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The maquiladora industry in Paraguay: An interview with Natalia Cáceres Martínez

by | Feb 3, 2024

Abog. Natalia Cáceres Martínez
Executive Secretary
National Council of Maquiladora Export Industries
Asunción, Paraguay
natalia.caceres@mic.gov.py

 

LATAM FDI: In what year did the maquiladora industry in Paraguay start? What are the conditions that brought about its birth?

Natalia Cáceres Martínez: The maquiladora industry in Paraguay officially began in 1997 with the enactment of Law 1064/97, which establishes how the Maquiladora Export Industry has to function. Compared to regional competitors, Paraguay offered lower wages, which was attractive for companies seeking cost-effective production. Also, Paraguay’s young and growing population presented a readily available labor pool.

LATAM FDI: How many manufacturing companies operate in the maquiladora industry in Paraguay, and what trends have been observed in establishing new companies in recent years?

Natalia Cáceres Martínez: The maquila regime currently has over 270 companies with an approved program. The maquiladora industry in Paraguay has experienced steady growth in recent years, with several new companies establishing operations in the country. The average growth of the maquiladora industry in Paraguay in the last ten years has been around 20%. The industry has also diversified, evolving from producing mostly textile and plastic products to unconventional products such as dog chews and electric bicycles, auto parts, high voltage cables, and intangible services such as call centers and BPO.

The establishment of new companies is due mainly to tax breaks and other incentives contemplated in the current legislation, a key attraction for new investors. Competitive labor costs compared to developed or regional competitors, general political and economic stability, as well as Paraguay’s ́strategic location for those companies that want to export products to countries in the region, especially Brazil, are also aspects that contribute to making the country a good investment choice. On top of everything, the country’s government has firmly supported and promoted the maquiladora industry in Paraguay.

LATAM FDI: What is the current workforce size in Paraguay’s maquiladora sector, and how has it changed over the past decade?

Natalia Cáceres Martínez: The maquiladora industry in Paraguay currently employs more than 25,000 people directly and indirectly around 60,000. The employment growth generated by this industry is linked to the installation of large manufacturers in recent years.

In 2023, employment in the maquiladora industries sector has increased by 6%. Seventy-four percent of the jobs linked to the maquiladora industries are registered in the following categories: auto parts, clothing, intangible services, plastics, and pharmaceutical products.

Forty-five percent of jobs linked to these industries are held by women, making this a highly inclusive regime since it also encourages first employment and family employment.

The maquiladora industry in Paraguay generates formal employment and provides technical skills training to people, allowing professional growth and new job opportunities.

LATAM FDI: What are the primary products manufactured in Paraguay’s maquiladora industry, and have there been any notable shifts or expansions in the range of goods produced?

Natalia Cáceres Martínez: The maquiladora industry in Paraguay produces a wide range of products. Textiles, auto parts, and food are the main ones. There has been notable expansion and diversification in production, with new sectors, such as pharmaceuticals, and a greater variety of products manufactured. Several multinational companies have established maquiladoras to produce electrical components, wire harnesses, and other automotive parts. Since their installation in 2013, they have expanded their operation considerably, employing almost 7,000 people and exporting more than 280 million dollars in 2023.

Products such as jeans, t-shirts, sportswear, and underwear are also being produced in Paraguay within the textile sector, representing 19% of exports under the regime. Some companies manufacture plastic products such as furniture, bottles, packaging materials, toys, and disposable medical supplies. Chemical companies also produce fertilizers, pesticides, and other industrial chemicals. Companies dedicated to producing pet chews have also set up shop in the country.

In recent years, companies have been established to manufacture non-conventional products such as electric bicycles, scales, gelatin, and synthetic fibers to reinforce concrete structures, among others.

LATAM FDI: Regarding major exports from the maquiladora industry in Paraguay, which products contribute significantly to the country’s export economy, and how have export patterns evolved?

Natalia Cáceres Martínez: The main exports of Paraguay’s maquiladoras are textiles, auto parts, food products, plastics, and leather goods. Export patterns have evolved towards greater diversification, increased added value, and exploration of new markets.

The auto parts sector currently represents around 30% of maquiladora exports, becoming a reference sector for the maquila. These companies from Paraguay export automotive and electronic components to Brazil, Argentina, Europe, the United States, and Asia.

The second important sector is textiles and clothing, which represent 19% of maquiladora exports. Paraguay has become an essential supplier of textiles and apparel to countries such as Brazil, Argentina, the United States, and the European Union.

Likewise, the manufacturing of food products has expanded, representing 16% of exports at the end of 2023.

LATAM FDI: What have been the main advantages that the maquiladora industry in Paraguay has introduced?

Among the main benefits that the implementation of this special incentive regime has provided to Paraguay are the following:

  1. Foreign investment for the installation of large industries that have found in Paraguay a place that allows them to shorten their production chains, reduce their costs, and become more competitive in international markets.
  2. The generation of labor, the formalization of employment, and the transfer of technical knowledge.
  3. The diversification of export products, the increase in the productive chain, and the income of net foreign exchange to the country.

LATAM FDI: What are the main attractions for foreign investors? Why choose Paraguay?

Natalia Cáceres Martínez: Without a doubt, Paraguay offers international investors:

  1. The best investment and business climate in the region.
  2. The most competitive tax scheme in the region.
  3. Tax incentives for investment and importing inputs for industrial transformation.
  4. Demographic bonus
  5. Cheapest green energy in the region.
  6. Macroeconomic stability.
  7. Greater ease for opening and closing companies.
  8. Expanded market access with 100% tariff preferences to all MERCOSUR countries, Chile and Bolivia, as well as almost all South American countries. All this and more makes Paraguay one of the most attractive countries in the region for investors.

LATAM FDI: Thank you for answering our questions, and good luck in working to make the maquiladora industry in Paraguay grow and prosper.

Natalia Cáceres Martínez: You’re welcome.  Thank you for the opportunity to address your audience about Paraguay and its maquiladora industry.

 

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