The Government of Uruguay (GoU) recognizes the important role foreign investment plays in economic development and continues to maintain a favorable investment climate that does not discriminate against foreign investors. Uruguay also has a stable legal system in which foreign and national investments are treated alike. Most investments are allowed without prior authorization and investors can freely transfer abroad their capital and profits from their investment. Investors can choose between arbitration and the judicial system to settle disputes. Local courts recognize and enforce foreign arbitral awards.
The World Bank’s 2018 Ease of Doing Business Index placed Uruguay fourth out of twelve countries in South America (and 94th out of 190 worldwide). Even with some tax incentives for investors, foreign direct investment (FDI) remains low compared to previous years. Domestic and FDI dropped significantly between 2015 and 2017.
About 130 U.S. firms operate locally and distribute their investments among a wide array of sectors, including forestry, tourism and hotels, services, and telecommunications. U.S. firms have not identified corruption as a problem for investment. In 2017, Transparency International ranked Uruguay as the most transparent country in Latin America and the Caribbean. Uruguay is a stable democracy. Political risk is low and there have been no recent cases of expropriation.
Uruguay is a founding member of MERCOSUR, the Southern Cone Common Market composed of Argentina, Brazil, Paraguay, and Venezuela, which entered into force in March 1991 (Venezuela was suspended from MERCOSUR in December 2016 for failing to adopt the bloc’s democratic principles). Uruguay has separate free trade agreements with Bolivia, Chile, Colombia, Ecuador, Peru, all of which are also MERCOSUR associate members. Montevideo is the headquarters of the MERCOSUR Secretariat and its Parliament. In 2004, Uruguay and Mexico deepened a 1999 agreement, which resulted in Uruguay’s first comprehensive trade agreement with a non-MERCOSUR country. In October 2016, Uruguay signed an agreement with Chile to extend and deepen the existing free trade agreement to increase trade in goods and services, which as of April 2018 is before Parliament.
Uruguay is also looking to strengthen bilateral trade ties with China. In a January meeting with China’s foreign minister, Uruguay’s president reiterated a strong hope to push for a free trade agreement with China and Uruguay’s willingness to participate in China’s Belt and Road Initiative.
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.
Labor unions are vocal and labor conflicts can escalate fast with strikes affecting overall productivity. The World Economic Forum’s 2017-2018 Global Competitiveness Index ranked Uruguay 76th of 137 countries surveyed. This index’s labor relations with business ranked Uruguay number 121 of 137 countries on that measurement. Many U.S. and regional investors have voiced concerns that Uruguayan labor unions can occupy work spaces and in that way shut down operations with few repercussions. Private sector representatives have also pointed out that labor unions’ close relationship with government means that the tripartite salary councils often increase salaries without sufficient regard for companies’ ability to absorb them.
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 also signed agreements on open skies, trade facilitation, cooperation in science and technology, customs issues, and social security totalization.
|TI Corruption Perceptions Index||2017||23 of 175||http://www.transparency.org/
|World Bank’s Doing Business Report “Ease of Doing Business”||2017||94 of 190||www.doingbusiness.org/rankings|
|Global Innovation Index||2017||67 of 128||https://www.globalinnovation
|U.S. FDI in Partner Country ($M USD, stock positions)||2016||1,548||http://www.bea.gov/
|World Bank GNI per capita||2016||15,230||http://data.worldbank.org/