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Investment Opportunitiesin Uruguay
September 2009
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Uruguay: LatAm’s Best-Kept Secret
•Highest internet, broadband and PC penetration in Latin America
•Lowest corruption in Latin America
•Continued growth and investment despite global slump
•Strongest democracy in Latin America
•Best labor value for money in the region
•New law to make investment even more attractive
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Political and social stability
Factor Uruguay vs. South America Uruguay vs. the World
Low Corruption(Transparency International)
1 23
Democracy Index(The Economist)
1 23
Economic Freedom Index(Heritage Foundation)
2 38
Quality of Life(Mercer; data for Montevideo)
1 76
Low Cost of Living (Mercer; data for Montevideo)
4 13
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Access to a large, wealthy marketAccess to a large and growing consumer market due to its
membership in MERCOSUR and its open economy
Uruguay MERCOSUR
Population (millions) 3.3 260
Area (sq. km) 176,215 11,800,000
GDP ‘08 (USD billions) 31 2,051
GDP p/capita ‘08 (USD) 9,500 8,300
GDP growth rate ‘08 (%) 8.9 5.5
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A strong economy
GDP variation in constant values
GDP growth
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CAGR (2003 – 2008): 5.7%
A strong economyEstimated growth rate for 2009
-2,0%
-1,5%
-1,0%
-0,5%
0,0%
0,5%
1,0%
1,5%
Argentina Brazil Chile Uruguay
-1,6%-1,3%
0,1%
1,3%
6
Source: IMF, April 2009
Volume index: goods (2005 = 100) Gross capital formation (% of GDP)
Strong investment stimulates growth
Source: Central Bank of Uruguay.
Average annual growth2006-2008: 13%
77
Booming foreign direct investment
0
500
1.000
1.500
2.000
2.500
2001 2002 2003 2004 2005 2006 2007 2008
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FDI grew by 1000% in 6 years
FDI in Latin America
(2008,% of GDP)
Uruguay’s FDI flows(in USD millions)
Openness ratio reaches record levels
Source:BCU and ECLAC.
Exports and importsas % of GDP
58%
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Strong growth in exports
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Exports tripledin 6 years
Goods and services as % of total exports
Source:BCU and TradeMap. Data in USD millions.
Export break-outExports – Main products and services – H1/2009
Meat
20%
Cereals, rice
14%Oil, Soybean,
seeds11%
Dairy products
7%
Wood products,
cellulose6%
Milling
products,malt4%
Plastics
3%Wool, tops
3%
Others
32%
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Goods Services
Main destinationsExports (goods) – H1/2009
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Uruguay:
A safe, reliable and competitive location,
providing an unbeatable logistics base in the heart of the wealthiest region of
the continent
Río de Janeiro2.400 Km
Sao Paulo1.970 km
Porto Alegre870 Km
MontevideoBuenos Aires
250 Km
Asunción1.550 km
Santiago1.900 km
Gateway to the region
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Gateway to the regionPort of Montevideo – Regional Hub
Goods in transit: 2008: 51% - 2009: 54.5%
0
100000
200000
300000
400000
500000
600000
700000
2000 2001 2002 2003 2004 2005 2006 2007 2008
Containers TEUS
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Modern infrastructure
• World-class port facilities in Montevideo, a regional hub par excellence for South America’s Southern Cone region
• Uruguay attends to 65% of in-transit merchandise in the region
• Boasts Latin America’s most dense highway network
• 2009: new airport terminal, Colonia ferry port and Montevideo ring road
• Solid information and communication technology infrastructure; highest telephone, PC, and broadband penetration in Latin America (e.g. 105 mobile lines per 100 residents in 2008; broadband penetration 13.7%)
• 98% of territory with access to low-cost electricity and drinking water
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Beneficial promotion systems
• Government recognizes important role of FDI and maintains favorableinvestment climate
• Track record of attracting large investors in agricultural, industrial, services and infrastructure
• Law 16,906 - January 1998:
Domestic and foreign investors are treated equally
Investments do not require prior authorization or registration
Free transferability of capital and profits from foreign investments
• Banking secrecy
Comprehensive legal framework for investment
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Beneficial promotion systems
• In 2008, government improved investment law by creating automatic, predictable, transparent and effective mechanism that benefits a broader base of firms and that specifies objective criteria for granting incentives
• It streamlines procedures for tax exemptions request, and establishes a one-stop shop for investment inquiries and advice
• In Uruguay income and value-added taxes exist only at the national level
Attractive investment incentives that may qualify for corporate income tax exemptions of up to 100% of investment
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Corporate income tax exemptions dependent on size of investment project and the following criteria:
- Creation of employment (quantity and quality)
- Contribution to territorial decentralization
- Contribution to export diversification and growth
- Strengthening of supply chains and increased added value
- Level of research, development and innovation to improve competitiveness
- Use of clean technologies
- Impact on national economy
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Other very attractive regimes
Free trade zones- Areas exempt from corporate income and wealth tax as well as from any other
tax created or to be created in the future- Introduction of goods into the FTZ is exempt from all import levies- Authorized to develop any industrial, commercial or service activity
Free port- Montevideo: first and only free port on South America’s Atlantic coast- Free goods transit, no authorizations or formal procedures required- Within port, facilities goods exempt from all import levies
Free airport- Value-added services can be carried out in activities related to goods- Also in activities associated with services applied to goods- Exemptions work in the same manner as in the Free Port regime
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Foreign investors show confidence
SoftwareDairy productsCall centers Alternative energy FoodAutoReal estateTourism ForestryWood products Pharmaceuticals
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Labor: best value for moneyExcellent education levels relative to the region
• Highest literacy rate in Latin America (98%), but one of the lowest labor costs
• The government provides free education through college
• 4.5% of GDP invested in education• 100% of 15-year-olds attending high school have
completed at least 3 years of English and 2 years of computer training
• 21% enrollment in accounting, finance and business administration at university level
• 17% enrollment in science and technology at university level
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One Laptop Per Child Program (Plan Ceibal)
Uruguay is the only country that hasimplemented the OLPC plan, covering allchildren at public primary schools
Helping our youngest citizens leapfrog the technology gap
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• Ultimate goal: full countrywide coverage of school-age children and teachers
• Total students covered as of September 2009: 370,000• Total teachers trained: 18,000• Total public elementary schools: 2,355• Total free Wi-Fi spots in Montevideo: 250• Thanks to the plan, 220,000 households (out of a total of
1,280,000) received their first computer; half of them belong to poorest 20% of population
One Laptop Per Child (Plan Ceibal)Helping our future workforce eliminate the technology gap
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Quality of life
• Free from natural disasters: no hurricanes, earthquakes, snowstorms, volcanoes
• Tolerant country, with no ethnic, racial or religious conflicts
• Third safest country in Latin America, evidenced by Uruguay’s booming second home market (Latin Business Chronicle 2009 Index)
• US-based Freedom House ranks Uruguay equal to Japan and the Scandinavian countries in their latest Freedom in the World Survey (2009)
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Uruguay and the
Global Crisis
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Uruguay is weathering the global crisis
GDP still growing in 2009
Strong investment flows
Macroeconomic stability
Public financing needs covered
Healthy banking system
Exchange rate flexibility
Low financial debt levels in the corporate sector
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Significant reduction of public debt
Source: Uruguayan Central Bank
84%
101%97%
80%
69% 67%
51% 54%59%
68% 67%
51%46%
40%
26% 26%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
120%
2002 2003 2004 2005 2006 2007 2008 2009Q1
% o
f G
DP
Gross Debt Net Debt
27
Private sector deposits
Stable banking system28
Uruguay’s budget deficit for 2009 lower than for most countries
Source: IMF and Ministry of Economy of Uruguay. Budget deficit defined as public deficit for Latin America, government deficit for
other countries
Estimated global fiscal result for 2009 (% of GDP)
URUGUAY
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Unemployment rate at historical lows
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Attractive Investment Opportunities in Several
Sectors
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Information and communications technology
•#1 software exporter in Latin America (USD 68 per capita, followed by Costa Rica with USD 33). 2008 exports of USD 219 M
•#1 technology country in LatAm (Latin Business Chronicle’s Latin Technology Index)*
•Highest total telephone penetration in LatAm: 105 mobile lines per 100 residents in 2008 (source: ITU)
•Connection to Global Crossing cable due late 2010 will enable connectivity 5 times larger than Uruguay ’s current demand
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(*) based on penetration of fixed and mobile phones, PCs, broadband and internet.
Information and communications technology
•Latest developments – government programs
•One Laptop per Child Program covers 100% of public primary school students as of September 2009
•Plan Cardales will massively expand triple play (bundling of telephone, cable TV and internet) coverage, with subsidies for low-income families
•Uruguay’s advantages for ICT investments:
•Skilled labor force
•Solid infrastructure
•Broad tax exemptions
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Outsourcing / shared services
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•Several success stories in last 10 years, including:
•Sabre Holdings (USA), 880+ employees•TCS (Tata Group, India), 800+ employees•RCI (USA), 400 employees
•Uruguay’s advantages:
•Multilingual labor force•Good value for money•Broad tax exemptions•Time zone between USA and Europe•Safe location
Tourism / entertainment
•2 million tourists per year. Additionally, 410,000 cruise passengers; 178 cruise ship calls in last cruise season
•Direct flights from global hubs: Miami, Madrid, Panama City
•Four Seasons, Conrad, Radisson, Sheraton all present. Ongoing investments: Intercontinental (USD 45 M), The Setai Group (USD 40 M), Related Group
•Tourism represents 6%+ of GDP; income in USD doubled in last 4 years
•One of few countries where number of visitors and expenditures are expected to keep growing in 2009
•USD 1.5 billion investment in tourism-related real estate over last 5 years (2nd homes and hotels)
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Punta del Este Convention Center and Fairground
Project for design, construction, financing and management
• Convention Center
– Plenary hall for 3,000 people
• Fairground Building
– Pavilion of 12,000 m² (130,000 sq.ft.)
• Concession for 35 years
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Infrastructure / logistics / transportation
•Optimal logistics location for South America’s Southern Cone where the Río de la Plata, Paraná and Uruguay Rivers converge with the Atlantic Ocean
•Deep water ports operating under free port regimes. Bid for 2nd Montevideo port terminal coming soon
•Uruguay attends to 65% of in-transit merchandise in the region
•Latin America’s densest highway network
•Montevideo: new airport terminal and ring road; expansion of highway to Colonia
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Uruguay leads in renewable energy
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• Hydro power is already a big energy source for Uruguay• Power generation from biomass and wind farms already in
place• Uruguay’s Strategic Development Plan: addition to the
national energy matrix of 500 MW of renewable energy by 2015 (200-300 MW wind, 200 MW biomass and 50MW small hydro)
• Forthcoming: state-owned utility UTE’s public bid for 150MW of wind power
• Soon Uruguay will have Nº1 position in the Americas in the proportion of non-traditional renewable power generation capacity out of total power capacity
Oil & gas
• Despite the global crisis, oil companies Petrobras (Brazil), YPF (Argentina/Spain) and Galp (Portugal) formed consortium to present E&P bids for two blocks off the Uruguayan coast at depths of between 50 and 2,000 meters
• Both blocks are located in the Punta del Este basin, starting 110 km (68 miles) off the Uruguayan coast
• This raises prospects for energy independence and with it, in the future, a significant reduction in energy costs
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Life sciences
•National R&D agency provides grants to over 2,000 scientists involved in research and to doctoral students
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•International and local companies have developed a niche market in animal health (e.g. pharmaceutical products and vaccines for livestock)
•Uruguay hosts France’s Institut Pasteur, where state-of-the-art research is conducted
•Uruguay’s investment in science and technology doubled from 2007 to 2008 to USD 474 M, or 1.5% of Uruguay’s GDP, a historic high (Source: RICYT.org )
Creative industries•Uruguay: provides state-of-the-art services to global film and advertising producers
•Hollywood productions: Miami Vice (Michael Mann, Colin Farrell) and Blindness (Fernando Meirelles, Mark Ruffalo and Julianne Moore) were partially shot in Uruguay
•Global ad campaigns are fully produced in Uruguay (e.g. Absolut Vodka)
•Uruguay’s advantages: diverse landscapes and locations (e.g., resembling Geneva or Havana), safety, counter-seasonality, availability of equipment and skilled technicians at low cost, and short distances that reduce time and costs
•Broad tax exemption for audiovisual services for export
•85% of industry turnover = exports; the industry accounts for 7% of employment in services in Montevideo
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Agribusiness • Over 25% of Uruguay’s land changed hands over the last
5 years, reflecting huge foreign investment
• Land prices in USD have grown by more than 400% in 5 years, but still are substantially lower than in developed countries
• Over 40% of meat exports are carried out by foreign companies
• Beef is free range and hormone-free; 1st country in the world with 100% traceability of beef
• 1 million hectares (2.5 million acres) of forest plantations, i.e. 6% of the territory
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In Summary
These are exciting times for Uruguay:
•Our economy is growing
•We top many Latin American rankings
•Investments are pouring in
•We have carried out many innovative programs
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Contact details
Álvaro Inchauspe
Head of Private Sector Support Unit, Ministry of Economy and Finance of Uruguay
Adrián Zak
Head of Investment Promotion Department, Uruguay XXI (Uruguay’s investment and export promotion agency)
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