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U.S. Department of State
Uruguay Country Commercial Guide
Office of the Coordinator for Business Affairs
Country Commercial Guide
URUGUAY
Fiscal Year 1996
This Country Commercial Guide (CCG) presents a comprehensive look at
Uruguay's commercial environment through economic, political and market
analyses.
The CCGs were established by recommendation of the Trade Promotion
Coordinating Committee (TPCC), a multi-agency task force, to consolidate
various reporting documents prepared for the U.S. business community.
Country Commercial Guides are prepared annualy at U.S. Embassies through
the combined efforts of several U.S. governement agencies.
TABLE OF CONTENTS
I. EXECUTIVE SUMMARY
Major Obstacles to Doing Business
II. ECONOMIC TRENDS AND OUTLOOK
Major Trends and Outlook
Inflation
Public Sector Reform
Principal Growth Sectors
Agriculture and Livestock
Fishing
Construction
Manufacturing
Services
Utilities
Government Role in the Economy
Balance of Payments situation
Current Account
Merchandise Trade
Capital Account
Net Foreign Reserves
Infrastructure Situation Re: Goods/Service Distribution
III. POLITICAL ENVIRONMENT
Nature of Bilateral Relationship with the United States
Major Political Issues Affecting Business Climate
Brief Synopsis of Political System, Schedule for Elections, and
Orientation of Major Political Parties
Colorado Party
National (Blanco) Party
Frente Amplio (Broad Front)
IV. MARKETING U.S. PRODUCTS AND SERVICES
Distribution and Sales Channels
Use of Agents/Distributors - Finding a Partner
Franchising
Direct Marketing
Joint Ventures/Licensing
Steps to Establishing an Office
Selling Factors Techniques
Advertising and Trade Promotion
Pricing Product
Sales Service/Customer Support
Selling to the Government
Protecting Your Product from Intellectual Property Right (IPR)
Infringement
Need for a Local Attorney
V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENTS
Best Prospects Products and services for U.S. Exports
Major Infrastructure Projects Underway
Parana-Paraguay River Transportation System
Colonia-Buenos Aires Bridge
Construction and Operation of Gas Pipeline Between Argentina
and Uruguay
Renewal of Truck Fleets
Private Power Generation
Other Major Infrastructure Projects
Major Local & Third Country Competitors in Specific Sectors (Table)
VI. TRADE REGULATIONS AND STANDARDS
Tariffs and Import Taxes
Customs valuation
Import Licenses
Export Controls
Import/Export Documentation
Temporary Entry
Labeling, Marking Requirements
Prohibited Imports
Standards
Free Trade Zones/Warehouses
Special Import Provisions
Membership in Free Trade Arrangements
VII. INVESTMENT CLIMATE
Openness to Foreign Investment
Trade and Investment Barriers
Industrial Promotion Law of 1974
Foreign Investment Law
Promotional Benefits
Conversion and Transfer Policies
Expropriation and Compensation
Dispute Settlement
Political Violence
Performance Requirements/Incentives
Right to Private Ownership and Establishment
Protection of Property Rights
Regulatory System: Laws and Procedures
Efficient Capital Market and Portfolio Investment
Bilateral Investment Agreements
OPIC and other Investment Insurance Programs
Labor
Foreign Trade Zones/Free Ports
Capital Outflow Policy
Foreign Direct Investment (FDI) Statistics
Major Foreign Investors
VIII. TRADE AND PROJECT FINANCING
Brief Description of Banking System
Foreign Exchange Controls Affecting Trading
General Financing Availability
How to Finance Exports/Methods of Payment
Types of Available Export Financing and Insurance
Project Financing Available, Including Lending from Multilateral
Institutions and Types of Projects Supported
List of Banks with Correspondent U.S. Banking Arrangements
IX. BUSINESS TRAVEL
Business Customs
Travel Advisory and Visas
Holidays
Business Infrastructure
X. APPENDICES
Appendix A: Country Data
Appendix B: Domestic Economy (table)
Appendix C: Trade (table)
Appendix D: Investment
Appendix E: U.S. and Country Contacts
Country Government Agencies
Country Trade Associations/Chambers of Commerce
Country Market Research Firms
Country Commercial Banks
Washington-based U.S. Government Country Contacts
U.S.-based Multipliers Relevant for Country
Appendix F: Market Research
Appendix F: Trade Event schedule
COUNTRY COMMERCIAL GUIDE - URUGUAY 1995
I. EXECUTIVE SUMMARY
Since 1990, Uruguay has pursued a program of economic liberalization
similar to that of many other Latin American countries, but with only
partial success. The new administration of President Sanguinetti is
pursuing the basic economic program of the former Lacalle administration
(March 1990 to March 1995) which has included lowering tariffs, Southern
Common Market (Mercosur) integration, reducing deficit spending,
controlling inflation and downsizing government. However, lack of
public support and a fragmented political system have stymied many of
these objectives. The conservative nature of the Uruguayan people and
the fragmented political system suggest continued slow modernization.
After growing at 7.9 percent in 1992, GDP grew 2.5 percent in 1993 and
5.1 percent in 1994, reaching $15.5 billion. GDP is projected to grow
1.0 percent in 1995. Growth in 1994 was led by the services sector (up
25.6 percent -- particularly tourism, a second record year), commerce,
banking and transportation. Construction increased 2.4 percent,
agriculture by 4.5 percent and manufacturing by percent.
Imports are growing rapidly - by 19 percent to $2.8 billion, in 1994 -
in an economy of $15.5 billion and 3.2 million people. Imports have
been stimulated by a growing economy, falling tariffs (to an average of
7.6 percent), the progressive implementation of Mercosur, revaluation of
the Uruguayan peso and gradual liberalization of the economy.
Imports of both consumer and capital goods have increased sharply, the
former reflecting pent up demand and lower international prices, the
latter reflecting the need to retool productive facilities to meet
increased foreign competition.
U.S. products and services are highly regarded. The U.S. occupies, and
has traditionally occupied, the third place in both imports and exports
after neighboring Brazil and Argentina. Everything else being equal,
the Uruguayan businessman will naturally prefer to conduct business
with, and import from, U.S. sources. The U.S. is seen as a provider of
high quality services and goods with a good reputation for product
backing. The only area in which the U.S. is seen as inflexible and with
little creativity is in export financing.
Best prospects for U.S. products continue to be chemicals (including
agricultural chemicals), transport equipment, food processing machinery,
computer hardware and software, office machinery, and medical and
laboratory equipment. The growth of tourism, forestry, and agribusiness
(especially off-season fruit growing) also provide excellent
opportunities for expanding U.S. exports. Opportunities for sales of
equipment or services and/or investment exist in several major projects
including the Parana-Paraguay River Transportation System, the Colonia-
Buenos Aires Bridge, construction and operation of a gas pipeline from
Argentina, renewal of the cargo truck fleet, construction of power
plants and private power generation (including wind and solar), and road
and port construction.
Given the close proximity of Brazil and Argentina to Uruguay,
businessmen visiting those markets should consider including a stop in
here on their itinerary to explore sales and investment opportunities.
Major Obstacles to Doing Business
U.S. manufactured products are generally regarded as high in quality and
competitive in price, but are sometimes rated low on an important factor
in the decision to buy: financing. American manufacturers offering
flexible, innovative, and competitive credit terms will overcome a
difficult hurdle in achieving export sales to Uruguay.
The distance and small size of the market often discourages U.S.
businessmen from investigating the Uruguayan market. Businessmen, as
well as government agencies planning trade and investment programs,
should consider including a trip to Uruguay in conjunction with business
in neighboring countries. Establishing an agent or distributor can
facilitate most sales to Uruguay.
Country Commercial Guides are available on the National Trade Data Bank
on CD-ROM or through the Internet. Please contact Stat-USA at 1-800-
STAT-USA for more information. To locate Country Commercial Guides via
the Internet, please use the following World Wide Web address: WWW.STAT-
USA.GOV. CCGS can also be ordered in hard copy or on diskette from the
national Technical Information Service (NTIS) at 1-800-553-NTIS.
II. ECONOMIC TRENDS AND OUTLOOK
Major Trends and Outlook
Since 1990, the administrations of presidents Lacalle and Sanguinetti
have attempted to carry out a program of economic liberalization similar
to that of many other Latin American countries, but with only partial
success. The Government's program has included lowering tariffs,
Southern Common Market (Mercosur) integration, reducing deficit
spending, controlling inflation and government downsizing. However,
lack of public support and a fragmented political system have thus far
stymied many of the Government's efforts. The conservative nature of
the Uruguayan people and the fragmented political system suggest
continued slow modernization.
The first two elements of the program, lowering tariffs and Mercosur
integration, have progressed the furthest. Lower tariffs in general
have generated a surge of imports, including both of consumer and
capital goods. Duties among the members of Mercosur (Argentina, Brazil,
Paraguay and Uruguay) were completely eliminated and a common external
tariff for most products was implemented on January 1, 1995.
Fiscal adjustment efforts faltered after achieving a small surplus in
1992. As expenditures rose more rapidly than revenues, a deficit of 1.2
percent of GDP reemerged in 1993 and grew to 1.9 percent of GDP in 1994.
Three stubborn and interrelated economic problems also remain a
challenge --persistent and high inflation, a bloated public sector and
high social security expenditures.
In November 1994, Dr. Julio Maria Sanguinetti of the Colorado Party was
elected President. The new government, which took office on March 1,
1995 is in the process of implementing a three-stage stabilization
program consisting of: a) an immediate fiscal adjustment package focused
mainly on increased consumption and payroll taxes and industrial tax
incentives; b) a medium-term program for government downsizing; and, c)
a long-term program for social security reform to address one of the
main sources of the deficit. A fiscal adjustment law to implement the
tax measures of the stabilization program went into effect on May 1,
1995. In addition, social security reform legislation was submitted to
Congress on June 5 and is expected to be approved by the end of the
year. The reduction of the fiscal deficit from social security reform
will be a gradual process of at least ten years and will require long-
term foreign financial assistance during the transition period. The
medium-term program for a major restructuring of government is to be
submitted to Congress by August 31 as part of the Sanguinetti
Administration's five-year budget submission.
Inflation President Lacalle and his economic team had some success in
taming inflation, bringing the rate down from 129 percent in 1990 to
44.1 percent in 1994. At the end of June, 1995, the twelve-month
inflation rate remained at a level of 44 percent. The projected rate
for all of 1995 is 35.0 percent.
Given a lack of means to exercise effective monetary policy, the
Government's only effective tool to fight inflation is through fiscal
measures. After a small budget surplus was achieved in 1992,
expenditures have since risen faster than revenues and resulting in
deficits of $151 million in 1993 and $339 million in 1994.
Public Sector Reform The former administration failed to reform the
bloated and inefficient public sector. Public enterprise privatization
stalled when voters rejected sale of the telephone company, ANTEL by 72
percent in a referendum in December 1992. The legislature also rebuffed
the former administration's attempt to reduce the government work force
and even rejected the proposed closure of a small government office
which had ceased to serve any practical purpose.
Despite the setback of the referendum, the Government continued
implementation of those parts of the state enterprise reform law passed
in September 1991 which had not been overturned. Privatization of port
services was implemented, improving efficiency and lowering prices.
Other activities which were transferred to the private sector either
under contract, concession or sale were: land services to airplanes and
operation of the cargo terminal at the Carrasco Airport; domestic air
service; construction and operation of the sewage and water supply for
the zone at the east of Punta del Este; construction of the new Punta
del Este airport; construction and operation of a new tollroad to Punta
del Este; operation of railroad passenger service; operation of a
cellular telephone system; reprivatization of one of the two banks taken
over by the government due to bankruptcy; termination of the government
insurance monopoly; privatization of the Montevideo gas company, and
privatization of 51 percent of the national airline (PLUNA).
The greatest single fiscal concern is social security, which will cost
10 percent of GDP this year. A growing population of pensioners
increases the burden yearly. Passage of Sanguinetti's modest social
security reform legislation is expected this year, but implementation
may prove difficult or impossible should the legislation, once approved
by congress, then be rejected by referendum.
After growing by 7.9 percent in 1992, GDP grew by 2.5 percent in 1993,
and by 5.1 percent in 1994, reaching $15.5 billion. GDP is projected to
grow at 1.0 percent in 1995. Growth in 1994 was led by the services
sector which was up by 25.6 percent (particularly tourism with second
record year). Construction increased by 2.9 percent, manufacturing by
3.1 percent and agriculture by 4.5 percent. Among smaller sectors of
the economy, fisheries were up by 3.8 percent and utilities declined by
3.6 percent.
Principal Growth Sectors
Agriculture and Livestock The agricultural sector (10.6 percent of GDP)
grew at an average yearly rate of 4.7 percent between 1990 and 1992. In
1993 it decreased 5.1 percent and recuperated 4.5 percent in 1994. Corn,
sunflower, wheat and malting barley production increased because of
larger acreage planted in response to rising domestic demand, while rice
decreased somewhat in response to the contraction of foreign demand.
Livestock holdings expanded as did beef production (up 25 percent) and
exports (up 51 percent). Wool and dairy production increased because of
very favorable weather conditions.
Fishing Fisheries production increased 3.8 percent in 1994. However,
fisheries production is 42 percent below the level of ten years ago.
Construction The sector grew 2.4 percent in 1994, substantially below
the 17.8 percent increase in 1993. Activity was concentrated in the
private sector, mainly in the construction of hotels and shopping
centers in the tourist area of Punta del Este and in the capital,
Montevideo. Financed by the Mortgage Bank, housing construction rose as
did public sector construction, led by the Municipality of Montevideo
and telephone company (ANTEL) projects.
Manufacturing Largely in decline since 1985, industrial production rose
3.1 percent in 1994 to meet rising domestic demand and increasing
exports to Brazil and other Mercosur countries and from Brazil.
Expanding industries included dairy products, tanneries, processed food,
beef and vehicles. Industries showing production decreases were glass,
textiles, alcoholic beverages and milling.
The manufacturing sector has severe structural problems as a carryover
from the protectionist import-substitution policies of the 1970's
designed to promote production for the domestic market. Conversion to a
more efficient and competitive industry will require substantial
investment in equipment, technology and training.
The advent of Mercosur has increased potential markets for Uruguayan
industrial products, but has also opened the domestic market to strong
competition from Argentina and Brazil. A few sectors, like textiles,
could thrive in Mercosur, since they are already competitive
internationally. Others, such as chemicals, pharmaceuticals and tires
are reasonably competitive and should do well given investment in new
technology and effective market strategies. Losers are likely to
include automotive, electronic and machinery manufacturers.
Services Commerce, restaurants and hotels, government services,
insurance, banking and other financial services, and various other
private sector services (60 percent of GDP) again registered solid gains
in 1994 (up 25.6 percent), accounting for almost 76.5 percent of total
growth for the year. The services sector has shown consistent growth
since 1984, based largely on tourism and the strength of Uruguay as a
regional financial center.
Utilities Despite a small increase in domestic demand, production
decreased by 3.6 percent mainly due to lower demand from Argentina for
hydro-generated electricity.
Government Role in the Economy
The Uruguayan economy is based on the principle of free enterprise and
private ownership. Businessmen, however, are faced with cumbersome and
lengthy bureaucratic procedures. These are the result of many years of
strongly protectionist economic policies. The Government owns outright
or partially companies in the sectors of insurance, water supply,
electricity, telephone service, petroleum refining, postal service,
railways, banking, and aviation. Wholly government-owned companies are
held on the basis of legal monopolies. The Government also assumed
control of a number of failing companies such as the gas company and
various commercial banks (one of which was reprivatized in 1994). These
activities generate about 18 percent of the gross domestic product and
employ a similar percentage of the total labor force. The first step
toward a more open and market-oriented economy can be traced to laws to
liberalize foreign trade and exchange policies in 1959. In 1974
existing laws were consolidated in the foreign investment law and the
industrial promotion law and the foreign exchange banking was opened to
competition. Since 1991 the pace of liberalization has stepped up, with
Mercosur, lower tariffs, and privatization and demonopolization laws.
Balance of Payments Situation
Current Account Uruguay had a negative current account balance of $396
million in 1994 . This negative balance was comprised of an $859
million foreign trade deficit, a $456 million travel account surplus and
a $7 million surplus in net interest and other services. Both a lower
trade deficit and a lower surplus in the services account (primarily
from tourism) are expected in 1995. The current account deficit is
expected to remain in the same magnitude as that of 1994.
Merchandise Trade In 1994, Uruguay's exports increased 16.3 percent,
imports rose 19.2 percent and the trade deficit was $859 million.
The leading categories of Uruguayan exports in 1994 were:
Category Change Amount
(Percent) (Million $US)
Beef and other animal products + 37.6 489
Wool and textile manufactures + 1.0 392
Vegetables, mainly rice - 0.8 248
Leather and leather manufactures + 20.3 212
Total Exports + 16.3 1,913
The leading import categories and their percentage increases in 1994
were:
Machinery and electrical equipment + 7.8 586
Vehicles + 5.4 429
Chemicals + 19.2 319
Minerals + 25.5 284
Plastic and rubber products + 16.2 166
Total Imports + 19.2 2,773
The country's principal trading partners in descending order in 1994
were Brazil, Argentina, the United States, and the Federal Republic of
Germany. Uruguay's leading export markets in 1994 were Brazil ($492.5
million), Argentina ($382.3 million), the United States ($130.6 million)
and Germany ($121.3 million). The leading suppliers of Uruguayan
imports in 1994 were Brazil ($709.6 million), Argentina ($652.6
million), the United States ($259.6 million) and Italy ($134.8 million).
The United States bought 6.8 percent of Uruguay's exports in 1994 and
sold 9.4 percent of the country's imports.
During the first four months of 1995, exports increased 21.4 percent and
imports increased 11.5 percent (of which 5 percent of the increase was
in the capital goods category) compared to the same period in 1994.
Exports to the U.S. declined by 5.4 percent while imports from the U.S.
increased 4.7 percent.
Capital Account The capital account in 1994 had a net inflow of $634
million, comprised of a $427 million net capital inflow for the public
sector and a $207 million inflow for the private sector. The public
sector capital inflow reflects a $131 million increase of financial
sector foreign debt and the $296 million increase of non-financial
sector foreign debt. The private sector inflow of $207 million includes
foreign credit and a negative errors and omissions item of $71 million,
reflecting mainly unregistered capital outflows since unregistered sales
are included in the travel account (tourism) of the current account.
Net Foreign Reserves The combination of a deficit in the current
account ($396 million), a surplus in the capital account ($634 million -
- including errors and omissions amount of -$71 million) resulted in an
increase of $238 million in the net foreign reserves of the Central Bank
in 1994. Total net foreign exchange reserves amounted to $1,440 million
on December 31, 1994. As of May 1995, the reserves had increased to
$1,473 million, due to the Central Bank's continued purchases of foreign
currency in the domestic market.
Infrastructure Situation Re: Goods/Service Distribution
Uruguay is covered by a North-South network of good to adequate roads.
From East to West however, roads are narrow and often in a poor state of
repair. Railway transportation is used for the shipment of goods mainly
along the Uruguay river border with Argentina and through other limited
routes in the interior. A major world-class seaport is located in the
capital city of Montevideo and most of its services have been recently
privatized. Small ports are located in the free zones of Nueva Palmira
and Colonia, and in the towns of Piriapolis, Punta del Este, and La
Paloma. Uruguay is connected to the rest of the world via an
international airport located in Montevideo which is serviced by
approximately twelve regularly scheduled foreign airlines and one
national airline. Interior air service, while recently privatized and
available, is not very reliable. Studies are currently underway for the
rehabilitation of certain stretches of the railway network as Uruguay
will soon need an efficient and reliable method to transport lumber from
the interior of the country to the seaports.
III. POLITICAL ENVIRONMENT
Nature of Bilateral Relationship with the United States
Relations between the United States and Uruguay are excellent. A
staunch defender of multilateralism and international law, differences
sometimes arise over U.S. actions which the Uruguayan government views
as unilateral. Uruguay is an active participant in international fora
and generally supports U.S. positions in the OAS and UN. The two
governments cooperate on a wide range of issues, including counter-
narcotics, technology, defense, and development projects.
Major Political Issues Affecting Business Climate
The government of President Julio Maria Sanguinetti (Colorado Party/Foro
Batllista), upon taking office March 1, 1995, immediately introduced a
vigorous legislative program to address the most pressing problems
facing the country. A parliamentary coalition with the Blanco Party
assured passage of the administration's economic plan, which took effect
May 1. The coalition is now pushing for approval of the government's
plan for reforming the social security system. This plan was submitted
to Parliament on June 5 and the government hopes for approval before the
end of the year. An administrative reform project, which would reduce
the number of central government offices and employees on the public
payroll, is currently under consideration by a working group of the
parliamentary coalition.
The main opposition to the government's programs comes from the Frente
Amplio, a grouping of leftist parties and factions, and from the
national labor confederation. The social security reform legislation is
also vigorously opposed by the large number of retired persons who
benefit from the current plan. The government has embarked on a public
relations program to convince the public of the need for social security
reform, and to avoid a public referendum which might reverse any reform
legislation.
Brief Synopsis of Political System, Schedule for Elections, and
Orientation of Major Political Parties
Uruguay is a constitutional democracy with an elected president and
parliament. The country is divided into nineteen departments (states)
including Montevideo, the capital. Uruguay's electoral system is unique
to Latin America in that political parties can (and do) present multiple
candidacies. The candidate receiving the most votes within the party
receiving the most votes is elected president. The president may not
stand for re-election, but may be re-elected after at least one term out
of office. State governors may be re-elected one time, but there is no
limit on the re-election of senators and deputies. All elected offices
are for a five-year term. The judiciary, one of the most independent in
Latin America, is headed by a five-member Supreme Court. Departmental
governments have budgetary independence from the central government and
may set their own tax rates.
The next general elections are scheduled for November 28, 1999.
There are three main political forces in Uruguay. The two traditional
parties, the Colorado and the Blanco (National), have existed for most
of this century. The third, the Frente Amplio (Broad Front), a leftist
coalition of parties and factions, was founded in 1971. The Frente
Amplio consists of numerous factions, but is more unified than the
traditional parties in terms of candidacies, generally selecting one
candidate for major offices. The factionalized nature of the parties
makes defining their orientations somewhat difficult. Nevertheless, in
general terms, the following observations hold true.
Colorado Party The Colorado Party is the traditional party of the urban
areas and, until being usurped by the Frente Amplio, was the party of
the working class. The largest faction of the party, the Foro
Batllista, is led by President Julio Maria Sanguinetti. Sanguinetti is
a self-proclaimed social democrat who advocates gradual economic reform
while protecting basic Uruguayan sectors, such as agriculture. For
example, during the electoral campaign, Sanguinetti pledged to protect
the tiny sugar industry. His economic team has sharply criticized the
overvaluation of the peso and the growing trade deficit registered by
Uruguay.
National (Blanco) Party The Blanco Party is the traditional party of
the rural interior. In the minority for most of its existence, the
1990-95 administration of President Luis Alberto Lacalle was only the
third Blanco Administration this century. While party ideology runs
from fiscal conservatism to populism, the largest factions favor
economic reform and free enterprise. The Lacalle administration
attempted to privatize a number of unprofitable state-owned enterprises
and reduced inflation from 129 percent to 44 percent during its term of
office.
Frente Amplio (Broad Front) The leftist Frente Amplio presented the
most detailed economic program of the 1994 electoral campaign. The
Frente advocates a redistribution of wealth through the reduction of the
value added tax (now 23%) and increases in other taxes directed at the
wealthy and at speculative enterprises. It has also advocated weakening
the country's legendary bank secrecy laws, although it acknowledges that
this may lead to a reduction in revenues. The Frente's 1994
presidential candidate, populist Montevideo ex-mayor Tabare Vazquez,
also promised to protect sugar growers and to defend industrial jobs.
The party supports Mercosur, but only if tariffs are sufficiently high
to defend domestic production and employment. As mayor of Montevideo,
Vazquez partially privatized garbage collection and promoted cooperation
with private business to address some of the city's more pressing needs.
His successor, also from the Frente, has continued and expanded these
efforts.
IV. MARKETING U.S. PRODUCTS AND SERVICES
Distribution and Sales Channels
Use of Agents/Distributors - Finding a Partner
A foreign supplier should be thorough in the selection of an agent or
local representative. For this purpose, the supplier may wish to take
advantage of U.S. Commerce Department services. These include the
Agent/Distributor Service (ADS), which helps identify
prospective/interested agents and distributors. The supplier should
make clear in the contractual agreement between the parties whether
their relationship is that of employer-employee or whether it is merely
a commission-based relationship. Failure to do so could result in
supplier liability for severance and related benefits if he or she
decides to sever the relationship.
Franchising
Franchising in Uruguay has so far been limited to fast-food outlets and
some retail clothing stores. The growth of franchised fast-food outlets
has been particularly noteworthy. There are no legal restrictions on
operating franchises in Uruguay.
Direct Marketing
Because of Uruguay's small size, direct marketing is generally not cost
effective. Exceptions to this norm include the one-time sale of major
high value capital, power generation, transportation, and medical
equipment, as well as inputs for major infrastructure projects.
Joint Ventures/Licensing
Both joint ventures and licensing are common in Uruguay and involve
similar or identical procedures to those practiced in most other
countries.
Steps to Establishing an Office
The formation of a new enterprise or the acquisition of an existing
Uruguayan company can be made freely. Shell corporations already formed
but with no operations are also available for acquisition.
Selling Factors/Techniques
Foreign manufacturers enjoying sustained sales of their products
imported into Uruguay typically use the services of an agent or
distributor. Practically all importers/distributors are based in
Montevideo, although some maintain sales networks in the interior of
Uruguay. A U.S. firm with a local representative has the advantage of
keeping up-to-date with local market conditions, as well as with changes
in policies affecting trade.
Uruguay is a good market for both new and used equipment and machinery.
Often, equipment considered obsolete in the U.S. may be sold to local
industry. U.S. manufacturers will find that the major factors affecting
a decision to buy their products are quality, price and payment terms,
delivery time, after-sales servicing, and compatibility with existing
systems.
U.S. manufactured products are generally regarded as high in quality and
competitive in price, but are sometimes rated low on an important factor
in the decision to buy -- financing. American manufacturers offering
flexible, innovative, and competitive credit terms will overcome a
difficult hurdle in achieving export sales to Uruguay.
Advertising and Trade Promotion
Advertising in Uruguay is relatively inexpensive by U.S. standards. It
is advisable to work through an advertising agency in selecting
appropriate media and which can obtain substantial rate discounts. The
major newspapers and business journals are Busqueda, El Observador
Economico, El Pais, and Cronicas Economicas.
The major U.S. export promotion activity in Uruguay is the yearly Prado
Agro-Industrial and Commercial Fair held in September. The U.S.
pavilion at this fair is traditionally the largest and features exhibits
of approximately 40 U.S. companies. It provides an excellent means of
introducing a new product or service to the Uruguayan market as it is
visited by approximately 400,000 people during the fair's two-week
duration. Another biannual fair, the Feria Internacional de la Plata
(FIPLA) is more appropriate for introducing industrial goods and
establishing contacts with agents and distributors. The Embassy also
hosts several industry-specific catalog exhibitions each year. Details
concerning these fairs may be obtained from the Commercial Attache,
American Embassy Montevideo, Unit 4510, APO AA 34035, Tel: (5982) 48-77-
77, Fax: (5982) 48-85-81.
Pricing Product
The Uruguayan market price structure reflects world market prices plus
import tariffs and transportation costs. In addition to tariff
advantages, products from large, nearby Mercosur countries like
Argentina and Brazil enjoy significantly lower transportation costs than
do products from the U.S., Europe and Asia.
Sales Service/Customer Support
Sales service and customer support are weighed heavily when deciding
which products to buy. U.S. manufacturers should appoint an agent in
Uruguay to provide customer support services. Experience has shown that
having an agent in a neighboring country such as Brazil or Argentina to
perform such services is less effective.
Selling to the Government
Although U.S. companies may sell directly to the Uruguayan Government,
it is useful to have a registered local representative. Registration
takes place once a year during a specified period of time in which
interested parties may be added to the listing of official government
suppliers. Companies should also consider providing product literature
and quotations to selected government purchasing offices, and to the
different state entities, as they frequently refer to literature on hand
when drafting specifications for their procurement tenders. The Embassy
continually reports via the Major Projects Program and other means to
the Department of Commerce on major opportunities for U.S. contractors
and manufacturers in Uruguay.
Protecting Your Product from Intellectual Property Right (IPR)
Infringement
Uruguay's IPR regime is not always consistent with international
standards. The most serious lack of IPR protection is the specific
exclusion of pharmaceuticals and chemical products from patent
protection. Uruguay is a member of the World Intellectual Property
Organization (WIPO) and a party to the Bern Convention, the Universal
Copyright Convention (UCC) and the Paris Convention for the Protection
of Industrial Property. Although the Government recognizes and accepts
the concept of IPR protection, it has not ratified these agreements.
Registering a foreign trademark without proving a legal commercial
connection with the trademark is no longer a possibility.
Need for a Local Attorney
It is advisable to obtain a local attorney before setting up operations
in Uruguay or carrying-out substantial amounts of business. Local
attorneys can be very helpful in sorting through the red tape and
bureaucracy which may otherwise be frustrating for a newcomer. A list
of reputable local attorneys may be obtained from the Embassy's Consular
Section.
V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENTS
Best Prospects Products and Services for U.S. Exporters
The United States occupies the third place in the ranks of leading
exporters to Uruguay, after Brazil and Argentina. Best prospects for
U.S. products are chemicals (including agricultural), manufactured goods
and machinery, transport equipment, food processing equipment, computer
hardware and software, office machinery, alternative energy sources
(such as wind energy and to a certain extent solar power),
telecommunications, and medical and laboratory equipment. Uruguay's
proportionally large elderly population should be a good market for
geriatric equipment and services in the near future. Tourism and
forestry are high in the Government's development plans and represent
excellent areas for exploration as prospective opportunities for U.S.
exports.
Major Infrastructure Projects Underway
Uruguay receives loans and grants from the World Bank, the Inter-
American Development Bank and other multilateral institutions for major
projects and programs. The Embassy continually reports via the Trade
Opportunity Program, the Foreign Government Tender Program, and the
Major Projects Program to the Department of Commerce and its district
offices on major opportunities in Uruguay for U.S. contractors and
manufacturers. Brief descriptions of these opportunities follow:
Parana-Paraguay River Transportation System - The governments of
Uruguay, Argentina, Brazil, Paraguay, and Bolivia are jointly working
together on what has become the largest Latin-American "regional
integration" program -- the joint use of the 2,500-mile long Parana-
Paraguay-Uruguay rivers for the transportation of goods from the five
countries to the Atlantic Ocean. The project, expected to be completed
by the year 2000, calls for investments on the order of $935 million
including civil construction ($120 million), dredging and maintenance
($150 million), ports (including equipment, $115 million), and fleet
($550 million). Further opportunities for U.S. involvement lie in the
development of the administration of the waterways.
Colonia-Buenos Aires Bridge - Feasibility studies for the construction
of this 24- to 32-mile long bridge joining the capital city of
Argentina, Buenos Aires, and the riverside town of Colonia in Uruguay
are being currently carried out by a U.S. firm and will be ready later
this year. If deemed feasible, possibilities for U.S. involvement will
exist in all aspects of this multibillion dollar bridge project. It is
planned that the bridge will be constructed and operated by a private
concession under a build-operate-transfer (BOT) regime.
Construction and Operation of a Gas Pipeline Between Argentina and
Uruguay - The governments of Argentina and Uruguay are considering the
construction and operation of a natural gas common carrier pipeline
joining both capital cities. The Government of Uruguay plans to grant a
concession to a private investor to finance the construction of the
project (estimated at 70-80 million dollars). The concession will
involve a contract to purchase Argentine natural gas at the well head
and resell the gas to the Uruguayan state electric utility and other
customers for a period of twenty years.
Renewal of Truck Fleets - Following a successful program to renew the
urban and interurban bus fleet, the Government of Uruguay is now
planning to help private companies in the renewal of their cargo truck
fleets. Essentially, the Government of Uruguay purchases the trucks
directly from the manufacturer and then leases them to the trucking
companies.
Private Power Generation - As part of its privatization program, the
Government of Uruguay is now allowing the private generation of
electrical power which is then resold to the state-owned power company.
Opportunities exist in the sale of aeolic and solar power generators.
Feasibility studies for the construction of a rice-husk operated plant
are currently underway.
Feasibility studies for the reconversion of existing and the
construction of new power plants are currently being done by a U.S.
firm. Among the projects being examined are a $7 million project
proposal to reconvert boilers (currently using fuel oil) to natural gas
with consumption capacity of 3,000,000 cubic meters of gas per day, a
$106 million proposal to transform a power plant into a combined cycle
119MW plant, and the proposed construction of 180MW and 362MW combined
cycle power plants at an estimated cost of $110 to $115 million).
Other major infrastructure projects currently underway include the
enlargement of the Punta del Este seaside resort airport, the
construction of two more 62-mile-long lanes along the road joining
Montevideo and Punta del Este, the construction of two more 95-mile-long
lanes along the road joining Montevideo to Colonia, the building of a
road bridge over the Santa Lucia River, and the enlargement of the Punta
del Este, La Paloma, and Piriapolis yacht ports.
Major Local & Third Country Competitors in Specific Sectors
Imports ($ millions) by country of origin
(HS Code/ World Arg. Bra. Ger. Jap. U.S. U.S. % Product)
total total total total total total of total
8471
Data
processing
equipment 30.4 0.4 0.4 0.1 0.6 22.2 72.4
3105
Fertilizers 23.1 0.0 0.6 0.1 0.0 11.4 47.6
9018
Medical
instruments 29.8 0.2 1.1 1.2 1.0 6.8 23.5
8528
TV sets 34.6 0.4 0.0 0.2 1.2 5.4 14.5
8418
Refrigeration
equipment 33.6 4.1 9.3 0.1 0.1 4.7 14.9
The Government of the United States acknowledges the contribution that
outward foreign direct investment makes to the U.S. economy. U.S.
foreign direct investment is increasingly viewed as a complement or even
a necessary component of trade. For example, roughly 60 percent of U.S.
exports are sold by American firms that have operations abroad.
Recognizing the benefits that U.S. outward investment brings to the U.S.
economy, the Government of the United States undertakes initiatives,
such as Overseas Private Investment Corporation (OPIC) programs,
investment treaty negotiations and investment facilitation programs,
that support U.S. investors.
VI. TRADE REGULATIONS AND STANDARDS
Tariffs and Import Taxes
Since June 1992, Uruguay's tariff structure has followed the "HS" or
Harmonized System of tariff nomenclature. All customs duties,
surcharges, service and other charges are consolidated in a customs
unified rate or "tasa global arancelaria" (TGA). There are basically
three tariff rates: 1) 6% (applied on capital goods and raw materials
not produced in Uruguay); 2) 15% (applied on intermediate or semi-
industrialized goods); and, 3) 20% (applied on finished goods, excluding
capital goods used in export related industries or considered vital to
the national interest). Goods imported from Mercosur countries
(Argentina, Brazil, and Paraguay) pay a 0.66%, 1.65%, and 2.20% tariff
respectively. These rates declined to zero percent for most Mercosur
products on January 1, 1995 and a common external tariff entered into
effect on imports from non-member countries, ranging (with some
exceptions) between 0 and 20 percent.
Customs Valuation
Customs valuation may be applied by the Office of the Director General
of Customs when there is a question concerning a supplier's
classification and/or valuation. Deception on the part of the importer
or altering the value of imports is considered fraud.
Import Licenses
Certain imports require special licenses or customs documents. Among
these are drugs, certain medical equipment and chemicals, firearms,
radioactive materials, frozen embryos, livestock, bull semen, anabolics,
sugar, seeds, hormones, meat, and wheat.
Export Controls
There are no export controls currently in force. Export sales of
certain domestic products enjoy tax exemptions and special credits.
Import/Export Documentation
Only commercial firms, industrial firms, or individuals listed in the
Registry of Importers may legally import products into Uruguay.
Temporary Entry
Products may be imported under the temporary admission or drawback
provisions. Products imported under temporary admission provisions must
be reexported within 18 months of being introduced into the country.
Labeling, Marking Requirements
Labeling and marking requirements are set and controlled by two federal
and several municipal agencies. Basically, labels must contain a
description in Spanish of the main ingredients of a product, its country
of origin, expiration date and the full name and address of the
Uruguayan importer.
Prohibited Imports
From time to time the Government bans the import of certain food
articles originating from areas declared to be infested by the World
Health Organization.
Standards
Uruguay uses the metric system of weights and measures. The Laboratorio
Tecnologico del Uruguay (LATU) is the officially approved agency that
controls standards and quality control of imports and exports.
Free Trade Zones/Warehouses
The use of established free trade zones as well as the establishment of
new free-trade zones is encouraged. These zones are designed to store
and process goods or raw materials of Uruguayan or foreign origin and
for the establishment and operation of export-oriented industries.
Special Import Provisions
There are no special import provisions or restrictions. All goods may
be imported except for a very limited list of goods which may be
imported only with special authorization.
Membership in Free Trade Arrangements
Uruguay is a member of the World Trade Organization (WTO), GATT and the
Latin American Integration Association (ALADI). It is also a founding
member of the Southern Common Market (Mercosur) comprised of Brazil,
Argentina, Uruguay and Paraguay which became a customs union on January
1, 1995. Separate interim free trade arrangements for certain products
are also in effect with Brazil and Argentina.
VII. INVESTMENT CLIMATE
Openness to Foreign Investment
The Government recognizes that foreign investment has an important role
to play in the continuing development of the economy and maintains a
favorable policy through a number of incentives, though it offers no
special benefits vis-a-vis foreign investors. There is neither de jure
nor de facto discrimination towards investment by source of origin.
Although not required, foreign investment may be channeled through the
Industrial Promotion or Foreign Investment Laws of 1974. Because there
are almost no restrictions on foreign investment, most investors do not
take advantage of these programs. However, a declaration by the
Uruguayan Government that an investment project is in the national
interest under this law may provide important tax and customs benefits.
One hundred percent of foreign ownership is permitted except where
restricted for national security purposes.
The Uruguayan Government does not generally prescribe specific
authorization in order to establish an industry, to import and export,
to effect deposits and banking transactions in any currency, or to
obtain credit. No special government authorization is needed to have
access to the Industrial Promotion Law, to capital markets or to foreign
exchange. Foreign investors, nevertheless, may obtain those guarantees
under the Foreign Investment Law of 1974.
Trade and Investment Barriers
U.S. banks, which have largely withdrawn from retail banking in Uruguay,
have attributed that withdrawal to the dominance of retail banking by
the state-owned Bank of the Republic of Uruguay (BROU), the militancy of
banking unions, as well as to legal difficulties in foreclosing on the
assets of delinquent debtors.
There are no significant official barriers to legal services by foreign
individuals or firms in Uruguay. However, the Uruguayan legal system
follows the Napoleonic Code, rather than English common law, and
therefore it is difficult for U.S. lawyers to meet local licensing
requirements.
Similarly, there are no significant restrictions on ticketing and travel
services. Uruguayan importers are required to pay a four percent ad
valorem tax on all freight arriving via foreign-registered airlines.
Freight which arrives by the national airline is exempt from the tax. A
civil aviation agreement between Uruguay and the United States provides
for equal treatment between U.S. and Uruguayan air freight carriers.
Therefore U.S. carriers are also exempt from this tax.
There are limitations on foreign equity participation in a number of
important areas of the Uruguayan economy deemed strategic for the
country's development. Investment in these areas require authorization
from the Government and include electricity, hydrocarbons, basic
petrochemicals, atomic energy, exploitation of strategic minerals,
banking and finance, railroads, telecommunications, radio, television,
press and those activities entrusted by law to government-owned
enterprises. However, authorization is readily granted for equity
participation in mining, hydrocarbons and banking and finance. There
are no restrictions on technology transfer.
Uruguay has long owned and operated state monopolies in a number of key
areas in which, by law, foreign equity participation is prohibited. The
state monopoly, UTE, controls all electrical distribution in Uruguay
(generation of power can now be produced, for sale to UTE, by private
firms). The state-owned oil company, ANCAP, is the only importer,
refiner and distributor of petroleum products in the country. It also
produces cement and distilled alcohol products. The retail gasoline
industry was privatized, although it is currently subject to extensive
regulation. All freight shipment by rail in Uruguay is controlled by
the state railroad AFE. The state telephone company, ANTEL, controls
the telephone and telecommunications industry. Cellular service is
provided by ANTEL and a private firm regulated by ANTEL. All Uruguayan
ports are operated by and administered through the National Port
Administration (ANP). Many port services, however, were privatized as a
result of the April 1992 passage of a port reform law. The state
enterprise, OSE, controls most water and sewage services in Uruguay
except in some small resort areas on the Atlantic coast. Fifty-one
percent of the state-owned airline PLUNA was recently sold to the
private sector.
Industrial Promotion Law of 1974 (No. 14,178 of 3/20/74):
This law establishes the benefits which may be granted to investments
that comply with objectives set forth in government social and economic
development plans and promote the establishment or expansion of
industrial plants deemed to be in the "national interest."
The promotional measures provided under this Act are in effect tax and
tariff exemptions. These "national interest" projects must support one
or more of the following objectives:
(1) greater efficiency in production and marketing;
(2) increase and/or diversification of industrial/manufactured exports
which incorporate the highest possible value-added;
(3) creation of new industries and expansion or reform of existing ones
when this promotes more advantageous use of local raw materials and/or
available manpower;
(4) encouragement of selected technical research programs which promote
the economic use of unexploited national raw materials, the improvement
of national products and the training of technicians and workers; and,
(5) promotion of tourism through the improvement and expansion of
related infrastructure.
Under this law, the following benefits may be granted:
(1) exemption from all import taxes (except value added and excise
taxes) levied on equipment required for the development of a project
provided it is not locally produced. In some cases, surcharge
exemptions may be provided to import equipment which is locally
produced.;
(2) exemption from the Net Worth Tax on assets incorporated in the
project;
(3) access to long-term loans through the Development Investments
Financing Fund, promotional credit for priority sectors and loan
guarantees from the Central Bank of Uruguay,
(4) deduction from the tax on industrial and commercial income of up to
twice the amount of expenses incurred in selected applied technological
research programs directed at training workers and technicians; and,
(5) a 20 percent reduction in port service charges on imported capital
goods.
Operations which are eligible for the terms granted under this law
without the national interest provision include meat processing,
tanning, leather finishing, the production of leather goods, textiles,
dairy products, knitted fabrics, garments, fisheries, fruits and
vegetables, rice, semi-precious stones, soaps, glass, crockery and
porcelain, clay products, extraction and transformation of marble and
granite, malting and roasting of barley, and prospecting, exploitation,
reduction and refining of metallic minerals.
Projects declared to be in the national interest may derive two major
benefits under the Industrial Promotion Law. First, credit is available
through the Central Bank in the form of local and foreign currency loans
for: the purchase of equipment, machinery and domestic raw materials;
the modernization and/or expansion of existing industries; and, to
finance accumulated tax debts which arose from the inefficiency of an
acquired Uruguayan company (where there is a reasonable expectation that
the investor will make the company profitable). Secondly, import
surcharges, import tariffs, consular fees, port charges, and other taxes
on imported equipment for the project may be waived.
Firms interested in the benefits of the national interest provision of
the Industrial Promotion Law may apply to the Uruguayan Ministry of
Industry and Energy. Applications require a detailed investment project
proposal including technical information on the financial and
operational status of the firm, the purpose of the planned investment
and the production process, costs, sales, export markets, financial and
credit needs, profitability and any other factors envisaged by the
investor. For more detailed information, interested investors may
contact the Unidad Asesora de Promocion Industrial, Rincon 723,
Montevideo, Uruguay. This office of the Ministry of Industry and Energy
will screen investment project proposals and determines whether they
meet the criteria for a national interest designation.
Foreign Investment Law
The Foreign Investment Law (Law No. 14,179 of 3/28/74 and Regulatory
Decree No. 808/974 of 10/10/74) guarantees the convertibility and
remittance of profits and invested capital within the terms fixed by
investment contracts signed with the Government. For the purpose of
this law, a foreign company is one whose foreign capital represents more
than 50 percent of the total capital and holds the decision-making
authority in the company. The remittance of profits is subject to a tax
of 40 percent on the portion of profits exceeding 20 percent per year of
the foreign capital invested. The capital invested, however, may not be
repatriated prior to the end of the third year from the date the
investment contract was signed.
Foreign investors under the Foreign Investment Law are not allowed to
make use of medium-term and long-term domestic credit and are required
to obtain prior consent of the authorities on a case-by-case basis for
the use of foreign credit.
If a foreign company chooses not to be established through the Foreign
Investment Act, it will not enjoy the permanent guarantee of profit
repatriation. However, as a result of the freeing of the foreign
exchange market in late 1974, a firm can, in practice, fully remit
capital and profits, even if the investment is not made within the
framework of this act. Few foreign companies are therefore operating
under the protection of this law.
While foreign investment is broadly permitted, there are a number of
sectors in which special approval on "national interest" grounds is
required. These include electricity, hydrocarbons, basic
petrochemicals, atomic energy, exploitation of strategic minerals,
agriculture and livestock raising, meat-packing, banking (financial
intermediation), railroads, telecommunications, radio, press,
television, and activities entrusted by law to state companies.
The Government is preparing a new investment law to eliminate many
provisions which in practice are not enforced and especially any
discriminatory treatment of foreign investment.
Promotional Benefits
Executive Decree No. 521/977 of September 1977 established minimum
promotional benefits for industrial projects declared in the "national
interest" which are eligible for exemptions from surcharges, consular
duties and taxes, the unified customs tax on imports, load handling
charges and, in general, taxes which would otherwise apply to imports of
equipment declared to be "non-competing" with domestic industry.
Executive Decree No. 461 of August 13, 1979, granted the "channeling of
savings" benefit which provides for an exemption from corporate tax, up
to the amount of a firm's paid-in capital in an approved project. Law
No. 15,548 of May 17, 1984 allows deduction from the corporate tax of
the increase in paid-in capital originating from the reserves or
dividends. Moreover additional special provisions exist for exemption
from income, wealth and some other taxes.
Conversion and Transfer Policies
There are no restrictions whatsoever on the purchase of foreign currency
or remittance of profits abroad.
Expropriation and Compensation
The Uruguayan Constitution provides for the prior payment of fair
compensation in the event of expropriation.
Dispute Settlement
Uruguay is not a member of the ICSID (International Center for the
Settlement of Investment Disputes). One unresolved expropriation case
involving a U.S. investor remains in litigation. The dispute, which
originated in 1968, revolves around the issue of whether there was any
net value to the assets and liabilities of the firm which was in
bankruptcy at the time of expropriation.
Political Violence
There have been no significant incidents over the past few years
involving politically motivated damage to property and/or installations.
Performance Requirements/Incentives
There are currently no specific performance requirements on which
foreign investment is conditioned.
Right to Private Ownership and Establishment
There are no restrictions on private ownership, the establishment of a
business and/or on engaging in any form of remunerative activity except
in areas declared of national interest or in which the Government
maintains a legal monopoly.
Protection of Property Rights
Trademark protection is provided for ten years from the date of filing,
with subsequent ten-year extensions renewable indefinitely. Names and
trademarks can be registered as well as emblems or other creations
provided the product or service is clearly distinguishable. The name of
a merchant or industrialist, the company, and the title of a commercial
establishment also qualify for intellectual property right protection.
Patents are granted for a non-renewable 15-year duration. Patents are
granted for inventions not previously released, publicized or
distributed in Uruguay or offshore before the application date. Patents
must be exercised within three years.
Books, records, videos and computer software may be copyrighted.
Computer programs can now be registered as intellectual property,
including successive versions of derivative programs. However, U.S.
companies report that a large portion of the software circulating in
Uruguay is pirated.
Uruguayan laws protecting intellectual property are outdated. The
Government is working on proposals to update them.
Regulatory System: Laws and Procedures
Laws and procedures regulating foreign investment are transparent and
streamlined. Red tape has been, for the most part, eliminated.
However, labor and social security legislation add significantly to the
firm's cost structure. Furthermore, the Government from time to time
creates a series of regulations that allow local debtors to refinance
debt on extremely favorable terms and conditions. This practice has the
effect of sustaining inefficient firms which compete with well-managed
firms and thus diminish their profitability.
Efficient Capital Market and Portfolio Investment
Foreign investors have easy access to credit on market terms in the
local market unless protection under the Foreign Investment Law is
sought. The private sector has access to a variety of credit
instruments. Uruguayan accounting systems are transparent and
consistent with international norms.
As the stock market is underdeveloped, there is no effective regulatory
system established to encourage and facilitate portfolio investment nor
are there "cross shareholding" or "stable shareholder" arrangements used
by private firms to restrict foreign investment.
Bilateral Investment Agreements
The Government of Uruguay has signed bilateral investment treaties with
a number of countries and investment protection agreements have been
signed with Italy, Germany, Switzerland, the Netherlands, Hungary,
Romania, France and Spain. Double taxation agreements have been signed
with Germany and Hungary. The Government has indicated a willingness to
negotiate a bilateral investment treaty with the United States and the
text of a draft agreement provided by the U.S. Government is currently
under review.
OPIC and Other Investment Insurance Programs
The Uruguayan Government signed an investment insurance agreement with
the Overseas Private Investment Corporation (OPIC) in December 1982.
The agreement allows OPIC to insure U.S. investments against risks
resulting from expropriation, inconvertibility, war or other conflicts
affecting public order.
Labor
The Uruguayan labor force of some 1.5 million is well-educated. It has
shown itself adept in the application of modern industrial techniques.
The Government has instituted technical training programs such as those
at the Universidad del Trabajo del Uruguay to help meet industry's
skilled labor requirements.
The social security overhead in Uruguay is high, increasing the basic
wage bill of an employer by over 50 percent. The social security system
currently allows for retirement at age 60 for men and at age 55 for
women. Disabled workers receive payment from the Government of 70% of
their salaries plus free medicine and medical care.
The average unemployment rate in Montevideo for 1994 was approximately
9.2 percent, up from 8.4 percent in 1993. The value of local
manufactured goods reflect a relatively high percentage of labor
content.
For several years, Uruguay's economy has experienced steady declines in
manufacturing while the services sector (especially tourism) has grown
sharply. It was estimated that approximately 50,000 industrial jobs
were lost in 1993 as companies trimmed their work forces or were forced
to close for lack of competitiveness. Whether these jobs were replaced
in the services and other sectors was a subject of heated discussion.
Official statistics reflect a slight downturn in unemployment and
government officials contended that jobs lost in industry had been
gained in other sectors. Others, however, argued that former industrial
employees were now working as street vendors or part-time employees, or
were otherwise underemployed. The high cost of wages was perceived to
be a primary factor in the overall decline of manufacturing.
Organized labor has also been undergoing a decline in influence, as aid
from the former Soviet Union has disappeared and far left domination of
the labor movement has diminished. While union leaders continue to come
from the far left, there are signs that their former confrontational
attitudes are changing. Unions show signs of beginning to recognize
that protection of jobs is as important as wage levels. Strikes and
labor-management conflict have diminished slightly, and some of the
union leadership appear to be seeking methods of cooperation and
negotiation.
An estimated 15 percent of the workforce is unionized. The Uruguayan
Constitution guarantees workers the right to organize and strike and
union leaders are protected by law against dismissal for union
activities. Labor unions are independent of government and political
party control. Sympathy strikes are not illegal. Uruguay has ratified
a large number of ILO conventions protecting worker rights, and
generally adheres to their provisions.
Uruguayan labor is neither plentiful nor inexpensive, but it is literate
and adapts to new techniques readily. These factors, combined with the
stiffer foreign competition resulting from reduced trade barriers, are
causing Uruguayan industries to adopt more capital intensive
technologies.
Foreign Trade Zones/Free Ports
Law No. 15,921 of December 17, 1987 regulates the operation of free
trade zones within the country. The law allows storage and warehousing,
manufacturing, and financial, data processing, or other related activity
to take place within free trade zones. State-owned and operated, state-
owned but privately operated, and private sector-owned free trade zones
are located throughout the country. Free zone locations include
Colonia, Nueva Palmira, Montevideo, Fray Bentos, Florida, Rivera, Nueva
Helvecia and Libertad. Mercosur regulations treat products manufactured
in all member-state free trade zones as extra-territorial and thus
manufacturing in Uruguayan free trade zones by a Uruguayan or foreign
firm will not provide for Mercosur customs union advantages.
The following advantages are granted by law to both local and foreign-
owned industries operating in a free zone:
1. Users of free trade zones are exempt from all domestic taxes in
effect or which may be created. The only tax not covered by this
exemption is employer contributions to social security for Uruguayan
employees. Uruguayans must comprise 75 percent of the labor force
employed by the user of the zone. The employer is free from payment of
social security taxes for non-Uruguayan employees if those employees
waive coverage under the Uruguayan Social Security.
2. Goods, services, products or raw materials of foreign and Uruguayan
origin may be entered into the zones, held there, processed, and re-
exported without payment of Uruguayan customs duties and import taxes
(goods of Uruguayan origin re-entering into free zones will be treated
as Uruguayan exports for all tax and other legal purposes). Goods
entering into Uruguayan customs territory from free zones are subject to
customs duties and import taxes.
3. Any industrial or commercial government monopolies are not allowed
within free trade zones.
Capital Outflow Policy
There are no controls on capital outflow from Uruguay. Some Uruguayan
companies, mostly state-owned, have foreign investments but they are
very limited. There is no government policy to promote investment
abroad.
Foreign Direct Investment (FDI) Statistics
Statistics on FDI in Uruguay are misleading because the vast majority of
the investors do not register under the Foreign Investment Law. The
latest year for which some data are available is 1988 at which time the
Uruguayan Central Bank estimated that foreign direct investment amounted
to $352.2 million. That source estimated U.S. investment in Uruguay at
$62.1 million, which contrasts with the U.S. Survey of Current Business,
which published a figure of $128 million for the same year. The
estimate of the Survey of Current Business for 1993 was $316 million.
The Government recognizes that Uruguay will require substantial amounts
of private capital investment to achieve sustained economic growth.
Therefore, significant adverse changes in the present favorable policy,
laws or regulations on foreign investment is unlikely.
Major Foreign Investors
As investment does not need to be registered, there are no reliable data
available.
VIII. TRADE AND PROJECT FINANCING
Brief Description of Banking System
The private commercial banking system is comprised of 21 banks and 13
financial houses. They jointly supply about one quarter of all banking
credit to the private sector, nearly all of it for periods of six months
or less. Major activities financed include foreign trade, industry,
livestock marketing, domestic retailing, and consumer purchases.
Financial houses operate with limited functions -- they may neither
accept resident deposits nor offer checking account services. They
engage primarily in intermediating foreign currency denominated funds
from abroad in the domestic financial market.
The Central Bank of Uruguay (BCU) is charged with the responsibility for
formulating and executing monetary and credit policies, supervising and
controlling the banking system, issuing currency, and managing
international reserves. The BCU also administers various development
credit lines provided by international and bilateral institutions for
the financing of industrial and agricultural activities.
The Bank of the Republic (BROU) is a multi-purpose government-owned bank
and the largest credit institution in Uruguay. The BROU is also in
charge of certain fiscal and foreign-trade financial activities such as
the collection of some excise duties and tariffs and the control of
foreign exchange proceeds from exports. It also provides about three-
quarters of total bank credit to the private sector. Roughly 90 percent
of the bank's private sector credit is short-term.
The Banco Hipotecario del Uruguay is the only mortgage bank in Uruguay
and the principal intermediary of medium- and long-term funds for
housing in the country. About one third of the bank's lending has been
channeled into the construction of low-income public housing under
contractual arrangements with municipalities and various central
government agencies. The remaining two-thirds is provided to the
private sector, chiefly to builders for the construction of housing for
middle-income families and individuals.
Foreign Exchange Controls Affecting Trading
There are no foreign exchange controls which significantly or otherwise
affect trading. There is only one exchange rate which applies to all
transactions and it is determined by market fluctuations.
General Financing Availability
Major project financing provided by such agencies as the World Bank, the
Inter-American Development Bank and the EXIM Bank. Foreign investors
also have ready access to local financing sources such as the Banco de
la Republica and other banks, government securities and the use of
repatriated funds. Debt-equity swap arrangements are also in use.
How to Finance Exports/Methods of Payment
U.S. exports are generally financed by EXIM, OPIC, the international
banking departments of major U.S. banks, the Small Business
Administration and the Trade and Development Agency. Exports are
usually financed through export letters of credit, sales on open
account, or drafts on foreign buyers.
Types of Available Export Financing and Insurance
The Overseas Private Investment Corporation (OPIC) offers investors
insurance against currency inconvertibility, damage or interruption of
operations from war, expropriation, and political risk. OPIC also
provides U.S. lenders with protection against both commercial and
political risk by guaranteeing repayment of principal and interest on
loans made to eligible investors.
Project Financing Available, Including Lending from Multilateral
Institutions and Types of Projects Supported
Some of the major sources of project financing include:
A. Export-Import Bank (EXIMBANK): Eximbank provides U.S. exporters with
several financing programs including working capital guarantees, export
credit insurance, commercial bank guarantees, medium-term credits, small
business credits, direct loans to foreign purchasers, and financial
guarantees. Further information on EXIMBANK's programs may be obtained
at 1-800-565-EXIM.
B. Overseas Private Investment Corporation (OPIC): OPIC's programs
include loans and loan guarantees, investment funds, and political risk
insurance (currency inconvertibility, expropriation, and political
violence). OPIC may be contacted at 202-336-8799.
C. Commodity Credit Corporation (CCC): The CCC finances exports of U.S.
agricultural commodities. The CCC may be reached at 202-447-4274.
D. Small Business Administration (SBA): SBA's Export Revolving Line of
Credit Loan helps small businesses export their products. SBA may be
contacted at 202-653-7794.
E. World Bank and Inter-American Development Bank: Both these banks
offer programs which allow U.S. companies to compete in international
major infrastructure projects. The Public Information Centers of both
banks may be contacted through 202-458-5454 and 202-623-2096
respectively.
Several states also have their own laws allowing for state export
financing programs.
List of Banks with Correspondent U.S. Banking Arrangements
U.S. banks operating in Uruguay include the American Express Bank,
Citibank, the First National Bank of Boston, the Republic National Bank
of New York and the Chase Manhattan Bank.
IX. BUSINESS TRAVEL
Business Customs
Business dress and appearance, as well as one's general approach to
business relations, should be conservative. An advance appointment for
a business visit is usually necessary and considered customary courtesy.
Typically, business is discussed after social amenities. Extensive
entertaining is common as are business lunches. At such meetings,
personal matters should not be discussed on your initiative.
Travel Advisory and Visas
U.S. citizens need a valid American passport, but visas are not required
for holders of other than official and diplomatic passports.
Business and tourist stays are limited to 90 days, although business
visits may be extended for an additional 90 days.
No inoculations are currently necessary for entry. International
travelers are advised to contact their local public health department,
physician or travel agent at least two weeks prior to departure to
obtain current information on health requirements.
Holidays
January 1 New Year's Day
January 6 Epiphany
February Two days for Carnival (6 weeks before Holy Week)
March Five days for Holy Week (dates vary from year to year)
April 19 \Landing Day of the 33 "Orientales"
May 1 Labor Day
May 18 Battle of Las Piedras
June 19 Birthday of Artigas
July 18 Constitution Day
August 25 Independence Day
October 12 Columbus Day
November 2 All Saints Day
December 25 Christmas
Business Infrastructure
International telephone, telex, and fax service is efficient. The local
telephone service is adequate. International phone cards with "Dial-
USA" features, such as AT&T, MCI and Sprint, may be used.
Several airlines have frequent service to Montevideo's Carrasco
International Airport from the U.S., Europe, and other parts of Latin
America. Internal transportation is mainly by car or bus. There is
very limited internal passenger railway or airline service. Within
Montevideo, bus and taxi services are extensive and inexpensive.
Uruguay observes standard time. This is three hours behind Greenwich
Mean Time, two hours ahead of Eastern Standard Time, and one hour ahead
of Eastern Daylight Time.
Electrical current is alternating 50 cycle, 220 volts, single and triple
phase. Specially requested electric power supply to industry may be
three-phase, 380 or 415 volts, 50 cycles.
X. APPENDICES
APPENDIX A
Country Data
Source of data
Population 1 1995 - 3.19 million
Population growth 1 Estimated yearly average 1985-95: 0.57% rate
Religions 3 Roman Catholic 66%, Protestants 2%, Jewish 2%, Non-
Professing or other 30%
Government system 4 Uruguay is a democratic republic with three
separate government branches: a) the Executive branch made up of the
President and twelve cabinet ministers; b) the legislative branch, a
bicameral system with a 30-member Senate and 99-member Chamber of
Deputies; and, c) the judiciary comprised of the Supreme Court, lower
courts and justices of the peace.
Language Spanish
Work week 5 Maximum 48 hours
APPENDIX B
Domestic Economy (USD millions, except where noted)
Source 1995 1996
of data 1994 Est. Proj.
GDP 6 15,543 17,736 19,137
GDP growth rate (%) 6 5.1 1.0 3.5
GDP per capita 6 4,908 5,567 5,974
Central Government spending
as percent of GDP 6 21.7 20.0 19.0
Inflation percent 2/6 44.1 38.0 25.0
Unemployment 1/6 9.2 10.0 9.0
Foreign exchange reserves 2/6 1,432 1,480 1,500
Average exchange for
USD 1.00 2/6 5.05 6.39 7.90
Foreign debt 2/6 4,605 4,800 5,000
Debt service ratio 2/6 10.0 12.0 12.0
U.S. economic assistance 7 1.0 -- --
U.S. military assistance 8
Sales of equipment 2.0 -- --
Grants 3.0 -- --
APPENDIX C
Trade (USD millions, except where noted)
Source 1995 1996
of data 1994 Est. Proj.
Total country exports 2/6 1,913 2,300 2,700
Total country imports 2/6 2,772 3,050 3,350
Exports to U.S. 2/6 131 200 250
Imports from U.S. 2/6 260 310 350
US share of imports (%) 2/6 9.4 10.2 10.5
Imports of manufactured goods 2/6
Total from world 2,128 2,350 2,580
From the U.S. 242 290 320
US share of imports (%) 11.4 12.3 12.4
Manufactured goods trade
balance with U.S. -191 -230 -250
Projected average annual
growth rate from world
through 1996 (%) 10.4 9.8
Projected average annual
growth rate from U.S.
through 1996 (%) 19.8 10.4
Imports of agricultural
goods 2/6
Total from world 430 450 470
From the U.S. 19 20 30
U.S. share of agricultural
imports (%) 4.4 4.4 6.4
Agricultural goods trade
balance with U.S. 60 120 150
Trade balance with three leading
partners in 1994 2/6
Brazil -217 -50 -50
Argentina -270 -290 -240
U.S. -129 -110 -100
Principal exports to U.S. 2/6
4104 Bovine leather 30 33 36
4203 Leather clothing
accessories 13 14 15
6403 Shoes 11 12 14
1602 Prepared meat 8 9 9
5101 Wool 7 7 6
Principal imports from U.S. 2/6
8471 Data processing
machines 22 24 30
3105 Fertilizers 11 13 15
9018 Medical instruments 7 8 8
8528 TV sets 5 6 6
8418 Refrigeration
equipment 5 7 7
Sources of data:
1 - National Institute of Statistics (INE)
2 - Central Bank of Uruguay (CB)
3 - U.S. Department of State - Background Notes on Uruguay - January
1993
4 - 1967 Constitution of Uruguay
5 - Law 7318 of 12/10/1920
6 - Embassy computations based on CB data, GOU economic program
submitted to IMF and estimates
7 - A.I.D.
8 - Embassy Office of Defense Cooperation
APPENDIX D
Investment - The Government of Uruguay does not keep records on foreign
direct investment. The survey of current business estimates U.S. direct
investment for 1993 is $ 316 million.
APPENDIX E
U.S. and Country Contacts
Country Government Agencies
Laboratorio Tecnologico del Uruguay
LATU
Av. Italia 6201
Montevideo, Uruguay
Tel: (5982) 61-37-24
Fax: (5982) 60-47-63
Ministry of Industry, Energy, and Mining
Rincon 747
Montevideo, Uruguay
Tel: (5982) 90-02-31
Fax: (5982) 92-12-45
Ministry of Economy and Finance
Colonia 1089, piso 3
Montevideo, Uruguay
Tel: (5982) 92-10-17
Fax: (5982)
Ministry of Tourism
Av. del Libertador 1409, piso 4-6
Montevideo, Uruguay
Tel: (5982) 90-41-48
Fax: (5982) 92-16-24
Ministry of Agriculture and Fishing
Constituyente 1476
Montevideo, Uruguay
Tel: (5982) 48-22-56
Investment Development Committee
Luis Alberto de Herrera 3350, piso 2
Montevideo, Uruguay
Tel: (5982) 47-21-10 ext. 1233
Fax: (5982) 80-93-97
Office of Planning and Budget
Edificio Libertad, piso 3
Montevideo, Uruguay
Tel: (5982) 81-95-25
Fax: (5982) 29-97-70
Central Bank of Uruguay
Paysandu y Florida
Montevideo, Uruguay
Tel: (5982) 98-50-08
MERCOSUR Sectorial Committee
Paysandu 919
Montevideo, Uruguay
Tel: (5982) 92-10-00
Fax: (5982) 92-36-55
Ministry of Transport and Public Works
Rincon 561
Montevideo, Uruguay
Tel: (5982) 95-73-86
Fax: (5982) 96-28-93
Country Trade Associations/Chambers of Commerce
Union of Exporters
Rincon 454, piso 2
Montevideo, Uruguay
Tel: (5982) 95-60-50
Fax: (5982) 96-11-17
Chamber of Industries
Av. Libertador Lavalleja 1672
Montevideo, Uruguay
Tel: (5982) 91-50-00
Fax: (5982)
Uruguayan Chamber of Commerce
Rincon 454
Montevideo, Uruguay
Tel: (5982) 96-12-77
Fax: (5982) 96-12-43
American Chamber of Commerce
Bartolome Mitre 1337, Esc. 108
Montevideo, Uruguay
Tel: (5982) 95-90-48
Fax: (5982) 95-90-59
Association Pro Intensification of U.S.-Uruguay Commerce
Rincon 454, Esc. 520
Montevideo, Uruguay
Tel: (5982) 95-18-07
Country Market Research Firms
AIM/BURKE-ADD
Colonia 933, piso 4
Montevideo, Uruguay
Tel: (5982) 92-64-70
Coopers & Lybrand
Treinta y Tres 1374, Piso 5
Montevideo, Uruguay
Tel: (5982) 96-08-20
Fax: (5982) 96-33-81
Equipos Consultores
Bulevar Artigas 1089
Montevideo, Uruguay
Tel: (5982) 40-26-63
Ernst & Young
18 de Julio 984, Piso 4
Montevideo, Uruguay
Tel: (5982) 92-31-47
Fax: (5982) 92-13-31
Oikos Consultora
Soriano 898, Esc. 401
Montevideo, Uruguay
Tel: (5982) 90-15004
Fax: (5982) 91-39-75
Montaldo y Associados
18 de Julio 841, Esc. 301
Montevideo, Uruguay
Tel: (5982) 92-09-44
Fax: (5982) 92-17-16
Country Commercial Banks
Commercial banks operating in Uruguay include ABN/AMRO, American
Express, Banesto, Centro Hispano Banco, Citibank, the Banco Comercial,
the Bank of Boston, the Discount Bank, the Republic National Bank of New
York, Lloyds Bank, Caja Obrera, Caja Pan de Azucar, Caja de la
Republica, Caja Hipotecario and the bancos de Credito, de la Nacion
Argentina, de Montevideo, do Brasil, Exterior, ING, Real, Santander,
Sudameris and Surinvest.
Washington-based U.S. Government country contacts
Uruguay Desk Officer
U.S. Department of Commerce
14th & Constitution Avenue
Washington, D.C. 20230
Tel: (202) 482-1495
Uruguay Desk Officer
U.S. Department of State
2201 C Street, N.W.
Washington, D.C. 20520
Tel: (202) 647-2296
Trade and Development Agency
Regional Director, Latin America/Caribbean
Washington, D.C. 20523
Tel: (703) 875-4357
Overseas Private Investment Corporation (OPIC)
1100 New York Ave, N.W.
Washington, D.C. 20527
Tel: (202) 336-8625
Fax: (202) 408-8625
EXIMBANK
811 Vermont Avenue, N.W.
Washington, D.C. 20571
Tel: (202) 566-4613
Fax: (5982) 566-7524
U.S.-based Multipliers Relevant for Country
General Directorate of Foreign Trade
Economic and Commercial Department
747 3rd. Avenue
New York, NY 10017
Tel: (212) 751-7137/7138
Bank of the Republic (branch)
Rockefeller Center
1270 Avenue of the Americas, 30th floor
New York, NY 10020
Uruguay-U.S. Chamber of Commerce, Inc. of New York
c/o Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Tel: (212) 504-6619
Trade Promotion Coordinating Committee
TPCC
Tel: 1-800-USA-TRADE
U.S. Department of Agriculture
Foreign Agriculture Service
Trade assistance and Promotion Office
Tel: (202) 720-7420
APPENDIX F
Market Research
List of Available and Upcoming Industry Sector Analyses and
International Market Insights
The Embassy reports International Market Insights on an ad hoc basis to
the U.S. Department of Commerce's National Trade Data Bank. Subjects
currently reported include: gas storage project, auto import overview,
insurance industry reform, oil company registration regulations, bridge
construction project, bank privatizations, highway construction, cable
tv projects, cellular phone projects, transport industry profile,
highway toll system purchase, piped gas network project, talc mining
joint venture project, thermal resort project, and hotel construction
projects.
The Embassy also plans to prepare comprehensive Industry Sector Analyses
on tourism, agroindustries (including forestry), and the medical
equipment and supplies sector during FY95.
List of U.S. Department of Agriculture/Foreign Agricultural
Service/Commodity Reports and Market Briefs
The Foreign Agricultural Service will be preparing a Livestock Annual
Report (in August), and an Agricultural Situation Report (due in
September).
APPENDIX G
Trade Event Schedule
The only regularly scheduled trade events of interest to U.S. companies
are the Prado Agro-Industrial and Commercial Fair which takes place each
year in September, and the Feria Internacional del Plata (FIPLA) which
takes place every other year in May. The next FIPLA fair will take
place in May, 1996.
Sponsored by the U.S. Department of Commerce, the Embassy organizes a
U.S. Pavilion in the Prado International Agro-Industrial and Commercial
Fair. Last year the prizewinning U.S. Pavilion was host to over thirty
U.S. companies which promoted their products and services. Attendance
at this exposition was calculated at over 400,000 by Fair authorities.
Many other nations also have pavilions along with those of local
companies. Participation in this fair is an excellent opportunity to
introduce U.S. products and services, especially consumer products to
the local market and to, a limited extent, the larger surrounding
markets of Brazil and Argentina.
The Embassy also organizes a smaller U.S. section in the FIPLA fair.
This fair has a much more restricted attendance and its target audience
is the Southern Cone (Brazil, Argentina, Paraguay) businessman.
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