Chilean companies see Paraguay as new South American China

RIO DE JANEIRO, BRAZIL – Paraguay is viewed by Chilean entrepreneurs as a place to start new businesses, with a strong domestic market rebounding as it leaves the pandemic behind, and with an emerging and active middle class, consuming goods and services that Chilean companies can provide.

Chilean-Paraguayan Chamber of Commerce director Carlos Medina stressed Chilean investors’ preferences in areas such as food, low-cost housing and services.

“Paraguay will be the new China of South America, a true manufacturing cluster. Chilean companies want to soon settle in Paraguay, a close and friendly country to develop companies focused on exports,” Medina said.

He added that the country is not only of interest for the agribusiness sector, but also for textile manufacturing, auto parts, building materials and pharmaceuticals.

Attractive for investment

As for the reasons why Paraguay is attractive for Chileans, the organization’s representative mentioned the macroeconomic stability achieved after two decades of a serious and continuous fiscal economic policy, a reliable banking system and a predictable, stable and favorable tax scheme for foreign investment.

“While populism seeks to convince us that indiscriminately raising taxes is the solution to social issues, Paraguay is offering foreign investors the region’s lowest rate, as taxes stand at 10%, both in Value Added Tax (VAT), profits and individual income,” Medina emphasized.

Chile considers that levying reasonable taxes has an impact on reducing tax evasion and allows companies to grow, invest and create new jobs. “Let’s not forget that generating formal jobs again will be one of the challenges in the post-pandemic period,” he added.

Lifting quarantine for foreigners

Despite the appreciation for Paraguay, there is a reality that somewhat discourages Chileans, and although it is understandable due to the health concerns of the pandemic, the country’s delayed mass vaccination campaign is discouraging the flow of foreign investors, Medina said.

“Our organization gets calls every day from medium-sized companies that want to do business and set up in Paraguay, companies that generate direct jobs. However, they are discouraged from boarding a plane when they know that they will be quarantined for 5 days in a hotel. We are confident that a negative PCR test and full vaccination will soon be sufficient for us to reach Asunción as soon as possible,” he said.

Trade relations

Paraguay is a producer of quality foodstuffs at competitive prices. In addition, it is geographically close. As for the products imported by Chile, red meat remains the star, as Chile is the country purchasing the largest volume of Paraguayan beef.

Up to July 31 this year, some 83,700 tons were shipped to Chile for a value of US$414.2 million, with an increase of 65.5% in volume and 95.1% in value over the same period in 2020.

As a trade organization, it supports the efforts of the Paraguayan Meat Chamber (CPC) and the Paraguayan Rural Association (ARP) to increase presence of local meat in restaurants and hotels, which are in a rapid process of total opening.

Medina emphasized the growth of supply with quality breeds such as brangus and braford, for which Chileans are willing to pay more, so it will be important for the Paraguayan industry to dispute this segment with Argentine, Uruguayan and American competitors, since 40% of expensive cuts are sold in hotels and restaurants.

Paraguay also sells rice, vegetable oils, soybean feed for animal nutrition and other balanced products to the trans-Andean country, but there are significant opportunities in the textile industry, building materials, manufacturing and poultry and pork meat. And according to new trends, biofoods and seeds with benefits for human health such as chia and sesame have much room to grow in the coming years.

Chile’s exportable supply to the Paraguayan market is focused on the traditional shipments of copper, steel and wine, but there is also a significant market for prefabricated wooden houses (environmentally sustainable), fresh fruit, frozen salmon, potatoes, engineering services and manufacturing.

Antofagasta, a stepping stone to Asia

In a similar context, Medina mentioned the efforts to make Antofagasta the great port of departure for Paraguayan products to Asia-Pacific countries. This huge economic and commercial zone is the great present and future market for foodstuffs exported by Paraguay.

It is worth noting that Antofagasta, the main port in northern Chile, where copper and lithium – the world’s new oil – are shipped, provides Paraguay with all shipping logistics to Asia. Along with the Paraguayan Bonded Warehouse in the terminal and the forthcoming Paraguayan Free Trade Zone, conditions are ideal for building business and investment opportunities.

Finally, Medina also highlighted the Paraguayan government’s commitment to building the Bioceanic Route, which he considered to be the right decision.