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Geoeconomics | South America
A growing number of Brazilian companies are relocating part of their production to Paraguay, attracted by an aggressive tax regime and significantly lower labor costs. This movement, driven by tax reform in Brazil, is reshaping the Mercosur industrial landscape and presents a new competitive paradigm for Spanish companies with interests in the region.
A new industrial dynamic is taking shape in the heart of MercosurBrazilian companies from sectors as diverse as textiles, automotive, and food are establishing manufacturing operations in Paraguay...in a strategic move to reduce costs and recover profit margins. This exodus, which began years ago with pioneering players such as the packaging manufacturer Grupo Wyda or the logistics company Fadel, has intensified recently with the arrival of giants like Lupo (clothing) and Döhler (textiles), and the active evaluation of others such as Adere (adhesive tapes) or Proeletronic (electronics).
The main catalyst for this trend is known as "Maquila Regime" Paraguay, a simplified tax system that allows export-oriented companies to pay a single tax of 1% on locally added valueAdditionally, the regime allows for the duty-free import of machinery and raw materials and the tax-free repatriation of profits and dividends. This attractive tax framework contrasts sharply with the current situation in Brasilwhere the ongoing tax reform is eliminating state tax incentives, forcing companies to seek new ways to maintain their competitiveness.
Paraguay's appeal isn't solely fiscal. Direct labor costs are a determining factor. "Labor expenses end up being almost 30% lower in Paraguay", it states Oscar Mersán de Gásperi, president of the Paraguayan consulting firm M360Some estimates, such as that of Roberto Carvalho, executive director of Grupo Wyda...raise that savings to 50%. According to data from M360Of the 363 companies that operate under the maquila regime, approximately 70%, or 254, are of Brazilian origin.
A new operations center for Mercosur and a challenge for Spain
This phenomenon transcends the bilateral relationship and positions Paraguay as an emerging low-cost production hub within the South American bloc. For Spanish companies, this reconfiguration presents a dual strategic analysis. On the one hand, it poses a direct competitive threat: Brazilian rivals operating in the same international markets will be able to offer more aggressive prices by reducing their production costs. On the other hand, it opens an opportunity for Spanish multinationals with a presence in the region, which could consider Paraguay as an alternative or complementary base of operations to optimize their own supply chains and access the market on advantageous terms Mercosur.
The decision LupoThe company that invested nearly 30 million reais in a hosiery plant in 2025 illustrates this calculation. Carlos Alberto MazzeoThe company president stated that the objective is "to strengthen competitiveness against imported products, especially from ChinaMazzeo clarifies that the Paraguayan plant "was not created to replace any existing plant in operation in Brasil", but to "add production capacity" and meet the growing demand for production for other brands (private label) with greater competitiveness.
Logistical challenges and feasibility analysis
Despite the growing interest, which has led companies like Cacau Show, Bauducco and even multinationals like Ajinomoto After exploring the options, relocation is not a universal solution. Experts such as Guilherme Rocha, partner at the law firm Raphael Miranda AdvogadosThey warn of excessive euphoria and point out that viability depends on each sector. Logistical complexity, the need for skilled labor, and still-developing infrastructure are critical factors to assess.
A case cited by Rocha It was that of a client who produces natural juices, who concluded that double transport Brasil-Paraguay-Brasil The need for a complex cold chain made the operation unfeasible in terms of both cost and final product quality. However, the trend seems to be consolidating, extending to higher value-added sectors. The paper mill's macro-project ParacelWith an investment of $2.800 billion, it has in turn attracted timber companies such as Sudatiwhich will be located in its free trade zone under an even more favorable tax regime: a single tax of 0,5% on income for 30 years. Economic and political stability, comparatively greater than in other neighboring countries, is cited as a key factor consolidating Paraguay as a long-term industrial investment destination.
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