Nearshoring & Regional Tax Planning: Paraguay, Uruguay & Argentina on the Radar of Brazilian Companies

The phenomenon of nearshoring has gained global relevance mainly from the experience between Mexico and the United States. In recent decades, Mexico has become an industrial extension of the North American market, as companies have moved production steps to Mexican territory to take advantage of the combination of competitive labor, reduced tax burden, cheap energy, robust trade agreements, and geographic proximity that allows for highly efficient logistics.

The creation of NAFTA, now replaced by the USMCA, consolidated this integration by eliminating tariffs and providing regulatory certainty. The result is a binational production model in which a large part of the products consumed in the United States is assembled or finished in Mexico, ensuring competitiveness for American companies without alienating them from their final consumer.

This example began to be observed with growing interest by Brazilian entrepreneurs, especially after the worsening of the tax burden in Brazil. In the current Brazilian scenario, the institution of new taxes, such as the Tax on Goods and Services (IBS), the Contribution on Goods and Services (CBS) and the Selective Tax (IS), whose sum projects an increase in the effective tax burden on several sectors, combined with the increase in import taxes in strategic sectors and, more recently, the approval of the taxation of dividends,  which profoundly changed the cost structure of national dividend companies, in addition to the increase in the presumption of profitability rate of companies classified in the presumed profit.

The well-known Brazil Cost[1], composed of deficient logistics, high regulatory complexity, and high labor charges, has become even more onerous. Consequently, the number of Brazilian companies that are considering moving part of the production or administrative chain to neighboring countries with more competitive tax structures is growing, replicating, on a South American scale, the logic that unites Mexico and the United States.

Among the countries most used in this regional movement, Paraguay, Uruguay and Argentina stand out, each with its own characteristics, specific advantages and well-defined operational niches. Paraguay, for example, stands out as the case most similar to Mexico, especially due to its aggressive tax competitiveness, with a corporate income tax (IRE – Impuesto a La Renta Empresarial) of 10% (ten percent) on net income[2], taxation of dividends (IDU – Impuesto a los Dividendos y a las Utilidades)[3] of 8% (eight percent) and a Value Added Tax (IVA – Impuesto al Valor Agregado) of 10%[4] (ten percent).

Even more relevant is the Maquila Regime, a tax regime that allows export-oriented companies to pay a single tax of 1% (one percent) on gross export revenue. Other benefits granted by this regime are: (i) the suspension of taxes related to the import of inputs intended for industrialization, enabling manufacturing to be oriented almost entirely to the Brazilian market; (ii) exemption in the remittance of dividends abroad; and (iii) some exemptions from customs and municipal fees.

This combination makes Paraguay especially efficient for operations in which companies import components from other countries, such as China, carry out assembly, finishing or packaging in Paraguay and later export the final product to Brazil within Mercosur rules. It is important to highlight that in order for the company to enjoy these benefits, it is essential that the goods produced incorporate the so-called “Paraguayan element”, that is, at least 40% (forty percent) of the added value of the product must originate in Paraguay or in the regional economic bloc of Mercosur, and the remaining 60% (sixty percent) may come from countries outside the region.

Paraguay has become, therefore, the natural destination for light assembly, textile, electronics, auto parts, furniture, cosmetics, and housewares industries, which seek to reduce the tax burden and maintain proximity to the Brazilian consumer market.

In addition, Paraguay also has free zones that attract Brazilian investments, since they have a wide range of incentives aimed at attracting commercial, industrial and service activities. Companies that operate exclusively with exports, when installed in free zones, are subject to reduced taxation, consisting of a flat tax of 0.5% on gross export revenue destined to third countries, as well as several other incentives.

It is important to note that products originating from the Paraguay Free Trade Zone, as well as in other free trade zones, will not have Mercosur certification of origin, being subject to Import Tax, on sales occurring within the Economic Bloc.

Uruguay follows a different path, since outside the special regimes, the country works with Income Tax from Economic Activities (IRAE) of 25% (twenty-five percent) and Value Added Tax (VAT) of 22% (twenty-two percent), [5]values that are not very competitive when compared to those of Paraguay. However, within the Uruguayan Free Trade Zones, a set of exemptions is in place that transforms the country into one of the safest and most sophisticated environments in South America for service operations and corporate structures.

Users of Uruguayan free zones are exempt from income tax on income generated there, do not pay estate tax on assets located in the zone, and operate on a VAT-neutral basis for transactions abroad[6]. This makes Uruguay a natural hub for the export of services, such as technology, BPO, telecom, administrative management of multinational groups, financial services, destined for customers in the United States, Europe or even Brazil.

The country also stands out as a logistics hub, allowing companies to import goods from China, keep them stored in a free zone, and later re-export them to various markets with legal certainty and regulatory predictability. Uruguay is still traditionally used as a platform for regional financial and patrimonial structures, given its institutional stability and its territorial taxation, which concentrates taxes on Uruguayan source income.

Argentina, on the other hand, offers a more complex and selective scenario. The country has a corporate income tax (Impuesto a las Ganancias) that reaches 35%[7] (thirty-five percent) and a standard Value Added Tax (VAT) of 21%[8] (twenty-one percent), values that, by themselves, do not constitute a comparative advantage. However, Argentina has mature industrial parks, qualified labor and special regimes, such as the one in Tierra del Fuego and incentives aimed at the knowledge economy, which can make certain operations advantageous, especially when they involve complex industrial chains, such as auto parts, chemicals, petrochemicals, more sophisticated electronics or machinery and equipment.

Argentina, therefore, does not stand out as a low-tax country, but rather as a suitable destination when the type of product requires industrial infrastructure that Paraguay cannot yet supply. In these situations, companies use the country as a productive platform for exports with higher added value to Brazil, the United States or Europe, taking advantage of Mercosur agreements and installed technical capacity.

This movement is not abstract, several Brazilian companies have already migrated part of their operations to Paraguay, Uruguay or Argentina. The most emblematic case is that of Lupo, which since June 2025 has been operating in Paraguay under the Maquila Regime, producing socks, basic garments and underwear at a significantly lower cost than in Brazil.

The company expanded its operation and transformed the neighboring country into a permanent part of its industrial strategy, a choice made after the change in the Brazilian rules for taxation of tax incentives for investments by Law 14,789/2023. The Riachuelo Group has also maintained a relevant apparel operation in Paraguay since 2010, with a significant reduction in industrial costs.

Also part of the migratory flow of Brazilian companies to Paraguay are names such as Buddemeyer, a traditional manufacturer of bed, table and bath articles from Santa Catarina, the Marisol and Malwee groups, in the textile sector, as well as JBS, one of the largest animal protein companies in the world, among others.

When comparing taxation and the operational vocation of each country, the picture becomes clear: Paraguay is ideal for industrial assembly operations, importation of Asian inputs and re-export to Brazil. Uruguay, especially via free zones, is the safest destination for services, financial operations, corporate structures, IT and re-export logistics hubs, including goods coming from China and destined for the United States, Latin America or Brazil itself. Argentina, on the other hand, becomes a valid option for complex industrial operations and production chains that require advanced infrastructure and highly qualified labor, working well for value-added industrial exports to Brazil, the USA and Europe.

This set of alternatives shows that nearshoring is not only viable, but is already underway in the surroundings of Brazil. The approval of the taxation of dividends, added to the increase in the indirect burden resulting from the consumption reform, creates an even greater incentive for Brazilian companies to rethink the location of their production and administrative chains.

Just as the United States benefited from integration with Mexico, Brazil can structure a regional network of distributed production, taking advantage of the fiscal, logistical and regulatory advantages of its neighbors. Although Mercosur does not have an agreement as broad as the USMCA, regimes such as the Paraguayan Maquila and the Uruguayan Free Trade Zones already perform similar functions in practice: they increase competitiveness, reduce costs and offer legitimate planning options in an increasingly demanding tax environment.

The trend is clear, Brazilian companies, pressured by a growing tax burden and high regulatory complexity, will continue to seek alternatives that are close geographically, politically accessible and fiscally lighter. In this new scenario, Paraguay, Uruguay and Argentina occupy complementary roles within the nearshoring strategy aimed at the Brazilian market and regional and global exports, allowing Brazil to function as a central consumption market around which different production platforms gravitate. It is a movement that has already begun and that tends to grow rapidly in the coming years.

Bibliographic reference:

ARGENTINA. Law No. 20.628, of 27 dic. 1973, which established the regime of Impuesto a las Ganancias. Available at: https://www.argentina.gob.ar/normativa/nacional/ley-20628-17699/texto. Accessed on: 15 Dec. 2025.

ARGENTINA. Law No. 23,349, of Aug. 7. 1986, which regulates the Income to Value Added (VAT). Available at: https://archivo.consejo.org.ar/Bib_elect/mayo03_CT/documentos/L23349.htm. Accessed on: 15 Dec. 2025.

BRAZIL. Constitutional Amendment No. 132, of Dec. 20. 2023. Amends the National Tax System. Official Gazette of the Union: Brasília, DF, 21 Dec. 2023. Available at: https://www.planalto.gov.br/ccivil_03/constituicao/emendas/emc/emc132.htm. Accessed on: 15 Dec. 2025.

BRAZIL. Law No. 14,789, of Dec. 29. 2023. Provides for the tax treatment of investment grants. Official Gazette of the Union: Brasília, DF, 29 Dec. 2023. Available at: https://www.planalto.gov.br/ccivil_03/_ato2023-2026/2023/lei/L14789.htm. Accessed on: 15 Dec. 2025.

SANTANA, Carlos Ribeiro. PARAGUAY AS A DESTINATION FOR BRAZILIAN PRODUCTIVE INVESTMENTS. Tempo do Mundo Magazine, RTM, n. 30, dez. 2022 Brasília: IPEA. Available at: https://repositorio.ipea.gov.br/server/api/core/bitstreams/cdce1b25-9990-483f-9948-4c06b72d7093/content. Accessed on: 15 Dec. 2025.

MERCOSUR. Common Market Council (CMC). Decision No 8/1994 on the treatment of free zones and special customs areas. Available at: https://normas.mercosur.int. Accessed on: 15 Dec. 2025.

MERCOSUR. Common Market Council (CMC). Decision No. 33/2015, on the regime applicable to free zones and Mercosur rules of origin. Available at: https://normas.mercosur.int. Accessed on: 15 Dec. 2025.

OBSERVATORY OF THE BRAZIL COST. Brazil Cost. Available at: https://custobrasil.org.br/custobrasil/. Accessed on: 14 Dec. 2025.

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT (OECD). Global value chains and nearshoring. Paris: OECD. Available at: https://www.oecd.org/trade/global-value-chains-and-nearshoring/. Accessed on: 15 Dec. 2025.

PARAGUAY. Law No. 6,380, of Jan. 1. 2019. De modernización y simplificación del sistema tributario nacional. Asunción: Dirección Nacional de Ingresos Tributarios (DNIT). Available at: https://www.dnit.gov.py/web/portal-institucional/w/d-ley-n-6380-19. Accessed on: 14 Dec. 2025.

PARAGUAY. Decree No. 523, of 1995. Autoriza y establece el régimen de Zonas Francas. Asunción: Poder Ejecutivo. Available at: https://zonafranca.com.py/leyes/PT-DECRETO-N-523.pdf. Accessed on: 15 Dec. 2025.

PARAGUAY. Decree No. 3,107, of September 30, 2017. 2019. Regulations for Value Added Value (VAT) established in Law No. 6,380/2019. Asunción: Presidencia de la República. Available at: https://impuestospy.com/impuestos/decreto-n-3-107-2019/.Accessed on: 14 Dec. 2025.

PARAGUAY. Decree No. 3,110, of Dec. 19. 2019. Regulates the Tax on Dividends and Utilities (IDU) established in Law No. 6,380/2019. Asunción: Presidencia de la República del Paraguay. Available at: https://www.dnit.gov.py/documents/47797/47809/Decreto+N%C2%B0+3110-19.pdf. Accessed on: 14 Dec. 2025.

PARAGUAY. Decree No. 9,582, of July 19. 2000. Reglamenta la Ley nº 1.064/1997 (Régimen de Maquila). Asunción: Poder Ejecutivo. Available at: https://www.bacn.gov.py/leyes-paraguayas/3770/decreto-n-9582. Accessed on: 15 Dec. 2025.

REUTERS. JBS returns Paraguay with $70 million investment, including plant purchase. Available at: https://www.reuters.com/markets/commodities/jbs-returns-paraguay-with-70-million-investment-including-plant-purchase-2025-10-02/. Accessed on: 15 Dec. 2025.

UNITED STATES TRADE REPRESENTATIVE (USTR). United States–Mexico–Canada Agreement (USMCA). Washington, D.C.: Office of the United States Trade Representative. Available at: https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement. Accessed on: 15 Dec. 2025.

URUGUAY. Law No. 15.921, of 17 Dec. 1987. Regula el régimen de Zonas Francas. Available at: https://www.impo.com.uy/bases/leyes/15921-1987. Accessed on: 15 Dec. 2025.

URUGUAY XXI. Tax system. Available at: https://www.uruguayxxi.gub.uy/pt/quero-investir/guia-do-investidor/sistema-tributario/descarga/. Accessed on: 14 Dec. 2025.

WORLD BANK. North America manufacturing integration. Washington, D.C.: World Bank Group. Available at: https://www.worldbank.org/en/topic/trade/publication/north-america-manufacturing-integration. Accessed on: 15 Dec. 2025.

Beatriz Giansante Moquiute is a lawyer specializing in Tax Law, a member of the law firm TM Associados. Graduated in Law from Mackenzie Presbyterian University, she is registered with the OAB/SP and has a postgraduate degree in Tax Law from the Pontifical Catholic University of Rio Grande do Sul (PUC-RS). He works predominantly in tax consulting and litigation, focusing on tax planning, tax reform, tax transaction and topics related to corporate taxation, also participating in the production of technical articles and legal analysis in the area.

Raphael Oliveira Ferreira de Toledo Piza is a tax lawyer, economist and partner at TM Associados, with extensive experience in the tax area. He holds a degree in Law from Mackenzie Presbyterian University and in Economics from IBMEC São Paulo, as well as a master’s degree in Accounting and Actuarial Sciences from the Pontifical Catholic University of São Paulo (PUC-SP). He has a solid professional background in tax consulting, tax planning, credit recovery, transfer pricing and tax litigation, having previously worked in large auditing firms and law firms, advising national and multinational companies in complex tax structures.

Leonardo Theon de Moraes is a lawyer working in the areas of Business and Tax Law and managing partner of TM Associados. Graduated in Law from Mackenzie Presbyterian University, with an emphasis on Business Law, he has been a member of the OAB/SP since 2012. He holds a postgraduate degree and specialization in Business Law and Mergers and Acquisitions from the São Paulo Law School of Fundação Getulio Vargas (FGV-SP), a master’s degree in Political and Economic Law from Mackenzie Presbyterian University and a degree in Structural Issues in the Management of Law Firms from Fordham University. He participated in the Management and Strategy course at G4 Educação and is currently attending the General Management Program (GMP) at Harvard Business School. He is the author of books and legal articles, lecturer and professor in the undergraduate, MBA and Executive Education programs at FIPECAFI and PUC Minas. He is a member of the São Paulo Lawyers Association (AASP), an exclusive member in Tax Law of IR Global for Brazil, an exclusive member of Mergers and Acquisitions of Global Law Experts for Brazil, a member of the Private Companies Committee and the Law Firm Management Committee of the International Bar Association (IBA), a member of the International Association of Young Lawyers (AIJA),  President of the International Law Commission of the OAB/SP – 33rd Subsection, President of the State Council of Commercial Law of FEDERAMINAS and national representative of the Young Lawyers Committee of the International Bar Association. He is recognized by Leaders League as a reference in the areas of Business Law and Tax Law, due to his strategic and technical performance in structuring business operations, corporate reorganizations and highly complex tax planning, with a focus on mergers and acquisitions, corporate law and business contracts.

[1] A set of structural, bureaucratic and economic obstacles that raise the operating costs of companies in Brazil, compromise productivity and make it difficult to attract investments.

[2] Law No. 6,380/2019. Article 21. Tasa. The tax on the IRE will be 10% (diez por ciento), on the granddaughter rent.

[3] Law No. 6,380/2019. Article 33. Tasas, La tasa IDU will be del:

1. 8% (eight per cent) when the dividend perceptor, utilities or returns are a physical, legal or resident entity in the country.
2. 15% (quince por ciento) cuando el perceptor de los dividends, utilidades o rendimientos se una persona física, jurídica o entidad no residente en el país, incluidos los obtenidos por la casa matriz del exterior.

[4] Law No. 6,380/2019. Article 90. Tasas. g) 10% (diez per sciento) for all cases.

[5] Title 10: Impuesto al Valor Agregado (IVA), regulated by Law No. 18.083, of December 27, 2006 (Diario Oficial 18.01.2007), which establishes the general VAT rate at 22% in Uruguay.

[6] Law No. 15,921/1987. Article 19.

 Users are exempt from all national taxes, created or created, including those in which specific exemption is required by law, respect for the activities that are developed in the same way, even though these are realized in the framework of this law, according to the terms of the authorization offered according to the provisions in article 16.

[7] Ley 20.628/1973 Art. 69 – Capital companies, por sus ganancias netas imponibles, quedan sujetas a las siguientes tasas:

1. a) Al treinta y cinco por ciento (35%):

[8] Law 23.349/1997. Article 28 (1) – Alicuotas. General and differential. The tax will be of the average weight (21%).