Welcome – “Bienvenidos”! Uruguay is a great place to do business, and the Commercial Section at the U.S. Embassy in Montevideo has compiled this guide to
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.
Uruguay is a market-oriented economy in which the State plays a significant role. On the heels of a deep economic and financial crisis in the early 2000’s, the economy has grown robustly in the past decade. It has been relatively unaffected by the recent global economic crisis and national banks have remained structurally sound.
Strong growth of over 5 percent (annual average 2003-2012) was supported by high commodity prices, rising investment (both foreign and Uruguayan), higher public expenditure and increased private consumption stemming from rising employment and wages.
Uruguay is a founding member of MERCOSUR, the Southern Cone trading bloc also
composed of Argentina, Brazil, Paraguay and Venezuela. Chile, Bolivia, Peru, Colombia and Ecuador have free trade agreements with MERCOSUR as associate members, though are not part of the customs union. MERCOSUR’s Secretariat and Parliament are located in Montevideo.
Uruguay and the U.S. enjoy a very good bilateral relationship. Commercial relations continue to develop under the auspices of the Trade and Investment Framework Agreement (TIFA).
Bilateral trade amounted to about $1.2 billion in 2012 and the U.S. trade surplus has increased dramatically since 2007 to $540 million in 2012.
Imports from the U.S surged in recent years following the economic upturn and sales of refined fuels (from under $331 million in 2006 to $890 million in 2012), turning it into Uruguay’s fourth largest supplier after Brazil, Argentina and China. The top five U.S. sales in 2012 consisted of refined fuels ($190 million, 21 percent of total exports), cell phones, computers, agricultural machinery and chemicals. The best opportunities for U.S. exports are telecommunication equipment, security equipment, computer hardware, fertilizers, renewable energy equipment, chemicals, heavy equipment and hand tools, and agricultural equipment.
Uruguayan exports to the U.S. declined significantly in recent years–from $763 million in 2005 to $324 million in 2012–as Uruguayan exporters of mainly beef and refined oil reoriented to other markets. As a result, the U.S. fell from being Uruguay’s second largest export market in 2005 to sixth 2012 (after Brazil, China, Argentina, Venezuela and Russia). Sales to U.S. are largely concentrated in beef, beef products, honey, leather and refined oil.
Uruguay’s overall imports of goods amounted to $10.7 billion in 2012 and exports of goods totaled $8.0 billion. Its top imports comprise crude and refined oil and capital goods.
Brazil is Uruguay’s top export market, followed by the Nueva Palmira Free Trade Zone (a re-export base mainly for soybeans and cellulose pulp to China and Finland), Argentina, China and Russia. While Uruguay has diversified its export portfolio in recent years by incorporating new products such as soybeans and cellulose pulp, its top six traditional exports (soybeans, frozen and fresh beef, rice, wheat, and powder milk) still account for about half of total sales. Uruguay is now a major exporter of cellulose pulp and beverage concentrates produced in free trade zones.
Uruguay boasts a dynamic services sector with tourism as its largest source of revenue. With a population of under 3.3 million, Uruguay welcomes about 2.5 million tourists a year, mainly from within the region, though increasingly from the U.S. and Europe. Transportation and logistics are also important elements of the services sector. Uruguay is well-situated to serve as a distribution platform for U.S. firms wishing to sell their products to the entire MERCOSUR region. Its centralized location, with comprehensive free-trade zones, a free port, adequate infrastructure, and drawback regimes, is naturally oriented towards stocking products for regional distribution or showcasing for regional buyers. Software development is another growing industry, with Uruguay already a leading software exporter in Latin America.
Uruguay’s investment climate is generally positive. A decree passed in 2007 and modified 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 commonly allowed without prior authorization. Overall, U.S. firms have not identified corruption as an obstacle to investment.
Uruguay has bilateral investment treaties with several countries – including a 2005 agreement with the U.S. – and several Double Taxation Agreements (although not with the U.S.). Uruguay and the U.S. also signed an Open Skies Agreement in 2004, a Trade and Investment Framework Agreement in 2007 that provides a platform for ongoing work on commercial issues, and a Science and Technology Agreement in 2008.
About 130 U.S. firms operate in Uruguay. The U.S. was its 4th largest investor during 2001-2011 (preceded by Argentina, Spain and Brazil), with annual investment more than tripling to $79 million in 2007-2011 versus $23 million in 2001-2006. U.S. investment is distributed among a wide array of sectors – mainly forestry, tourism and hotels, services, and telecommunications.
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 subsequently unknown to many U.S. companies.
Local companies have traditionally looked first to neighboring MERCOSUR countries to develop trade. In recent years, attention has turned increasingly to China, with the U.S. losing market share to the Chinese 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.
A combination of favorable exchange rates, higher wages, historically low unemployment, and consumer confidence in Uruguay’s economy fueled increasing demand for imported products in 2012, with projections for 2013 indicating similar trends. 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, the new PPP legislation formalizes the procedures, responsibilities, and obligations of the State and private investors. The Government of Uruguay (GOU) anticipates that this law will further attract foreign investment, mainly in much-needed infrastructure projects. Among these are:
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 no 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.asp
You can also use the link below to access a PDF version of the complete report.
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