The Paraguayan Investment and Export Network (Rediex) recently announced a significant upswing in foreign investments, primarily attributed to policies such as Law 60/90 and the maquila regime in Paraguay. These initiatives are central to fostering a robust national industry and transforming Paraguay into an attractive destination for foreign investors. Rediex noted that, in 2024, over 1,250 potential investors have visited Paraguay, drawn by its strategic location, favorable regulatory environment, and promising growth opportunities. The increasing number of international investors signals growing interest in Paraguay’s business potential, with many exploring various sectors hoping to establish future investments in the country.
Strategic Investment Policies: Law60/90 and the Maquila Regime
Law 60/90 and the maquila regime in Paraguay are the cornerstones of the country’s strategy to attract foreign direct investment (FDI). Law 60/90, officially known as the “tax incentive regime for national and foreign investment,” provides significant tax benefits to domestic and international investors. Under this law, approved investments are eligible for various tax exemptions, including import duties on machinery and equipment and tax exemptions on dividends and profits. This favorable tax treatment has created an appealing climate for investors looking to reduce operational costs and increase profitability. According to Rodrigo Maluff, Deputy Minister of Rediex, projected investments under Law 60/90 reached USD 293 million as of September 2024, marking a notable 9% increase compared to previous periods.
On the other hand, the maquila regime in Paraguay serves as a complementary policy explicitly aimed at promoting export-oriented manufacturing. The regime allows companies to import raw materials and components duty-free, provided they are used for products manufactured in Paraguay and later exported. This model has proven especially attractive for companies in light industries such as textiles, electronics, and automotive parts. The maquila regime in Paraguay enables them to keep production costs low and maintain competitiveness in international markets. The regime’s tax incentives and Paraguay’s advantageous geographic position between Argentina, Brazil, and Bolivia make the country an ideal location for manufacturing and export-oriented activities targeting the broader South American market.
Expanding Investor Interest Across Borders
According to Maluff, Paraguay has witnessed significant diversification in its pool of interested investors. While Brazilian investors continue to dominate, accounting for the bulk of interest in recent years, there is a notable increase in inquiries from Argentina, Bolivia, and other international markets. The diversity of investor origins reflects the increasing global awareness of the business advantages of the maquila regime in Paraguay, particularly its favorable tax regimes, low production costs, and rapidly growing economy.
Maluff elaborated on the unique preferences of each group. Brazilian investors, for instance, are predominantly interested in the maquila regime in Paraguay and light industry sectors, which allow them to leverage Paraguay’s low labor costs and favorable tax incentives to manufacture products for export. The ease of cross-border logistics between Paraguay and Brazil also enhances this appeal, as goods produced in Paraguay can be transported swiftly to Brazilian markets. Argentine investors, however, are showing a different pattern of interest. Many focus on the real estate sector, particularly high-rise developments in Paraguay’s capital city, Asunción. This interest in real estate is primarily driven by Paraguay’s relatively stable economic environment and less stringent capital controls compared to Argentina, where real estate investments are often more restricted and subjected to higher regulatory scrutiny.
Bolivian investors, meanwhile, are exploring various opportunities in agribusiness and construction. Paraguay’s fertile land and favorable climate make it attractive for agribusiness investments. The booming infrastructure sector has also caught the eye of Bolivian investors looking for more stable and scalable opportunities outside their home country. Maluff attributes this growing interest in Bolivia to the economic and political challenges in the Bolivian market, prompting investors to seek more secure avenues for growth in neighboring countries.
Industrial Development and Job Creation
The influx of foreign investments driven by policies like Law 60/90 and the maquila regime in Paraguay has substantially impacted Paraguay’s industrial sector. These policies contribute to national economic growth and create employment opportunities for Paraguayans. As manufacturing facilities expand under the maquila regime in Paraguay, the demand for local labor increases, stimulating job creation and strengthening the country’s workforce. Additionally, growth in real estate, agribusiness, and construction fuels the demand for skilled and unskilled labor, benefiting various population segments.
The Paraguayan government is keen to ensure that these investments translate into skill development for local workers. Many maquiladora companies offer on-the-job training and skills enhancement programs, which improve workers’ technical expertise and competitiveness in the job market. This focus on workforce development is essential for sustaining Paraguay’s industrial growth, as it equips the local workforce with skills necessary for the country’s evolving economy.
Infrastructure and Logistics Connectivity
Paraguay’s strategic investments in infrastructure and logistics connectivity have also played a pivotal role in attracting foreign investors. Efficient transportation networks, modernized ports, and improved road infrastructure facilitate the movement of goods and reduce business operational costs. The Paraguay-Paraná waterway, one of the most important waterways in South America, provides a cost-effective route for transporting goods to international markets. These infrastructure improvements benefit industries operating under the maquila regime in Paraguay and boost Paraguay’s export potential across a wide array of industries.
The Paraguayan government plans to enhance its logistics infrastructure further to support the ongoing industrial growth. Investments in road networks, bridges, and port facilities are expected to improve regional connectivity, making it easier for businesses to access markets in neighboring countries. This commitment to improving infrastructure is critical for international companies seeking efficient supply chains and reliable transportation channels.
Promotional Efforts to Boost Market Awareness
In addition to favorable policies and infrastructure investments, Paraguay is actively promoting its market through events that bring together business leaders from across the region. One such event is the Paraguay-Brazil Expo, which will hold its 16th edition on November 7 and 8. This annual event has become an essential platform for Paraguay to showcase its economic potential to Brazilian investors and other international stakeholders. The expo typically attracts over 400 businesspeople from various industries, providing an opportunity to network, share insights, and explore potential partnerships.
Maluff emphasized the importance of these promotional activities in attracting more FDI and building international awareness of the maquila regime in Paraguay and its investment opportunities. Events like the Paraguay-Brazil Expo serve as a valuable platform for businesses to learn about Paraguay’s market dynamics and engage with government representatives who can provide insights into the regulatory and investment landscape. Paraguay is reinforcing its commitment to welcoming foreign investors and fostering a collaborative environment where companies can explore synergies and joint ventures by organizing these events.
Outlook for Foreign Investment in Paraguay
Paraguay’s investment-friendly climate and proactive approach to attracting foreign capital suggest a promising future for FDI in the country. Policies like Law 60/90 and the maquila regime in Paraguay will continue to play a pivotal role in drawing interest from abroad, especially as global companies seek cost-effective locations for manufacturing and export. The government’s commitment to improving infrastructure and its strategic location within South America positions Paraguay as an emerging investment hub with considerable potential.
The presence of diverse investors from countries like Brazil, Argentina, and Bolivia indicates that Paraguay’s appeal extends beyond regional borders, attracting a global audience interested in various sectors. This diversity brings economic benefits and enriches Paraguay’s business landscape, encouraging innovation and collaboration. With continued efforts to enhance its regulatory environment and promote its advantages internationally, Paraguay is well-positioned to build on this momentum and solidify its role as a leading investment destination in South America.