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Paraguay – Automotive OutlookParaguay’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 backingIn 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 BrazilNeighbouring 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 connectionsIn 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 businessAs 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 revolutionParaguay 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.
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