Area: 176,000 km2
Population: 3.5 million
Urban population: 95.5%
Population density: 19.7 people per km2
Population growth rate (change): 0.4%
Capital city: Montevideo
Official language: Spanish
Currency: Uruguayan Peso
Nominal GDP: US $54.6 billion
Real annual GDP growth: 3.1%
GDP per capita: US $16,722.4
Annual inflation rate: 6.2%
Unemployment rate: 7.4%
General government gross debt: 66.2% of GDP
Fiscal balance: -3.5% of GDP
Current account balance: 1.6% of GDP/US $1 billion
Exports of goods to UK: £65 million
Exports of services to UK: £16 million
Imports of goods from UK: £136 million
Imports of services from UK: £9 million
[Source – mostly FCO Economics Unit, Apr 2018]
Uruguay is a small country in the southeast of South America, slightly larger than England. It borders Argentina to the west, Brazil to the north and east, the Rio de la Plata (Silver River) to the south and the Atlantic Ocean to the southeast.
Its landscape is mostly rolling plains and low hill ranges, the highest point being the Cerro Catedral at 514m. There are numerous rivers, a fertile coastal region and over 600 km of sandy coastline. The capital, Montevideo, is located along Montevideo Bay at the mouth of the Rio de la Plata.
The climate in Uruguay is mild and humid (on average 17°C), with warm summers and rainfall throughout the year. Its latitude is between 30ºS and 35ºS and there are four distinct seasons. However, a clear difference exists between the northern and southern parts of the country.
The zone located in the extreme northeast (Artigas, Salto, Rivera) is considerably warmer, with an average temperature between 18-19°C and an average of 1,400 mm of rainfall per year (the typical climate in the most northern part of the country is known as “mild subtropical”).
In the south and east (Montevideo, Maldonado, Rocha, Lavalleja) temperatures are slightly cooler with an average of 16°C and an average yearly rainfall of 1,000 mm (these zones have the characteristics of a “mild maritime” climate).
[Source – mostly Uruguay Ministry of Tourism and Sports]
Uruguay is a stable country. It has strong institutions and performs well on all major transparency and ease-of-doing-business indices.
In 2017, the country celebrated 200 years since Uruguay signed its first free trade agreement (FTA), which was with the UK. Not only did Britain support Uruguay’s independence, but for much of its first 150 years the British played a major role in its economy. British investors developed the agricultural industry (Hereford and Angus remain the breeds of choice) and the accompanying transport infrastructure (railways and ports) to get products to the market. The British also developed meat packing plants, of which Fray Bentos is the best known, and Uruguayan farmers helped feed the UK during both World Wars.
In recent years, Uruguay’s economy has become more resilient, its exports more diversified and GDP has grown at an average of 4.38% between 2006 and 2016.
Uruguay is a founding member of the Mercosur regional bloc (having Brazil, Argentina, Paraguay and Venezuela as partners, although Venezuela has been suspended since 2017), which is currently negotiating a Free Trade Agreement with the EU.
The Uruguayan Government is keen to look beyond its traditional trading partners in the immediate neighbourhood and open up new markets.
The main challenges in the short term are the fiscal deficit and the financing of public investment. To ensure continued economic growth in the medium to long term, Uruguay must address the quality of education, the relative size of the public sector (significant in a population of just 3.5 million), labour regulation and infrastructure gaps.
Contact a Department for International Trade (DIT) export adviser at: https://www.contactus.trade.gov.uk/enquiry/topic for a free consultation if you are interested in exporting to Uruguay.
Contact UK Export Finance (UKEF) about trade finance and insurance cover for UK companies, see: https://www.gov.uk/government/organisations/uk-export-finance. You can also check the current UKEF cover position for Uruguay at: https://www.gov.uk/guidance/country-cover-policy-and-indicators#uruguay.
[Source – DIT/ UKEF/gov.uk]
Uruguay’s political party system is one of the most institutionalised in the world. Citizens choose their government in free and fair elections every five years based on universal and equal suffrage. In 2014 Mr Tabaré Vázquez won a second five-year presidential term (he was previously President from 2005 to 2010). It is the third consecutive term for the left-wing Frente Amplio party coalition. In Parliamentary elections, the Frente Amplio won 15 of 30 seats in the Senate and 50 of 99 seats in the Chamber of Deputies. The party has strong links with the most important labour unions and other social movements in the country. In both 2015 and 2016, the Economist Intelligence Unit’s Democracy Index ranked Uruguay 19th out of 167 countries and it was ranked 18th in 2017. It is the only country in Latin America designated as a full democracy.
Other traditional parties like the Colorado Party and the White Party are also predominant in the political landscape and have governed the country intermittently before Frente Amplio took office in 2005 for the first time in history.
During 2013, Uruguay was in the international spotlight due to its decisions to legalise same-sex marriage, pass the continent’s most liberal abortion law, and become the first nation in the world to legalise and regulate the production, sale and consumption of marijuana.
The Uruguayan Government works hard to endorse the Organisation for Economic Co-operation and Development (OECD) standards. This includes the signing of several tax information exchange agreements, the modification of the bearer shares system (Law 18,930 from 2012) and the relaxation of banking secrecy provisions through the Law of International Tax Transparency, Prevention of Money Laundering and Financing of Terrorism, sanctioned in 2016 and in force in 2017.
In October 2015, Uruguay became a member of the Development Centre of the OECD. This centre functions as a link between the OECD and developing countries, seeking to promote dialogue on several issues such as the contribution of the private sector.
Uruguay was removed from the Development Assistance Committee (DAC) list of official development assistance (ODA) recipients starting 2018, because of its high per capita income, low level of inequality and poverty rates and the almost complete absence of extreme poverty.
[Source – FCO Overseas Business Risk/gov.uk (Aug 2018)]
Business and human rights
The Constitution of Uruguay states that all people have the right to equality before the law, not recognising another distinction between them but that of the talents or the virtues. See: http://www.parliament.am/library/parlamentarizmnor/Uruguay.pdf.
The law also provides for freedom of speech and press, academic freedom, freedom of peaceful assembly and association, freedom of religion, freedom of movement, foreign travel, emigration and repatriation, including the protection of refugees.
Uruguay has ratified all the main international human rights treaties, and the eight core International Labour Organization (ILO) conventions. It has also ratified all four Governance Conventions, which are the most important rules in relation to the operation of the international labour standards system. Finally, the vast majority of the Technical Conventions are also in force.
Uruguay has ratified all international commitments regarding gender equality and women’s rights. Women are represented in many high-profile positions in Uruguay, including politics.
Regarding Sexual Orientation and Gender Identity (SOGI), Uruguay bans SOGI discrimination and guarantees transgender rights. It was the 12th country in the world to legalise same-sex marriage nationwide. In its Penal Code, the provisions related to hate crimes include SOGI as a criterion since 2003 (Law 17.677, Articles 1 and 2). Transgender people possess the right to change their official sex and name since 2009 (Law 18.620). The Marriage Equality Law legalised same-sex marriage in 2013, in addition to raising the legal age of marriage to 16 for both women and men (Law 19.075).
The trade union movement is significant in Uruguay. The main grouping, the Inter-union Plenary of Workers – National Workers Convention (PIT-CNT) – has more than 400,000 affiliates.
Despite economic growth and improvement in poverty and unemployment indexes, and despite being the country with the least inequality in Latin America and the Caribbean, Uruguay does face the challenge of structural gender inequalities in strategic areas for development.
[Source – FCO Overseas Business Risk/gov.uk (Aug 2018)]
Uruguay is a country with a very high Human Development Index (HDI), ranked 54th out of 188 countries in 2016 according to the United Nations (UN). Based on the World Bank’s per capita income measures, Uruguay became a high-income country in July 2013. The inflation rate for 2017 was 6.55%, 1.55% lower than the previous year and the lowest annual record in five years, with further reductions forecasted for 2018 and beyond.
In the past ten years Uruguay’s economy has become more resilient and its exports more diversified. According to the World Economic Forum (WEF), it is the 10th most competitive economy in Latin America and the Caribbean, with a GDP of around US $54.6 billion that has been growing at a faster rate (4.3% per year) than the regional average for several years.
Commodities dominate Uruguay’s exports, principally beef (representing 17% of total exports), soybeans (15% of total exports) and cellulose (8% of exports).
The main British exports to Uruguay include oil products, spirits (mostly Scotch whisky), books, pharmaceuticals, chemicals and heavy machinery. In 2017 the trade balance of goods and services between the UK and Uruguay resulted in a UK trade surplus of £64 million.
The country ranks 125th out of 171 countries (where number one is the most exposed and vulnerable), according to the ‘exposure and response to potential natural disasters’ report as documented in the United Nations’ World Risk Report 2017. See: https://reliefweb.int/sites/reliefweb.int/files/resources/WRR_2017_E2.pdf.
Regarding the country’s energy matrix, the government has encouraged considerable investment in renewable energies (principally wind) to diversify the energy mix and improve Uruguay’s energy security. Over 98% of electricity is now produced from renewable sources.
Foreign direct investment (FDI)
The favourable environment for investment and the good economic performance of the country over the last decade have contributed to Uruguay being a reliable investment destination. With a 4.3% annual average GDP growth in the last decade, this period of strong economic expansion has been characterised by a noticeable increase in the rate of investment of the economy. This is due to greater investment by the private sector, strongly driven by the inflow of foreign direct investment, which is also a driver for innovation. Uruguay’s credit rating was maintained as BBB by Standard & Poors in May 2018 for foreign currency and A-2 for local currency. The perspective remains stable, reflecting Uruguay’s sovereign sustained and balanced growth and the economy’s solid external position, despite still high general government deficits and dollarisation levels.
The country has worked actively to maintain the characteristics that have made it attractive to investors: macroeconomic stability, attractive regulatory framework, transparency and institutional quality. Uruguay does not impose any type of restriction for the repatriation of utilities, notwithstanding 60% of the profits of the foreign companies that are installed in the country are usually reinvested.
The main origins of foreign investment are the countries of the Southern Cone, the United States and European countries. In the same way as it has worked to diversify and open new markets for its exports, Uruguay is keen to attract FDI from the rest of the world, rather than just the immediate region.
Uruguay is ranked 95th out of 190 for ease of doing business by the World Bank, performing particularly well in relation to starting new businesses and fighting corruption. It also ranked in 76th place for competitiveness according to the World Economic Forum (WEF), and 38th for economic freedom (moderately free). Regarding competitiveness, and according to the indicators used by the WEF, Uruguay is above the Latin American and Caribbean average scores in institutions, infrastructure, health and primary education, higher education and training, market efficiency and technological readiness.
The important growth of the country in the last decade is associated with the strong increase in investment. In Uruguay, foreign direct investment (FDI) has reached record levels, which has allowed the country to position itself among the main recipients of FDI. See Uruguay XXI’s value proposition for Uruguayan inward investment at: http://www.investinuruguay.uy/en/ and for their export of goods and services at: http://www.buyfromuruguay.uy/en/.
According to the results of the latest survey conducted by Uruguay XXI in May 2016, the decisive factors for foreign investors in choosing Uruguay were legal security and macroeconomic stability. The managers surveyed expressed a high level of satisfaction with the set-up process (84%) and with the business climate (76%) in the country. Those surveyed also noted the slowness and complexity of other bureaucratic processes and procedures as a challenge to doing business in Uruguay.
Uruguay has a Bilateral Investment Treaty (BIT) with the United Kingdom, which entered into force on 1st August 1997, see: http://investmentpolicyhub.unctad.org/Download/TreatyFile/2372. It aims to promote and protect reciprocal investments between the UK and Uruguay.
In addition to the UK, Uruguay has bilateral investment treaties with over 30 countries. These treaties guarantee foreign investors certain principles such as most-favoured-nation clause, fair and equitable treatment provisions, and clauses linked to expropriation and non-restriction on transfers. They also contain provisions relating to the settlement of disputes, including the possibility of an international tribunal appealed by an investor who has a claim against the State.
A Tax Information Exchange Agreement between the UK and Uruguay entered into force on 20th October 2016. See: https://assets.publishing.service.gov.uk/government/uploads/system/uploads
On 14th November 2016, the Uruguay-UK Tax Treaty: double taxation convention, which was signed on 24th February 2016 entered into force. See: https://assets.publishing.service.gov.uk/
Benefits of the UK-Uruguay double taxation agreement. See: https://www.gov.uk/government/news/benefits-of-the-uk-uruguay-double-taxation-agreement.
Within a reliable institutional environment, with outstanding social and political stability in the region, Uruguay offers a comprehensive regulatory framework to promote investment. This includes:
Tax benefits, free repatriation of capital and profits – through a flexible financial system and a free exchange market – and non-discrimination between local and foreign investors.
Law 16,906 on Investment Promotion and Protection (updated with Decrees 455/007 and 002/012) stating that the foreign investor enjoys the same benefits as the national investor and does not require prior authorisation to settle in Uruguay. For investment projects in any sector of activity presented and promoted by the Executive Branch, it is permitted to exempt from the Income Tax on Economic Activities (IRAE) between 20% and 100% of the amount invested, according to the classification of the project.
Law 18,786 on Public-Private-Partnership (PPP): a public administration entrusts a private person, for a determined period, the design, construction and operation of infrastructure – or any of these benefits – in addition to financing.
Promotional regimes: Free Zones
The law that regulates the Free Zones was updated in January 2018 after 25 years. Some of the changes made were:
Companies settled in Free Zones can provide their services to companies that are established in national territory.
Incomes derived from the exploitation of Intellectual Property rights and other intangible assets, will be tax-exempted if they are generated from research and development activities carried out within the free zones.
Users of Free Zones located in the Metropolitan area, will be able to develop certain activities outside the Free Zone, as long as these complement the main activity of the company.
The Free Zone regulations generally encourage the use of high quality employment, the generation of national value added, the development of high technology and innovation activities, the decentralisation of economic activities and regional development:
Free ports and airports regimes: refers to port and airport bonded spaces, offering special fiscal and customs regimes. It includes the free circulation of goods, not requiring any authorisations and the exemption of any customs duties, taxes or fees to the entered merchandise or goods.
Industrial parks: an industrial park is considered ‘a tract of land developed and subdivided into plots according to a comprehensive plan with or without built-up factories, sometimes with common facilities for the use of a group of industries’.
Temporary admission: this regime allows imports, duty free, for raw material, supplies, parts and pieces, equipment or materials (even software support or IT related) to be used to manufacture goods that will be exported later, either in the condition they were imported, or after being transformed, manufactured or repaired.
Bonded warehouses: is the customs regime through which the goods enter or are kept in a space under private management without payment of taxes – except for appropriate fees – for their later inclusion in a different customs regime, their re-loading or re-exports. Within these warehouses, foreign goods stored in transit may be unloaded and loaded again any time, free of any imports or exports taxes and any domestic tax. Furthermore, they may be stored there for 24 months (non-extendable) and the Mercosur certificates of origin are withheld for up to 180 days, provided the goods are modified at the warehouse.
Solid and reliable institutionalism
Uruguay XXI: Uruguayan Government agency to promote trade and investment. It provides free support and advice to foreign investors. See: https://www.uruguayxxi.gub.uy/en/.
Global Export Services Program: financed by the Inter-American Development Bank (IADB), this program provided information on the opportunities offered in Uruguay for investment, developing the global export services market. See: http://www.smartservices.uy/.
Private Sector Support Unit (UnASeP): under the Ministry of Economy and Finance (MEF), this central unit provides support to the investor – national or foreign – with a view to developing the private sector.
National Development Agency (ANDE): promotes and attracts strategic and proactive investments. See: https://www.ande.org.uy/.
Customs Code (CAROU): regulation introducing various innovations in the customs area. See: https://www.mef.gub.uy/innovaportal/file/5646/2/ley-19276.pdf.
National System for Productive Transformation and Competitiveness: its objective is to promote productive and innovative economic development, with sustainability, social equity and environmental and territorial balance. The first version of this plan (2017 – 2021), is structured by projects in four areas of interest: innovation, capacities development, business climate and internationalisation.
The Uruguay XXI Country Presentation site: https://www.uruguayxxi.gub.uy/en/information-center/article/country-presentation/ has more information on the country brand, investment in and buying from Uruguay, as well as statistical information and reports.
[Source – Uruguay XXI (2018)]
The State plays an important role in the economy, where several areas are monopolised by the government, such as landline telephony and internet services (ANTEL), importing and refining oil (ANCAP), electric power (UTE), water sanitation (OSE) and workers’ compensation insurance (through BSE).
Nonetheless, in recent decades, private sector competition has been allowed in sectors that were traditionally monopolised by the state. Also, the Build-Operate-Transfer (BOT) form of project financing is sometimes implemented, meaning private entities receive a concession to construct, design, operate and finance, conceded in the contract. Regarding this issue, the PPP law was passed with the aim of addressing the country’s major infrastructure needs.
[Source – FCO Overseas Business Risk/gov.uk (Aug 2018)]
In 2018 Uruguay was ranked 23rd out of 180 countries in Transparency International's latest Corruption Perceptions Index (the UK ranked 8th; Argentina 85th and Brazil 96th): https://www.transparency.org/news/feature/corruption_perceptions_index_2017#table.
Uruguay is ranked 95th out of 190 countries in the World Bank’s 2019 Ease of Doing Business Index (the UK ranks 9th; Argentina 119th and Brazil 109th ): http://www.doingbusiness.org/en/rankings.
The World Economic Forum’s Global Competitiveness Report 2018 ranks Uruguay 53rd out of 140 (the UK is ranked 8th; Argentina 81st and Brazil 72nd): http://reports.weforum.org/global-competitiveness-report-2018/country-economy-profiles/#economy=URY.
Uruguay is ranked 38th out of 180 countries in the Heritage Foundation’s 2018 Index of Economic Freedom (the UK ranks 8th; Argentina 144th and Brazil 153rd): https://www.heritage.org/index/ranking.
Contact a DIT export adviser at: https://www.contactus.trade.gov.uk/enquiry/topic for a free consultation if you are interested in exporting to Uruguay.
Contact UK Export Finance (UKEF) about trade finance and insurance cover for UK companies. You can also check the current UKEF cover position for Uruguay. See: https://www.gov.uk/guidance/country-cover-policy-and-indicators#uruguay.
[Source – DIT/UKEF/gov.uk]
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