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Information of Uruguay
Total area: 313.782 Km2 Official Language: Spanish
Population: 3.151.700 inhab Continental territory:176.215Km2
Density: 18 hab/km2 Population growth rate: 0,264% annual
Literacy: 96.7 % Currency: Uruguayan peso
Uruguay is located in the South of Latin America, bordering with Argentina and Brazil. In Latin America context it is set apart due to the fact that it presents an homogeneous culture result of the similar origins of its inhabitants and of the little territory area compared to the countries of the region.
It is a democratic republic with national elections that take place every five years. It is governed by three different powers: Executive, Legislative and Judicial, which have their individual autonomy in the decision making in relation to the other branches.
Uruguay presents distinguishing features compared to the other Latin America countries.
Uruguay is located within the Latin America most important central commercial point: the MERCOSUR central point that links the cities of Brasilia, Rio de Janeiro, Sao Paulo and Santiago de Chile stretched as far as Asunción, Montevideo and Buenos Aires. This stream has the highest quantity of exchange flows within the region and the highest urban concentration of Latin America.
The commercial agreements have been intensified within the region and extra-regional due to the globalization of the world’s economy.
Uruguay together with Argentina, Brazil and Paraguay is part of the Southern Common Market – MERCOSUR. Such agreement makes the Uruguayan internal market to grow, offering facilities not only to the import of products but to the export of goods and services from the region.
The idea is to continue advancing in different negotiations with the aim of obtaining other extra-regional integration agreements in the medium term, either through Mercosur or in a bilateral way.
OTHER COMPETITIVE ADVANTAGES
The Uruguayan Government contributes to the foreign investment and has no discrimination between local and foreign investors as regards to incentives.
A very important role is played by the State in the investment promotion through fiscal incentives that facilitate its development. There is a favorable tax system that includes:
The nineties were fundamental in the economic plan.
Progress has been made in several structural reforms that attempt to solve aspects in the long-term. These reforms tend to:
Important reforms are achieved in different areas.
As regards to social security, the lack of financial viability in the current system at that moment made it necessary to transform the so far simple intergenerational sharing out system into a mixed one with individual capitalization. This ensured a reduction in the structural deficit in the long term.
As regards to financials, the outstanding elements were the “AFAPS” emergence (“Administradoras de Fondos de Pensión” - Pension Fund Administrators) and the Local Stock Market growth.
As regards to the commercial, a larger opening-up towards the rest of the world is attempted through duties reduction and import quotas. In 1991 Uruguay signs with Argentina, Brazil and Paraguay the treaty creation of the Southern Common Market (MERCOSUR) that came into effect in 1995. Such treaty has been crucial for Uruguay commercial insertion that starts a productive reorganization process in different areas from then on.
Uruguay maintains the importance of the cattle trade whose production was transformed by the agro-industrial complexes. There is an export diversification that set aside the traditional cattle product to more elaborated goods, even though they are based on agro products.
As regards to labor, there is an attempt to increase the labor flexibility through a series of specific changes that reduce dismissal costs, special recruitment types through individual companies, among others.
As regards to exchange rate and price levels evolution, the nineties were also significant; a stabilization plan with anchor exchange rate by using a flotation band system is started in 1991. As a consequence, inflation is gradually put down from 128% in the nineties to one-digit levels in 1998.
Within this framework, the country consolidates an important growth stage that is maintained until 1998.
From then on, an economic crisis had to be faced due to the mass withdrawal of capital flows from the emergening markets, which caused distrust among the investors and which transferred to Brazil, Argentina and also to Uruguay.
In early 2002 the difficult fiscal situation in a context of economic recession that is also contaminated by Argentinian situation, causes the agents uncertainty leading to a mass deposits withdrawal not only from residents but from non residents. The financial market performance is affected and leads to a system restructuring still in process.
The help given to the country by multilateral organizations of credit as an important external financial assistance, as well as the success in the voluntary operation of debt rescheduling proposed by the government, were key to relieve the State weight, calm the market place and generate recovery expectations.
In 2003 first quarter the first recovery signs were registered. The level of activity has been recovering slowly since then and reached an spectacular 12.3% rise in 2004. The outlook for next year shows an average growth rate of 3.5%.
This growth consolidation is feasible in a stable macroeconomic environment.
Inflation is maintained at one-digit level, while the level of competitiveness is closed to its average value, the unemployment declines and the exchange rate is kept practically stable.
The financial system recovers reasonable levels of solvency and liquidity.
The acceptable level of competitiveness, plus an international and regional favorable context and the reopening of meat markets abroad, led to a good environment for the export increase.
In early 2003, exports have shown a large dynamism.
The activities with best performance are industries based on agriculture. Particularly, the Cold-storage Industry has been the engine of the industrial recovery.
The cattle sector has a large weight in the country total exports. Particularly, the opening-up of new markets for the meat after the foot-and-mouth (“aftosa”) outbreak, as well as the good prices at an international level, have been an incentive for the exploitation of cattle.
Also in the forestry area, there are excellent investment outlook. The setting up of two cellulose plants is already predicted and there are additional projects in this sector. The future paper plants establishment is not dismissed.
Within the services sector, tourism has achieved special importance to the country during recent years, as it generates employment and foreign currencies, being an important engine to the economy in recent years.
Uruguay is receptive of investments also in the infrastructure area through the public works concession and other products directed to overseas market, i.e. software industry, dairy products, grape and wine-growing and agriculture. Within this last, the most outstanding products are oil products, wheat, rice and barley brewer.