Uruguay’s largest free zone operator Zonamerica SA, which hosts over 350 companies, plans to break ground on more than $100 million in real estate projects through next year as it bets stressed global supply chains will boost the country’s appeal as a regional hub. 

Those projects include $18 million in new offices and warehouse space as companies like German power tool-maker Einhell Germany AG and Brazilian retailer Lojas Renner SA supply their South American operations from Zonamerica, chief executive officer Martin Dovat said.

“The breaking down of international supply chains that were very ‘just in time’ strengthens the regional distribution concept,” Dovat said in an interview at his office in Montevideo. “Having inventories closer to consumers, who are the people you have to serve, is a greater necessity.” 

The sprawling international logistics web that emerged in the 1990s has come under stress from the pandemic, China’s zero Covid policy, and the war in Ukraine. As costs to move goods across the globe rise, Zonamerica is betting that Uruguay could help add to the regional offices and distribution centers multinationals have opened in recent years.

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Thanks to the country’s stable economy, tax breaks and proximity to Argentina and Brazil, Uruguay’s free zones have captured a lot of that business with more than 1,000 firms including Finnish wood pulp maker UPM-Kymmene Oyj and India’s Tata Consultancy Services Ltd exporting goods and services for $5.3 billion in 2019, according to a report by local think tank Ceres. Firms operating from Zonamerica accounted for almost $2.2 billion of those exports.

Zonamerica is receiving more inquiries from Chilean, Peruvian and Brazilian firms with the latter seeking a “strategic hub” to serve Spanish-speaking Latin America, Dovat said.

Dovat also wants to boost his free zone’s competitiveness by building homes next to Zonamerica where more than 10,000 people work. Zonamerica plans to start a $50 million housing joint-venture next year and is seeking to rezone land for a separate 20-hectare community development that will include residential, commercial and educational real estate, he said.

“It’s a project where we are talking about more than $40 million just for infrastructure,” said Dovat in reference to the community project. “We would be the master developer.”