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The maquiladora industry in Paraguay captures investments exceeding US$ 1 billion

by | Oct 1, 2023

At the end of the first half of 2023, the total investment in the maquiladora industry in Paraguay reached just over US$ 1 billion. After more than two decades of the regime being in effect, the maquiladora sector achieved the highest level of productive capacity in its entire history.

Cnime provides export statistics

The National Council of Export Maquiladora Industries (Cnime) of Paraguay highlights in its report that, in the breakdown of exported products, it is observed that “auto parts” reached 27% of the total and the second most important item produced is that of “clothing and textiles” with 20%.

Other important items correspond to “food products” with 15%, “aluminum and its manufactures” with 13%, and “plastics and its manufactures” with 6%.

Among the main export destinations for Paraguayan maquiladora exports in the first half of 2023, Brazil stood out with 57%. Following Brazil was Argentina, 12%; USA, 7%; Netherlands, 6%; Chile, 5%; and Uruguay, 3%, according to the Ministry of Industry and Commerce (MIC) information.

Shipments corresponding to the year’s first half reached 492 million dollars, registering a slight decrease of 2% compared to the first half of 2022.

Imports of inputs destined for industrial transformation under the Maquila Regime reached a total of US$ 265 million, 14% less compared to the same period in 2022, With which the trade balance (export minus import) from January to June grew 16%, thus reaching a total of US$ 227 million.

Total employment in the maquiladora industry in Paraguay

The report highlights that the more than US$1 billion investment coincides with the highest employment levels generated in Paraguay’s history of the maquila industry. Direct employment (workers on companies’ payroll and in the Social Security Institute (IPS)) reached 22,319 workers, 6% more than the first half of 2022.

Regarding indirect employment (formal workers who provide services in companies that support the maquila industry), it is estimated that the maquiladora activity helped create 10,713 jobs.

The employment generated by the maquiladora industry in Paraguay has a “spillover effect” or “multiplier” (which is created when direct and indirect workers collect their salaries and go to markets to procure goods and services) and an estimated incidence of 32,867 workers.

The Paraguayan maquila regime has supported creating an estimated 65,899 jobs, either directly, indirectly, or through a spillover (multiplier) effect.

The largest sectors of job creation in the area of the maquila regime correspond to “auto parts” (30%), “confections” (27%), “intangible services” (11%), and “plastics and their manufacturers” ( 9%). Together, these four sectors are responsible for 77% of job creation in the maquiladora industry.

Currently, there are 278 maquiladora companies in Paraguay with approved programs, of which 48% are located in the Department of Alto Paraná. The second region that can attract maquiladora investments corresponds to the Central Department and Capital City, which comprise 36.3% of all maquiladora operations. Finally, the Department of Amambay encouraged the establishment of 6.8% of production facilities in the maquiladora industry in Paraguay.

Projections for the remainder of 2023

Referring to the projections for the remaining months in 2023, the report estimates a 9% growth in maquila exports this year, with a total of US$ 1.12 billion in shipments being achieved. These projections were based on conservative estimates, where the uncertainty of the elections in Brazil and Paraguay slowed down shipments in the first semester. However, assuming that in the remainder of the second, they will improve once the electoral uncertainty scenario is overcome.

Additionally, it is expected that this year, the goal of 23,000 direct jobs generated in the maquiladora industry in Paraguay will be reached, considering that in the first half of this year, a total of 21 new projects were approved, which contributed about US$ 40 million in new investments.

The importance of the maquiladora industry in Paraguay

The maquiladora industry in Paraguay plays a pivotal role in the country’s economic landscape, representing a cornerstone of the nation’s development and economic stability. Paraguay’s strategic location, low labor costs, and business-friendly policies have transformed it into a burgeoning hub for maquiladoras, attracting numerous foreign companies seeking cost-effective manufacturing solutions. This industry provides a significant source of employment for the Paraguayan workforce and contributes substantially to the nation’s export revenue. Maquiladoras have fostered technology transfer, skill development, and industrial diversification, elevating Paraguay’s competitiveness on the global stage.

Furthermore, the maquiladora industry bolsters Paraguay’s broader economic growth by attracting foreign direct investment, promoting the development of modern infrastructure, and fostering innovation within the manufacturing sector. The sector’s expansion has led to increased production capacities, which, in turn, have strengthened Paraguay’s position in regional and global supply chains. Moreover, the revenue generated from maquiladoras has enabled the government to invest in essential public services, education, and healthcare, ultimately improving the quality of life for its citizens. In conclusion, the maquiladora industry in Paraguay stands as a linchpin in the South American nation’s economic development, underlining its significance as a catalyst for job creation, foreign investment, and sustainable progress.

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