Uruguay should copy the Paraguayan tax regime to break the impasse

Uruguay faces chronic economic stagnation, inherited from Batllism and aggravated by decades of state interventionism, suffocating regulations and labor rigidities. While Paraguay is moving forward with a maquila regime that attracts massive investment through a single tax of 1% on value added and total exemptions from tariffs and VAT on imports of raw materials and capital goods, our country is struggling with mediocre growth and persistent unemployment

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It's imperative to copy this successful model right away. Those responsible for this paralysis — unions, the left, the Broad Front and the Multicolor Coalition — have blocked profound reforms, perpetuating an obsolete system that punishes production and rewards inefficiency

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The data is convincing. In 2025, Paraguayan maquiladora exports reached a record of more than 1,309 million dollars, a significant increase compared to the previous year and representing around 69-70% of the country's industrial manufacturing exports. In December 2025 alone, 98 million dollars were exported, 7% more than the previous month

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This sector generates more than 35,357 direct jobs at the end of 2025, with an increase of more than 5,400 jobs compared to the previous year, and is diversified into intangible services that totaled 47 million dollars in exports. In January 2026, maquiladora exports already reached 115 million dollars, 15% more than in the same month of the previous year, consolidating a strong trade surplus

and attracting continued investment.

Paraguay projects GDP growth of 6% in 2025 and 4.2% in 2026, consistently leading the regional ranking according to sources such as ECLAC and the Paraguayan Central Bank. Its economy shows dynamism in manufacturing, services and construction, with inflation converging towards 3.5%. In contrast, Uruguay grew by just around 2.1-2.2% projected for 2026 by organizations such as the UN and private analysts, with estimates that even fall to 1.8-1.9% in some cases. Unemployment rose to 7.4% in January 2026, with 133,000 people unemployed, and inflation remains at levels above 5% in recent averages (around 5.4% in 2025 and 5.2% in 2026 according to forecasts), reflecting instability and lack of

competitiveness.

The Paraguayan maquila regime, regulated by Law 1064/97 and modernized in 2025 by Law 7547, offers clear benefits: a single tax of 1% on domestic value added or export value (the higher of both), total suspension of tariffs and taxes on imports of inputs and machinery, recovery of VAT on local purchases and exemptions that last up to 20 years with the possibility of renewal. This has transformed Paraguay into an industrial and export services hub, attracting global companies and generating quality formal employment

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In Uruguay, Batllism left a legacy of protectionism, inflated public spending and regulations that curb investment. Unions, with their veto power through strikes and irrational demands, artificially raise labor costs, scare away capital and generate structural unemployment. They prioritize sectoral privileges over mass employment and real growth, acting as coercive monopolies

that distort the market.

The left and the Broad Front deepened this model during their governments, increasing taxes, expanding bureaucracy and encouraging clientelism that inflates the State without creating sustainable wealth. Its policies maintained rigidities that prevent flexibility and competitiveness, resulting in stagnation and

talent emigration.

The Multicolor Coalition, in power from 2020 to 2025, has been lukewarm: it prioritizes consensus with the opposition rather than radical reforms, essentially maintaining Batllista interventionism.

It has not dismantled union power or sufficiently liberalized the labor and tax markets, limiting itself to partial adjustments that do not break the cycle of low growth.

Uruguay cannot continue like this. Copying the Paraguayan maquila regime — a 1% tax on exporters, tariff exemptions and total taxes on inputs — would attract investment, multiply manufacturing exports and services, create thousands of genuine jobs and raise our growth to the level of Paraguay. It's time to leave behind Batllism, confront unions and politicians who block progress, and embrace real economic freedom. Prosperity awaits, but only if we act urgently

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