Latin America is a diverse and opportunity-rich region, but when it comes to starting a business, the differences between countries can be substantial. Entrepreneurs often underestimate how much tax pressure, labor costs, and bureaucracycan affect profitability and operational freedom.
This article offers a practical comparison between Paraguay and three major Latin American economies — Brazil, Argentina, and Mexico — focusing on the factors that matter most when opening and running a company.
Taxation
Paraguay
Paraguay has one of the lowest and simplest tax systems in the region.
- Corporate Income Tax: 10% flat
- Personal Income Tax: 10%
- VAT (IVA): 10%
- Territorial taxation: only income generated in Paraguay is taxed
This structure offers clarity, predictability, and strong long-term planning advantages.
Brazil
Brazil has one of the highest tax burdens in Latin America.
- Corporate taxation is effectively around 34%
- Complex indirect tax system (federal, state, municipal)
- Ongoing VAT reform creates transition uncertainty
- High compliance costs
Brazil can be attractive for market size, but taxes and administration are heavy.
Argentina
Argentina combines high taxes with frequent regulatory changes.
- Corporate tax: 25%–35%
- VAT: 21%
- Additional local and turnover taxes
- Capital controls and regulatory volatility
Tax planning in Argentina often requires constant adjustments.
Mexico
Mexico sits between Paraguay and South America’s high-tax countries.
- Corporate tax: 30%
- VAT: 16%
- More structured and predictable than Argentina
- Still significantly heavier than Paraguay
Paraguay is clearly the most competitive for low-tax structures and international business planning.
Company Formation & Legal Formalities
Paraguay
- Incorporation usually takes 30–45 days
- Low minimum capital
- 100% foreign ownership allowed
- Simple corporate maintenance
Brazil
- Multi-step incorporation at federal, state, and municipal levels
- Higher notary and legal costs
- Slower timelines (often several months)
Argentina
- Formal incorporation with notaries and registries
- Ongoing reporting requirements
- Regulatory changes increase complexity
Mexico
- Clear but formalized incorporation process
- Moderate setup time
- More paperwork than Paraguay, less than Brazil
Paraguay is faster and less formalistic, especially for foreign founders.
Labor Costs and Employment Flexibility
Paraguay
- Low minimum wages
- Employer social security approx. 16–17%
- Mandatory 13th salary, but overall labor cost remains low
- Flexible employment framework
Brazil
- Employer costs often exceed 28–30% of gross salary
- Mandatory FGTS contributions
- Strong labor protections and litigation risk
Argentina
- Employer contributions around 24–26%
- Mandatory 13th salary
- Highly rigid labor system
- Expensive dismissals
Mexico
- Employer contributions roughly 15–18% (varies with caps)
- Moderately flexible labor framework
- More balanced than Argentina and Brazil
Paraguay offers the lowest total employment cost and flexibility in the comparison.
Bureaucracy & Ongoing Compliance
Paraguay
- Fewer recurring filings
- Lower accounting and legal costs
- Less aggressive enforcement environment
- Streamlined administration
Brazil
- Heavy monthly compliance
- Sophisticated digital tax systems
- High reliance on accountants and tax advisors
Argentina
- Frequent reporting
- Administrative complexity
- Higher operational friction
Mexico
- Moderate bureaucracy
- Formal compliance requirements
- Manageable but not lightweight
Paraguay minimizes administrative drag, especially for small and medium-sized businesses.
Comparison Table
| Paraguay | Brazil | Argentina | Mexico |
| Corporate Tax | 10% | ~34% | 25%–35% | 30% |
| VAT (standard) | 10% | Complex / transitioning | 21% | 16% |
| Tax System | Territorial | Worldwide | Worldwide | Worldwide |
| Employer Labor Cost | Low (~16–17%) | High | Very high | Medium |
| Hiring Flexibility | High | Low | Low | Medium |
| Bureaucracy Level | Low | Very high | High | Medium |
| Setup Speed | Fast | Slow | Medium | Medium |
| Foreign Ownership | 100% | 100% | 100% | 100% |
Which Country Is Best?
Paraguay is particularly well suited for:
- International entrepreneurs
- Holding companies
- Service and consulting businesses
- Digital and remote-first companies
- Cost-efficient regional structures
Brazil and Mexico are stronger choices when:
- A large domestic market is essential
- Manufacturing or logistics scale is required
Argentina can be relevant for market-specific opportunities but is rarely chosen for tax or operational efficiency.
Conclusion
When comparing Paraguay with Brazil, Argentina, and Mexico, Paraguay stands out for its simplicity, low taxes, affordable labor, and reduced bureaucracy. While larger economies offer scale, Paraguay offers something increasingly rare in Latin America: clarity, predictability, and efficiency.
For entrepreneurs prioritizing cost control, operational freedom, and long-term planning, Paraguay is one of the most compelling jurisdictions in the region. Ask an expert