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The Central American Group – Hello, welcome to another installment of the Central American group’s podcast series in which experts discuss topics related to doing business in Costa Rica, El Salvador, and the rest of the region. We have conversations with very knowledgeable people that are both internal and external to the organization. Today we have a wonderful young lady joining us. She’s from the Association of Free Zones of the Americas. She’s the director, and her name is Camilla Moreno. How are you today, Camilla?
Camila Moreno– Thank you, Steven, thank you very much for the invitation. And thank you for saying that young lady.
The Central American Group – Well, it’s true. Could you give us a little bit of background information on yourself just so that the listeners can have some familiarity with your biography?
Camila Moreno – So my name is Camila Moreno. I’m from Bogota, Colombia. Currently, I’m based in Bogota, and I have worked for the past 14 years attracting foreign direct investment. I have a master’s degree in international law and economics from the University of Bern. I lived for two years, three years actually in China, in Beijing. For the past seven years, I have been working for the Association of Free Zone of the Americas.
The Central American Group – Can you tell us about the organization? For instance, when was it founded? What is the purpose of the group?
Camila Moreno– The Association of Free Zones of the Americas was created 24 years ago by a group of entrepreneurs that operate free trade zones, mainly from Central America and South America from countries like the Dominican Republic, Guatemala, Costa Rica, Uruguay, and Colombia. These entrepreneurs held annual meetings to discuss different topics regarding their businesses. The group continued to grow until 2011 when it was decided to create legally the association. Although it’s based in Bogota, we currently represent 25 countries. Actually, among our members, we have Free Trade Zones, Ministers of Industries and heads of Associations of Free Trade Zones, National Associations of Free Trade Zones, and trade consultants.
The Central American Group – As you may know, I have experience working with free zones and working with industrial developments that are outside of free zones. Perhaps you could tell us what the benefits companies should consider when they’re deciding whether to be in or out of a free zone. What type of benefits are there?
Camila Moreno – Great question. As you might expect, this is the most frequent question that we receive from the investors. It’s our job to give them all the information. You have, of course, all the industrial parks. Free Zones of the Americas have very good real estate and infrastructure. The difference between Free Trade Zones and ordinary industrial parks is that you have benefits, you have incentives. Regarding the three main ones that we can talk about in this podcast are the income tax, that is, preferential income tax, zero VAT, no tariffs for imported goods.
The Central American Group – Can you give me a little bit of insight on your feelings with regard to a discussion that the US government is having? The Biden administration is currently working internationally to attempt to establish a minimum global corporate income tax rate. From my perspective, I’m not in favor of this, I believe that every country should be able to compete as it sees fit. Do you have any thoughts on this?
Camila Moreno – That’s a very, very interesting question. To think, as you mentioned, every country has its own rules. Right now, after the pandemic, after all the China-US trade war, and after the situation on the Suez Canal, the companies are really looking at where to move. That is, where they’re going to establish their next production process or their services. Each country has a lot of incentives for potential investors. A global minimum corporate income tax sounds like a very romantic idea, but I don’t know how practical it is going to be or if governments are going to be in favor of it. I definitely think that each country is going to have its own set of incentives. Preferential income tax rates are very big incentives for the free trade zones in the Americas and for attracting companies. I don’t think it will be well received if there’s another government telling you that you need to raise your corporate income tax to a higher rate. This is going to create a lot of noise. Finally, companies that have already invested in the free zones in the Americas are not going to be happy.
The Central American Group – I think it’s rather impractical. That topic aside, what are the services that you offer to members of your organization?
Camila Moreno – Well, we have two main objectives, the first is the promotion of the free trade zones in the Americas so that more investors see them and want to invest in them. The other is to defend, as you just mentioned, and as you were asking, what do you think about this initiative.
We have a lot of initiatives. Governments usually want to change the rules for the investors. We’re objective, and we provide a service to these governments. I say governments because we work closely with the various Ministries of Trade and Industry. We need to talk and communicate with the ministers of finance. These are the officials that usually want to decrease the incentives and raise the percentage of the income and other corporate taxes. As for the association, we work with all of the member governments to explain to them what happens if rules are changed for the investor. Some officials say, “we’re going to increase the income tax, and we’re going to decrease benefits because we’re going to receive more money and create a bigger budget for the government. We have seen that it creates completely the opposite set of circumstances. Companies leave the country, and they look for other nations where taxation is more favorable for their business.
The Central American Group – We see something along those lines happening in countries like the US. Recently, a major automotive company canceled a project in the United States. I think that the reason why this was done was because of the announcement of raising corporate income tax. That aside, however, in terms of activities of free zones of the Americas, we know that there’s a number of different activities that can take place in free zones. Maybe you can give us an overview of those?
Camila Moreno – Of course, what’s found in the free zones of the Americas? They have logistics operations, shared services, including for, BPO. They have call centers and also have manufacturing, of course. We see the production of things like textiles and furniture, as well as any other class of manufacturing that you can imagine. So those are the three main areas that I can mention today: manufacturing, logistics, and services.
The Central American Group – I find what you say to be very interesting. I’ve dealt with industry throughout my career. But recently, I’ve been talking with the operators of a free zone in Uruguay. They do all types of back-office things. I would imagine that a lot of our audience thinks that free zones of the Americas are just about manufacturing. But as you pointed out, you know, it’s quite a few activities that can actually take place in free zones.
Our audience has a particular interest in Central America. And with that in mind, could you tell us a little bit about your activities, specifically as they relate to Central America?
Camila Moreno – Of course. Central America is also a very important market for us. I’ll give you some numbers for the audience, that will realize make them realize how important free zones of the Americas are. Fifty-six percent of the total exports of the Dominican Republic go out of the Free Trade Zones. In Costa Rica, six out of 10 new jobs created in the formal sector of the economy are in Free Trade Zones. Thirty-eight percent of the global GDP of Costa Rica is from Free Trade Zones by the businesses that operate in them. So definitely Central America is a big market for Free Trade Zones. In Nicaragua, for instance, more than 150,000 formal jobs are in Free Trade Zones. In El Salvador, for example, there are maquilas, and manufacturing and textiles are also very, very important to the country’s economy. Furthermore, in Panama, there are actually five different regimes. All of these countries in Central America have Free Trade Zones. And they’re extremely important for each of their economies. Actually, if you see a map, and you can go inside our website, you will see a lot of points in our investor, bap, a lot of points. And all the points mainly are in Central America and Colombia.
The Central American Group – You mentioned your website earlier. Our listeners are an inquisitive group of people. If you could provide the Free Trade Association of the Americas URL, I will include this in the transcript of our conversation. But if you could provide the URL of the website, I think that’d be helpful.
Camila Moreno – Thank you. Thank you for that. In addition to our main website, we have another one now that you mentioned, which is very, very interesting for the investors which is called relocatelatam.com It was one of the initiatives that we created last year after we realized everything that was going to go on after the pandemic. This is a specialized website with all the inventory of lots and offices and warehouses of the free zones of the Americas.
The Central American Group – That’s a pretty comprehensive bit of information. You’ve got a lot of members. If listeners have further questions that they would like to ask you, how would they get in contact?
Camila Moreno – Well, you can search me on LinkedIn by Camilla Moreno.
The Central American Group – Thank you very much for joining us today. And we wish you and your organization success now and in the future.
Camila Moreno – Thank you, Steven, for the invitation, and thank you to the Central American Group.
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