Ruta Internacional, Km. 11 Monday Tel. +595 61 580-260 - - PowerPoint PPT Presentation

Ruta Internacional, Km. 11 Monday

• Tel. +595 61 580-260

sac@zfg.com.py ; mohamad@zfg.com.py Ciudad del Este, Paraguay September, 2.016

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WHAT IS A FREE ZONE?

It's a recognized worldwide economic regime and used for the development of a country, the Free Zone it's a defined part of national territory, where does not apply the common customs legislation. The Free Zone is a good tool used by various corporations around the world to facilitate the production and the logistics with destination to exports, and optimize financial resources for any kind of international business. Within this restricted area of Condominium of Sheds of the Free Zone the procedures are faster, the payment

• f taxes is more simplified, to facilitate, promote and to strengthen the commercial activities, industrial and of

the services, mainly for export. There are no restrictions of economic character, such as import quotas, previous licenses or others. Bureaucracy is minimal for installation and operation of a company, and the introduction of machines, products and raw material, from anywhere in the world or even of the Country. There are more than 500 Free Zones around the world. Worldwide success examples are: Colón - Panama, Manaus - Brazil, Tanges - Morocco, Iquique - Chile, Florida - Uruguay, JAFZA - Dubai and many others.

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THE ZONA FRANCA GLOBAL OF PARAGUAY S.A.

The Zona Franca Global is a Condominium of Sheds where can develop any activity commercial, industrial or services in the Normal Regime, as well as in the Maquila Regime, or even in the Free Zone Regime. In Paraguay the free zones are ruled by law 523/95, and various regulations and normative. The private company Zona Franca Global of Paraguay S.A. won a public bidding in the year 2.002, and signed with the Paraguayan Government the Concession Agreement and its additives, to promote, develop and explore a Free Zone in Ciudad del Este by the year 2.032, renewable until 2.062. Since then, the Zona Franca Global strives to provide adequate physical spaces for activity and for people, with a good environment for commercial business, industrials and services, with the advantage of the location very close of large consumer centers. The Zona Franca Global is a real case of success, of the project that started from scratch until to be consecrated as one of the mark of the new industrialization in the country.

4 Front view in July 2.016

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BRIEF HISTORY

1995 - Its approved the law 523/95, that creates and authorizes the free zone regime. 2002 - Zona Franca Global wins public bidding, and signed the Concession Agreement with the Government of Paraguay. 2003 - Start of operations on land of 50.000 m2. 2005 - The Government of Paraguay and Zona Franca Global extend the Concession Agreement, to change to a bigger land. 2007 - The ZFG moves and starts working with new infrastructure on land of 400.000 m2 on the route international. 2010 - Installs Fujikura of Paraguay, the first multinational export industry of Paraguay autoparts, to attend "just in time" for Wolkswagen of Brazil (cities of Taubaté, São Carlos, São Bernardo do Campo e Curitiba). Winning paradigms, it’s considered the cornerstone for the beginning of the automotive industry in Paraguay. 2012 - Fujikura inaugurated the second factory in Zona Franca Global, and has 900 employees. 2014 - Start the operation of factories EMDEP (control panels) and ABBA expands its factory (residential sofas).

• Industry Ministry allows Maquila's Regime within the Zona Franca (tax regime of maquila).

2015 - The factory AMERICA 1500 (Deliz Jeans), makes the first export under the Maquila's Regime, from the ZFG.

• Signed the Mutual Understanding Agreement between the (SUFRAMA) Manaus Free Zones and Zona Franca Global.
• Fujikura expands its factories to attend Renault of Brazil (city of São José dos Pinhais).
• It settles the ZM factories (hydro pumps) and Itidai (injected pieces of the aluminum).
• The UIP - Unión Industrial of Paraguay it settles in the ZFG, providing excellent service to the members of Alto Paraná.

2016 - It settles the Koumei factories (luminaires), Bancor (cables), Cia de Cosmeticos Essencia de la Naturaleza, Seven Seas

• Ministry of Finance allows Manufacture of Clothes by the Free Zone Regime.
• The ZFG, signs agreement with the SNPP - National Professional Promotion Service, to train workers for the industries

interested in setting up in Alto Paraná.

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DEFINITION OF BUSINESS:

The Zona Franca Global is an integral center for production, logistics, services and business.

OUR VISION:

Promote the ZFG worldwide, and capture the companies with target on the neighboring markets, makes ZFG

• ne of the companies of great strategic importance for the Paraguay.

OUR MISSION:

Provide adequate infrastructure, equipment and technology, services and the facilities necessary for the proper development of the work of our customers and employees. Generate conditions and a business environment conducive to good development of our customer's works, and explore new opportunities. Support with information and managements to easy installation of the companies. Work by legality and transparency of transactions. Create formal work opportunities in a good environment, with improve for quality of life and contribute to the good economic and social development of the population.

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ADVANTAGES THE INSTALLING IN CIUDAD DEL ESTE - PARAGUAY:

• 1. Availability of executives and professionals with experience in international business.
• 2. Paraguay is a "Country Youth". Availability of young labor hand, with quality and without work vices,

largely with secondary education, of easy training (Strategic Asset).

• 3. Relative availability of electromechanical engineers.
• 4. Lower implications of indirect costs on the social charges, even if the minimum salary is higher.
• 5. Within a radius of 30 km we have 3 international airports: Minga Guazú - Paraguay, Foz do Iguaçu -

Brazil and Puerto Iguazú - Argentina.

• 6. The ZFG it's in a geographical area regarded as the Commercial Capital of South America, which in

itself, for many activities is already a competitive and comparative advantage.

• 7. This location offers the possibility of serving a potential market of 60 million people, in a travel circle of 2

hours by flight or 24 hours by highways (Brazil, Argentina, Uruguay, Bolivia), beyond the waterways of the Paraná and Paraguay rivers and the Itaipu Lake.

• 8. Access to an annual GDP(PIB) of U$3,0 TRI, Mercosul (Brazil, Argentina, Bolivia, Uruguay, Venezuela).
• 9. Pleasant climate, stable geology. There are no major natural disasters.
• 10. Excellent road logistics of round trip to any part of Brazil, by the wide availability of carriers and trucks

(Strategic Asset).

• 11. Relative multimodal logistic Paraná River, Paraguay River, Basin of the Rio da Prata - Atlantic.
• 12. Varied ethnic populations, estimates more than 50 ethnic group in Ciudad del Este (languages).

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MAIN DISTANCES:

Airports in a radius of 30 km: Guaraní International Airport - Paraguay 14 km Foz do Iguaçu International Airport – Brazil 32 km Puerto Iguazú International Airport – Argentina 38 km Ports: Port of Presidente Franco, on the Paraná River 25 km Several ports around Asunción, on the Paraguay River 360 km Port of Paranaguá, access to Atlantic – Brazil 780 km Main Consumers centers: Curitiba, Campo Grande, Londrina – Brazil 600 - 800 km São Paulo, Rio de Janeiro, Porto Alegre, Belo Horizonte, Florianópolis – Brazil 1.000 - 1.200 km Santa Cruz de la Sierra – Bolívia, Buenos Aires – Argentina, Montevideo – Uruguay 900 - 1.000 km Iquique, Santiago – Chile 1.800 km

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COMPETITIVE AND COMPARATIVE ADVANTAGES OF ZONA FRANCA GLOBAL

• 1. Neighbor of a large consumer market, Brazil and Argentina.
• 2. Within the Park of Zona Franca Global, there is a complete administration of customs, DNA, which makes

agile all the customs procedures of transit, introduction, import and export.

• 3. Partners and Users of ZFG, which providing full service of import and export orders, warehousing and

logistics of products, follow-up in government offices.

• 4. Availability of real estate infrastructure for all activities. Available buildings with build quality, water

network for consumption, water network to combat fire, electrical network of the park in medium and low voltage, communication, paving, parking.

• 5. Partners and Users of ZFG, dedicated to construction activity on measure to rent (Build to Suit).
• 6. High availability of electric power with quality at a competitive cost. The Zona Franca Global has a

exclusive feeder of 6MVA from the k-14 substation.

• 7. An high-voltage grid 220KV cuts through the park of Zona Franca Global (future own substation).
• 8. Low operation costs to manufacture and to sell to Paraguay customers or to neighbors countries.
• 9. No loss of origin of the products introduced into the free zone (law.523/95, Art.20 and Decree No.

7068/2006).

• 10. High capacity and reliability, at a reasonable cost, of the consultants associated on the accounting

areas, legal, tax, environmental, for assistance in the investment projects.

• 11. For the year 2.018, a modern office building for professionals and service companies.
• 12. Is simplified contracts and procedures (not bureaucratic). Is quick to start operations.
• 13. Commercial Point well-known in the Corporate world, like all Ciudad del Este.
• 14. Environmental license previously analyzed for almost all type of non-polluting activity.

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• 15. No need to hire the Insurance Policy for Guarantees Customs.
• 16. As an industry settles in Paraguay, you can achieve protection measures specific to their products, such

as differentiate the import tax, advance licenses for similar products and others.

• 17. Issue of Certificates of Origin for products manufactured in the ZFG that comply with the Requirements
• f Origin of Mercosur - ROM, guaranteed by law of free zones, and by the Concession Agreement signed

between the Zona Franca Global and the Government of Paraguay. "The Origin Regime MERCOSUL provides as a general rule: shall be regarded as "Products originating in MERCOSUL," the goods elaborated wholly in the territory of any

• f the States Parties of the MERCOSUL, using materials originating;

goods with those on what his last substantial transformation has been carried out in the territory of any of the State Parties of MERCOSUL, in so far as the CIF value of the inputs imported from third countries does not exceed 60% of the FOB value of the final good (rule of aggregate value for the country less favored that is Paraguay),

• r goods, that in the final product corresponds to it a tariff classification in level of different tariff

position of their inputs (rule of the jump of position). These rules are valid for the product manufactured by any regime that fits a basic productive process, be Maquila, be Free Zone or even by the Normal Regime.

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GENERAL BENEFITS BEING AN USER OF ZONA FRANCA GLOBAL.

• 1. Entire freedom to import and re-export the products in their original form, fractionated, in a new packaging,

and all preparations for sale, to any country or to Paraguay.

• 2. Freedom Import of Raw Material from anywhere in the world without taxes.
• 3. Management and control of stock by distribution channels. All stocked product is stored exempt from

taxes, which will be paid to the extent that it sells to the Paraguayan market.

• 4. Possibility of selling in wholesale or in retail for Brazilian buyers in the RTU regime.
• 5. Exemption from almost all the national, state and municipal taxes (except for services actually rendered).

examples:

• a. Free remittance of profits and dividends to third countries.
• b. All remuneration for services, technical assistance, technologies transfer, loans and financing, rental
• f machinery and equipment.
• c. All the other services from third countries, or between users of free zones.
• 6. When available a user who is dedicated for the activities, issue of the Certificates of Warrant, for the

products stored in the Free Zone.

• 7. Insurance policies at low cost because of the security offered by the park.
• 8. Excellent location and easy direct access to the main highway of the country, the Internacional Route.
• 9. Easy parking and internal movement of the cargo vehicles.
• 10. When necessary, they hire the loading, unloading and movement, with known personnel.
• 11. Business Center equipped to meet 50 people.
• 12. Lower tax when is engaged principally to the export to third countries.

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13. Lower invested capital in stock in the Free Zone, because on these same stock don't pay the taxes. 14. Availability of dozens of International carriers with a flow of cargo vehicles to several parts of Brazil, Argentina, Chile, Uruguay and Bolivia. Logistics facility at competitive price. The Logistics affects your business!

• a. High delivery time prevents to meet satisfactorily the customer.
• b. High logistics cost is difficult, prevents to make money, and there are no why of the business.

15. The best place of Paraguay for your project to be a success, because the product arrives at your customer with satisfactory quality (quality manpower) and in final competitive costs (cost of the finished product and the taxes in the country of consumption). 16. Only place where you can hire rent with longer terms than five years.

PERSPECTIVE:

Considering the new order and dimension of international business, and the business vision more progressive

• f the Government of Paraguay, is the Zona Franca Global, is making investments in the construction of a

complex of warehouses and industrial buildings, with a top quality infrastructure higher than the average. This demonstrates the vision and the confidence of participants as the place of present opportunities, emerging and materializing in many activities. And the greatest proof that the shareholders believe and trust in what we say, is the important investment in the construction and infrastructure.

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IMMEDIATE BUSINESS OPPORTUNITIES:

Autoparts industries for export. Manufacturing industry of plastic resins. Textile and Clothing industry in general for export. Industries electro intensive. Pharmaceutical industries. Materials industries and electro electrical products for export. Automakers motorcycles and other vehicles. Distributors of manufactured, building materials in general for domestic and foreign markets. Hotel service, for the local market. Cargo consolidator and re-embark, providing service to the RTU regime. International Carriage of grain, vehicles, vans. Industry of leather goods (large availability of blue leather). Call Center for languages Japanese, Portuguese, Spanish, Mandarin, Arabic. Commercial software services (ERP, CRM, E-commerce). Consulting for multinational companies (auditors, lawyers, accountants). Reverse logistics of major brands. Packaging industry.

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70.000 M2 OF READY CONSTRUCTIONS + 12.000 M2 UNDER CONSTRUCTION:

Back view in July 2.016

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FREQUENTLY ASKED QUESTIONS:

• 1. What are the government incentives for a large company to install in Paraguay?

a) The taxes of Maquila Law, by temporary admission; b) The import tax exoneration to introduce machines by the Law 60/90; c) The import tax exoneration by the Materia Prima regime; d) The law of Industrial Parks; and e) The economic incentives of the Free Zone Regime.

• 2. Who are some of the customers of Zona Franca Global?

a) FUJIKURA of Paraguay SAIC - Harness manufacturing to VW and Renault; b) DIESA S.A. - Vehicle logistics of Volkswagen, Case machines, Scania trucks; c) OSAC International S.A. - Customs Services, consignment and storage of goods; d) SUNSET S.A. - Sale and logistics of tyres to the Paraguay and Brazil market; e) LOCADORA ATLANTIC S.A. - Construction and rental of measure; f) AMERICA 1500 S.A. - Jeans by the MAQUILA Regime; g) ABBA TRADING SRL. - Sofas and beds box; h) EMDEP S.A. - Panels of control and testing for automotive industry; i) ATLANTICO SA - Distributor PlayStation (Sony) in Paraguay; j) COLISEÈ SRL - Electronic Commerce in general; k) ZM SUDAMERICA - Hydro pumps of pressure; l) ITIDAI SA - Factory of injected of the aluminum; m) KOUMEI SA - Fixtures factory for special projects; n) BANCOR SA - Manufactures of Coaxial Cables.

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• 3. Which taxes pay a Commercial operation, Industrial or Services in the Free Zone?
• a. Import Tax of the introduction of raw material or goods = 0%
• b. IVA (Value Added Tax) = 0%
• c. Services provided or sales among of the users of the free zones in Paraguay = 0%
• d. Export to third countries = 0,5% of the invoice value (U$500 to each U$100,000)
• e. Exportation to Paraguay = 0,5% of the invoice value, and when the annual value of sales to Paraguay exceed in 10% of

total sales, it will pay the annual income tax of 10% on net profits of these sales to Paraguay, with a 70% reduction.

• f. Currently the Mayor of CDE - Ciudad del Este does not recognize the exoneration of the Permit, of the construction tax and
• f the real estate tax, that is, for while to charge these values.
• 4. What are the costs of a normal worker?
• a. The minimum monthly wage since August/16 is G$1.824.055 (U$ 326,00), for daily journey of 8 hours from Monday to
• Saturday. The night time is 30% higher, period from 8 p.m. until 06 a.m.
• b. The additional of overtime daytime is 50%, and 100% for overtime night or holiday.
• c. For the first 5 years of contract the holidays are 14 calendar days. From 5 to 10 years of contract the holidays are 20

calendar days, more than 10 years of contract, 30 calendar days.

• d. Pay the 13th salary in December.
• e. Social Provision (IPS) of 25,5% (16,5% paid by the company and 9,0% deducted from the employee).
• f. Notice issued by the company is 30 days during the first year of the contract, 45 days between 1 and 5 years of the

contract, 60 days for contracts of 5 to 10 years and 90 days for more than 10 years of contract.

• g. Compensation for employment contract termination,15 days of the salary per year of contract.

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• 5. What fees pays the customers who import products stored in the Zona Franca Global?
• a. Importers of Paraguay - They pay all fees that would correspond to pay if they came directly from the origin countries. The

products introduced in the Zona Franca Global do not lose the "origin Mercosul."

• b. Importers from other countries - Both in Brazil, Argentina or any other country, pay normal taxes in accordance with the

legislation of each country.

• 6. Which fees pays the customers who buy products made in Zona Franca Global?
• a. Importers of Paraguay - They pay taxes as if they were produced in Mercosul, without the paying of the import tax.
• b. Importers from other countries - Both in Brazil, Argentina or Uruguay, pay taxes considering the "Certificate of Origin

Mercosul" in general, exempt from the Import Tax.

• 7. Do you need a paraguayan partner to constitute a business in Paraguay?

You don't need to have paraguayan partner. In the companies of type Anonymous Society, where all partners can be individuals or foreign legal entities. Foreign company branch or not. However the directors of the society must have residence in Paraguay (rootedness document). It's usual to have local hired directors, paraguayan professionals or not. See the required documents: http://www.migraciones.gov.py/web/guest/tramites

• 8. What are the interest rates practiced in Paraguay?

With minor variations, the prevailing bank interest and offered to the companies are:

• a. Applications in CDB pay:

2 to 6% (in U$) 6 to 12% (in G$)

• b. Loans charge:

8 to 12% (in U$) 12 to 22% (in G$)

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• 9. It's possible to out loans from abroad?

Yes, there is no impediment to a company hire directly from exterior any loan.

• 10. What is the entrance fees or egress fees for trucks, charged by ZFG?

It is equivalent a "port charges" that ZFG is legally authorized to collect. Starts with the maximum amount of U$ 240/truck, and is negotiated with each customer depending on volume estimate

• perated in a period. The ZFG is working continually to reduce this rate, as the operations of the users increase, thus making

the ZFG more competitive.

• 11. What is the User Agreement fee, charged by ZFG?

The government charges an annual fee of the Concessionaire (Canon). The concessionaire recovers this and other costs with charging a "user agreement fee" to operate under the ZF regime. The ZFG negotiates continuously with the government the reduction or elimination of the Canon, to make ZFG costs more

• competitive. This fee is detailed in annex of Rates and Prices practiced.
• 12. Who manages the condominium of the park where is installed the Free Zone?

Legally the park should be managed by the concessionaire of the Zona Franca Global. The expenses are prorated between the users who occupying spaces, with a 7% administration fee. In July 2.016 it was around U$ 0,15/m2.

• 13. What is the exchange rate parity of dollar with guarani, and as the currency devalues?

In April/16 U$1,00 = G$5.600. Since its inception 1943/October/05 did not remove any zero. The Paraguay has the fiscal stability and monetary highest in Latin America. There was never sudden devaluations. Inflation controlled in 3 to 6% a.a.

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• 14. Can I use other currencies in the Zona Franca Global?

All accounting becomes to Guaraní, but is possible to commercialize in other currencies. In April/16 the Central Banks of the Brazil and Paraguay agreed to make business transactions in local currencies of Reais

• r Guaranies, only missing the regulation to be valid.
• 15. How is the foreign exchange control over foreign trade?

In Paraguay the flow of foreign currencies in cash is free, being that the most accepted the american dollar, the brazilian real, argentine peso and euros. Either companies or individuals can open and operate current account or savings account in dollars or guaranis. When necessary, you can buy or sell dollars in a bank or in a home exchange. The exchange fluctuates based on supply and demand, with few variations. The Central Bank rarely intervenes in the market.

• 16. Who can operate in the Zona Franca Global?

Every individual, company or entity legally established in Paraguay or abroad, can operate in the ZFG in three ways:

• a. As User - by signing the User Agreement with the Concessionaire of Zona Franca Global, to settle and develop its

activities in the Free Zone.

• b. As Consignee - signs an agreement with a User established in the Zona Franca Global, to introduce products in the Free
• Zone. The documents accompanying the cargo is coming all consigned on behalf of the owner of the goods.
• c. In Storage character - one of the services that can provide an User of the Zona Franca Global, is the storage of products

to third parties not users of free zones. In this case the User of the free zone, do invoice and do charges for the storage services provided and other.

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• 17. Which the taxes will be subject to the industry in the Free Zone, when win the contract in 2.032?

If we use an analogy or similarity to what Brazil has offered to Manaus, probably before maturity of year 2.032, the contract of concession of Paraguay's Free Zone will also be renewed for another 30 years. Hardly the Country will waive this condition in favor to another Country Brother. Otherwise IVA 10%, IR 10% for all.

• 18. The Logistics in practice, how to get in (and get out) the loads in the Zona Franca Global?
• By air, to Guarani Airport and terrestrial traffic of 12 km.
• By terrestrial to Foz do Iguaçu and terrestrial traffic of 12 km in Ciudad del Este.
• By maritime to Montevideo or Buenos Aires, Fluvial by river of Plata and Paraguay and terrestrial traffic of 350 to 450

km, depending of the Port.

• By maritime to Paranaguá and terrestrial traffic of 750 km by the Paraná.
• By Fluvial-Maritime Port of Ciudad Presidente Franco, on the Paraná River - at 25 km from ZFG.
• 19. Which are the benefits that the Zona Franca Global has brought to Paraguay:
• a. The first multinational of auto parts that has settled in Paraguay was Fujikura today with 1.000 employees. Copying this

model it came their competitors THN, Yazaki, Sumitomo and Leoni. These five new companies that did not exist in Paraguay, and in 2.016 will employ 10.000 direct workers, formal and quality employment.

• b. The multinationals train their workers and form a training groups in abroad. Is already have Paraguayan workers working

abroad, formed by the companies of the Zona Franca Global.

• c. The Zona Franca Global always seeks clients with stable business, which means stable job.
• d. Multinationals have quality management, from recruitment, training, production procedures, and it animates the
• surroundings. The result in chain is an immeasurable number.
• e. There is no renounces tax in the Free Zone regime. The 0,5% of the tax of free zone, nothing more would be the same

as paying 10% of Income Tax on a net income of 5% of the revenues. In practice there is no exoneration, but the charging of an income tax on an assumed net income of 5% of the revenues. This is a good accounting simplification, valid during all the years of the user agreement term.

• f. The IVA (internal tax) is exempt from any export, whatever the regime.

More informations: http://www.hacienda.gov.py/web-hacienda/index.php?c=543