Dozens of companies from around the world have set up operations in Uruguay in recent years. This small country with a population of just 3.3 million has achieved record levels in Foreign Direct Investment (FDI) in the last few years, during which, in addition, its economy has grown above the regional average. Why? What makes Uruguay such an attractive destination for foreign capitals? There are a number of factors that explain this reality.
According to a survey from last May conducted by the Agency Uruguay XXI, the official body for export promotion and investment attraction, foreign companies emphasize legal certainty (57%), macroeconomic stability (45%), profitability (34%), tax incentives (34%) and strategic location and access to Latin American markets (27%), as the main reasons which have encouraged them to make investments in the country. Furthermore, 84% of the respondents indicated that they were "satisfied" or "very satisfied" with the process for establishing a business in Uruguay, and 75% claimed to be "satisfied" or "very satisfied" with the conditions that exist in the country for the development of their activities.
Between 2004 and 2014 the local economy registered one of the best performances in Latin America. During these years, its Gross Domestic Product (GDP) increased at an annual average of 5.4%, which has enabled per capita income to rise from USD 10,000 in 2005 to almost USD 17,000 in 2014, the highest in Latin America measured in current dollars. This expansion phase coincided with the period which recorded the sharpest increase in FDI in the country's history.
In addition, Uruguay, who holds an investment grade rating by Moody’s, Standard & Poor’s, Fitch Ratings and DBRS, ensures equal treatment to foreign and national investors, and does not impose any restrictions on the movement of capital, repatriation of profits, or foreign currency trading.
Local regulations promote national and foreign investments through tax benefits. The investment promotion law offers the possibility of obtaining between 20% and 100% Corporate Income Tax (IRAE) exemption on the invested amount, according to the classification of the project. There are also specific tax benefits for companies that invest in global services.
Concurrently, the duty-free zone regime in force provides 100% exemption from all current or future taxes on the production and export of goods and services, except for social security contributions. The promotion and development of duty-free zones has been declared of national interest by means of a law, in order to encourage investment, exports, employment and international economic integration.
At present, dozens of companies from Argentina, Brazil, Spain, United States, India and France, among other countries, have offices and operation centres in different free zones in Uruguay. For example, with respect to ICTs, one of the sectors which has registered the greatest growth in attracting foreign investment in free zones, the arrival of multinational companies such as TATA Consultancy Services, Globant and TOTVS stands out.
The country's size and location are two aspects which have also been noted by foreign entrepreneurs. In this regard, its small market proves to be an excellent test bench for the subsequent launching of projects in the region and its strategic geographic location, with its time zone positioned in between Europe and the United States, makes it a perfect spot for the provision of global services, especially in the ICT sector.
Additionally, Uruguay is a country of short distances, with few geographic features and pleasant climate. Foreign nationals who take up residence in the country point out the tranquillity and hospitality of its people, and accessibility to basic services such as health and education. The country's quality of life is reflected in studies as those conducted by the international consulting firm Mercer, which this year, as in 2015, concluded that the Uruguayan capital, Montevideo, is the best city in South America to live in.