2023: Doing Business In Uruguay
Doing Business In Uruguay
1. What is the current business climate in your jurisdiction including major political, economic and/or legal activities on the horizon in your country that could have a big impact on businesses?
Uruguay offers a favorable business climate for foreign investors due principally to its rule of law, low political risk, macroeconomic stability, strategic location, and investment incentives. The country recognizes the important role that foreign investment plays in economic development. Uruguay's legal system treats foreign and national investments equally. Most investments are allowed without prior authorization, and investors can freely transfer capital and profits from their investments abroad.
In this context, Uruguay emerged as a regional hub for the fintech sector due to the tax benefits, technological talent, and flexibility to hire employees.. While the Government is currently in the process of formulating legislative measures pertaining to fintech, the growing fintech sector actively fosters innovation and progress. Notably, it has established a fintech chamber to contribute to these endeavors. We are advising the government in the design and implementation of the Uruguay Innovation Hub.
In 2022, the National Administration of Fuels, Alcohols and Portland (ANCAP as per its Spanish acronym) launched its second open offshore licensing bid-round in Uruguay for offshore exploration activities. The round was successful, resulting in the allocation of three blocks to winning companies (most of them are receiving our firm's assistance) which are engaged in negotiations with ANCAP to formalize the agreements.
Looking ahead, Uruguay will hold general presidential elections in October 2024. However, this should not have an impact on the flow of foreign investments considering that over the past three decades, it has been a consistent practice for all political parties to uphold significant legal frameworks.
2. From what countries do you see the most inbound investment? What about outbound?
According to research published by the Economic Commission for Latin America and the Caribbean (CEPAL as per its Spanish acronym), Uruguay's inbound investment tripled in 2022.
The countries with larger investments in Uruguay are Spain, Argentina, Finland, and Brazil, with investments in industries such as energy generation (in particular wind power projects), fintech, services, and agro-industrial production.
As for outbound, several investments were made by Uruguay, with projects in Colombia, Chile, Brazil, Peru, Bolivia, and Mexico in Latin America, and the United States and Spain outside the region. Uruguay's outbound investment is based in a variety of sectors, such as hotels and tourism, textiles, software and computer services, transport, and storage.
3. In what industries/sectors are you seeing the most opportunity for foreign investment?
There are several key industries and investment opportunities in Uruguay, including trade and service center, agribusiness and food, technology, real estate, and those related to energy. As mentioned above, the second energy transformation brings opportunities for investors to actively participate from the beginning in the consolidation of the new decarbonized energy matrix.
4. What advantages and pitfalls should others know about doing business in your country?
Uruguay has a unique combination of attributes that make it a reliable partner and offers a favorable business climate based not only on political and social stability but also because it provides incentives to local and foreign investors. It treats foreign and national investors alike, providing free remittance of capital and profits, and allows most investments without prior authorization. Domestic investment and foreign direct investment, which have been traditionally low, increased significantly during the economic boom but have stabilized since then. Reacting to COVID-19 in October 2020, the government increased tax benefits to investors to promote investment.
Over the past decade, Uruguay strengthened bilateral trade, investment, and political ties with China, its principal trading partner. Uruguay formally joined the Asian Infrastructure Investment Bank in 2020. In recent years, China has signaled openness to a free trade agreement either with Uruguay bilaterally, or with Mercosur (the Southern Common Market).
Uruguay is a founding member of Mercosur, created in 1991, which also comprises Argentina, Brazil, and Paraguay. Uruguay has separate trade agreements with Bolivia, Chile, Colombia, Ecuador, and Perú, all of which are also Mercosur associate members. Uruguay and Mexico have had a comprehensive trade agreement in place since 2004, and in 2018, Uruguay extended the existing free trade agreement with Chile to increase trade in goods and services.
Uruguay's strategic location (in the center of Mercosur's wealthiest and most populated area), and its special import regimes (such as free zones and free ports) make it a well-situated distribution center.
5. What is one cultural fact or custom about your country that others should know when doing business there?
When dealing with certain public agencies or ministries, there are often different levels of bureaucracy that investors must expect and attend to. This could range from established processes with several steps to follow, other types of complex processes, or dealing with timeframes that do not necessarily align with the investor's expectations.
Investors are highly encouraged to adapt to this cultural fact and custom and follow these processes rather than demanding excessive flexibilization of the pre-determined rules and process.
Our Firm
1. What distinguishes your firm from others in your market?
Guyer & Regules is proud to be considered a top firm in Uruguay, frequently entrusted for international and domestic legal, accounting, and tax matters.
At Guyer & Regules, we strive to build "strong personal working relationships" both with our clients and with the people in our firm. We count on a solid team of highly trained professionals and the largest group of the most experienced partners in the country. Our commitment to excellence and dedication to our clients have endorsed us as trusted advisers. We are committed to serving their needs, and this is our purpose.
Our great trajectory and expertise allow us to achieve excellence and stand out widely in the many practice areas in which we service our clients
Our global reach gives us visibility, being constantly recognized by prestigious international legal publications.
2. What are two terms that describe the culture of your firm?
Personal Relationships. Excellence.
3. How does your firm participate in Corporate Social Responsibility (CSR) and/or Environmental, Social and Governance (ESG) initiatives?
Diversity and inclusion are strategic pillars in several ways.
We have developed an interactive drama experience called "Blind Acting" for companies and organizations of all kinds, wherein we role-play situations and how to respond accordingly. The objective is to create awareness for a better development of human relations within the organization.
Separately, around environmental law and sustainability, we have extensive experience and a solid multi-disciplinary team that has engaged in the settling, acquisition, and financing of the most important national and international companies in the country. We possess unrivaled experience in this subject matter across all industries, especially manufacturing, agricultural, forestry, renewable energies, and infrastructure.
The team comprehensively assists clients in the diverse areas of this practice, such as biodiversity, waste management, climate change, and energy efficiency. We are pioneers in Uruguay in rendering environmental legal monitor services set forth under international certification standards (ISO 14001), and periodical regulation update reports tailored-made for each client and industry.
4. Are there any new and exciting initiatives, practice areas or industry focuses in your firm?
We are currently focused on green hydrogen initiatives, which represent one of the main pillars of the second energy transition that Uruguay is facing. Although Uruguay's involvement in green hydrogen projects is still under development, there are initiatives based on a Road Map approved by the Ministry of Energy and Mining, which sets forth the general guidelines for the expansion and diffusion of applications of green hydrogen both at a local level and for export.
Authors
Juan Manuel Mercant and Tania Cavallo Mallo