This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 7/23/2019

 

Overview

Paraguay offers an interesting alternative for assembly/distribution operations with attractive investment incentives (tax breaks, duty free import of capital goods, and unlimited repatriation of capital) and the lowest factor costs (especially hydro-generated electricity) in the region.  The government has been pushing for the development of this sector, which it sees as an alternative to the informal economy of Paraguay’s cities on the border with Brazil and Argentina.

Sub-Sector Best Prospects

There are few restrictions on the type of product that can be produced under the maquila system.  The combination of relatively low labor and electricity costs makes Paraguay suitable for a variety of manufacturing industries. 

Opportunities

Paraguay has a unique advantage under the Mercosur agreement that allows products to be marked as “made in Paraguay/Mercosur” with a minimum amount of value that must come from the region (Mercosur) of only 40 percent.  The remaining 60 percent could be from any other country in the world.  Once labeled as “country of origin Paraguay/Mercosur,” the product may be re-exported to any Mercosur country tax free (in Paraguay, these products pay a one percent tax over the value-added in Paraguay).  For example: an automotive spare part that is only 60 percent complete could be imported into Paraguay (tax free) where components from Argentina, Brazil,  Uruguay, or Paraguay are added in order to complete the product for sale.  Once the product is finished, it could be re-exported into any Mercosur country paying only a one percent tax.
 
However, although Paraguay is an active Mercosur member, Brazil and Argentina regularly find non-tariff reasons to block Paraguayan goods from entering their markets, especially in certain industries.  Maquilas providing necessary semi-finished inputs for factories in Brazil or Argentina (such as auto-parts destined for automobile factories in those countries) will find less resistance. 

Web Resources

Paraguayan Export & Investment Promotion Bureau
Paraguayan Maquila Industry Council
Paraguayan Ministry of Industry and Commerce
U.S. Embassy Asuncion

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