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Free trade zones have evolved from a tax incentive mechanism into a strategic ecosystem that is redefining investment in Latin America, according to an EY analysis.
Currently, the region has more than 800 operational free trade zones and over 10,000 companies operating within them, generating exports exceeding US$60 billion and more than 3.2 million direct and indirect jobs.
In countries like Costa Rica, this system allows for above-average salaries, reflecting the increasing sophistication of talent and operations.
One of the most significant findings is the high concentration of this model in Central America, Panama, and the Dominican Republic, which together account for 77% of these zones, solidifying their position as the main hub for production relocation in the hemisphere.
“Free trade zones are transforming the region’s economic geography, connecting countries with deeper and more resilient value chains”, said Antonio Ruiz, Managing Partner of Tax & Legal at EY Central America, Panama, and the Dominican Republic.
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The study highlights that the value of the model has changed structurally, as it no longer resides solely in tax incentives, but also in its capacity to offer operational resilience, logistical efficiency, and access to specialized talent.
“Free trade zones promote more flexible business structures, facilitating integration with global supply chains and the adoption of new technologies”, explained Alejandra Arguedas, Executive Director of Tax at EY.
At the national level, Costa Rica leads in sophistication and added value, with up to 60% of its exports originating from free trade zones, driven by sectors such as medical devices, advanced manufacturing, electronics, and global services.
The Dominican Republic stands out for its scale and economic return, generating up to seven times the value of the tax incentives granted, within a robust ecosystem of manufacturing, medical devices, tobacco, textiles, and international services, in addition to a high rate of formal job creation.
In this regional dynamic, Panama is consolidating its position as a strategic logistics hub, where free trade zones operate as platforms for logistics, warehousing, international distribution, and services, leveraging their multimodal connectivity and their role as a bridge between markets.
El Salvador, meanwhile, demonstrates an efficient model focused on textiles and apparel, with a strong manufacturing base that represents approximately 11% of GDP, highlighting its significant contribution to job creation in the country.
Guatemala, although with a relatively smaller share of exports from free trade zones, is emerging as a market with high growth potential in the context of nearshoring, with a manufacturing base, especially in textiles, and emerging opportunities for integration into regional value chains.
Taken together, these countries reflect how the region does not compete as a homogeneous bloc, but rather as a complementary ecosystem, where each market contributes different capabilities, from sophistication and scale to logistics and operational efficiency, consolidating Central America, Panama, and the Dominican Republic as the core of new investment in Latin America.
In a context marked by the relocation of supply chains, EY concludes that free trade zones are consolidating their position as the main vehicle for capturing growth without increasing operational risk, positioning Latin America as a key player in the new geography of global trade.
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