Often referred to as the Switzerland of South America, Uruguay’s political stability is being bolstered by growing economic and financial stability, consequences of moderate governance, sustainable fiscal policy, market and economic diversification, and a strong focus on education, among other things.
Although it suffered overspill from the Argentinean financial crisis in 2002, Uruguay has made such a strong comeback that several international financial institutions are waiting in line to enter, while economic growth has only faltered to a low of 2.9% during the worst of the current global economic downturn. The IMF predicts growth for the coming years to remain stable at 4-5%, although analysts in Uruguay claim these estimates are conservative, as productivity continues to rise and foreign investment increases. The fact that Uruguay serves as headquarters for Mercosur, the Southern Cone Common Market that also includes the huge markets of Brazil and Argentina, additionally lends the country the advantage of serving as the key gateway to the region for trade and investment.
“Investing in Uruguay is no risky venture,” says Jose Mujica, voted President of Uruguay in March 2010. “The most important advantage we have is that we’re in the southern market and given Uruguay’s reliability, from here one can enter a market much larger than our own, such as Brazil and Argentina, without running the risks of establishing oneself there.”
According to Carlos Gianelli, Uruguayan Ambassador to the U.S., Uruguay offers excellent conditions for foreign investment, namely transparency, legal and political stability, a highly educated population, and an open economy. These factors have not gone unnoticed by investors: total investment grew at an annual average rate of 13% between 2006 and 2008.
The U.S. is the fourth largest foreign investor in Uruguay, who despite its small size (it is slightly smaller than the state of Washington), is the sixth world exporter of bovine meat, seventh in rice, and eighth in soybeans. While agriculture has traditionally been Uruguay’s flagship sector – thanks to its vast tracts of green arable land and low population density – it is being taken over by services related to IT, finance activities, and logistics. Indeed, today Uruguay is among the first three major exporters of software and services in the continent.
U.S. investors enjoy the added advantage of two ‘third generation’ investment instruments. Approved in 2005, the Bilateral Investment Agreement, or BIT, is a legal instrument that promotes and reciprocally protects FDI between the two countries. The Trade and Investment Treaty (TIFA) of 2007 was the first treaty of its kind signed with a Latin American country and is paving the way for cooperation in many issues that go beyond commerce and into the realm of scientific and technological research.
“We must build a highly-qualified society that sells knowledge,” explains President Mujica. “The most important thing we can learn from the U.S. is knowledge and science.”
Mr. Mujica is carrying on with most of his predecessor’s policies, among the most noteworthy perhaps is Plan Ceibal, or the One Laptop per Child program. Uruguay is the first country in the world to have full connectivity at the primary school level, and the second phase, supplying students and teachers at the secondary level, will reach completion this year.