Paraguay faces the opportunity of nearshoring

The trade conflict between the U.S. and China, the covid-19 pandemic, and the recent war in Ukraine have reconfigured global value chains (GVCs) and warned of the risks of relying on single suppliers for some products, which can lead to interruptions in the supply of inputs and unexpected cost increases.

In addition to these geopolitical risks, there is growing concern about the environmental impact of trade and, in particular, the carbon footprint of products.

Global companies are taking steps to align an offer of closer sourcing options or nearshoring to ensure greater resilience to future disruptions and reduce their environmental impact by shortening transit distances.

This rearrangement of GVCs presents a unique opportunity for Paraguay to attract new investments, generate more jobs, strengthen its participation in some value chains and make inroads in others.

Paraguay is one of the best-positioned countries in Latin America and the Caribbean to take advantage of these trends. It has one of the most open and dynamic economies in the region.

In addition, it has a stake in several GVCs thanks to its comparative advantages, which include competitive labor costs, geographic and cultural proximity to large South American markets, attractive investment incentive laws, energy abundance, and macroeconomic stability.

Opportunities to attract new investments within the framework of the reconfiguration of GVCs are found in various sectors: forestry, textiles, agri-food, pharmaceuticals, auto parts, and knowledge-based services.

In the case of forestry, the country already has investments that will modify its export pattern by diversifying forestry products with the potential to expand into specialized services.

The country’s strategic location close to Brazil’s industrial forestry south and Argentina’s productive north is key.

The textile sector is the main Latin American supplier to Brazil (and the third worldwide) in consolidated brands with a very competitive cost structure and proximity logistics.

Paraguay can consolidate itself as a regional hub and, at the same time, diversify its production in input niches.

The agri-food export sector, on the other hand, is consolidated with 74% of exports. With agricultural frontiers expanding, mainly in the Western Region, the country will continue to increase its production volume.

The auto parts sector has also consolidated as the main export product under the maquila regime.

Although it is focused on the assembly of electrical wires and cables, it has the potential to expand into other wiring components and motors.

These are just a few examples of Paraguay’s potential to attract value-added investments.

Many of these opportunities will be made available to international investors at the “Invest in Paraguay” forum, organized by the Paraguayan government and the Inter-American Development Bank, on September 8 and 9 at the Conmebol Convention Center.

The forum will review world trends in production and investment, the opportunities offered by the country, and specific investment projects and offer a business and networking roundtable. The occasion could not be more timely.

With information from La Nación