The main objective of this study is to analyze the opportunities and supply chain allocations of niche industries in Taiwan’s allied countries in Central and South America, and to encourage investors from Taiwan to invest in these countries. The four selected industries include the “textile and garment industry,” “agriculture and agricultural product processing industry,” “metal or plastic processing industry,” and the “tourism industry”. The “Diamond Model” presented by Professor Michael Porter is the main analysis tool.
First, the business opportunities in the textile and garment industry are surging due to the tariff preferences of the CATFA-DR agreement, and Taiwanese investors are able to invest in the manufacturing of upper and midstream materials to enhance the vertical integration effect of the industry. By means of the tariff preferences provided by the US government, six Central American countries have been able to maintain the competitive advantages of their products in the US market.
Secondly, Central and South American countries have possessed an abundance of agricultural products and a ready supply of labor to develop agriculture and the related processing industries.
After analyzing the longitudinal trade data and tariff reduction timetable of CAFTA-DR, we suggest that melons, cane sugar, juice, canned food and cigars be seen as potential items for investment.
Third, metal or plastic processing is considered to be the potential niche industry in view of the continued economic growth in Central America. Based on their mature technologies and production efficiency, Taiwanese manufacturers could consider investing in this industry and in that way tap into the regional market.
Fourth, the tourism industry has served as the pillar industry in the economic development of Central and South America, especially the Caribbean countries. Due to the ongoing improvements in infrastructure and the regulatory framework on the part of the governments, the tourism industry will continue to grow and provide many investment opportunities within the supply chain that currently depends on imports.
In terms of South America, Paraguay, the only country allied with Taiwan in this area, is an important springboard to the regional market due to its location and relaxed rules of origin compared with other MERCOSUR member countries. Moreover, this study refers to four potential niche industries for the reference of Taiwanese enterprises, namely, “unrecorded CDs,” “cloth dyeing,” “plastic materials for packaging,” and “vegetable and fruit processing.”
To sum up, in view of the improvements in the economy and the opportunities derived from regional integration, Central and South American countries could be the perfect stepping stones for Taiwanese investors in the regional market. However, it is important to consider the industries that lean upon the supply chain, with the first priority being the procurement of materials locally and the application of resources provided by the Taiwan government, and only then focusing attention on capturing the emerging market opportunities.