The Use of Free Zones for the Promotion of the Offshore Industry in MERCOSUR Countries: A Reasonable Choice?

This paper discusses the suitability of using free zones as a mechanism for the promotion of the offshore industry in MERCOSUR countries, both from a legal and a broader policy perspective. From a legal perspective, the paper examines the consistency of the incentives offered by free zones with WTO disciplines and discusses the implications that stem from this for offshore suppliers that operate within free zones. The paper also discusses the merits of using free zones in light of the attributes sought by multinational corporations when choosing an offshore destination and suggests that, instead of offering goods-biased fiscal incentives, governments should focus on improving IT and communications infrastructure, training the local workforce, encouraging research and development, upgrading the legal framework, and securing a business-friendly environment.