COMPANY PROFILE

URUGUAY

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Uruguay is a small country, both in size and population, although its living standards are among the highest in Latin America.

Characterized as an open economy to the world, it is recognized worldwide for its agricultural vocation, even though services represent a significant proportion of its GDP.

Uruguayan economy is based in free enterprise principles. Foreign investors are welcome and enjoy the same opportunities as local agents.

Highly integrated into the region (in particular, Argentina and Brazil), Uruguay has also diversified markets, positioning itself as a worldwide quality producer.

After having crossed one of the worst crises in its history, Uruguay was able to return to the path of economic growth immediately, successfully overcoming the difficulties encountered. The Uruguayan economy recorded eight consecutive years of expansion (even in 2009, despite the impact of the international crisis), growing at an average annual rate of 5.6% between 2003 and 2010.

GDP
(Annual change)

Source: Central Bank of Uruguay (BCU)

Recognized worldwide as an agricultural country, the share of primary activities in GDP is around 9%. Manufacturing activities contribute 13% to the country’s output, while services such as trade, communications, real state/business activities, health and education represent about 60% of GDP. These activities have increased their share in recent years, with average annual growth rates exceeding that of the economy as a whole.

Measured in dollars, GDP was estimated at 40,284 millions in 2010, resulting in a Power Purchasing Parity (PPP) GDP per capita of 14,338 dollars.

Regarding foreign trade, exports account for about one quarter of the economic output, being one of the main drivers of growth. In 2006-2010 exports grew at an annual average of 6.4% in terms of physical volume. In particular, in 2010 total exports reached around 10,600 million dollars. The main exports are related to agricultural activities and agribusiness: beef (frozen and refrigerated), soybeans, rice, wheat and wood. Meanwhile, tourism activities are highlighted on the side of exports of services.

On the other hand, oil is the main imported product. In 2010, the imports of this fuel were around 1,600 million dollars. Excluding this product, highlight the purchases of vehicles and other consumer goods, mainly driven by real income growth.

From the commercial perspective, Uruguay is one of the founding members of MERCOSUR, which also includes Argentina, Brazil and Paraguay.

Throughout the second half of the 20th century inflation was extremely high, with figures of two and up of three digits. The policies of stabilization of inflation applied since the mid-nineties have reduced considerably the pace of price growth. With the exception of 2002, annual inflation reached single digits since 1998. At present, the Central Bank has set an inflation target of 5% with a tolerance of +/- 1%.

Annual inflation (1980-2010)		Public sector: Overall result (% of GDP)
Source: National Statistics Institute (INE)		Source: Economy and Finance Minister (MEF)

The success of price stabilizations schemes was associated with an arranging of the fiscal accounts, which has led to a reduction of the deficit over the recent years. In addition, efforts have focused on changing public debt profile gradually, reducing the share both of foreign currency and variable interest rate debt. This has resulted in a gradual reduction in country risk and improved sovereign rating. In this sense, major agencies have placed the country close to investment grade.

Uruguay Credit Ratings

Source: Debt Management Unit

Uruguay is characterized as an open country to foreign investment. In this sense, there are no restrictions on profit transfer or repatriation of capitals and, since it has a free exchange market, investments can be made in any currency. Also, there is a regime of Promotion and Protection of Investments (which awards tax exemption to productive enterprises) and attractive regimes of free zones.

In 2010, FDI reached 2,300 million dollars (a figure higher than the record set in 2008), representing 6% of GDP. The arrival of large foreign investments in the coming years and the setting of a proper business climate in the country, predicts an increase in this type of investment.

Foreign Direct Investment (Million of dollars)

Source: Central Bank of Uruguay (BCU)

Regarding the ease of doing business in Uruguay, the World Bank ranked the country 90th among 182 worldwide. In South America, Uruguay places in third place, behind Chile and Peru. The Global Competitiveness Report, prepared by the World Economic Forum ranks Uruguay 63th among 142 countries. In Latin America, Uruguay is positioned in third place, behind Chile and Brazil. Uruguay’s performance is based on development of infrastructure, energy supply (ranking second in both cases), institutional development and higher education and training of human resources.

Uruguay also ranks 24th among 178 countries worldwide and in second place in Latin America (behind Chile) in terms of the Transparency Index prepared by Transparency International.

In turn, Uruguay is classified as a high human development country by the United Nations, locating above both worldwide and Latina American average. In this case, Uruguay is positioned in third place, behind Chile and Argentina.

Uruguay: main macroeconomic variables