2018 Investment Climate Statements: Uruguay

Policies Towards Foreign Direct Investment

The GoU has traditionally recognized the important role that foreign and local investment plays in economic and social development, and works to maintain a favorable investment climate. Uruguay has a stable legal system in which foreign and national investments are treated alike. Most investments are allowed without prior authorization and investors may freely transfer abroad their capital and profits from their investment. Investors can choose between arbitration and the judicial system to settle disputes. The judiciary is independent and professional.

Foreign investors are not required to meet any specific performance requirements. Moreover, foreign investors are not subject to discriminatory or excessively onerous visa, residence, or work permit requirements. The government does not require that nationals own shares or that the share of foreign equity be reduced over time, and does not impose conditions on investment permits. Uruguay normally treats foreign investors as nationals in public sector tenders. Uruguayan law permits investors to participate in any stage of the tender process.

Uruguay’s export and investment promotion agency, Uruguay XXI (http://www.uruguayxxi.gub.uy/ ) provides information on Uruguay’s business climate and investment incentives, both at a national and a sectoral level. The agency also has several programs to promote the internationalization of local firms and regularly participates in trade missions.

There is no formal business roundtable or ombudsman responsible for regular dialogue between government officials and investors. Some private business associations have suggested that formal, regular dialogue could ease concerns regarding perceived or actual government biases towards labor unions and against the private sector.

Limits on Foreign Control and Right to Private Ownership and Establishment

Aside from a few limited sectors involving national security and limited legal government monopolies in which foreign investment is not permitted, Uruguay practices neither de jure nor de facto discrimination toward investment by source or origin, with national and foreign investors treated equally.

In general, the GoU does not require specific authorization for firms to set up operations, import and export, make deposits and banking transactions in any particular currency, or obtain credit. Screening mechanisms do not apply to foreign or national investments, and investors do not need special government authorization for access to capital markets or to conduct foreign exchange.

Other Investment Policy Reviews

Uruguay is a member of the UN Conference on Trade and Development (UNCTAD), but the organization has not yet conducted an Investment Policy Review on the country. Uruguay is not a member of the Organization for Economic Co-operation and Development (OECD). Uruguay is a member of the OECD Development Center, its Global Forum on Transparency and Exchange of Information for Tax Purposes, and participates in the OECD’s Program for International Student Assessment (PISA) evaluation. Uruguay does not yet have a defined roadmap for accession to the OECD.

The World Trade Organization (WTO) published its trade policy review of Uruguay, which includes a detailed description of the country’s trade and investment regimes in 2012 and is available at http://www.wto.org/english/tratop_e/tpr_e/tp363_e.htm .

Business Facilitation

Domestic and foreign businesses can register operations in approximately seven days without a notary at http://empresas.gub.uy . Uruguay is ranked 61st in the World Bank’s Starting a Business indicator, while its position in the Doing Business Index is 94 out of 190.

Uruguay receives high marks in electronic government. The UN’s 2016 Electronic Government Development and Electronic Participation indexes ranked Uruguay third in the entire Western Hemisphere (after the United States and Canada). Recently, industrial small to medium-sized U.S. enterprises (SMEs) describe the Uruguayan market as difficult to enter in some sectors of the economy. Those SMEs pointed to legacy business relationships and loyalties, along with a cultural resistance by distributors and clients to trusting new producers. Local law firms working with U.S. companies said that industrial production companies entering the Uruguayan market might have to operate for two years to establish a client base and a revenue stream. U.S. company representatives said they filed a complaint with Uruguay’s Commission for the Defense of Competition regarding monopolistic business practices in Uruguay’s chemical production market.

Outward Investment

The government does not promote nor restrict domestic investment abroad.

In November 2005, Uruguay and the United States signed a Bilateral Investment Treaty (BIT) to promote and protect reciprocal investments. The BIT, which entered into force on November 1, 2006, grants national and most-favored-nation treatment to investments and investors sourced in each country. The agreement also includes detailed provisions on compensation for expropriation, and a precise procedure for settling bilateral investment disputes. The annexes include sector-specific measures not covered by the agreement and specific sectors or activities that governments may restrict further. The full text of the agreement is available athttps://ustr.gov/trade-agreements/bilateral-investment-treaties/bit-documents. 

Besides the United States, Uruguay has Bilateral Investment Agreements in force with 30 countries from different regions. The full list is available at http://investmentpolicyhub.unctad.org/IIA/.

Uruguay and the United States do not have double taxation or tax information agreements in place.

The GoU endorsed OECD standards on transparency and exchange of information and upgraded several regulations prompted by OECD including Uruguay in its 2009 grey list of jurisdictions that had not “committed to implement the internationally agreed tax standard.” In 2012, the OECD acknowledged the GoU’s progress and allowed Uruguay to move on to the second phase of the review process, consisting of a survey of the practical implementation of the standards. In 2016, the GoU passed a fiscal transparency law. In 2017, the GoU began implementing an automatic exchange of tax information with countries with which it has established Tax Information Exchange Agreements or TIEAs.

Uruguay ratified a security totalization agreement with the United States in December 2017, which remains before the U.S. Congress awaiting ratification as of April 2018.

The OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes indicates that Uruguay has exchange of information relationships with 35 jurisdictions through 21 double taxation agreements and 16 Tax Information Exchange Agreements. The full list is available at http://www.eoi-tax.org/jurisdictions/UY#agreements .

Transparency of the Regulatory System

Transparent and streamlined procedures regulate local and foreign investment in Uruguay. Uruguay has state and national regulations. The Constitution does not provide for supra-national regulations. Most laws, except those having an impact on public finances, can start either in the executive branch or in the parliament. The President and one or more ministers may issue decrees. Ministers may also issue resolutions. All regulatory actions –including bills, laws, decrees and resolutions– are publicly available at https://www.presidencia.gub.uy/normativa .

Accounting, legal, and regulatory procedures are transparent and consistent with international norms. The government only occasionally proposes laws and regulations in draft form for public comment. Parliamentary commissions typically engage stakeholders while discussing a bill. Non-governmental organizations or private sector associations do not manage any informal regulatory processes.

Article 10 of the U.S.-Uruguay BIT mandates that both countries publish promptly or make public any law, regulation, procedure or adjudicatory decision related to investments. Article 11 sets transparency procedures that govern the accord.

International Regulatory Considerations

Uruguay is a member of several regional economic blocs, including Mercosur and the Latin American Integration Association (ALADI), neither of which have supranational legislation. In order to become local law Uruguay’s parliament must ratify either of these bloc’s decisions.

Uruguay does not send notifications of draft technical regulations to the WTO Committee on Technical Barriers to Trade.

Legal System and Judicial Independence

The legal system in Uruguay follows a civil law based on the Spanish civil code. The highest court in Uruguay is the Supreme Court of Uruguay, which has five judges. The executive branch nominates judges and the General Assembly appoints them. Judges serve a ten-year term and reelection happens after a lapse of five years following the lapse of the previous term. Other subordinate courts include the court of appeal, district courts, peace courts, and rural courts.

In 2017, Uruguay enacted a new criminal procedural code, expressed in Law No. 19.293. The law passed in December 2014, but because the changes it made were so significant it took three years for the authorities to bring it into force. The process for criminal cases is now accusatory instead of inquisitorial. Uruguay is implementing changes to improve judiciary independence. Judges will not be involved at the start of an investigation or arrest, and prosecutors will take on a much more prominent role to lead the investigation. Other fundamental changes include the right to bail, instead of the courts remanding individuals into custody to await trial, and opening up hearings to the public, among others.

The judiciary is transparent and remains independent of the executive branch. Critics complain that the judicial system can be slow. The executive branch rarely interferes directly in judicial matters, but at times voices its dissatisfaction with court rulings. Investors can appeal regulations, enforcement actions, and legislation. Investors may choose between arbitration and the judicial system to settle disputes.

Laws and Regulations on Foreign Direct Investment

Uruguayan law treats foreign and domestic investment alike. Law 16,906 (passed in 1998) declares promotion and protection of investments made by both national and foreign investors to be in the nation’s interest, and allows investments without prior authorization or registration. The law also provides that investors can freely transfer their capital and profits abroad and that the government will not prevent the establishment of investments in the country.

As of March 2018, Decree 002/12 regulates incentives to foreign and local investors and contributes to an increase in foreign and local investment in 2005-2014. Prompted by a fall in domestic and foreign investment in 2015-2017, the GoU announced in February 2018 that it planned to amend Decree 002/12 to strengthen incentives for investment further and advance a number of the GoU´s strategic goals, such as creating jobs, fostering research and development, and developing clean production.

Uruguay’s export and investment promotion agency, Uruguay XXI, website helps potential investors navigate Uruguayan laws and rules http://www.uruguayxxi.gub.uy/en/ .

Competition and Anti-Trust Laws

Uruguay has transparent legislation established the Commission for the Promotion and Defense of Competition at the Ministry of Economy to foster competition. The main legal pillars (Law No. 18,159 and decree 404, both passed in 2007) are available at the commission’s website: https://www.mef.gub.uy/578/5/areas/defensa-de-la-%20competencia—uruguay.html .

A 2017 Peer Review of Uruguay´s Competition Law and Policy is available at http://unctad.org/en/Pages/DITC/CompetitionLaw/Voluntary-Peer-Review-of-Competition-Law-and-Policy.aspx .

The GoU created the regulatory agencies URSEC (Unidad Reguladora de Servicios de Comunicaciones) for telecommunications and URSEA (Unidad Reguladora de Servicios de Energía y Agua) for water and energy in 2001 to regulate and control their respective markets. In 2010, the executive branch transferred URSEC’s policy-design capacity to the National Telecommunications Directorate (DINATEL), leaving it only with regulatory control attributes.

The GoU passed an Audiovisual Communications Law (No 19,307) in December 2014. Also known as the media law, it includes provisions on market caps for cable TV providers that could limit competition. In April 2016, Uruguay’s Supreme Court ruled that these market caps and some local content requirements were unconstitutional. In late 2017, the Executive Branch presented a draft regulation that was pending approval as of April 2018.

Expropriation and Compensation

Uruguay’s constitution declares property rights an “inviolable right” subject to legal determinations that may be taken for general interest purposes and states that no individuals can be deprived of this right – except in case of public need and with fair compensation.

Article 6 of the U.S.-Uruguay BIT rules out direct and indirect expropriation or nationalization of private property except under specific circumstances. The article also contains detailed provisions on how to compensate investors, should expropriation take place. There have been no cases of expropriation of investment from the United States or other countries in the past five years.

Dispute Settlement

ICSID Convention and New York Convention

Uruguay became a member of the International Center for the Settlement of Investment Disputes (ICSID) in September 2000, and is a signatory of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Investor-State Dispute Settlement

Local courts recognize and enforce foreign arbitral awards issued against the government. The U.S.-Uruguay BIT devotes over ten pages to establishing detailed and expedited dispute settlement procedures.

Over the past decade, two investment disputes have arisen. There is currently only one active investment dispute between a U.S. person and the GoU. In 2016, a U.S. telecommunications enterprise filed a complaint before ICSID under the BIT, which remained pending as of April 2018.

In 2010, the tobacco company Philip Morris International sued the Government of Uruguay, arguing that new health measures involving cigarette packaging amounted to unfair treatment of the firm. They filed the case under the Uruguay-Switzerland Bilateral Investment Treaty. This case closed in 2016 with the ICSID ruling in the GoU’s favor.

International Commercial Arbitration and Foreign Courts

Commercial contracts frequently contain mediation and arbitration clauses and local courts recognize them. Investors may choose between arbitration and the judicial system to settle disputes. Local courts recognize and enforce foreign courts’ arbitral awards.

Bankruptcy Regulations

The Bankruptcy Law passed in 2008 (No. 18,387) expedites bankruptcy procedures, encourages arrangements with creditors before a firm may go bankrupt, and provides the possibility of selling the firm as a single unit. Bankruptcy has criminal and civil implications with intentional or deliberate bankruptcy deemed a crime. The law protects the rights of creditors according to the nature of the credit, and workers have privileges over other creditors.

The World Bank’s 2018 Doing Business report ranks Uruguay third out of 12 countries in South America and 66^th globally for its ease of “resolving insolvency.”

Investment Incentives

The investment promotion regime, regulated by Law 16,906 (passed in 1998), grants automatic tax incentives of up to 40 percent of corporate income tax to several activities, including personnel training; research, scientific and technological development; reinvestment of profits; and investments in industrial machinery and equipment. The GoU provides other benefits to industrial and agricultural firms by regulatory decree.

In addition to the automatic tax exemptions, Uruguay has several other incentives for greenfield and brownfield investments that help achieve some of the government´s strategic goals, including creating jobs, contributing to geographical decentralization away from the capital, increasing exports, promoting research and development, and fostering the usage of clean technologies. The principal incentive consists of the deduction from corporate income tax of a share of total investment over a pre-defined period. Other incentives include the exemption from tariffs and taxes on imports of capital goods, and the refunding of the Value Added Tax paid on domestic purchases of certain goods.

There are also special regimes to promote specific sectors. Certain activities – such as the purchasing of land, real estate or private vehicles – are not eligible for the benefits. A government decree establishes that government tenders will favor local products or services, provided they are of comparable quality and any cost increase is no more than 10 percent. U.S. and other foreign firms are able to participate in local or national government financed or subsidized research and development programs. Please refer to a detailed document on incentives to investment, available in English at http://www.uruguayxxi.gub.uy/guide/schemes.html .

Foreign Trade Zones/Free Ports/Trade Facilitation

The GoU has increasingly promoted Uruguay as a regional, world-class logistics and distribution hub. In 2010, the GoU created the National Logistics Institute (INALOG by its Spanish acronym), a public-private sector institution that seeks to coordinate efforts towards establishing Uruguay as the leading Mercosur distribution hub. INALOG and Uruguay XXI have issued several reports on Uruguay’s role and advantages as a logistics hub.

The GoU established free trade zones (FTZs) in 1987 (by Law 15,921) and in 2017 passed new legislation (Law 19,566). The new law provides for minor changes in tax benefits, streamlines the requirements and activities that companies must perform in order to be able to operate inside a FTZ, and improves international cooperation related to international tax evasion. The GoU provides key legislation and regulations of FTZs at http://zonasfrancas.mef.gub.uy/ .

There are 11 FTZs located throughout the country. Most FTZs host a wide variety of tenants performing various services (e.g., financial, software development, call centers, warehousing and logistics). One FTZ is dedicated exclusively for the development of pharmaceuticals, and two for the production of paper pulp. Mercosur regulations treat products manufactured in most member states’ FTZs (with the exception of Tierra del Fuego and Manaus located in Argentina and Brazil) as extra-territorial and charge them the common external tariff upon entering any member country. As a result, industrial production in local FTZs is usually destined to non-Mercosur countries.

Firms may bring foreign and/or Uruguayan origin goods, services, products, and raw materials into the FTZs. Firms may hold, process, and re-export the goods without payment of Uruguayan customs duties or import taxes. Uruguay exempts firms operating in FTZs from national taxes. Laws governing legal monopolies do not apply within the FTZs. The GoU exempts firms operating in an FTZ from all domestic taxes. Additionally, the employer does not pay social security taxes for non-Uruguayan employees who have waived coverage under the Uruguayan social security system. Uruguay treats goods of Uruguayan origin entering FTZs as Uruguayan exports for tax and other legal purposes.

Law 17,547 passed in August 2002 allows for the establishment of industrial parks. Several additional decrees signed since 2007 allow for the establishment of sector specific industrial parks. Industrial park advantages include tax exemptions and benefits, and private sector, national, or local governments may establish them.

Uruguay has other special import regimes in place called “temporary admission,” “bonded warehouse,” and “free port.” The temporary admission regime allows manufacturers to import duty-free raw materials, supplies, parts and intermediate products they will use in manufacturing products for export. However, the regime requires government authorization, and firms must export all finished products within 18 months. Firms do not have to be in a specific location to benefit from temporary admission.

A free port and bonded warehouse are special areas where goods that remain on the premises. The GoU exempts all import-related duties and tariffs in this case. Firms may re-label and re-package merchandise while on the premises. There are two differences between the free port and the bonded warehouse regimes. Goods can stay for an unlimited amount of time in a free port while a bonded warehouse restricts the stay to one year. In addition, firms may not significantly modify a good while it is in a free port. Firms may engage in “industrialization” in bonded warehouses only.

Performance and Data Localization Requirements

Foreign investors are not required to meet any specific performance requirements, and do not report impediments or onerous visa, residence, or work permit requirements. The government does not require that nationals own shares or that the share of foreign equity be reduced over time, and does not impose conditions on the number of foreign workers or on investment permits. A labor-related requirement is that tenants of free trade zones employ at least 75 percent Uruguayan workers.

Article 8 of the U.S.-Uruguay BIT bans both countries from imposing performance requirements on new investments, or tying the granting of existing or new advantages to performance requirements.

Uruguay does not require foreign investors to use local content in goods or technology in order to invest. However, local content may be required in some sectors in order to become eligible for special tax treatment or government procurements. For instance, in 2016 the state-owned electric utility (UTE) offered a number of long-term purchase agreements for wind and solar generated electricity that included 20 percent local content requirements.

Uruguay does not require foreign IT providers to turn over source code or provide access for surveillance. Companies can freely transmit customer or business-related data across borders. Banks can transmit information out of Uruguay on their loan portfolios but not on their depositor base. Banks are obliged to provide information once a year to the local tax authority on their depositors. This information is exchanged with tax authorities from countries that enjoy Tax Information Exchange Agreements (TIEAs) with Uruguay (Uruguay does not have a TIEA with the United States). Legislation governs the central government’s computer system security requiring all assets to remain in Uruguay, except those that do not constitute a risk for the government. The GoU’s Agency for e-Government and Information Society (AGESIC by its Spanish acronym) is in charge of enforcing this regulation. In 2016, the state-owned telecommunications company ANTEL inaugurated a $50 million, tier III data centers, one of five such facilities in Latin America.

Real Property

The GoU recognizes and enforces secured interests in property and contracts. Mortgages exist, and Uruguay has a recognized and reliable system of recording such securities. Uruguay’s legal system protects the acquisition and disposition of all property, including land, buildings and mortgages.

Law 19,283, passed in 2014, prevents foreign governments from buying land, either directly or in association with private companies. Traditional use rights are not applicable as there is no applicable indigenous community in Uruguay. The vast majority of land has clear property titles.

The current presidential administration has supported the unions’ position that sit-ins or occupation of workplaces are an extension of workers’ right to strikes, thus enabling workers to lawfully occupy workplaces. Business chambers have opposed extending the definition of the right to strike to include the physical occupation of a workplace. The chambers have filed cases before the International Labor Organization (ILO) objecting to workplace occupations (see Labor Section for further information).

Intellectual Property Rights

Protection of intellectual property rights (IPRs) in Uruguay is chiefly governed by the Copyright Law of 1937 and amendments thereto; the Trademark Law of 1998; and the Patent Law of 1999. The Trademark Law and the Patent Law underwent some minor adjustments during the period under review. The Patent Law, the Trademark Law and the Copyright Law all contain provisions on enforcement of IPRs and provide for civil and criminal sanctions for infringement.

Uruguay is a member of the World Intellectual Property Organization (WIPO), and a party to the Bern and Universal Copyright Conventions, the Paris Convention for the Protection of Industrial Property, as well as the Marrakesh Treaty to Facilitate Access to Published Works by Visually Impaired Persons and Persons with Print Disabilities. In March 2017, the Executive sent a bill for Uruguay to adhere to WIPO’s Patent and Cooperation Treaty (PCT), which, as of April 2018, remained before Parliament.

In 2014, Uruguay notified the World Trade Organization (WTO) of its acceptance of the Protocol Amending the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Likewise, in January 2016, Uruguay notified the WTO Council for Trade in Services that it was granting preferential treatment to services and service suppliers of least developed countries, in accordance with the decisions on the services waiver adopted at the Eighth and Ninth WTO Ministerial Conferences.13 Uruguay deposited the instrument of ratification of the Trade Facilitation Agreement in August 2016. It notified its Category A commitments under the Trade Facilitation Agreement in July 2014.

The quality of IP protection and level of enforcement has improved over time and the Office of the U.S. Trade Representative (USTR) removed Uruguay from its Special 301 Watch List in 2006 due to Uruguay’s progress in enforcing intellectual property rights, especially with respect to copyright enforcement. As of April 2018, Uruguay remains off the Watch List.

Uruguay was included in USTR’s 2014 Notorious Markets Report (for an increase in reports of counterfeiting and piracy from its free trade zones), and was removed from the Report in 2015 (due to the passage of a decree that imposed stricter customs controls on free zones). The 2015 decree gave Customs officials the authority to operate inside free trade zones, control the flow of in-coming and out-going goods, and fine both the owners of counterfeit goods and the storage providers that facilitate distribution of counterfeits. In 2016 and 2017, Uruguay was not included in the Notorious Markets Report.

Some industry groups criticize the slowness of the patent-granting process, which on averages takes 10 years, as well as the lack of data protection for proprietary research submitted as part of the grant process. They also criticize an amendment to the Patent Law (passed in a 2013 omnibus law) that eliminated provisional protection for patents during patent pendency. This removed the ability of patent right holders to claim damages for infringement of their rights from the date of the patent application filing up to its granting date.

Uruguay protects geographical indications under its Trademark Law. In order to enjoy protection for an indefinite term, appellations of origin must be registered, while indications of source are protected indefinitely without having to be registered. In order to secure protection for a period of 20 to 25 years, a plant variety has to be listed in the National Register of Cultivars. Uruguayan law provides for civil and criminal sanctions for infringement of intellectual property rights.

While enforcement of trademark rights has improved in recent years, local citizens have sometimes managed to register trademarks without owners’ prior consent. Customs officers have border measures authority for trademark protection. After temporarily freezing a shipment of suspicious goods, Customs is required to communicate with the local representatives for the trademarks’ right-holders to determine whether there is a trademark infringement. Customs is responsible for paying for the storage and the local representatives are responsible for paying for the destruction of any counterfeit goods. A new procedure enables a trademark holder to lodge a preventative complaint with the customs authorities concerning the potential entry of fraudulent goods into the country and to request suspension of their clearance.

Uruguay’s National Customs Directorate keeps a register of seizures of goods, which is public and updated monthly, some of which are counterfeit. Information is available at http://www.aduanas.gub.uy/innovaportal/v/10500/4/innova.front/incautacion-de-mercaderias.html . However, there is no centralized dedicated reporting system for seizures of counterfeit goods.

Resources for Rights Holders

Post’s Economic Officer covering IP issues is:

Mr. Lawrence Pixa, Chief of Economic-Commercial Section
Lauro Muller 1776
Tel: (5982) 1770-2449
E-mail: pixald@state.gov

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Capital Markets and Portfolio Investment

The government maintains an open attitude towards foreign portfolio investment, but there is no effective regulatory system to encourage and facilitate it. Uruguay does not impose any restrictions on payments and transfers for current international transactions.

Uruguay passed a capital markets law (No. 18,627) in 2009 to try to jumpstart the local capital market. However, despite some very successful bond issuances by public firms, the local capital market remains underdeveloped and highly concentrated in sovereign debt. Such underdevelopment makes it very difficult to finance through the local equity market, and restricts the flow of financial resources into the product and factor markets. Due to its underdevelopment and lack of sufficient liquidity, Uruguay typically receives only “active” investments oriented to establishing new firms or gaining control over existing ones and lacks “passive investments” from major investment funds.

Uruguay allocates credit on market terms, but long-term banking credit has traditionally been difficult to obtain. Foreign investors can access credit on the same market terms as nationals.

The GoU banned “bearer shares” in 2012, which had been widely used, as part of the process of complying with OECD requirements (see Bilateral Investment Agreements section). Private firms do not use “cross shareholding” or “stable shareholder” arrangements to restrict foreign investment, nor do they restrict participation in or control of domestic enterprises.

Money and Banking System

The GoU restructured the local banking system significantly after the severe 1999-2002 local economic and financial crisis. The local system successfully weathered the 2008 global financial crisis and currently shows good capital, solvency and liquidity ratios. Uruguay established the Central Bank (Banco de la Republica del Uruguay or BROU), in 1967. With over 40 percent of the market, government-owned Central Bank is the nation’s largest bank. The rest of the banking system is comprised of another government-owned mortgage bank and nine international commercial banks. The Central Bank’s Superintendent of Financial Services regulates and supervises foreign banks or branches.

Mostly related to Foreign Account Tax Compliance Act (FATCA) provisions, there have been some cases of U.S. citizens having difficulties establishing a first-time bank account. The U.S. Department of State’s International Narcotics Control Strategy Report (INCSRII) classifies Uruguay a “Jurisdiction of Primary Concern” for money laundering.

The GoU started developing a financial inclusion program in 2011, with a view to granting universal access to basic financial services and modernizing the domestic payment system. Since then, and especially after the passage of a financial inclusion law in 2014 (No. 19,210), the use of debit cards increased fourteen-fold and credit card use quadrupled. Account holders also rose significantly, and the GoU authorized a number of private sector firms to issue electronic currency. However, given strong opposition from some business chambers, in December 2017 the GoU submitted a bill to relax several aspects of the 2014 law, such as enabling citizens to withdraw their entire wages from financial institutions. More information, in Spanish, on the GoU´s financial inclusion program is available at http://inclusionfinanciera.mef.gub.uy/ .

Fintech represents technological innovation in the financial sector, including innovations in financial literacy and education, retail banking, investment, and crypto-currencies. The first Fintech Forum held in Montevideo in mid-2017 led to the creation of the Fintech Ibero-American Alliance. The Alliance is composed of Fintech associations from Central America & the Caribbean, Colombia, Spain, Mexico, Panama, Portugal, Peru and Uruguay. While some local firms have developed domestic and international electronic payment systems, emerging technologies like blockchain and crypto currencies remain underdeveloped.

Foreign Exchange and Remittances

Foreign Exchange Policies

Uruguay maintains a long tradition of not restricting the purchase of foreign currency or the remittance of profits abroad. Free purchases of any foreign currency and free remittances were preserved even during the severe 2002 banking and financial crisis.

Uruguay does not engage in currency manipulation to gain competitive advantage. Since 2002, the peso has floated relatively freely, albeit with intervention from the Central Bank aimed at reducing the volatility of the price of the dollar. Foreign exchange can be obtained at market rates and there is no black market for currency exchange. The U.S. Embassy uses official rates when purchasing local currency.

Remittance Policies

Uruguay maintains a long tradition of not restricting remittance of profits abroad. Article 7 of the U.S.-Uruguay BIT provides that both countries “shall permit all transfers relating to investments to be made freely and without delay into and out of its territory.” The agreement also establishes that both countries will permit transfers “to be made in a freely usable currency at the market rate of exchange prevailing at the time of the transfer.”

Sovereign Wealth Funds

There are no sovereign wealth funds in Uruguay.

There is no consolidated published list of State-Owned Enterprises (SOEs). The State still plays a dominant role in the economy and Uruguay maintains government monopolies in several areas, including importing and refining of oil, workers’ compensation insurance, telecommunications (land and mobile), internet services, and water sanitation.

Uruguay’s largest enterprises wholly owned by the government include the petroleum company ANCAP, telecommunications company ANTEL, electric utility UTE, water utility OSE, and Uruguay’s largest bank BROU. While deemed autonomous, in practice these enterprises coordinate in several areas – mainly on tariffs – with respective ministries and the executive branch. Their boards are appointed by the executive branch, require parliamentary ratification and remain in office for the same term as the executive branch. Uruguayan law requires SOEs to publish an annual report, and independent firms audit their balances.

However, some traditionally government-run monopolies are open to private-sector competition. Cellular and international long-distance services, insurance, and media services are open to local and foreign competitors. The GoU permits private-sector generation of power and private interests dominate renewable energy production, but the state-owned power company UTE holds a monopoly on the transfer of electrical power through transmission and distribution lines from one utility’s service area to another’s, otherwise known as wheeling rights. SOEs tend to have the largest market share even in sectors open to competition. Potential cross-subsidies likely give SOEs an advantage over their private sector competitors.

Uruguay does not adhere to the OECD’s Guidelines on Corporate Governance of State-Owned Enterprises. A parliamentary commission investigated the multi-million dollar losses of the government-owned oil company ANCAP in 2015. The investigation triggered a debate about the need to reform the corporate governance of SOEs. The World Bank has assisted the GoU in strengthening the management of SOEs with no notable policy changes.

Privatization Program

Uruguay has not undertaken a major privatization program in recent decades. While Uruguay opened some previously government-run monopolies to private-sector competition, the government continues to maintain a monopoly in the key sectors already referenced.

Parliament passed a public-private partnership (PPP) law by consensus in July 2011 and created regulations with decree 007/12. The law allows various kinds of contracts that enable private sector companies to design, build, finance, operate and maintain certain infrastructures, including brownfield projects. With some exceptions (such as medical services in hospitals or educational services in schools), PPPs can also be applied to social infrastructure. The return for the private sector company may come in the form of user payments, government payments or a combination of both.

Historically, the GoU had been unsuccessful attracting private sector participation in major infrastructure projects. In 2015, the GoU passed new regulations (Decree 251/15) to simplify the procedures and expedite the PPP process. To date Uruguay has constructed a $100 million prison under PPP, and there is a $1.7 billion pipeline of projects in the transportation, education, and waste management sectors. All are in different stages of development.

The concept of responsible business conduct (RBC) is relatively new to producers, consumers, and the government, which does not have a high-profile plan to encourage it. Many companies do abide by the principles of RBC as a matter of course. Many multinational companies develop RBC strategies and make significant contributions in promoting safety awareness, better regulation, a positive work environment and sustainable environmental practices. U.S. companies have proven to be leaders in promoting a greater awareness of and appreciation for RBC in Uruguay. In 2015, the U.S. Department of State awarded a U.S. company the Secretary of State’s Award for Corporate Excellence for its work on environmental sustainability.

Consumers tend to pay attention to the RBC image of companies, especially as it relates to a firm’s work with local charities or community causes. The Catholic University (Universidad Catolica) has a program in place to monitor RBC matters (www.ucu.edu.uy/es/rse ). In the late 1990s, the Catholic University also founded DERES, a non-profit business organization to promote corporate social responsibility that currently has over 120 member companies (http://deres.org.uy/english-brief/ ).

Transparency International ranked Uruguay as the least corrupt country in Latin America and the Caribbean in their 2017 edition of the Corruption Perception Index. Overall, U.S. firms have not identified corruption as an obstacle to investment.

Uruguay has laws to prevent bribery and other corrupt practices. The GoU approved a law against corruption in the public sector in 1998 and the acceptance of a bribe is a felony under Uruguay’s penal code. The government prosecuted some high-level Uruguayan officials from the executive, parliamentary, and judiciary branches for corruption in recent years. The government does not encourage nor discourage private companies in establishing internal codes of conduct.

The Transparency and Public Ethics Committee (JUETEP by its Spanish acronym) is the government office responsible for dealing with public sector corruption (http://www.jutep.gub.uy/ ). Traditionally a low-profile office and still with a limited scope, it gained relevance in face of a case that ended in the resignation of Uruguay´s Vice-President in 2017. Since then JUTEP has played a role in denouncing alleged nepotism in the public sector. There are no major NGOs involved in investigating corruption.

A 2017 law (No. 19,574) sets an integral framework against money laundering and terrorism finance, brings Uruguay into compliance with OECD and UN norms, and includes corruption as a predicate crime.

Uruguay signed and ratified the UN’s Anticorruption Convention. It is not a member of the OECD and therefore not party to the OECD’s Convention on Combating Bribery.

Resources to Report Corruption

Government agency responsible for combating corruption:

Ricardo Gil, President
Junta de Transparencia y Etica Publica
Address: Rincon 528, 8th floor, ZC 11000
Tel: (598) 2917 0407
E-mail: secretaria@jutep.gub.uy

The local branch of Transparency International is http://www.uruguaytransparente.org.uy /.

Uruguay is a stable democracy in which respect for the rule of law and national debates to resolve political differences are the norm. The majority of the population is committed to non-violence. In 2017, The Economist magazine ranked Uruguay as the only “full democracy” in Latin America, and one of only two in the world “outside of the rich western countries of Europe, North America and Australasia.” There have been no cases of political violence or damage to projects or installations over the past decade.

Tracking strong economic growth, Uruguay’s labor market operated at virtually full employment with rising labor costs until 2014. As the economy cooled down in 2015 and 2016, the unemployment rate rose and wage increases slowed. In 2017 the economy resumed its growth path (GDP grew by 2.7 percent) but failed to create new jobs. Unemployment is structurally higher among the youth, especially young women. In recent years, there has been a significant increase in migrant workers, especially from Venezuela and the Dominican Republic.

Uruguay’s labor system is compliant in law and practice with most international labor standards. The Uruguayan Constitution guarantees workers the right to organize and the law against dismissal for union activities protects strike, and union members. Uruguay has ratified numerous International Labor Organization (ILO) conventions that protect worker rights, and generally adheres to their provisions. Reports by the UN’s Economic Commission for Latin America and the Caribbean (ECLAC) indicate that the percentage of informal workers has dropped significantly over the past decade.

In discussions with the Embassy, business owners and managers often described the local labor laws as rigid and very burdensome. The World Economic Forum’s 2017-2018 Global Competitiveness Index ranked Uruguay 76th of 137 countries surveyed. On labor relations with business, Uruguay ranked 121 of 137 countries, echoing private sector concerns with Uruguayan labor unions and rigid labor laws. Arguing that unions are aggressive and that labor conflicts escalate quickly, a range of private sector representatives call for the creation of a labor-dispute process that would define the necessary steps needed before workers may strike or occupy a workplace. Many foreign investors report high absentee rates by employees and resultant lower than average productivity rates. Productivity is not included in the negotiations that take place in the Salary Councils.

Labor unions are nominally independent from the government, but in practice have a close relationship with the ruling Frente Ampliocoalition and key positions in the Ministry of Labor. For years, Communist Party leaders have occupied leading positions in the unions and inside the Ministry of Labor. Unionization nearly quadrupled from about 110,000 in 2003 to over 400,000 in 2018 (almost one-fourth of employed workers), and is particularly high in the public sector and some private industry sectors, such as construction, metal fabrication, and banking.

Since 2005, the government has passed over 30 labor laws. Some of these laws promote and protect labor unions, reinstate collective bargaining, regulate outsourcing activities, regulate work times in rural activities, extend the term to claim worker’s rights, relate to the eviction of employees who occupy workplaces, and impose criminal sanctions on employers who fail to adopt safety standards in their firms. In labor trials, the judiciary tends to rule in favor of the worker assuming the worker as the disadvantaged party.

Collective bargaining is the rule. Salary Councils (The Councils) are responsible for assessing wage increases annually at a sectoral level, then applying any wage increases to all individual firms in the sector. The Councils consist of a three-party board, which includes representatives from unions, employers, and the government. If unions and employers fail to reach an agreement to determine the wage increase, the government makes the final decision.

Labor provisions apply across all sectors, and the GoU does not normally issue waivers to attract or retain investment. Except in the construction sector, social security payments are approximately 13 percent of workers’ basic salary. Including health care insurance, social security, and other charges, employers pay approximately 40 percent of a worker’s basic total salary to the government. In addition, there is a mandatory annual bonus and vacation pay, which result in employers paying the equivalent of 14 months of salary per employee each year. Labor laws do not differentiate between layoffs and firing. Employers must pay dismissed workers one month for each year of work with a cap of six months, except in cases of “for cause” firings. Laws prohibit private sector employers from firing workers for discriminatory or anti-union reasons. Dismissals often result in labor conflicts, even if dismissals are required to adjust employment to fluctuating market conditions. Unemployment insurance pays workers a percentage of their salary for up to six months. In the past, the government has extended the term of the unemployment insurance for select groups of laid-off workers.

Historically, Uruguay took pride in a high literacy rate and a tradition of quality public education. However, Uruguay is experiencing a crisis in its public education system. Dropout rates at the high school level are very high, and Uruguayan students have performed poorly in the OECD’s Program for International Student Assessment (PISA) tests. These challenges may limit the number of qualified workers available over the mid-term and long term. In 2008, the government launched a special institute, INEFOP, to bolster workforce development. There is a structural shortage of workers in the IT sector and other specialized, technical industries as well.

Overseas Private Investment Corporation (OPIC) programs are active in Uruguay, though few U.S. companies or projects request their services due to Uruguay’s stability and access to foreign currency. The GoU signed an investment insurance agreement with OPIC in December 1982.

Table 3: Sources and Destination of FDI

Uruguay’s Central Bank reports that in 2015 the United States held the fourth largest stock of investment, after Argentina, Brazil and Spain. U.S. investment is distributed among a wide array of sectors, including forestry, tourism and hotels, services (e.g. call centers or back office) and telecommunications.

Source: IMF Coordinated Direct Investment Survey

Table 4: Sources of Portfolio Investment

Source: IMF Coordinated Portfolio Investment Survey

Mr. Larry Pixa
Chief of Economic-Commercial Section
Lauro Muller 1776
Tel: (5982) 1770-2449
e-mail: pixald@state.gov