The Maquila Regime – ‘de la industria maquiladora de exportacion’, in spanish – is a project of Paraguay, presented by Law No. 1,064/97 (Maquila Law), which, in summary, grants a series of relevant tax benefits to foreigners – individuals or legal entities – who are interested in establishing themselves in the country and are willing to destine their final products or services to exportation.
In a more in-depth explanation, the Maquila Regime aims to welcome foreign companies for the use of labor, inputs, electricity, goods and services of Paraguayan origin and whose final products are intended for sale abroad, in order to generate macroeconomic growth in the country. Avoiding, in this way, competition with domestic companies in the internal market.
In this context, once established in Paraguay, the company – called ‘maquiladora’ – begins to enjoy a series of benefits for it to make these foreign investments in the country. And about these benefits, we can mention the total exemption from taxes on the company’s constitution operations and the import machinery for the production lines.
In addition, after the production/industrialization for commercialization/export, carried out in Paraguay, there is exemption from taxes on exports/imports between Mercosur countries – as defines the Treaty of Asunción, signed between Argentina, Brazil, Paraguay and Uruguay. And in its first article, the Treaty determines the following: “free movement of goods, services and productive factors between countries through the elimination of customs duties and restrictions to the movement of goods and other measures having equivalent effect”.
However, to enjoy the free commerce benefit in the countries of Mercosur, the product will require a Paraguayan Origin Certificate, according to the Economic Complementation Agreement ECA 18 – also signed between Argentina, Brazil, Paraguay and Uruguay – that disciplines the terms of the Origin Certificate of products coming from these countries.
The Maquila Regime is, therefore, the result of a growth planning carried out by Paraguay, through economic analysis of the local law of the Mercosur and its current economic situation in comparison with intrablock possibilities. In an innovative, creative and disruptive way, the Maquila Regime has been proving effective, attracting investments from various sectors, in view of the conservative stance of the other countries of the region.
Finally, although it is necessary to consider several operational aspects for adherence to the Maquila Regime and to the possible transfer of operations of production/imports to Paraguay, this can be a relevant competitiveness differential for companies that operate and/or trade in Mercosur countries – which are increasingly observed by the more diverse sectors of business activity.