Guidance

Overseas business risk: Uruguay

Updated 23 September 2024

1. General overview

Uruguay is a politically stable country with a strong democratic tradition and institutions. It is positioned at the top of the Democracy, Political Stability and Transparency rankings in Latin America.

Uruguay is a founding member of the MERCOSUR regional bloc (alongside Brazil, Argentina and Paraguay), which represents 60% of Latin America’s GDP. The Uruguayan government is looking beyond its traditional trading partners in the immediate neighbourhood and keen to open up new markets. In recent years, Uruguay’s economy has become more resilient and its exports more diversified thanks to sound macroeconomic policies, strong institutions and political stability.

The country’s GDP has increased at an average of 1.52% in the last decade, including a post-pandemic growth of 5% in 2022. In 2023, Uruguay confronted the impact of a once-in-a-century drought, causing significant direct losses to the primary sector. The economic situation in Argentina created further headwinds for Uruguay, although with no signs of financial spillovers. The economy remained resilient, owing to the authorities’ sound macroeconomic policies, the country’s political stability, and strong institutions. The current administration, in office since 2020, has implemented a significant upgrade of the fiscal and monetary policy frameworks and has advanced decisive structural reforms. Economic growth is expected to recover to 3.2% in 2024.  The main economic challenges are lowering the debt to GDP ratio and maintaining the inflation targets.

To ensure continued economic growth in the medium to long term, experts state that Uruguay must address the lack of job opportunities, the relative size of the public sector (significant in a population of just 3.5 million), labour regulation and infrastructure gaps.

2. Political

Uruguay’s political party system is one of the most institutionalised in the world. Citizens choose their government in free and fair elections held every 5 years, based on universal, equal and compulsory suffrage.

After 15 years and 3 consecutive terms for the left-wing Frente Amplio party coalition, the centre-right opposition National Party, led by Luis Lacalle Pou won the 2019 elections with a majority in Congress for his multi-party coalition. Initial willingness to carry out important reforms led to the approval of an Urgent Consideration Bill in July 2020 which contained 476 articles and modified over 30 public policies. It included economic and political reforms, as well as relevant changes in social security, education, health, agriculture, among other sectors.

In 2022, the Economist Intelligence Unit’s Democracy Index ranked Uruguay 13th out of 167 countries, with a score of 8.85 out of 10 (its highest ever). This score ranks first in Latin America and deems Uruguay a “full democracy”, with strong institutions and transparency standards.

Uruguay works hard to endorse Organisation for Economic Cooperation and Development (OECD) standards. This includes signing several tax information exchange agreements, modification of the bearer shares system (Law 18,930 from 2012) and relaxation of banking secrecy provisions through the Law of International Tax Transparency, Prevention of Money Laundering and Financing of Terrorism.  Uruguay became a member of the OECD Development Centre and a participating observer in the Fiscal Affairs Committee in 2015.

In 2018, Uruguay graduated from the Development Assistance Committee (DAC) list of eligible countries to receive official development assistance (ODA) from donor countries, due to having reached USD 17.165 per capita income for more than 3 years. In March 2021, Uruguay became associate member of the OECD’s Investment committee.

During 2013, Uruguay was in the international spotlight for legalising same-sex marriage, approving the continent’s most liberal abortion law, and becoming the first nation in the world to legalise and regulate the production, sale and consumption of marijuana.

In 2023, the Uruguayan parliament approved a social security reform that will reduce pressures caused by an aging population. The government also implemented an education reform to update and boost the educational system.

Uruguay will have general elections in October 2024 with a potential second round in November. The new government will take office in March 2025. In May 2025, there will be elections in the 19 municipalities across the country.

3. Economic

Uruguay is a country with a high Human Development Index (HDI), ranked 52nd out of 189 countries in 2022, according to the United Nations (UN).

Uruguay became a high-income country in July 2013 (World Bank). The inflation rate for 2023 was 5.11%; previously 8.29% in 2022 and 7.96%, 2021 (National Institute of Statistics).

The Uruguayan tax system includes indirect and direct taxes which apply the source principle. Tax is applied to all incomes originating within its borders for residents and non-residents. In 2023, the Uruguayan government approved tax reductions by increasing deductions from the Individual Tax (IRPF), and by increasing the non-taxable minimum of the Social Security Assistance Tax (IASS).

Since 2013, Uruguay’s economy has become more resilient and its exports more diversified. According to the World Economic Forum (WEF), it is the 3rd most competitive economy in Latin America and the Caribbean. Its GDP was worth USD 77 billion in 2023, according to the World Bank.

Commodities dominate Uruguay’s exports, principally beef (representing 18% of total exports in 2023), cellulose (17.5%) and dairy products (7%), according to Uruguay XXI.

British exports to Uruguay amounted £196 million in 2023. Main UK exports to Uruguay include Medical & Pharmaceutical products (19%), Beverages & Tobacco (18%), Specialised machinery (4.5%) and Cars (3%).

According to the United Nations’ World Risk Reports 2023, Uruguay ranks 88 out of 193 countries (where number one is the most exposed and vulnerable). This ranking reflects the countries’ exposure and response to potential natural disasters.

As for Uruguay’s energy sector, renewables accounted for 93% of the electricity matrix between 2018 and 2022 (53% wind, solar and biomass and 40% hydro), significantly reducing greenhouse gas emissions. It has the second highest penetration of unconventional renewable energy in the world.

While hydropower led the renewable energy matrix since the beginning of the energy transition in 2008, wind energy has now become the main energy generation source. This is due to:

1. Uruguay’s “First Energy Transition”, which started in 2008 and focused on the diversification of the energy matrix
2. a 3-year drought that Uruguay faced between 2020 and 2023

Uruguay ranks 23rd in the Energy Transition Index and is one of the leaders in the region (World Economic Forum, 2023). It has potential for growth in the renewable energy sector, which is contingent on a consolidated electricity market. The country is also one of the first in the region to promote large-scale electric vehicle mobility. Energy Council (WEC),

Uruguay’s Energy Transition Plan is now in its second stage. Its main objectives are:

• direct electrification of end-use consumption
• development of a green hydrogen economy
• consolidate a Smart Grid to efficiently coordinate energy supply and demand
• continue to incorporate energy storage technologies
• expand the possibilities of generating energy from agricultural waste, transforming an environmental liability into an energy asset
• advance in the energy recovery of solid urban waste
• incorporate clean energy into the transport sector by applying the latest available technologies

Green hydrogen has become a priority to the Uruguayan government. It has set up a 3-phase roadmap (H2U Roadmap) for the establishment of institutional lines and work for the growth of hydrogen and its derivatives. This is currently in its first stage with aims to develop the regulatory scheme and attract pilot and first export-scale projects. This has led to the announcement of HIF Global’s US$4 billion investment (the largest in Uruguay’s history) for a green hydrogen production plant. The proposal aims to produce 180,000 tonnes of synthetic fuels per year, using 710,000 tonnes of carbon dioxide.

Uruguay is improving its energy demand matrix. Fossil fuels account for 40% of the country’s total consumption, with a high proportion corresponding to the transport and industrial sectors.

4. Foreign direct investment

A favourable environment for investment and good economic performance over the last decade has contributed to Uruguay being a reliable investment destination. With 1.52% annual average GDP growth in the last decade, the strong economic expansion has been characterised by a noticeable increase in the rate of investment of the economy. This is due to greater investment by the private sector, strongly driven by the inflow of foreign direct investment. Standard & Poor’s credit rating for Uruguay stands at BBB+ with stable outlook. Moody’s credit rating was last set at BAA1 with stable outlook. The perspective remains stable, reflecting Uruguay’s sovereign sustained and balanced growth and the economy’s solid external position, despite high general government deficits and dollarisation levels.

Uruguay has worked actively to maintain the characteristics that have made it appealing to investors: macroeconomic stability, attractive regulatory framework, transparency, institutional quality and financial and trade openness. It offers an attractive set of investment incentives, adequate infrastructure, qualified human capital and agreements to avoid double taxation (including with the UK). Uruguay does not impose any type of restriction for the repatriation of utilities, notwithstanding 60% of the profits of foreign companies are usually reinvested.

The main origins of foreign investment are from Southern Cone countries, the United States and Europe. In the same way as it has worked to diversify and open new markets for its exports, Uruguay is keen to attract FDI from the rest of the world, rather than just the immediate region.

Finnish company UPM made a US$3 billion-dollar investment in 2019 into a second wood pulp plant in Uruguay. This second plant is expected to permanently contribute 2% of the country’s GDP.  In the business environment, Uruguay performs well in Starting a Business and Resolving Insolvency. However, it struggles with Dealing with Construction Permits and Protecting Minority Investors. There are some challenges in the labour market including significant taxation, recruitment, redundancy and flexibility in setting wages.

Uruguay is above the Latin American and Caribbean average scores in institutions, infrastructure, health, primary and higher education, goods market efficiency and technological readiness. Uruguay ranks 35th in UN E-Government ranking 2022, just behind Canada and the United States.

According to the results of the latest survey (2023) conducted by Uruguay XXI (the government trade and investment agency), the decisive factors for foreign investors in choosing Uruguay were:

• social, political and macroeconomic stability
• tax incentives and exonerations
• qualified human resources and short distances.

The managers surveyed expressed an elevated level of satisfaction with the business climate (84%) although 49% are dissatisfied with the higher prices and 20% with the slowness and complexity of other bureaucratic processes.

5. Treaties

Uruguay has a Bilateral Investment Treaty (BIT) with the United Kingdom, which came into force in 1997. It aims to promote and protect reciprocal investments. Uruguay has bilateral investment treaties with over 30 countries. These treaties guarantee foreign investors certain principles such as a most-favoured-nation clause, fair and equitable treatment provisions, and clauses linked to expropriation and non-restriction on transfers. They also contain provisions relating to the settlement of disputes, including the possibility of an international tribunal appealed by an investor who has a claim against the State. 

Tax Information Exchange Agreement between the UK and Uruguay (2016)

Uruguay-UK Tax Treaty: double taxation convention (2016)

6.  Investment/trade facilitation

Uruguay ranks above average in Latin America regarding governance indicators, and first in the region in most of them, providing a secure environment to invest. Uruguay’s strategic location, top-level logistics infrastructure and state of the art telecommunications technology have positioned it as a regional and logistical hub through which an investor could access a market of 400 million people in South America.

The country also offers a comprehensive regulatory framework to promote investment. This includes tax benefits and a single taxation system, free repatriation of capital and profits and non-discrimination between local and foreign investors.

Law 16,906 on Investment Promotion and Protection provides foreign investors with the same benefits as national investors and does not require prior authorisation to settle in Uruguay.

Investment projects presented to and promoted by the executive branch, can be exempt of up to 100% of Income Tax on Economic Activities (IRAE).

In 2012, public-private-partnership (PPP) law was approved to address infrastructure shortage: projects vary from highways, education infrastructure, a prison and railway reconstruction lines.

6.1 Free trade zone (FTZ)

The promotion and development of the Uruguayan free zone regime has been declared of national interest, being first regulated in 1987. There are currently 12 free-trade zones in which commercialisation of goods and services is carried out within the country and with third countries. Several recognised multinational companies benefit from this regime. They mainly operate in the following industries: agrifood, pharma/life sciences, ICT, business services, forestry and timber, creative industries and infrastructure. In 2025, a new Free Trade Zone in Punta del Este coastal city will begin operations. FTZs are regulated by Law 15,921, Law 19,566 (2018 update) and Decrees 454/988 and 309/018.

Overview of tax benefits within FTZ

Permitted activities: commercial, industrial and service activities of any type developed within the FTZ. Certain auxiliary activities can be performed outside the FTZ. Free zone users (FZU): Almost full tax exemption (Corporate Income Tax-IRAE, Net Wealth Tax-IP, Value Added Tax – VAT and several withholding taxes) and customs duties exemption.

Employees: Foreign employees may opt out of the Uruguayan social security system and, regarding personal income tax, opt to be subject to non-residents income tax (IRNR) at a 12% flat rate instead of Individual Tax (IRPF). FZU users must hire a minimum of 75% of natural or legal Uruguayan citizens, (three Uruguayan citizens per foreign employee), although the Government could authorise different ratios.

6.2 Other FTZ services in Uruguay

Free ports and airports regimes: refers to port and airport bonded spaces, offering special fiscal and customs regimes. It includes the free circulation of goods, not requiring any authorisations and the exemption of any customs duties, taxes or fees to the entered merchandise or goods.

Temporary admission: this regime allows duty free imports of raw material, supplies, spare parts, equipment or materials (including software support or IT related) to be used to manufacture goods that will be later exported.

Bonded warehouses: customs regime through which the goods enter or are kept in a space under private management without payment of taxes - except for appropriate fees for later inclusion in a different customs regime, their re-loading or re-exportation. Within these warehouses, foreign goods stored in transit may be unloaded and loaded again any time, free of import or export taxes and any domestic tax. Furthermore, they may be stored there for up to 24 months.

Solid and reliable institutionalism

Uruguay XXI: Is a Uruguayan government agency to promote trade and investment. It provides free support and advice to foreign investors.

Private Sector Support Unit (UnASeP): under the Ministry of Economy and Finance (MEF), this central unit provides support to the investor, national or foreign.

National Development Agency (ANDE): Promotes the productive development of the country through the design and implementation of programs and instruments for the improvement of business and territorial competitiveness, with emphasis on MSMEs and articulation between interested public and private actors.

National Research and Innovation Agency (ANII) government entity that promotes research and the application of new knowledge to the productive and social reality of the country.

Customs Code: regulation introducing various innovations in the customs area, including the figure of the Authorized Economic Operator.

7. State-owned companies

The State plays an important role in the economy, where several areas are monopolised by the government, such as landline telephony and internet services (ANTEL), importing and refining oil (ANCAP), electric power (UTE), water sanitation (OSE) and workers’ compensation insurance (through BSE). Companies seeking to participate in public tenders must register in a specific list called RUPE (contact the British Embassy to find out more).

8. Business and human rights

The Constitution of Uruguay states that all people have the right to equality before the law, not recognising another distinction between them but that of their talents or their virtues.

The law provides for freedom of speech and press, academic freedom, freedom of peaceful assembly and association, freedom of religion, freedom of movement, foreign travel, emigration and repatriation, including the protection of refugees.

Uruguay has ratified all the main international human rights treaties, and the 8 core International Labour Organisation (ILO) conventions. It has also ratified all 4 Governance Conventions, which are the most important rules in relation to the operation of the international labour standards system. Most Technical Conventions are also in force.

Gender equality: Uruguay has ratified all international commitments regarding gender equality and women’s rights. Women are represented in many high-profile positions in Uruguay, including politics, but further advances in this area are still needed. In the 2019 general elections, Beatriz Argimón was elected Vice President, becoming the first woman to hold the position.

Despite economic growth and improvement in poverty and unemployment indexes, Uruguay has structural gender inequalities in strategic areas. The gaps include rural women and Afro descendants. Law 19,122 was passed in 2013, aiming to favour the participation of afro-descendants in education and labour.

Sexual orientation and gender identity (SOGI): Uruguay bans SOGI discrimination and guarantees transgender rights. It was the 12th country in the world to legalise same-sex marriage nationwide. In its penal code, the provisions related to hate crimes include SOGI (Law 17,677, Articles 1 and 2). Transgender people have the right to change their official sex and name (Law 18,620, 2009). The Marriage Equality Law legalised same-sex marriage in 2013, in addition to raising the legal age of marriage to 16 (Law 19,075).

In 2018, Uruguay passed a law recognising and protecting the rights of transgender people. The law aimed to guarantee the access of transgender people to quality jobs and healthcare services. Though this law faced criticism in parliament, an attempt to derogate it in 2019 via referendum failed.

The trade union movement is significant in Uruguay. The main grouping, the Inter-union Plenary of Workers – National Workers Convention (PIT-CNT) has more than 400,000 affiliates.

9. Bribery and corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or as Scottish partnership to bribe anywhere in the world. In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case, it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

Corruption has not been identified as an obstacle to investment. In 2023, Uruguay ranked 16 of 180 countries in Transparency Internationals corruption perception index (CPI). It leads the Americas, alongside Canada. It is ahead of France (21st), the US (24th), Chile (27th), Costa Rica (48th) and China (65th).

Uruguay has several laws to prevent bribery and other corruption practices. Laws 17,835, 18,494 and 19,355 were passed as a framework against money laundering and terrorism finance. Criminal law is applied in cases of this nature.

The government office that combats public sector corruption is the Transparency and Public Ethics Committee (JUTEP).

10. Terrorism threat

For information on terrorism threats, consult the terrorism section of our FCDO travel advice for Uruguay.

11. Protective security and organised crime

Organised crime presents no direct threat to UK business in Uruguay.

For more information, view FCDO travel advice for Uruguay.

12. Intellectual property

IP rights are territorial, that is they only give protection in the countries where they are granted or registered. If you are thinking about trading internationally, then you should consider registering your IP rights in your export markets.

The regulation of intellectual property rights in Uruguay is subject to international treaties such as the Paris Convention (industrial property), the Berne Convention (copyrights) and the Protocol of Harmonization of Norms (industrial property) in the framework of MERCOSUR. These treaties are complemented by local regulation covering industrial property and copyright matters. The national division in charge of intellectual property affairs and registrations is known as DNPI. Intellectual property rights are also subject to protection under Uruguayan criminal law.

Uruguay is a member of the World Intellectual Property Organization (WIPO). Further information is available in its country profile.

In 2024, the UK and Uruguay signed a Memorandum of Understanding between the National Directorate for Industrial Property (DNPI) of the Ministry of Industry, Energy and Mining (MIEM) and the Intellectual Property Office of the United Kingdom (UKIPO) to establish the Patent Prosecution Highway Program. Further guidance on how to implement this can be found here.

13. UK Export Finance

The Government can provide finance or credit insurance specifically to support UK exports to Uruguay through UK Export Finance – the UK’s export credit agency. For up-to-date country specific information on the support available see UK Export Finance’s country cover policy and indicators.

14. Contact

Contact the UK Department for Business and Trade for more information and advice on opportunities for doing business in Uruguay.

You can email us at: UKTrade.Uruguay@fcdo.gov.uk