to access global markets with competitive products. Additionally, initiatives to improve port infrastructure and streamline customs processes have made the country more attractive to exporters and trading partners.

Monetary Policy and Financial Stability

The Central Bank of the Dominican Republic maintained an active approach to monetary policy throughout 2024, effectively managing liquidity in the financial system to support economic growth. During the year, the Central Bank reduced its policy interest rate by 275 basis points, which helped lower borrowing costs, encourage investment, and sustain economic dynamism. This monetary easing also contributed to exchange rate stability, providing a stable environment for trade and investment.

The Dominican financial system remains a pillar of economic stability, characterized by high levels of solvency and profitability. As of the end of 2024, the banking system’s return on equity (ROE) stood at an impressive 22.8%, while the non-performing loan ratio was a low 1.4%, reflecting prudent risk management practices. These metrics highlight the robustness of the financial sector, which continues to play a crucial role in funding economic activities and supporting businesses of all sizes.

Outlook for 2025

Looking ahead to 2025, the Dominican Republic is well-positioned to sustain its strong economic performance. The Central Bank has adopted forward-looking monetary policies to foster continued economic dynamism while maintaining inflation and exchange rate stability. Combined with government initiatives to enhance infrastructure, promote innovation, and attract foreign investment, these measures are expected to reinforce the country’s growth trajectory.

Key sectors like tourism, remittances, and exports will likely remain vital drivers of the Dominican economy. The ongoing development of eco-tourism projects, luxury resorts, and cultural heritage initiatives will ensure the tourism sector thrives. Meanwhile, the steady growth of remittances will provide a reliable source of income for households and stimulate domestic consumption.

The government’s commitment to expanding trade agreements and integrating into global supply chains will further strengthen the Dominican economy’s external sector. Efforts to diversify exports and explore emerging markets will enhance resilience against global economic shocks, ensuring long-term sustainability.

In conclusion, the Dominican Republic’s impressive economic growth in 2024 reflects its strong fundamentals, strategic policymaking, and the resilience of its key sectors. With a favorable outlook for 2025, the country is poised to continue its trajectory as a regional leader in economic performance and stability.

Japanese Investment in Guanajuato Fuels Job Creation and Economic Growth

Japanese Investment in Guanajuato Fuels Job Creation and Economic Growth

Investment in the state exceeds $8.9 billion, according to Claudia Cristina Villaseñor Aguilar, Secretary of Economy. Japanese companies in Guanajuato have invested more than $8.9 billion in various projects, generating 48,140 new direct jobs, stated Claudia Cristina Villaseñor Aguilar, Secretary of Economy. This achievement has positioned the state as the leader in foreign investment.

Japan as Guanajuato’s Key Economic and Cultural Partner

State authorities recognized this during the New Year celebrations in Japan, highlighting that Japan is not only Guanajuato’s leading economic partner but also a key cultural and social ally in the region. Japanese investment in Guanajuato has been pivotal in transforming the state into a hub for innovation and industrial growth.

Automotive Industry Drives Economic Expansion

Japanese companies’ investments have materialized in 145 projects. These include automakers such as Toyota, Mazda, and Honda, as well as many companies involved in the auto parts, components, and services supply chain. Toyota, for example, has established a significant manufacturing plant in Apaseo el Grande, where it produces the Tacoma pickup truck for domestic and export markets. Mazda operates a major facility in Salamanca, producing vehicles like the Mazda3 and Mazda2 models. Honda’s presence in Celaya focuses on producing compact cars and motorcycles, further reinforcing the state’s reputation as a leading automotive manufacturing center.

Broader Impact of Automotive Supply Chain Companies

In addition to automakers, numerous Japanese companies specializing in auto parts and components have invested heavily in Guanajuato. These include Sumitomo Electric, which produces wiring harnesses, and Aisin Seiki, a key supplier of automotive transmissions and other components. Other prominent firms like Denso specialize in advanced automotive systems like air conditioning and engine cooling modules. The presence of these companies has bolstered Guanajuato’s competitiveness on a global scale, with products manufactured locally being exported to various countries.

Geographic Reach of Japanese Investments

These companies have a presence in various municipalities, including Acámbaro, Abasolo, Apaseo el Alto, Apaseo el Grande, Manuel Doblado, Celaya, Comonfort, Coroneo, Cortazar, Cuerámaro, Doctor Mora, Dolores Hidalgo, Guanajuato, Huanímaro, Irapuato, Jerécuaro, Juventino Rosas, León, Ocampo, Pénjamo, Purísima del Rincón, Pueblo Nuevo, Romita, Salamanca, Salvatierra, San Diego de la Unión, San Felipe, San Francisco del Rincón, San José Iturbide, San Luis de la Paz, San Miguel de Allende, Silao, Uriangato, Valle de Santiago, Victoria, and Villagrán. The widespread geographical distribution of these companies ensures that the benefits of Japanese investment in Guanajuato are felt across the entire state.

Advancing Local Economies Through Technology and Supply Chains

Claudia Cristina Villaseñor Aguilar stated that this type of investment brings diversification and a promising outlook for the future of Guanajuato’s residents, as it contributes to improving the work culture and transferring technology. Adopting Japanese methodologies, such as Kaizen and Just-In-Time production systems, has enhanced local manufacturing facilities’ operational efficiency and quality standards.

Opportunities for Local MSMEs in Guanajuato

She also emphasized that the opportunities extend beyond those directly offered by these companies. The investment creates a virtuous cycle that fosters the development of value chains, opening opportunities for micro, small, and medium-sized enterprises (MSMEs) in each locality. Local businesses have been able to integrate into supply chains, providing goods and services ranging from raw materials to specialized logistics solutions. This integration has not only strengthened the local economy but also increased the resilience of the state’s industrial ecosystem.

Expanding Into New Industries

In addition to the automotive sector, Japanese investment in Guanajuato has expanded into other industries, such as electronics, machinery, and renewable energy. Companies like Panasonic and Mitsubishi have created operations to produce advanced technologies, including energy-efficient appliances and industrial equipment. Mitsubishi’s focus on renewable energy projects, such as solar panel production, aligns with Guanajuato’s broader sustainability goals and efforts to transition toward greener energy solutions.

Cultural Exchange Deepens Ties Between Japan and Guanajuato

The cultural impact of Japanese investment in Guanajuato cannot be overlooked. Many Japanese companies have supported initiatives to foster cultural exchange, including Japanese language and cultural programs in local schools. This has enriched the educational landscape and strengthened ties between the Japanese and local communities, creating an environment of mutual respect and collaboration.

Conclusion

Japanese investment in Guanajuato is a cornerstone of the state’s remarkable economic and cultural transformation. With over $8.9 billion in investments and more than 48,000 direct jobs created, the partnership between Guanajuato and Japanese companies has solidified the state’s position as a leader in foreign investment. Japanese enterprises continue to drive industrial growth and innovation across the region, from the booming automotive industry to emerging sectors like renewable energy and electronics. Beyond economic benefits, this collaboration has fostered cultural exchange, technology transfer, and supply chain development, empowering local businesses and communities. Guanajuato embraces Japanese methodologies and strengthens its value chains, building a resilient, competitive, and sustainable industrial ecosystem. Looking ahead, the enduring partnership with Japan promises to unlock new opportunities, further positioning Guanajuato as a global benchmark for economic and cultural collaboration.

These are the countries with the highest percentage of their population in the middle class in Latin America

These are the countries with the highest percentage of their population in the middle class in Latin America

The growth of the middle class in Latin America represents a profound economic and social transformation within the region, signifying significant progress in poverty reduction and social mobility. According to data from the World Bank, 41% of Latin America’s population is now part of the middle class. This phenomenon reflects a significant shift in the region’s socioeconomic structure, driven by sustained economic growth and development policies that have improved living standards for millions.

The middle class in Latin America reflects rising incomes and indicates shifting aspirations and expectations among its citizens. This demographic is characterized by better access to education, healthcare, and essential services. Their growing purchasing power and demand for quality goods and services fuel economic development, creating a positive feedback loop for growth in various industries.

Leaders of the Middle Class in Latin America

Chile, Uruguay, and Argentina are among the countries leading this socioeconomic shift. These nations stand out for their high proportion of middle-class citizens, which is attributed to effective policies that have fostered economic growth and reduced inequality. Their success stories provide valuable insights into how targeted government actions can elevate large population segments.

  • Chile: Chile has emerged as a leader in expanding its middle class. According to World Bank data, the percentage of Chileans in this socioeconomic group rose from 20% to 53% between the early 1990s and 2009—an impressive 33-percentage-point increase. This growth can be attributed to sound economic policies, an open trade environment, and robust education and social welfare program investments. By creating pathways for upward mobility, Chile has set a benchmark for other nations in the region.
  • Uruguay: Uruguay’s middle class grew significantly, from 50% of the population to 74% over the same period, marking a 24-percentage-point rise. Uruguay’s success stems from its commitment to universal healthcare, quality education, and progressive labor laws. These factors have created a stable environment for economic growth and allowed its citizens to enjoy a higher quality of life. Uruguay’s economic and social policies have ensured that the benefits of growth are widely shared.
  • Argentina: Argentina also made significant strides in expanding its middle class, which grew from 44% to 57% of the population between the early 1990s and 2009, an increase of 13 percentage points. However, recent challenges, including economic instability and the impact of the COVID-19 pandemic, have caused setbacks. By 2021, the middle class in Latin America had contracted to 36%, but signs of recovery have emerged as the region adapts to post-pandemic realities.

Implications of Middle-Class Growth

Expanding the middle class in Latin America has far-reaching implications for the region’s economic and social landscape. On the positive side, this growth has increased consumption and stimulated local economies. A more affluent population invests in education, healthcare, housing, and other areas, contributing to human capital development. These investments create a ripple effect, driving demand in the construction, retail, and technology industries.

Furthermore, a robust middle class in Latin America contributes to political stability and social cohesion. With improved access to resources and opportunities, citizens are more likely to support democratic institutions and participate in civic activities. The middle class often stabilizes, advocating for policies that promote sustainable development and equitable growth.

However, the growth of the middle class is not without challenges. Rising income levels can exacerbate inequality if wealth is not distributed equitably. Economic vulnerabilities such as inflation, high unemployment rates, and fluctuating commodity prices pose significant risks. Many middle-class households remain precariously close to slipping back into poverty, particularly during economic downturns or crises.

Challenges Facing the Middle Class

Several structural and external factors threaten the sustainability of middle-class growth in Latin America. Inflation, a persistent issue in many countries, erodes purchasing power and disproportionately impacts those on the lower end of the income spectrum. Political instability and corruption also undermine economic progress, deterring investment and slowing growth.

Moreover, the COVID-19 pandemic revealed the fragility of the middle class in Latin America. Many families experienced job losses and income reductions, pushing them back into poverty. This setback highlights the need for resilient social safety nets and robust economic policies to protect vulnerable populations during crises.

Another challenge is the inequality in access to quality services such as education and healthcare. While the middle class has better access than lower-income groups, disparities persist, particularly in rural and underserved areas. Addressing these inequalities is crucial for ensuring that middle-class growth is inclusive and sustainable.

Key Drivers of Middle Class Growth

To sustain and further expand the middle class in Latin America, governments must prioritize policies that promote inclusive economic growth. Key drivers include:

  • Education and Skills Development: Investing in education systems to improve access, quality, and relevance can equip citizens with the skills needed for a competitive job market.
  • Social Safety Nets: Strengthening social programs such as unemployment benefits, pensions, and healthcare protects families against economic shocks.
  • Job Creation: Promoting industries with high employment potential, such as technology, renewable energy, and manufacturing, can provide stable income opportunities.
  • Financial Inclusion: Expanding access to banking and credit services enables middle class households to invest in businesses, property, and education.
  • Tax and Labor Policies: Implementing progressive tax systems and fair labor laws can reduce inequality and ensure economic growth benefits all segments of society.

Reflection on the Middle Class in Latin America

The growth of the middle class in Latin America is a testament to the region’s progress and resilience. While challenges remain, the upward mobility of millions of citizens underscores the potential for continued development. To secure these gains, governments must adopt forward-looking policies that address structural inequalities, promote economic diversification, and strengthen democratic institutions.

As the middle class in Latin America continues to expand, it serves as a driving force for economic stability, innovation, and social cohesion. Ensuring this growth is inclusive and sustainable, the region can pave the way for a more prosperous and equitable future for all its citizens.

Assessing the Level of Economic Development in Argentina

Assessing the Level of Economic Development in Argentina

Argentina is rich in potential, with its economic development shaped by a unique mix of strengths and challenges. The nation’s progress can be evaluated across various dimensions, including natural resources, human capital, infrastructure, technological development, public institutions, economic policies, industrialization, access to capital, geographic location, demographics, cultural and social factors, global integration, environmental sustainability, political stability, and innovation. This blog will explore how these factors interact to define Argentina’s current state of economic development.

Natural Resources

Argentina is endowed with abundant natural resources, a cornerstone of its economy. The country is a global leader in agricultural production, particularly soybeans, wheat, and beef. The fertile Pampas region drives its agricultural sector, while its lithium reserves in the “Lithium Triangle” position it as a key player in the global energy transition. Additionally, Argentina possesses significant oil and gas reserves, including the Vaca Muerta shale formation, which has drawn considerable foreign investment. However, fully leveraging these resources requires substantial investment in infrastructure and regulatory improvements.

Human Capital

Argentina’s population is well-educated compared to many of its regional peers. The country has a strong tradition of free public education, contributing to high literacy rates and a skilled workforce. Universities like the University of Buenos Aires produce graduates in fields ranging from engineering to medicine. Despite this, economic instability and limited job opportunities have led to a significant brain drain, with many talented Argentines seeking opportunities abroad.

Infrastructure

Infrastructure development remains a bottleneck for economic growth. While urban areas like Buenos Aires boast modern transportation systems, rural regions often face inadequate infrastructure. Argentina’s rail network, once a strength, is now underdeveloped, hampering logistics and trade. Recent investments in renewable energy infrastructure, such as wind farms in Patagonia, demonstrate progress but highlight the need for broader infrastructure development to support sustained economic growth.

Technological Development

Argentina has shown promise in technological innovation, particularly in software development and tech startups. Cities like Buenos Aires have become hubs for entrepreneurial activity, with companies like MercadoLibre gaining international recognition. However, the broader adoption of technology in industries like manufacturing and agriculture has been slow, limiting productivity gains.

Quality of Public Institutions

The quality of public institutions significantly impacts economic development in Argentina. Corruption and inefficiencies in governance have historically undermined investor confidence. While recent administrations have made efforts to combat corruption, progress remains uneven. Strengthening judicial independence and reducing bureaucratic red tape are critical to improving institutional quality.

Economic Policies

Argentina’s economic policies have been characterized by volatility. Over the years, the country has faced cycles of inflation, currency devaluation, and debt crises, which have eroded public trust and deterred foreign investment. Efforts to stabilize the economy, such as agreements with the International Monetary Fund (IMF), often face domestic resistance. Policy consistency and long-term planning are crucial for fostering economic stability.

Level of Industrialization

Argentina has a relatively diversified industrial base, with strengths in food processing, automotive production, and chemical manufacturing—the country’s industrial sector benefits from access to raw materials and a skilled workforce. However, high production costs and limited access to export markets hinder competitiveness. Revitalizing the manufacturing sector could significantly boost Argentina’s economic development.

Access to Capital and Credit

Access to capital is a persistent challenge for businesses and individuals in Argentina. High inflation and interest rates have limited the availability of affordable credit. The country’s history of debt defaults has also constrained access to international financial markets. Encouraging domestic savings and improving economic stability are critical to addressing these issues.

Geographic Location

Argentina’s geographic location offers both opportunities and challenges. Its proximity to key trade partners in South America, such as Brazil and Chile, facilitates regional trade. Access to the Atlantic Ocean also enables global exports. However, the country’s vast size and varied geography make infrastructure development and logistical coordination complex.

Demographics

Argentina has relatively young and urbanized population provides a demographic dividend for economic growth. However, population growth has slowed in recent years, and regional disparities in access to education and healthcare persist. Addressing these disparities is essential for maximizing the potential of Argentina’s human capital.

Cultural and Social Factors

Cultural and social factors play a significant role in Argentina’s economic development. The country’s strong European cultural influences have contributed to its vibrant arts, education, and culinary scenes. However, income inequality and social tensions remain challenges, particularly in marginalized communities. Promoting social cohesion and reducing inequality are critical to sustainable development.

Global Economic Integration

Argentina’s integration into the global economy has been inconsistent. The country is a member of Mercosur, a regional trade bloc, but trade barriers and protectionist policies have limited its engagement with international markets. Recent efforts to negotiate trade agreements, such as the EU-Mercosur deal, could enhance Argentina’s global economic integration and spur growth.

Environmental Sustainability

Environmental sustainability is an increasingly important aspect of economic development in Argentina. The country has made strides in renewable energy, particularly wind and solar power. However, deforestation, overgrazing, and mining activities pose environmental risks. Balancing economic growth with ecological preservation is vital for long-term sustainability.

Political Stability and Security

Political stability remains a concern in Argentina. Frequent changes in government and policy direction have created uncertainty, discouraging long-term investment. Additionally, social unrest and crime rates in certain areas undermine security. Building political consensus and enhancing public safety is crucial for fostering a stable investment climate.

Innovation and Entrepreneurship

Argentina’s entrepreneurial ecosystem is a bright spot in its economic landscape. The country has produced successful startups in fintech, e-commerce, and agritech. Government programs, such as seed funding initiatives, have supported innovation. Expanding access to venture capital and fostering a culture of risk-taking could further enhance entrepreneurship and drive economic growth.

Conclusion

The economic development in Argentina is a complex tapestry woven from its natural resources, skilled workforce, and entrepreneurial spirit, tempered by challenges such as political instability, infrastructure gaps, and inconsistent policies. By addressing these challenges and leveraging its strengths, Argentina can unlock its full economic potential. Strategic investments in education, technology, and infrastructure, coupled with consistent policies and global integration, will be key to fostering sustainable development. While the road ahead is fraught with obstacles, Argentina’s rich resources and human capital provide a strong foundation for future growth.

The Service Sector in Paraguay Leads in Job Creation

The Service Sector in Paraguay Leads in Job Creation

According to data from the Service Providers Registry (Repse), the service sector in Paraguay showed remarkable dynamism in 2024, generating 9,288 new jobs. This growth highlights the sector’s role as a critical driver of employment in the country. Figures released by the Ministry of Industry and Commerce (MIC) underscore the significant involvement of local talent across various skill levels, reflecting the strength and adaptability of Paraguay’s workforce.

Employment Breakdown and Workforce Distribution

The labor force distribution within Paraguay’s service sector reveals a diverse structure. Approximately 62% of the workforce comprises unclassified workers, representing 5,799 employees. These roles encompass entry-level positions that provide essential services to businesses and consumers. Meanwhile, the professional level accounts for 25% of the workforce, with 2,330 employees engaged in specialized roles that require advanced education and expertise. The remaining 12%, or 1,158 individuals, operate at the technical level, showcasing the importance of skilled technicians in driving operational efficiency within the sector.

Among the subsectors, merchandise distribution emerged as the leader in job creation, reflecting Paraguay’s strategic position as a hub for regional trade. Cleaning services and land freight transport also played significant roles, underscoring the demand for essential services supporting businesses and households. This diversification across subsectors highlights the resilience and adaptability of the service sector in Paraguay in responding to market needs.

Local Talent as a Driving Force

National professionals play a pivotal role in the service sector’s success. According to Repse data, national professionals represent 24.57% of the workforce, with 2,282 employees actively contributing their expertise to the industry. Additionally, national employees in other categories make up 55.95%, equating to 5,197 workers. This highlights the predominance of local talent and the sector’s ability to effectively harness Paraguay’s human capital.

The strong presence of national talent is a testament to Paraguay’s commitment to workforce development. Educational institutions and vocational training programs have played a critical role in equipping workers with the skills needed to thrive in the service sector. This investment in human capital supports job creation and positions Paraguay as a competitive player in the global market.

Strategic Plans for Sector Growth

Looking ahead, the Ministry of Industry and Commerce has outlined ambitious plans to expand the service sector further. Rodrigo Maluff, Deputy Minister of Commerce and Services, stated that in 2025, the institution aims to grow the industry with a particular focus on exporting business services. This initiative is proposed as a cornerstone for the country’s economic diversification, leveraging Paraguay’s strategic location and skilled workforce.

One key strategy involves modernizing Law No. 1,064/97 on the Export Maquila Industry. This legislative update seeks to enhance the outsourcing of business services, creating new opportunities for Paraguayan companies to compete in international markets. The government aims to attract foreign investment and stimulate job creation within high-value sectors such as finance, technology, and customer support by streamlining regulations and providing incentives for service-related maquila operations.

Service-Related Maquila Operations

Service-related maquila operations represent a significant growth area for Paraguay. Traditionally associated with manufacturing, maquila operations in the service sector involve outsourcing specialized tasks such as software development, data analysis, and business process management. These activities generate employment and contribute to knowledge transfer and technological advancement within the country.

By expanding the scope of the maquila program to include business services, Paraguay can position itself as a competitive destination for outsourcing. This aligns with global trends, where companies increasingly seek cost-effective and skilled labor for back-office operations. The modernization of the maquila law will be instrumental in capitalizing on these opportunities, ensuring that the service sector in Paraguay remains an attractive destination for international clients.

Challenges and Opportunities

While the service sector’s growth is promising, several challenges must be addressed to sustain its momentum. Infrastructure development is crucial to support the sector’s expansion, particularly in logistics and telecommunications. Enhancing internet connectivity and transportation networks will enable service providers to operate more efficiently and reach broader markets.

Additionally, continued investment in education and training is essential to meet the industry’s evolving demands. Programs focusing on technical skills, language proficiency, and digital literacy will ensure that Paraguay’s workforce remains competitive in a globalized economy.

On the other hand, the sector presents numerous opportunities for economic growth. The rise of e-commerce and digital services offers new avenues for innovation and entrepreneurship. Paraguay can unlock the potential of the service sector and drive sustainable development by fostering a supportive ecosystem for startups and small businesses.

Conclusion

The service sector’s performance in 2024 underscores its vital role in Paraguay’s economy. With 9,288 new jobs created, the industry has demonstrated its capacity to generate employment and adapt to market demands. The strong participation of local talent highlights the country’s commitment to workforce development, while strategic initiatives such as the modernization of the maquila law pave the way for future growth.

As Paraguay continues to invest in its service sector, it stands poised to capitalize on emerging opportunities in the global market. By addressing infrastructure challenges and enhancing workforce capabilities, the country can solidify its position as a dynamic and competitive player in the service industry.

The Mexico Plan Advances with Sheinbaum’s Decree

The Mexico Plan Advances with Sheinbaum’s Decree

President Claudia Sheinbaum Issues Decree to Promote Nearshoring with Tax Incentives

President Claudia Sheinbaum’s government has issued a new decree to incentivize nearshoring through tax benefits. The decree, published on Tuesday, January 21, 2025, in the Official Gazette of the Federation, represents a significant step in strengthening Mexico’s local economy while fostering innovation. This strategic move aims to attract companies to relocate their manufacturing operations to Mexico, particularly in high-value sectors such as technology, research, and development.

The decree outlines a series of fiscal stimuli for both domestic and foreign companies operating in these fields. These tax deductions will remain valid until October 2030. Furthermore, businesses that invest in workforce training through partnerships with educational and research institutions will be eligible for additional benefits, underscoring the administration’s commitment to enhancing human capital.

Goals of the Mexico Plan

The Mexico Plan seeks to achieve several objectives. Primarily, it aims to reduce reliance on imports from China by strengthening local industries and increasing national content in key sectors by 15%. Among the targeted industries are automotive manufacturing, aerospace, and semiconductors—fields where Mexico has significant potential for growth. The plan also sets an ambitious goal: ensuring that 50% of the products and materials used in these industries are manufactured domestically.

In addition to industrial growth, the plan promotes the development of value chains that support Mexico’s broader economic objectives. By increasing the use of local inputs, the government hopes to enhance the competitiveness of Mexican products in global markets, particularly in North America, given the country’s proximity to the United States and its participation in the United States-Mexico-Canada Agreement (USMCA).

Encouraging Foreign Investment

In 2023, Mexico attracted $36 billion in foreign direct investment (FDI), representing a 27% increase compared to the previous year. Much of this growth has been fueled by nearshoring trends as global companies seek to diversify their supply chains and reduce dependence on Asia. However, limited access to essential services like electricity and water has hindered Mexico’s ability to fully capitalize on its nearshoring potential.

President Sheinbaum’s administration is working to address these infrastructure constraints to ensure Mexico remains a competitive destination for foreign investors. Enhancing energy and water availability will be critical to achieving the goals outlined in the Mexico Plan.

Navigating Trade Tensions

Another crucial aspect of the plan involves aligning Mexico’s trade policies with the interests of its USMCA partners, the United States and Canada. This alignment comes against the backdrop of ongoing trade tensions, particularly following the election of Donald Trump in the United States. Trump’s administration has previously threatened to impose tariffs on Mexican goods if issues such as drug trafficking and migration are not adequately addressed.

President Sheinbaum emphasizes cooperation and integration within the USMCA framework to mitigate these tensions. By strengthening economic ties with its northern neighbors, Mexico aims to solidify its position as a critical link in North America’s supply chain.

Tax Incentives

The Mexico Plan allocates 30 billion pesos ($1.6 billion) in incentives to promote nearshoring. Of this amount, 28.5 billion pesos will be dedicated to tax deductions for investments in fixed assets, while 1.5 billion pesos will support spending on workforce training and innovation.

The decree specifies that these fiscal benefits will be available starting in 2025 and will extend through 2030. Businesses will be eligible for deductions ranging from 35% to 91%, depending on the type of assets acquired and the industry in which they operate. The automotive, aerospace, and semiconductor sectors are expected to benefit the most from these incentives.

Support for Micro, Small, and Medium-Sized Enterprises (MSMEs)

Recognizing the importance of smaller businesses in driving economic growth, the government has reserved at least 1 billion pesos of the total incentives for micro, small, and medium-sized enterprises (MSMEs). With annual revenues of up to 100 million pesos, these businesses will have access to significant tax benefits under the plan.

The Mexico Plan aims to foster a more inclusive economy by supporting MSMEs. This will enable smaller enterprises to participate in high-value supply chains and contribute to national growth.

Evaluation of Applications

To ensure transparency and effectiveness, the government will establish an Evaluation Committee to oversee the allocation of incentives. This committee, comprising representatives from the Ministries of Finance and Economy, will review investment projects, dual-training agreements, and technological developments seeking access to fiscal benefits.

Within 60 days of the decree’s enactment, the committee will publish detailed guidelines for applying for the incentives. Additionally, it will determine the maximum stimulus amounts available for each fiscal year and issue compliance certificates to eligible applicants.

Nearshoring: A Strategic Opportunity

Nearshoring refers to relocating business operations, such as manufacturing or services, to countries closer to a company’s primary market. For Mexico, nearshoring represents a strategic opportunity to integrate more deeply into global value chains and leverage its geographic advantages.

With a 3,152-kilometer shared border with the United States, Mexico is uniquely positioned to serve as a nearshoring hub for companies seeking proximity to North American markets. The country’s extensive transportation infrastructure, competitive labor costs, and trade agreements make it an ideal destination for businesses looking to streamline operations and reduce supply chain risks.

Broader Economic Impact

The Mexico Plan’s focus on increasing domestic content and fostering innovation is expected to have far-reaching economic implications. By integrating more local suppliers into high-value industries, the plan will stimulate job creation and enhance Mexico’s industrial capabilities. Sectors such as electricity generation, metallurgy, and paper manufacturing are also expected to benefit from the plan’s emphasis on local sourcing.

Ultimately, the Mexico Plan aims to position the country as a global leader in manufacturing and innovation. By capitalizing on its geographic location, skilled workforce, and supportive policy environment, Mexico is poised to attract significant investment and drive sustained economic growth in the years to come.