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 still plays a significant role. Following a deep crisis in 1999-2002, Uruguay’s economy grew robustly from 2003-2013 led by private consumption –fueled by full employment, rising wages and a weak dollar– and exports related to record-high commodity prices. Growth decelerated from an annual average of 6.0% in 2004-2008 to 5.2% in 2009-2013, and is expected to be about 3.0% in 2014. Growth performance, foreign trade and investment, and the banking system were largely unaffected by the 2009 global financial crisis. In mid-2012 Uruguay regained investment grade status by major risk rating agencies.
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, but 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. Uruguayan President Mujica met with President Obama at the White House in May 2014 and the occasion reinforced the positive dialogue that exists between the two countries. Commercial relations continue to develop under the auspices of the Trade and Investment Framework Agreement (TIFA). Bilateral trade of goods amounted to about $1.35 billion in 2013 and the U.S. trade surplus has increased dramatically since 2007 to $659 million in 2013.
Imports from the U.S surged in recent years following the local economic upturn and sales of refined fuels and wind turbines, turning it into Uruguay’s fourth largest supplier after China, Brazil and Argentina. The top five Uruguayan imports from the U.S. in 2013 consisted of refined fuels ($150 million, 15 percent of total exports), wind turbines, fertilizers, cell phones, and agricultural machinery. The best opportunities for U.S. exports are telecommunication equipment, security equipment, computer hardware, fertilizers, renewable energy equipment, chemicals, heavy equipment, hand tools, and agricultural equipment. Uruguayan exports to the U.S. declined significantly in 2005-2009–from $763 million to under $200 million– as Uruguayan exporters of mainly beef and refined oil reoriented to other markets. Exports to the U.S. have grown robustly since 2009 to $350 million in 2013. The U.S. is currently Uruguay’s fifth largest export market (after China, Brazil, Argentina and Venezuela). Sales to the U.S. are largely concentrated in beef, beef products, honey, leather, and refined oil.
Uruguay’s overall imports of goods amounted to $11.6 billion in 2013 and exports of goods totaled $9.0 billion. Its top imports are comprised of crude and refined oil and capital goods.
Brazil is Uruguay’s top export market, followed by China and the Nueva Palmira Free Trade Zone (a re-export base mainly for soybeans and cellulose pulp to China and Finland), Argentina, Venezuela and the United States. Uruguay has diversified its export portfolio in recent years by incorporating new products such as soybeans and cellulose pulp. The top six export products –soybeans, frozen and fresh beef, rice, powdered milk and wood account for about half of total sales. Uruguay is also 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 slightly under 3.4 million, Uruguay welcomes about 2.5 million tourists a year, mainly from within the region, though increasingly from Mexico, 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, mainly corporate income tax cuts, 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, a Science and Technology Agreement in 2008, and a Customs Mutual Assistance Agreement signed on May 13, 2014.
About 120 U.S. firms operate in Uruguay. The U.S. was its fourth largest investor during 2001-2012 (preceded by Argentina, Spain and Brazil). Annual average U.S. investment more than tripled to $87 million in 2007-2012 from $23 million in 2002-2006. 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 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 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.
Presidential elections will take place in October 2014. If no one candidate achieves a majority of the vote, a second round will take place in November. Voting is compulsory and campaigns are vigorous, so Uruguayans tend to be very politically aware. The new Administration will take office in March 2015 and serve through March 2020. No major changes or challenges are expected in the economic/financial arena, but as the political agenda tends to dominate during the election year, the business community is traditionally less active during the elections and transition period.
Uruguay passed a Public-Private Partnership (PPP) law that could provide market opportunities for U.S. companies, but Uruguay is experiencing a steep learning curve. Both public and private sectors need to learn PPP success stories in other countries, best practices, potential problems, and financing opportunities.
A new labor law that emphasizes safety and security measures for employees, with major legal implications for violations, could be a challenge for companies undertaking new projects.
Uruguay has little corruption; it is one of the 20 top countries that were ranked as having the lowest perceived levels of corruption in 2013. It has a strong banking sector; it is strategically located, is a leader in Internet fiber optics and has proven political stability. The current leftist administration has maintained 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 in 2013, with projections for 2014 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) anticipated that this law would 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 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.asp or contact Office.Montevideo@trade.gov
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