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While Paraguay Attracts Industrial Giants With Low Taxes and Stability, Brazil Sinks Into Deindustrialization. Weighty Companies Like Guararapes and Camargo Corrêa Have Already Established Themselves In The Neighboring Country. What Is Needed For Brazil To React and Prevent This Industrial Exodus?
In recent years, a silent but impactful movement has been redefining the industrial landscape in the South America.
Brazilian companies, many of them giants in their sectors, are crossing borders to establish themselves in Paraguay.
But what makes the small neighboring country such a fertile ground for industry? And why is Brazil, with its economic potential, failing to retain these companies?
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Brazilians’ disposable income after basic expenses has fallen to its lowest level in 15 years. Only 21% of their income remains for the entire month, and those earning a minimum wage are left with a meager R$ 340 to live on, while credit card interest devours what’s left.
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Toyota surprises the automotive world by planning three new factories and initiating an industrial expansion that could redefine its global production in the coming years.
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An agreement between the EU and Mercosur could lead Brazilian companies to produce in Paraguay to pay less taxes and export more to Europe.
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The world’s largest manufacturer of gummy candies has definitively pulled out of Brazil, closed production in Bauru, laid off 150 employees, and now promises to supply the country with dwindling stocks, while the true reason for the abandonment remains a mystery that the company refuses to disclose.
This phenomenon reveals a combination of economic, political, and social factors that is transforming Paraguay into an emerging industrial hub.
According to journalist Moacir de Melo from the Planeta Água portal, the numbers are impressive and the trend shows no signs of slowing down.
In 2015, according to the National Confederation of Industry (CNI), at least 42 Brazilian companies had already transferred operations to Paraguay.
By 2025, this number had surpassed 180 industries, including heavyweights like Guararapes (owner of Riachuelo), Buddemeyer (bedding, table, and bath items), and the Camargo Corrêa Group (Yguazú cement factory).
What Attracts Brazilian Industries To Paraguay?
The answer can be summarized in one word: competitiveness. Paraguay offers an extremely favorable environment for business, especially for industry.
The country has a Value Added Tax (VAT) fixed at only 10%, while in Brazil companies face an avalanche of taxes, such as IPI, ICMS, ISS, PIS, COFINS, and others, which combined can exceed 35% of the final cost of a product.
Moreover, Paraguay does not tax fortunes held abroad, has simplified labor legislation, and offers generous tax incentives.
The cost of labor, for instance, is about 40% lower than in Brazil.
According to Moacir de Melo, this creates a true “Chinese cost” in South America, with the advantage of geographical proximity to markets like Brazil.
Political Stability and Strategic Incentives
Another important attraction is the social and political stability of Paraguay.
Recent governments, conservative and pro-market in profile, have worked to create a reliable and streamlined legal environment.
This includes security in the transport of goods, the creation of strategic industrial hubs, and a policy that incentivizes exports.
Companies established in Paraguay have easier access to international markets, including the European Union, thanks to the country’s inclusion in the Generalized Preference System (GSP).
The Paraguayan government is also dedicated to transforming the country into a textile and auto parts center in Latin America.
These sectors have attracted significant investments, creating jobs and boosting the local economy.
And Brazil, Where Does It Stand?
While Paraguay advances, Brazil faces challenges that seem insurmountable in the short term. Deindustrialization continues to accelerate, and the high tax burden discourages internal investments.
Complex labor legislation, combined with bureaucracy and the lack of structural reforms, puts the country at a disadvantage compared to its neighbors.
Moreover, the individual micro-entrepreneur (MEI) model has been growing as an alternative to formal unemployment but faces criticism.
According to Moacir de Melo, most of the around 20 million MEIs in Brazil do not have a structured business plan, which limits the economic impact of this model.
Another structural problem is Social Security, which consumes almost half of the federal revenues.
Administrative and tax reforms remain stalled, and when implemented, could result in the highest VAT in the world, according to experts.
What Can Be Done?
To reverse this scenario, Brazil would need to adopt measures such as:
- Reduction of the size of the state to alleviate the tax burden.
- Administrative and tax reforms that prioritize efficiency and simplification.
- Incentives for large-scale entrepreneurship, going beyond the focus on MEIs.
- Facilitation of exports and imports, to integrate Brazil more competitively into the global market.
- Investments in education and professional training, preparing the workforce for modern industrial demands.
Unfortunately, as highlighted by Moacir de Melo, these initiatives still seem distant from the national political agenda.
Meanwhile, Paraguay is consolidating itself as a viable alternative for Brazilian industry, offering a model that combines low cost and high efficiency.
A Warning For The Future
The industrial exodus to Paraguay is a direct reflection of Brazil’s structural flaws. If nothing is done, the country risks losing even more relevance in the economic landscape of Latin America. Is there still time to reverse this trend?
Infelizmente, por mais que gostaria de estar errado, o Brasil vai demorar muito ainda, para se desenvolver de vdd, não depende de governos de direita ou esquerda, nosso povo, a principal razão desse esculacho todo, qdo nos tornarmos uma nação, e só aí sim, iremos crescer de vdd, duvido muito, que aconteça logo, um povo criado com esmolas, acostumado a receber benefícios, achando que é de graça, não vai mudar tão cedo, o que não falta são vozes e ex., mas ninguém se importa
Não acho que a culpa seja do povo. Entendo que nos falta é um plano de país, prioridade para a educação, formação de pessoas mais qualificadas. A escola pública está completamente largada. Isso não é um problema de qual governo, mas dos Estados e Munícipios principalmente, pois começa na escola fundamental. Poucos projetos do legislativo para fomentar educação, pequisa e parcerias entre escolas e empresas. Partidos apenas interessados em mais fundo partidário e acesso à recursos do orçamento sem qualquer compromisso com prestação de contas. Na minha opnião precisamos de 2 coisas: Movimento Faça o que é Certo e uma cultura de cada eleitor acompanhar o que está fazendo o candidato que elegeu. Mas aí voltamos ao tema da Educação. Mas a quem isso interessa?
E muito fácil transformar os trabalhadores em eficiências e só o governo priorizar em especificação de trabalhadores em profissionais do ramo de qualquer indústria como por ex:muitas escolas profissionais vontade de aprender não falta só falta incentivo dos governos e indústrias
Com as características do governo atual, tudo tende a criar cada vez mais uma elite economica, pouco se importando se trabalhadores estarão, significativamente, sendo explorados sem moderação. Esta historia já conhecemos bem…