A Quarter Century of Growth and Development
For the past 25 years, Paraguay has maintained a robust and forward-looking maquila regime, established under Law 1064 of 1997, “On the Export Maquiladora Industry,” and further regulated by Decree 9585 of 2000. This legal framework has provided a solid foundation for the country’s export-oriented manufacturing model. Known locally as the Maquila Regime, the system was designed to promote foreign investment, industrial activity, and economic development by facilitating the establishment and operation of maquiladora companies in Paraguay.
The maquila model in Paraguay refers to an investment regime in which foreign companies or Paraguayan firms primarily process goods or services for export. These goods are value-added within Paraguay, which increases their international competitiveness and contributes significantly to the local economy. In doing so, the maquila regime has proven to be a cornerstone of the country’s broader development strategy.
Maquila as a Catalyst for Economic Diversification
Since its inception, the maquila regime has become an effective and strategic tool for diversifying Paraguay’s economic base, which has traditionally relied on agricultural exports, particularly soybeans. While agriculture will continue to be a major contributor to GDP, the future of the Paraguayan Maquila industry lies in its capacity to balance the national economic portfolio and shield it from the volatility associated with global commodity prices and climatic disruptions.
Today, Paraguay’s maquila sector is a growing contributor to national exports. In 2024 alone, the sector closed the year with exports totaling $1.15 billion, representing approximately 50% of the country’s soybean exports —a remarkable milestone underscoring its increasing relevance.
Job Creation and Workforce Development
One of the most compelling features of the maquila industry is its job creation potential. Currently, the sector provides approximately 32,500 direct jobs, many of which offer on-the-job training and opportunities for skill development. For a country like Paraguay, where the population is predominantly young, this represents a vital opportunity to channel youthful energy into productive economic activities.
The future of the Paraguayan maquila industry will heavily depend on the country’s ability to cultivate a well-trained, dynamic workforce. This requires joint efforts by the public and private sectors to invest in education, technical training, and policies that foster innovation. Workforce development programs must be tailored to meet the evolving needs of an industry that is becoming increasingly tech-driven.
Fiscal Incentives and Competitive Advantages
Paraguay’s maquila sector benefits from a series of attractive fiscal incentives, making it highly competitive in the region. These include tax exemptions, a single-tax system (with a flat 1% tax on value-added), tariff elimination on imported inputs, and duty-free repatriation of profits. These features create a business-friendly environment that has drawn the attention of investors from diverse sectors, including automotive, textiles, electronics, and services.
Yet, the long-term future of the Paraguayan maquila industry will also depend on continued institutional support and regulatory stability. Investors seek predictability, and a consistent legal and policy framework will play a critical role in encouraging sustained foreign direct investment (FDI).
The Role of Energy and Industrial Hubs
Paraguay is blessed with abundant, renewable hydroelectric energy from the Itaipú and Yacyretá dams. This clean energy resource reduces manufacturers’ production costs and aligns Paraguay with the global shift toward sustainable production. Paraguay’s energy matrix becomes a strategic asset as the world increasingly prioritizes low-carbon and eco-friendly supply chains.
Leveraging these energy advantages, Paraguay has the potential to evolve into a significant industrial hub in South America. The maquila sector serves as a vital stepping stone toward this goal. The future of the Paraguayan Maquila industry must be aligned with broader national objectives to enhance infrastructure, improve logistics networks, and develop industrial parks that can accommodate larger, more complex manufacturing operations.
Exploring New Markets and Innovation
At its recent 25th anniversary celebration, the Paraguayan Chamber of Maquiladora Companies (CEMAP), under the leadership of President Carina Daher, emphasized the importance of expanding into new international markets and investing in technological innovation. These twin goals are crucial for securing the long-term competitiveness of Paraguayan-made products.
To achieve this, greater emphasis must be placed on market diversification strategies and quality certification systems that meet international standards. The public sector can support this through export promotion programs, bilateral trade agreements, and diplomatic efforts to open new commercial opportunities.
Incorporating new technologies, particularly Artificial Intelligence (AI), into maquila operations is another frontier. AI can improve supply chain efficiency, streamline production processes, and enhance product quality. This makes it imperative for government-led training programs to include AI literacy and digital skills development as core components. Indeed, the future of the Paraguayan Maquila industry may be defined as much by its ability to embrace innovation as by its cost competitiveness.
Policy Support and Social Responsibility
Government support will be essential in fostering a favorable environment for the maquila sector. Beyond tax incentives, the state must develop and implement policies that support inclusive industrial growth, focusing on job creation, environmental responsibility, and technological readiness.
Additionally, the social role of the maquila industry must not be underestimated. It offers stable employment opportunities, particularly in regions with limited formal job creation. For many Paraguayans, maquila jobs represent a gateway to financial stability and upward mobility. Therefore, protecting and growing this sector contributes to economic and social development.
A Vision for the Future
Looking forward, Paraguay stands at a strategic crossroads. It has the opportunity to build on the successes of the past 25 years and move toward a more industrialized and diversified economy. The maquila sector is uniquely positioned to lead this transformation. But for this to happen, visionary leadership, proactive policymaking, and collaborative action from all stakeholders must occur.
If these elements come together, the future of the Paraguayan Maquila industry could serve as a model for other emerging economies seeking to balance industrial growth with social inclusion and sustainability.
Conclusion
The maquila industry in Paraguay is more than just an export mechanism—it is a key pillar of national development, offering a viable path toward industrialization, job creation, and global economic integration. With the right investments in training, innovation, and infrastructure, the future of the Paraguayan Maquila industry looks promising. However, continued success will depend on how well the country navigates emerging challenges and leverages its strengths to build a resilient, forward-looking manufacturing sector.