The Government of Uruguay (GoU) recognizes the important role foreign investment plays in economic development and offers a stable investment climate that does not discriminate against foreign investors. Uruguay’s legal system treats foreign and national investments equally, most investments are allowed without prior authorization, and investors can freely transfer the capital and profits from their investments abroad. International investors can choose between arbitration and the judicial system to settle disputes. Local courts recognize and enforce foreign arbitral awards.
In 2019, Transparency International ranked Uruguay as the most transparent country in Latin America and the Caribbean. The World Bank’s 2020 “Doing Business” Index placed Uruguay fourth out of twelve countries in South America. Uruguay is a stable democracy. U.S. firms have not identified corruption as an obstacle to investment. As of April 2020, Standard & Poor and Moody’s rate Uruguay two steps above the investment grade threshold with a stable outlook.
Domestic and foreign investment rose substantially from 2004-2014 following Uruguay´s economic boom, but have dropped significantly since 2015 despite tax incentives for investors passed in mid-2018. About 120 U.S. firms operate locally and are invested among a wide array of sectors, including forestry, tourism and hotels, services, and telecommunications. In 2018, the United States was the second largest investor in Uruguay, reflecting its longstanding presence in the country. Uruguay has bilateral investment treaties with over 30 countries, including the United States. The United States does not have a double-taxation treaty with Uruguay. Both countries have a Trade and Investment Framework Agreement in place, and have signed agreements on open skies, trade facilitation, customs mutual assistance, promotion of small and medium enterprises, and social security totalization.
Over the past decade, Uruguay strengthened bilateral trade, investment, and political ties with China, its principal trading partner. In August 2018, Uruguay was the first country in the Southern Cone to join China’s One Belt One Road initiative. Uruguay formally joined the Asian Infrastructure Investment Bank in 2020. In recent years, China has signaled openness to a free trade agreement either with Uruguay bilaterally or with Mercosur.
A 2018 survey by Uruguay’s Ministry of Economy and Finance showed that about half of foreign investors were satisfied or very satisfied with Uruguay´s investment climate, principally its rule of law, low political risk, macroeconomic stability, strategic location, and investment incentives. Almost all investors were satisfied or highly satisfied with Uruguay’s 11 free trade zones and free ports. However, roughly one-fourth of investors were dissatisfied with at least one aspect of doing business locally, expressing concerns about high labor costs and taxes, high energy costs, as well as unions and labor conflicts. Following a March 2020 change of government from the left-leaning Frente Amplio to a coalition under the centrist Partido Nacional party, private sector representatives expect the new administration will have a more balanced approach on labor relations.
Uruguay is a founding member of Mercosur, the Southern Cone Common Market created in 1991 that is headquartered in Montevideo and also comprises Argentina, Brazil, and Paraguay. (Note: Venezuela joined the bloc in June 2012 and was suspended in December 2016.) Uruguay has separate trade agreements with Bolivia, Chile, Colombia, Ecuador, and Peru, all of which are also Mercosur associate members. Uruguay and Mexico have a comprehensive trade agreement in place since 2004, and in 2018, Uruguay extended its existing free trade agreement with Chile to increase trade in goods and services.
Uruguay’s strategic location (in the center of Mercosur’s wealthiest and most populated area), and its special import regimes (such as free zones and free ports) make it a well-situated distribution center for U.S. goods into the region. Several U.S. firms warehouse their products in Uruguay’s tax-free areas and service their regional clients effectively. With a small market of high-income consumers, Uruguay can also be a good test market for U.S. products. U.S.-Uruguay IT services trade is also a recent growth area.
|TI Corruption Perceptions Index||2019||21 of 180||http://www.transparency.org/
|World Bank’s Doing Business Report “Ease of Doing Business”||2020||101 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2019||66 of 129||https://www.globalinnovationindex.org/
|U.S. FDI in Partner Country ($M USD, stock positions)||2018||1,314||https://apps.bea.gov/international/di1usdbal|
|World Bank GNI per capita||2018||15,650||https://data.worldbank.org/indicator/