Maquila is a production system in which companies located in Paraguay can produce goods and services for export. Production is done to order from an overseas headquarters and can be shipped to all countries in the world. Any natural or legal person, national or foreign resident in the country, who is qualified to carry out commercial acts, can operate as a maquiladora.
Law 1,064/97 called Maquila Law, promulgated by Decree 9,585/2000 in Paraguay, has as its executing and regulatory body for maquiladora industries the CNIME – National Council of Maquiladora and Exporting Industries – belonging to the country's Ministry of Industry and Commerce and acts in line with the Mercosur Treaty, with a view to promoting regional development.
The term Maquila itself, which comes from the Arabic Makeil, refers to a unit of measurement and presupposes outsourcing or manufacturing, whose main objective is to attract investors, mainly regional ones, to manufacture their products in Paraguay.
News – Paraguayans have the best economic climate in Latin America
Paraguay is at the top of the list of countries with the best economic climate in Latin America alongside Colombia, according to a survey carried out by the German Ifo Institute and the Brazilian Institute of Economics of the Getúlio Vargas Foundation (FGV). In the last survey, for the month of April, the country's ECI was 135.8. Brazil's index, which is in 9th position, is 82.5.
In 2013, Paraguay achieved the third highest economic growth in the world, with 14.1%. For this year, the outlook is 5.5% to 7%, driven mainly by industry and civil construction. One of the country's bottlenecks currently is the precarious infrastructure. According to a survey by the Paraguayan government, the country needs investments of US$ 15 billion in the sector.
Disadvantages
There is a lack of improvements in airports, highways and electricity distribution lines. With low taxes, the country's revenue is small. Therefore, the government is betting on the so-called Public-Private Alliance to attract investors. The law has already been approved, but needs regulation.
Inspection – Rules and conditions for action
The National Council of Exportation Maquiladora Industries is responsible for monitoring maquilas. Although they have tax advantages, companies need to follow rules strictly. The same amount of imported raw material needs to be transformed into a product and exported. Only 10% of production can be sold on the Paraguayan market, but only after the company completes one year.
When exporting, you must inform the type and quantity of raw material used to manufacture the product. The transformation into a product must be done within one year. All maquiladoras must have a headquarters abroad.
Driven by economic growth that is the envy of its South American neighbors – GDP grew 14.1% in 2013 –, Paraguay is gradually leaving behind the status of Mercosur's poor cousin and becoming a showcase for new investments. One of the pillars of this development are the so-called “maquiladoras”, companies that import parts and components from foreign matrices so that the products can be manufactured (assembled) in Paraguay and then exported.
Understand how the Maquila Law works
The country currently has 60 maquiladoras in the most diverse sectors, of which at least 20 are Brazilian-owned. These are clothing factories, textile industries, plastic factories, auto parts, auto parts and even call centers. Some are mixed in nature and were created from partnerships between Brazilian, Paraguayan and Argentine investors. There are also contributions from Japanese, Koreans and Spanish.
Inspired by Mexican legislation, Paraguay's Maquila Law (nº 1,064/2000) provides tax exemption for importing machinery and raw materials. When the manufactured merchandise leaves the country, the tax charged corresponds to 1% of the value of the export invoice.
Sources: People's Gazette.
