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Brazilian Companies Are Outsourcing to Paraguay — Here’s Why

Reuters has released a new report revealing that Brazilian companies have increasingly moved to Paraguay since 2013. 

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This month, for example, Brazilian toy maker Estrela opened a new production plant in Hernandarias, a small Paraguayan town that shares a border with Brazil. 

“Paraguay has important competitive advantages: cheap energy, labor flexibility and low social charges on wages,” Estrela chief executive Carlos Tilkian told Reuters. 

“In Brazil, this would be much more expensive.”

Estrela isn’t the only Brazilian company that has found a new home in Paraguay — 42 companies in sectors ranging from footwear to auto parts built factories in Paraguay last year, Barings Investments reports.

Over 400 companies have sent representatives to evaluate outsourcing plans since 2014. 

In 2015 alone, Brazilian corporations invested US$101 million in Paraguay, Reuters also reports. This accounts for more than one-third of the Brazil’s total foreign investment of US$260 million. 

Since right-wing Paraguayan President Horacio Cartes took office in 2013, the small South American country has been dubbed “Latin America’s China.” The moniker makes reference to larger countries like Brazil and Argentina using Paraguay as a source of cheap labor and imports. 

Cartes instituted a reform that allows foreign exporters to pay taxes below 10 percent while excluding them from customs tariffs. The incumbent leader has also cracked down on trade unions across the country, making it harder for workers to win better wages and working conditions. 

Since Cartes took power, the number of foreign manufacturers in Paraguay has nearly tripled, Paraguay’s Central Bank reports. Over 100 of the 126 foreign manufacturers currently in Paraguay are Brazilian-owned. 

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Paraguay President Becoming More Authoritarian, Opposition Says

Cartes’ neo-liberal policies that cater to multinational elites have been accompanied by increased authoritarianism. 

The head of the Liberal Party, Paraguay’s largest opposition organization, told EFE this week that Cartes is marching full speed toward “authoritarianism” by trying to introduce a constitutional amendment allowing presidential reelection, which is banned by the country’s constitution.

If re-elected, Cartes plans to continue privatizing Paraguay’s economy to allow more foreign companies to exploit the country’s low wages and lax labor laws. 

Article source: http://www.telesurtv.net/english/news/Brazilian-Companies-Are-Outsourcing-to-Paraguay--Heres-Why-20170224-0021.html

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