The COVID-19 pandemic is now being seen as an opportunity for certain markets, in particular in Latin America, where investments are coming from the relocation of multinational companies that have been established in Asia.
According to the Inter-American Development Bank, the disruption in the global value chains means a US $70 billion investment opportunity for Latin America, in a year where international trade is expected to grow 8%. Such prolific funding in new projects may also result in 2 million jobs for the region and 40 million square meters of new construction.
Where some only see difficulty, like China, after suffering a US $108 billion drop in exports to the United States during 2021, others glimpse an opportunity to conquer America under a brand-new concept.
“We can talk about ‘friendshoring’ rather than nearshoring, because the United States is eager to do business with its closer commercial allies,” explained Martín Gustavo Ibarra, Advisor to the Board of Directors of the World Free Zones Organization.
Up to 11 countries in the region that signed FTA agreements with the United States can take advantage of this situation, because U.S. companies are looking for lower costs as well as avoiding mishaps with their products.
In this scenario, Latin American free zones can benefit from relocation if they create optimal conditions for business, and follow some trends such as 4.0 Free Zones (E Zones), data center hubs (Cloud Zones), blue economy, and agricultural trade (Agro Free Zones), among others.
The keys to relocation to the Best Free Zones in Latin America
The keys of relocation
The Latin American Free Zones may take advantage of many factors that are driving American companies closer to their headquarters:
- COVID-19 pandemic.
- Commercial blocking from China.
- Global container crisis.
- E-commerce boom.
- Global chip shortage.
- Labor shortage.
- Compliance of UN’s Sustainable Development Goals.
Source: Free Trade Zones Association of the Americas (AZFA)
“Free Zones in Latin America are living their best moment right now,” Ibarra said. How can he back such a bold statement?
Costa Rican Free Trade Zones, for instance, attracted more than US $1,010 million in investments during 2021, with new projects by Intel, Terumo, SAE-A Spinning, and Bayer, which started the construction of a state-of-the-art US $200 pharmaceutical plant in Coyol Free Zone.
Furthermore, Mexico witnessed the birth of 37 parks in 2021, with 7.7 million square meters of new constructions, in the last two years. Likewise, Panama experienced investments worth US $80 million during 2021, with 145,000 square meters of new properties.
On the other hand, Colombia and the Dominican Republic also enjoyed prosperity in their Free Zone Regime, with upcoming projects and renewed benefits for the companies established in such countries.