An example of what I mean:
For a lot of this track it sounds like Paco has a synth effect on his bass, but that isn't that relevant for this percussion effect.
What he is doing is muting or damping with his left hand and using the right to act as a tom. The movement of his hand up and down the fretboard gives a tonal change (fractionally) but this is basically a percussion technique.
When trying to replicate this, don't worry about where your right hand is, concentrate on the tapping with fingers and the damping with the heel of your palm.