Opportunities in Paraguay’s Automotive Industry

Paraguay is heralded as one of the fastest-growing economies in the region, with steady positive economic development over the last 6 years, and a future forecast of another 3.2% growth. However, little is known about the small inland nation. A business-focussed government has established a number of mechanisms to draw investors into the country. Easy registration processes and tax compliance requirements, and accessible entrance options make Paraguay a country worth looking at for your next business venture. In recent years, positive economic growth has supported a steady increase in disposable income. Coupled with increasing technological developments affecting both old and new industries, new commercial opportunities are surfacing in the Latin American country. One such example is the automotive industry.

Paraguay – Automotive Outlook 

Paraguay’s automobile market hit a record sales high in 2018, increasing 27.1% from the previous year. The country’s strong, steady economic growth is supporting a growing middle class and therefore, a surge in private consumer demand.  Automotive businesses don’t currently represent a major sector in Paraguay’s economy, experiencing a period of dormancy between 2012-14. However, the boom in vehicle sales suggests that Paraguayan and Brazilian automobile and peripheral industries (insurance services, panel beating and car parts) are set to experience corresponding revenue increases. Increased household wealth, government support and international connections offer business opportunities with great potential in this developing industry. Paraguay does, as well, have the opportunity to add another notch to its longstanding and diverse manufacturing outputs. Local auto assemblers are set to benefit as new international models are brought into the country under government efforts to boost car sales. In 2014, Hyundai invested US$40 million in Asunción to establish a number of new plants for part manufacturing. The move has brought 3,000 new jobs to the capital.

An industry with government backing

In late 2017, Paraguay’s government launched an initiative aiming to boost family car consumption, named ‘Auto Familiar.’ This plan is a joint venture with Brazilian manufacturers, and sets affordable pricing of vehicles for families. Under Auto familiar, the country’s National Development Bank (BNF) offers 60-month extended credit loans to buyers for automobiles with a set price US$8,800. These loans offer payments of around US$158 and must be used to purchase family cars. The plan drives uptake of Brazilian- and Paraguayan-assembled vehicles, and has a twofold effect for the local economy. President Horacio Cartes said in a Twitter post “With financing and reasonable prices, the national automotive industry grows and [also] benefits Paraguayan families.” Further to local impacts, a joint venture such as this with regional power Brazil strengthens the bilateral relations between the two countries and paves the way for smooth trade channels.

Wheeling and dealing with Brazil

Neighbouring manufacturing giant Brazil is playing a significant role in supporting Paraguay’s automotive industry, and is cutting deals with the Paraguayan to make cars more affordable for its citizens. The two countries are working together to mutually benefit their automotive and manufacturing industries. Auto familiar is a key project in achieving this. The programme offers around 500 models from 8 international brands, including Fiat (Italy), General Motors (US) and Volkswagen (Germany). Through this initiative, assembly industries in both countries are receiving a boost in business through cross-border trade and increased local demand.

International trade connections

In addition to Brazil, Paraguay is actively seeking trade deals  on vehicles and vehicle parts with other MERCOSUR members Argentina and Uruguay. Paraguayan Foreign Minister Luis Alberto Castiglioni pointed out that it was the only MERCOSUR country that hadn’t established agreements on cars with its partners. Further boosts to the auto industry are on the horizon thanks to MERCOSUR’s finalizing of 20 years of trade negotiations with the European Union (EU). Thanks to a newly-minted trade deal, Paraguay’s automotive industry is set to benefit from increased access to new, powerful partners, and an opportunity to strike further deals on imports from foreign vehicle brands.

Opportunities for business

As is the case in many local and regional industries, Paraguay’s automotive businesses are undergoing a technological makeover. A 2019 industry report identifies a gradual shift towards ‘service-oriented models,’ and that new commercial actors in the industry are placing a greater focus on customer experience and collecting consumer data. Companies working in services, importing parts, auto assembly all have the potential to benefit from an emerging automotive industry in Paraguay. Innovative ‘value add’ technology that supports customer experience throughout the operable life of the vehicle would do well in this flourishing economy, as well.

Latin American EV revolution 

Paraguay is recognized as the greenest place in the world to drive an electric car, showing prime potential to spearhead the region’s developments in electric vehicle adoption. The country’s unique collection of natural resources grant it the opportunity to become a leading adopter and supplier of electric vehicles (EVs) in Latin America. Thanks to its 50% share of the Itaipu Dam (shared with Brazil), the country enjoys a 400% surplus in renewable electricity. It has a great opportunity to power EVs without the use of fossil fuels – a feat currently only achieved by Norway. Businesses and investors should consider the opportunity in clean, green EV manufacturing and technology in Paraguay. Adding to the appeal, the country is a stone’s throw away from the greatest lithium deposits in the world, residing in Bolivia. Cooperation between Bolivian EV battery manufacturers and trading giant Brazil could mean serious commercial success for businesses moving into Paraguay’s electric vehicle industry.

Biz Latin Hub can help you with company formation in Paraguay

At Biz Latin Hub, we provide integrated market entry and back-office services throughout Latin America and the Caribbean, with offices in Paraguay as well as over a dozen other major cities in the region. We also have trusted partners in many other markets. Our unrivalled reach means we are ideally placed to support multi-jurisdiction market entries and cross border operations. As well as knowledge about hiring and recruitment outsourcing in Peru, our portfolio of services includes hiring & PEO, accounting & taxation, company formation, bank account opening, and corporate legal services. Contact us today to find out more about how we can assist you in finding top talent, or otherwise do business in Latin America and the Caribbean. If this article on Paraguay was of interest to you, check out the rest of our coverage of the region. Or read about our team and expert authors.