THE MOST DEMOCRATIC COUNTRY IN LATIN AMERICA
URUGUAY HAS A HISTORICAL RECOGNIZED POLITICAL AND SOCIAL STABILITY
The natural gateway to MERCOSUR
Known as the Switzerland of America, Uruguay is a safe emerging market destination for investors looking to balance risk with reward. Its strategic location between Brazil and Argentina and its maritime gateway to the Atlantic Ocean, combined with its membership to the South American Common Market (MErCOSur), makes Uruguay an ideal platform from where business opportunities can be launched to a 270 million people market with the highest per capita income of the continent.
Uruguay has the highest alphabetization rate (98%), the highest classification in terms of modern communications use (Internet and mobile/land line) and the lowest corruption level in Latin America. The country is also known for its democracy over history (most democratic country in Latin America in 2008, according to The Economist) and politic and social stability. It is also known for respecting the law empire, and an independent Judiciary.
As of 2004, GDP in Uruguay represents a sustained and robust growth, that continues exceeding expectations (for 2013 a 4,4% growth was registered) laying on solid macroeconomic measures consistently applied by governments of different parties, and also on an exportations peak, which triplicated in the last 6 years. This positive perspective has led the participants of the market to believe that Uruguay will recover the investments lost in 2002 to its worst economic and financial crisis.
Foreign Investment Access and Promotion
Foreign investment has played a significant role in the Uruguayan emerging economy. According to Uruguayan law, both domestic and foreign investors are (economically) treated as equals with no discrimination whatsoever; in order to invest, there is no prior authorization or record required, nor do restrictions exist for incoming or outgoing capitals (including the remission of profit transfers); purchase of foreign currency is free, which can be obtained at market prices. Also, a company can be 100% property of foreign parties.
The Uruguayan government passed a regulation bill to promote investments, creating a complete legal framework so as to not only promote them but also obtain important tax exemptions, based on objective and transparent criteria. A single-window mechanism was also established to channel investment requests and guide investors. Other assurances offered by Uruguay to investors derive from its membership of the World Intellectual Property Organization (WIPO), together with its ratification of the Bern and universal Copyright Conventions, as well as the Paris Convention for the Protection of Industrial Property, and from its membership with the International Center for the Settlement of Investment Disputes (ICSID).
Main Market Opportunities
In Uruguay, growth was mainly based on: (a) sound macroeconomic policies consistently applied by governments of different ideological orientations; (b) soaring commodity prices that boosted exports; (c) low interest rates that produced a surge in capital inflows; (d) increases in employment and real salaries that stimulated consumption in the domestic market; and (e) the expansion of the ‘Brazilian cluster’.
As of 2009-year end, a remarkable expansion of activity and of foreign direct investment has occurred in several sectors of the economy, particularly in the finance, energy, real estate, tourism, logistics and especially on the agribusiness sectors.
Referring to the agribusiness sector specifically, on the recent past, the comparative advantage in terms of land, pasture and nice weather, together with the increasing international price of commodities, has led to historic results in the agro investment field; exportation of traditional goods, such as meat, soybean, cereals, rice, leather and wool, skyrocket.
Said boom of soy prices resulted in an agricultural revolution in Uruguay; the new projects, focused in citric, fruits, honey and blueberries (among others), reflected the constant opportunity for doing businesses in the country.
Asides from this, foreign capital has shown significant interest in the mining production. Likewise, forest industry has encouraged extraordinary investments, especially in the cellulose production. Mineral water companies were also attracted to Uruguay, betting hard on the market, taking as a reference recent studies that predicted water would be a limited resource in the upcoming years. This contributed to promote the (potential) profitability of the business.
Uruguay’s strategic location is a key element to its economic development, jointly with the MERCOSUR duty preferences.
Logistic services such as distribution centers, warehousing, transportation (ocean, fluvial, road freights), manufacture and distribution of goods and services, are all on going businesses, aimed to comply and serve both Brazil and Argentinean markets.
Asides from being the deepest natural port of the Silver Plate River (so called Río de la Plata), the Port of Montevideo is the first and unique port of South America that operates under the “Free Port” regime.
Therefore, logistics companies settled within the Port of Montevideo are in condition to provide a vast list of logistic services, such us loading, unloading, transportation, redirection, transit, fractioning, storage, picking, packing, labeling among others. Despite the fact that the Port of Montevideo is the main port of the country, Uruguay’s river coast (border to Argentina) - Nueva Palmira´s Port in particular – is experiencing an outstanding growth, thanks to the Parana-Paraguay hydro way. This hydro way (3,442 km long) connects the center of South America to the Atlantic coast, reaching the coasts of Brazil, Argentina, Paraguay, Bolivia and Uruguay.
>Infrastructure projects had a strong impact in Uruguay’s economy, especially in the rehabilitation and modernization of the railways, plus on the renewable energy projects, such as wind power parks. The Uruguayan government has established infrastructure development as a policy, making of these one of its primary goals.
The importance of increasing the energetic capacity through renewable energy projects and decreasing dependency towards imported resources has been one of the pillars of the energetic “revolution” Uruguay experienced.
An agreement to invest between 25% and 50% of the retirement funds actives (AFAPs) has been signed. These actives can be invested on infrastructure projects, and the Government is studying a new legal framework to associate public and private capitals, especially to promote infrastructure development projects. These two measures will boost the economy´s dynamism, while it will also provide the foreign community an attractive opportunity and an alternative to invest.