Francisco A. Laguna & Francisco Moran
Uruguay is the smallest country in the Southern Cone, and the second smallest in South America. It is located between Argentina and Brazil, and has a natural outlet to the Atlantic Ocean.
The country has an impressive agricultural sector, and is one of the world’s largest producers of soybeans, greasy wool, horse meat, beeswax, quince, natural honey and cattle meat. The banking sector is robust and touted as safe and reliable. In addition, Uruguay’s coastline boasts beautiful beaches and resorts that attract visitors from the Southern Cone and beyond.
Traditionally, Uruguay has been economically dependent on its larger neighbors, particularly Argentina, establishing important supply channels between the two countries. Dependence on Argentina, however, took its toll as that country’s economy floundered in the early 2000s, and Uruguay suffered the spill-over effects. Those ripples continue as Argentina’s foreign exchange regulations restrict the purchase of hard currency needed for Argentines to travel abroad.
Uruguay’s government responded to the financial crisis by opening its markets to foreign investment, attracting companies interested in more cost-effective manufacturing locations or regional headquarters to manage the transportation of goods. The port of Montevideo, located in a natural harbor, is one of the most advanced container terminals in South America. Uruguay’s location makes it an ideal hub for both Atlantic and Pacific routes. Transported commodities range from mining products, such as iron ore, oil and fuels, to agriculture and other goods.
Uruguay’s government, now headed by socialist President Jose Mujica, has largely succeeded in weathering the financial storm of the last decade. It has implemented successful poverty-reducing and economic stimulus measures. Uruguay is one of the most stable economies in the region with a strong banking sector, willing to work with foreign investors to establish a favorable business climate and consistently following pro-growth domestic and foreign policies – unlike some of the nationalist and isolationist policies adopted by Argentina.
Its pro-growth strategy also includes developing multiple duty free zones for international imports to the region and expanding its traditional markets beyond Mercosur. Most interesting among these efforts is the recent letter of intent signed between India and Uruguay to explore and encourage investment opportunity in iron and steel sector and to facilitate exchange of technical know-how in iron ore and steel related raw materials. Indian officials also see possible collaboration in mining granite, gold and diamonds. Will similar programs be established with China?
Socially, Uruguay is one of the most progressive countries in the region, recognizing both abortion rights and same-sex marriage, despite its majority Roman Catholic population.
Despite these efforts, Uruguay is well aware that challenges continue. Inflation estimates for 2013 run ~ 7.5% per year, while GDP figures are ~ 3.9%. However, Uruguay has laid a solid foundation for market expansion and the establishment of new markets and bed-fellows, which bodes well for expansion.
TransLegal routinely works with clients in the Southern Cone and Mercosur. Contact us with questions related to how you can benefit from the economic measures being implemented in Uruguay.
Pictures: The photographs in this blog are provided by Mariana Silveira, a friend and colleague from Uruguay, who is a Contract Specialist for Minetec in Tucson, Arizona.