A new groundbreaking analysis from EY, titled *Free Zones: The ecosystem that redefines investment in the region*, has underscored the rapidly growing economic importance of free trade zones across Central America, Panama, and the Dominican Republic, positioning the bloc as the leading nearshoring destination for global businesses in Latin America. The research reveals that together, these three markets hold 77 percent of all free trade zone operations across Latin America, a concentration that has cemented their status as the region’s primary hub for companies looking to relocate production closer to North American and European consumer markets. Aggregate data from the study shows that free trade zones across the broader region already generate over $60 billion in annual export revenue and support more than 3.2 million formal jobs, figures that reflect the sector’s outsized contribution to regional livelihoods and economic output. In the Dominican Republic specifically, the analysis finds that the free trade zone regime delivers economic value equal to seven times the total value of the tax incentives the government extends to the sector. This outsized return has helped the country build one of the most resilient and high-performing free trade zone ecosystems in the region, driving growth across a diverse portfolio of key industries including medical device production, general manufacturing, tobacco processing, textile manufacturing, and cross-border international services. Beyond strong export performance, the Dominican Republic also stands out for its ability to generate high volumes of formal employment, a major social and economic win for a developing market looking to reduce informal labor. The report notes that the free trade zone model across the region has undergone a profound structural shift in recent decades. Where the model once attracted investment almost exclusively through generous tax breaks, today its appeal stems from far more strategic advantages: it delivers enhanced operational resilience for global supply chains, streamlined logistical efficiency that cuts shipping times and costs, and access to a growing pool of specialized, skilled local talent that meets the needs of advanced industries. While the Dominican Republic leads in overall scale and economic return, other markets in the region have carved out distinct competitive niches. Costa Rica, for example, tops the region in operational sophistication and export value-add, with nearly 60 percent of the country’s total exports originating from its free trade zones. Its ecosystem is anchored by high-growth, high-value sectors including advanced medical device manufacturing, high-tech industrial production, electronics assembly, and global business services. Panama, meanwhile, has steadily consolidated its position as a specialized strategic logistics hub, where free trade zones function as critical regional platforms for international freight management, bulk storage, and global product distribution. Industry observers note that the strong performance outlined in the report positions the region to capture even more nearshoring investment as global companies continue to diversify their supply chains away from more distant manufacturing hubs.
Free trade zones generate up to seven times the value of the incentives granted.
