3 Things You Didn’t Know About LATAM Free Trade Zones

Globalization is a pivotal mechanism in the modern world, driven by features like LATAM free trade zones. It has enabled businesses to expand their operations into foreign markets, creating and exploiting new opportunities previously constrained in their respective domestic markets. Increasingly, awareness about the benefits of harnessing the international business environment through the process of nearshoring.

Due to misperceptions, some business leaders are reluctant to capitalize upon opportunities such as LATAM free trade zones. Many believe their companies will face problems when dealing with governmental processes and trade bodies – especially when it comes to the trading and manufacturing of goods abroad, or how to legally offer a service while staying compliant.

If you’re a company looking to expand your global operations, continue reading to find out more information regarding LATAM free trade zones and doing business in Latin America. With Biz Latin Hub being the leading provider of back-office services in Latin America, we are here to help you better understand and realize the potential across the continent. Thank you to the executive director of the Association of Free Trade Zones in the Americas (AZFA), Maria Camila Moreno, for assisting in the content of this article.

What are LATAM Free Trade Zones?

A Free Trade Zone (FTZ) is a limited geographical location where a company has fiscal, customs, and international trade incentives. There are a variety of incentives for operating in an FTZ depending on the country, but there are 3 reasons that generally apply to all of Latin America, including:

• Reduced or lower income taxes
• 0% Value Added Tax (VAT)
• 0% on Tariffs

FTZs seek to simplify government restrictions without stripping away governmental authority. However, it still means it might be necessary to pay duties to the country of any of your exported goods. FTZs do not eliminate your obligation to pay duties on the products you export. What they do offer is a strategic place where you can store and manufacture your products and make changes to your inventory with the previously mentioned incentives.

What Incentives Exist for both Goods and Services Providers?

LATAM free trade zones are commonly understood to only benefit businesses that are selling goods. This misconception completely overlooks the numerous services providers operating from FTZs in Latin America including call centers, and even hospitals. Therefore, if you are a service company you too can also benefit from the lower income tax FTZs provide alongside the benefit of not having to pay taxes on any of the equipment you may need to provide your services.

You will find industrial and manufacturing companies in textiles, automobiles, tobacco, agriculture, medical equipment, alongside service companies in sectors that offer subcontracting, hospital services, call center services. A major challenge for any business looking to utilize FTZs is deciding on which country provides the most advantages in their favor. FTZs accommodate a varying range of industries and sectors, with specific FTZs being more optimized under their jurisdiction depending on business activities. It is important to perform due diligence and perform your own research, or contact a regional expert to strategize a successful market entry.

What Advantages do Free Trade Zones Provide?

Aside from the economic incentives that FTZs offer, there are also other benefits that make this economic feature appealing to foreign investors.

• The safety you will feel from operating in an FTZ because of the various levels of security one needs to get through to access the area.
• FTZs fast-tracks your product into the market because of the concentrated and specialized attention your business will get. Every zone has administrators who are equipped to deal with whatever obstacles and challenges that your business might face and are ready to overcome them so that you can get to the market faster.
• FTZs are communities comprised of various affiliates and partners that help manage and see through the process of successfully setting up your service or industry.

If you are looking to start operations in a LATAM free trade zone, it is worth going over to the AZFA website. The non-profit are the leaders on this topic matter and are able to go into far grater depths about how this exciting business opportunity can benefit your company. From there you will discover the most relevant resources and information about free trade zones in Latin America.

FAQs About LATAM Free Trade Zones

Biz Latin Hub can Support you and Your Business in LATAM Free Trade Zones

At Biz Latin Hub, we have vast experience helping investors from all over the world handle their businesses in a variety of LATAM free trade zones. 

We have a multilingual team for legal, accounting, recruitment, and company formation services, ready and waiting to support your business efforts in the Caribbean and Latin America. Rest assured that your legal transactions are in professional hands and will be handled with confidentiality and efficiency.

Reach out to our team to learn more about how we can assist you in doing business in Latin America.

Learn more about our team and expert authors and how they are enabling commercial growth across Latin America.