Welcome – “Bienvenidos” The Commercial Section of the U.S. Embassy in Montevideo has compiled this guide to provide you with a brief background on the Uruguayan market as you consider export opportunities. Please do not hesitate to reach out to the Embassy at any time. The Commercial Section looks forward to assisting U.S. exporters in finding local buyers and business partners.
Top 5 reasons why U.S. companies should consider exporting to Uruguay:
1. Steady economic growth; private consumption has been a key driver.
2. Open trade policy.
3. Strategically located offering excellent opportunities as a regional distribution platform and a great test market.
4. Both the government of Uruguay and the business community honor contracts and payments.
5. Excellent bilateral relations between the United States and Uruguay.
- Uruguay is a market-oriented economy in which the State still plays a significant role. The economy grew robustly in the past decade registering annual average growth rates of 5.4 percent from 2004 to 2014. Growth was led by private consumption and exports, partially related to strong commodity prices. Domestic investment and foreign direct investment (FDI), which have been traditionally low, also increased significantly, led by investments in industry, agriculture and construction. From 2009-2013, Uruguay enjoyed the second largest FDI/GDP ratio in South America.
- The 2008 global financial crisis put a temporary brake on growth –mainly through lower foreign trade and investment– but Uruguay managed to avoid a recession and kept a positive growth rate of 4.2 percent in 2009. After twelve years of unprecedented high growth, the economy is gradually decelerating. Growth of about 3.0 percent is expected for 2015 and 2016. The global financial crisis has not affected Uruguay’s banking system, which remains sound. In mid-2012, Uruguay regained the investment grade status it had lost during its harsh 1999-2002 economic crisis.
- The Frente Amplio (Broad Front) administration headed by President Tabaré Vazquez will be in office until March 2020 and has prioritized investing in infrastructure, improving education and security, and enhancing competitiveness.
- A decree passed in 2007 and revised in 2012 provides significant incentives to local and foreign investors. Foreign and national investors are treated alike, there is free remittance of capital and profits, and investments are allowed without prior authorization. There are thirteen free trade zones, three of which are exclusively dedicated to services (e.g. financial, software, call centers, paper pulp and logistics).
- In 2012, Uruguay became a high-income country by World Bank’s standards. Adjusted by purchasing power parity, Uruguay’s per capita GDP is about 40 percent of that of the United States. Social indicators remain high by Latin American standards. According to the U.N. Economic Commission for Latin America and the Caribbean, Uruguay has the second most equal income distribution in Latin America.
- While Argentina and Brazil remain key partners, Uruguay has gradually diversified its economic partnerships in recent years. It is a founding member of MERCOSUR, the Southern Cone trading bloc also composed of Argentina, Brazil, Paraguay and Venezuela. MERCOSUR’s Secretariat and Parliament are located in Montevideo. Uruguay has free trade agreements, both on a bilateral basis and as a member of MERCOSUR, with most countries in South America plus Mexico.
- Imports from the United States have risen in recent years following robust growth. The U.S. is Uruguay’s 4th largest supplier of goods, mainly fuels, telephony equipment, electricity generators and agricultural machinery. Uruguay offers U.S. firms significant advantages as a regional distribution platform for the MERCOSUR trade bloc. Uruguay sells mostly beef and other agricultural products to the United States. Sales to the U.S. have risen substantially since 2009, at a pace that almost doubled exports’ global growth (19% vs. 11% p.a.). The U.S. is currently Uruguay’s 4th largest export destination.
- Uruguay has bilateral investment treaties with several countries – including one with the United States (signed in 2005) – and several Double Taxation Agreements (none with the United States). Uruguay and the United States also have agreements on Open Skies (2004), Science and Technology (2008), and Promotion of Small and Medium Enterprises (2014). A Customs Mutual Assistance Agreement was signed in 2014 but final ratification is still pending parliamentary approval. A Trade and Investment Framework Agreement signed in 2007 provides the basis for the bilateral economic and commercial relationship.
- Almost 120 American firms operate in Uruguay. The U.S. Dept. of Commerce reports a $1.3 billion stock of U.S. investments in Uruguay and a $327 million stock of Uruguayan investment in the United States.
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- The challenges Uruguay faces in promoting its local market are its small size (3.3 million inhabitants) and the lack of trade-related financing. Uruguay is consequently unfamiliar to many U.S. companies. Local companies have traditionally looked first to neighboring MERCOSUR countries to develop trade. In recent years, their attention has turned increasingly to China, causing the U.S. to lose market share to China in many sectors. U.S. exporters need to be flexible in their minimum sales and payment requirements. The distance and added cost in shipping products from the U.S. (vis-à-vis neighboring countries) can at times be a deterrent when sourcing imports. Government procurement and bidding processes are generally transparent, but slow. The bureaucracy for obtaining official investment information and procedures can be sluggish at times. President Tabaré Vazquez took office on March 1, 2015 and will serve through March 2020. No major changes or challenges are expected in the economic/financial arena. In 2011, Uruguay passed a Public-Private Partnership (PPP) law that could provide market opportunities for U.S. companies, but the country is experiencing a steep learning curve. Both public and private sectors need to learn from PPP success stories in other countries, best practices, potential problems, and financing opportunities.
- A labor law passed during the previous Administration that emphasizes safety and security measures for employees has major legal implications for violations.
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- Uruguay has little corruption; it is one of the 21 top countries that were ranked by Transparency International as having the lowest perceived levels of corruption in 2014. It has a strong banking sector; it is strategically located, is a leader in Internet connectivity and has proven political stability. The current administration is maintaining an open trade policy with strong economic fundamentals.
- A combination of favorable exchange rates, higher wages, historically low unemployment, and consumer confidence in Uruguay’s economy fueled increasing demand for imported products during 2013 – 2014. Cellular phones, information technology, agricultural machinery, and chemicals are the top non-commodity U.S. exports to Uruguay. Uruguay offers good opportunities as a test market for the region, given the small sample size, respect for the rule of law, and sound investment climate.
- In late 2011, the Uruguayan Parliament approved a Public-Private Partnership (PPP) law. While this type of association had already existed, this PPP legislation formalized the procedures, responsibilities, and obligations of the State and private investors. The Government of Uruguay (GOU) anticipated that this law could further attract foreign investment, mainly in much-needed infrastructure projects. Among these are:
- Road and highway rehabilitation;
- Renewable energy;
- River ports;
- Building of Public Schools
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- All import channels are available -- agents, distributors, importers, trading companies, subsidiaries, and branches of foreign firms. Sales outlets and supermarkets are traditional storefronts. There are very few discount general merchandisers.
- U.S. suppliers should be thorough in their selection of an in-country agent or representative. The contractual relationship (employer-employee or commission-based) should be made clear from the start. Failure to do so could result in supplier liability for severance if the U.S. company decides to end the business relationship.
- The recommended strategy to enter the local market is for interested parties to visit Uruguay, interview potential partners, and name a representative/agent. Business relationships and creative financing terms are very important.
- U.S. exporters are encouraged to take advantage of the export promotion services provided by the Commercial Section of the U.S. Embassy in Montevideo. Please check http://export.gov/uruguay/servicesforu.s.companies/index.asp for the full list of services provided. For more information, please visit: http://export.gov/uruguay/index.aspor contact Office.Montevideo@trade.gov
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For more details on Doing Business in Uruguay, read the Uruguay Country Commercial Guide, please select the link below:
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