Foreign direct-investment-in-uruguay 052012

08 Otoño

May 2012

FFoorreeiiggnn DDiirreecctt IInnvveessttmmeenntt iinn UUrruugguuaayy

URUGUAY XXI Instituto de Promoción de Inversiones y Exportaciones

2

I. EXECUTIVE SUMMARY ............................................................................................... 3

II. FDI IN LATIN AMERICA .............................................................................................. 4

III. FDI IN MERCOSUR ................................................................................................ 7

IV. FDI IN URUGUAY ..................................................................................................... 9

V. URUGUAYAN FDI PER COUNTRY OF ORIGIN ................................................................... 12

VI. URUGUAYAN FDI PER ACTIVITY SECTOR ....................................................................... 15

VII. ENQUIRIES RECEIVED BY THE INVESTMENT PROMOTION DEPARTMENT ................................ 17

VIII. PERSPECTIVES FOR FDI IN URUGUAY ........................................................................... 18


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I. Executive Summary

Latin America is consolidating as an important region for Foreign Direct Investment (FDI)

attraction. In the last years, this region has increased its participation as global FDI attraction

region. Several countries are acquiring more importance as foreign investment attraction

destination. Uruguay is not an exception. Taking into account FDI data in terms of GDP, it can

be observed that in Uruguay FDI accounts for over 5% the GDP (as of 2011), which reports one

of the highest investment percentages of the region, in relative terms.

Uruguayan FDI has experienced a strong growth over the last years, reaching in 2011 US$

2,528 millions, a record figure. This means that Uruguayan FDI multiplied by eight in the last

decade.

Considering the origins of Uruguayan FDI (2001-2009 period), the main countries of origin of

our FDI have been Argentina, Spain, United States, Brazil and England, altogether accounting

for less than half the FDI attracted by Uruguay in the period.

As regards the different sectors, the largest foreign capital raising sectors in Uruguay have

been: agriculture, cattle raising, and forestry (afforestation), construction and manufacturing

industry, which altogether account for more than 60% the total FDI of 2001-2009 period.

Uruguay XXI’s Investment Promotion Department receives a large number of enquiries from

foreign investors interested in settling in Uruguay. In 2011, more than 260 companies from

over 40 countries have contacted said department. Enquiries received were mainly from

Argentina, Spain and the United States. Furthermore, enquiries from Japan stand out.

Enquiries received were oriented to investments mainly in automotive and autopart industries,

services (in particular, tourism), agribusiness, energy and construction.

Finally, FDI perspectives are introduced. FDI flows towards the region are expected to keep

their growth in the next years. Moreover, Uruguay is expected to follow this trend and

consolidate as one of the main FDI attracting countries of the region, in relative terms.

Therefore, it is necessary to continue the progress towards the improvement of the regulatory

framework in order to promote investments and continue enhancing investment conditions in

Uruguay. An important milestone is that Uruguay has recovered the Investment Grade Rating

(GR) it had lost a decade ago. This shows the trust generated by the country’s institutional

framework as well as by the economic policy management, thus creating an even more

attractive framework to do business in Uruguay.


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II. FDI in Latin America

Over the last decade, Latin America has been consolidating as an important Foreign Direct

Investment (FDI) attractive region. According to the last report submitted by the Economic

Commission for Latin America and the Caribbean (ECLAC)1, the FDI flows towards the region in

2011 registered an increase of 31% compared to 2010, reaching US$ 153,448 million. Latin

America and the Caribbean (LA&C) was the region with the highest FDI attraction growth rate

with a 10% participation in total global investments. According to the ECLAC forecast for 2012,

the region will continue to be an attractive localization, maintaining FDI inflows of around US$

150,000 million.

The underlying reason for such dynamism is to have taken advantage of the domestic markets

as a consequence of the economic growth in the South region - the high price for raw

materials that spurred investments in natural resource extraction and processing and an

increase in outsourcing of manufacturing activities and business services by developed

countries). On the other hand, the growth of emerging economies has revealed an increase in

investments in the South.

South America has shown an outstanding performance as the sub-region’s major recipient,

with a participation of 80% of the total FDI, with Brazil accounting for over half of the FDI

inflow. Furthermore, other Latin American countries achieved historical records; such is the

case of Chile (US$ 17,199 million), Colombia (US$ 13,234 million) and Uruguay (US$ 2,528

million).

The FDI sector destination varies according to countries of destination. In South America

companies invest mainly in natural resources, with the exception of Brazil which has the

manufacturing industry as main destination with a focus on the metallurgical industry and

food and beverages. Alternatively, Mexico, Central America and the Caribbean’s major FDI is in

the services and manufacturing sector.

In the following chart Latin America’s main FDI origins can be observed for the accumulated

period 2006-2010 and the year 2011. Netherlands is the main investor (accounting for 21% of

the total FDI)2, followed by the United States (18%), Spain (14%) and Japan (8%). An interesting

fact worth mentioning is the increase of investments from Asia in 2011. In effect, 9 of the 10

major cross-border merges and acquisitions carried out by foreign companies were Japanese

and Chinese.

1 Foreign Direct Investment in Latin America and the Caribbean,2011. 2 Due to its status as a hub for investments carried out from foreign countries.


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Chart II. 1 – FDI in Latin America per country of origin (% share)

1%

4%

4%

8%

9%

14%

18%

21%

20%

2%

5%

4%

3%

9%

9%

23%

7%

38%

50% 30% 10% 10% 30% 50%

China

Canada

United Kingdom

Japan

Latin America

Spain

USA

The Netherlands

Others

2006-2010 2011

Source: URUGUAY XXI based on ECLAC

Uruguay appears in the list among the major FDI attracting countries in the region over the

past few years. Brazil is the main FDI recipient in Latin America, followed by Mexico and Chile.

Colombia and Venezuela have also attracted greater FDI flows by 92% and 339% respectively

compared to 2010. The rise in FDI received by Colombia is driven by the investments carried

out in the natural resources sector, particularly mining and oil as well as investments in the

trade and transport and telecommunications sector3. Moreover, the surge recorded in

Venezuela corresponds to reinvested earnings and inter-affiliate loans in the oil sector and

financial activities.

Chart II. 2 – Main FDI recipients in the region (In billions of US$)

05

10152025

3035

4045

50

2010 2011


3 Some of the main investments carried out in Colombia: Itochu, acquisition of assets of mining company Drummond (US$ 1,524 million); BHP Billiton y Xstrata, expansion of coal mines (US$1,300 million); DHL, logistic center (US$ 1,300 million).


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Comparing the FDI in terms of GDP of different countries of Latin America and the Caribbean,

it can be observed that in 2011 the Uruguayan FDI accounts for almost 6% of the GDP. Such

figure not only shows the significance of FDI in our country but also positions us as one of the

major investment flow recipients in the region, in relative terms, with a significantly larger

percentage than other Mercosur member states.

Chart II. 3 – FDI in South America (GDP %) – 2011

1.2%

2.4%

4.1%

4.1%

4.3%

5.4%

7.1%

0% 2% 4% 6% 8%

Argentina

Paraguay

Colombia

Brazil

Peru

Uruguay

Chile

Source: URUGUAY XXI based on Central Banks of each country


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III. FDI in MERCOSUR

In the last decade, the flows of FDI into MERCOSUR had followed an upward trend, registering

in the period 2001-2011 an average growth rate of 21%. This dynamism has determined an

important increase of the MERCOSUR’s share in global FDI flows. In 2010, the share of FDI

attracted by MERCOSUR reached the maximum value in the last 10 years - 5% of total global

FDI flows, meanwhile in 2001 was 3%-.

In 2011, FDI in MERCOSUR exceed the value recorded in 2010 by 31%, reaching a record high

of US$ 76,580 million, after the decrease in 2009 experienced as a result of the fall of global

FDI. The volume of FDI relative to GDP increased, reached 2.7% in 2011. This value was slightly

below the maximum value reached in 2008.

Chart III.1- FDI in MERCOSUR (US$ Millions and % of GDP)


Over the past years there have been changes regarding the recipient countries of FDI in MERCOSUR. Brazil continues to stand as the largest recipient of FDI, with a share of over 80%. Argentina was the second recipient but Uruguay begun acquiring greater significance since 2005. In particular, in 2011 Uruguay’s share was 3% of the total FDI received by MERCOSUR. While Paraguay has also increased its participation over the last three years, its share is still

around 1%. Regarding sectors, investment flows were mainly directed to natural resource,

manufacturing and services.

25,00418,943

12,239

22,64121,232

26,026

42,573

57,209

31,767

57,548

76,580

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

US$ millions

0%

1%

1%

2%

2%

3%

3%

4%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011


8

Chart III.2- Distribution of FDI in MERCOSUR (%)


0%

20%

40%

60%

80%

100%

2002 2011

11%9%

1%3%

Argentina Paraguay Uruguay

0%

20%

40%

60%

80%

100%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Argentina Uruguay Paraguay Brazil


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IV. FDI in Uruguay4

FDI in Uruguay has grown strongly, tripling in the last 7 years. In 2011, FDI reached US$ 2,528

millions. Therefore, 2011 is a record year regarding FDI attraction, even surpassing the levels

reported in 2008.

Chart IV.1 - Uruguayan FDI (Millions of US$ and GDP %)

297194

416 332

847

1,4931,329

2,106

1,593

2,3582,528

0%

2%

4%

6%

8%

10%

0

500

1000

1500

2000

2500

3000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

GDP % US$ millions

Source: Uruguay XXI based on Central Bank of Uruguay

Chart IV.1 shows the significant leap of level experienced as from 2005, when Uruguay started

reporting large investments, basically related to pulp mill setting5. Likewise, the chart shows

the growing trend of FDI flows attracted by Uruguay, which remained at high levels despite

2009 international crisis. Furthermore, in 2010 another important investment related to a new

pulp mill was materialized6. This important investment will have strong effects in FDI figures of

this year and the next ones.

In fact, in 2006-2011 period, FDI reported an average growth rate of 26%, reaching in 2011

unprecedented levels.

FDI in terms of GDP has grown considerably over the last years, reaching its highest level in

2006 (8% of GDP). In 2011, the FDI reached 5.4% of the GDP.

4

Methodological Note: Uruguayan FDI information is gathered from Balance of Payments quarterly publications issued by BCU

Financial Scheduling Department. Contributions of capital, profit reinvestment and net financing between headquarters and their branches or subsidiaries, as well as real estate investment in the seaside city Punta del Este are included. As from 2003, direct investment estimations in the primary sector (land) are included. Such data allows identifying reverse investments, i.e. investments of subsidiaries in their own headquarters.

5 Investment made by Botnia (currently UPM) was approximately US$ 1,200 millions, which were ascribed to FDI between 2005

and 2006.

6 Investment made by Montes del Plata is estimated in US$ 1,900 millions in the plant and US$ 700 millions in land approximately.

The plant will begin operations in the first quarter of 2013. This investment will be allotted to FDI in 2011, 2012 and 2013.


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It is worth mentioning that this growing trend has deepened as from 2007 with the approval of

Decree 4557 which regulates chapter III of the Law on Investment Promotion and Protection

No. 16,906 (Ley de Promoción y Protección de Inversiones) yielding an even more favorable and

attractive investment environment in the country. In this issue, it is worth mentioning that

Uruguay has an attractive statutory framework to attract investments.

Law 16,906 promotes productive investment by means of tax benefits granted to IRAE-

generating companies, no matter the amount to be invested, sector or legal nature of the

company. Benefitted investments are those which create jobs, increase exports, use cleaner

technologies, invest in research, development and innovation, favor decentralization or rate in

several sector indices.

The Decree in force, No. 2/0128, incentives projects which create quality jobs (according to the

salary level), hire groups with more problems finding jobs, promote undertakings outside

Montevideo (basically in departments with less resources) or in less developed neighborhoods

in Montevideo, among other amendments.

Apart from the Investment Promotion Law, Uruguay has several systems which make

investment in the country even more attractive, such as Free Zones, Free Ports and Airports,

Industrial Parks, Temporary Admission, Customs Deposits, among others.

In addition, Uruguay presents an excellent business environment, as shown by the outstanding

position of the country in several international rankings. Among them, we can highlight the

first position in the Economic Environment in Latin America ranking made together with the

Brazilian Economy Institute, the Getulio Vargas Foundation and the Economic Research

Institute of Munich University (January 2012). Furthermore, according to the last report Doing

Business 2012 drawn up by the World Bank, Uruguay moved up 17 positions regarding its

favorable environment to do business, it being ranked in the 90th position among the 183

analyzed countries.

Last but not least, at the beginning of April 2012, Standard & Poor´s granted Investment Grade

(IG) status to Uruguayan sovereign debt, a rating that our country had lost ten years ago. This

shows the trust generated by the country’s institutional framework as well as by the economic

policy management, in particular, it reflects a very orderly conduction of macroeconomic

policy. The recovery of the IG creates an even more attractive framework to do business in

Uruguay (see section below).

7

November 2007. 8

February 2012.


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What is the significance of the Investment Grade in Uruguay?

It has several effects with different degrees of importance:

The Investment Grade widens the range of prospective investors who can invest in Uruguay.

This applies both for financial investments (purchase of Uruguayan Government Bonds and

securities from Uruguayan private companies) and for productive investments.

The IG enhances our position in the current international uncertain scenario, thus assuring that

Uruguay will find no difficulty in accessing funding on a risk-averse environment.

Finally, IG provides Uruguay with better funding conditions regarding terms and rates. Note

that Uruguay already had similar sovereign risk levels to those present in countries of the

region with IG. Therefore, no effects on short and medium term rates will be expected;

however, there will be long term effects.

9 Decree No. 354/009 http://archivo.presidencia.gub.uy/_web/decretos/2009/08/245%20.pdf

10 Decree No. 532/009 http://archivo.presidencia.gub.uy/_web/decretos/2009/11/ASUNTO413%20.pdf

11 Decree No. 207/008 http://archivo.presidencia.gub.uy/_web/decretos/2008/04/951_19%2010%202007_00001.PDF

12 Decree No. 04/010 http://archivo.presidencia.gub.uy/sci/decretos/2010/12/mef_889.pdf

13 Decree No. 175/003 http://www.mef.gub.uy/inversor/decreto_175_03.pdf

14 Decree No. 6/010 http://archivo.presidencia.gub.uy/_web/decretos/2009/08/ASUNTO3682%20.pdf

More Incentives...

In the Investment Promotion System framework and with the purpose of energizing some sectors, the

government has established tax incentives to companies carrying out activities related to certain specific

sectors. Some of these sectors are:

Renewable Energies9: activities such as power generation from non-traditional renewable sources, electrical

power generation through co-generation, transformation of solar power in thermal power, national

manufacturing of machines and equipment destined to the activities mentioned above, among others.

Shipping Industry and Electronics Industry10: ship and water vehicle building, maintenance and repair

activities fall within the shipping industry. With respect to the electronics industry, activities such as

production of electronic and electric equipments, logic controls, computers, telecommunication equipment,

measurement instruments, medical equipment and domestic appliances are promoted.

Remote customer service centers11: activities such as services rendered by telemarketers receiving or making

phone calls, Internet messages and other kind of communication channels.

Condominium Hotels12: destined to offer lodging services in order to attract the tourism demand.

Tourism13: investments related to civil works corresponding to Tourism Projects, including activities destined

to offer lodging, cultural, commercial, congress, sports, recreational, amusement or health services or

investments related to the acquisition of goods destined to fitting out Tourism and Hotel Projects, Apart

Hotels, Motels and Tourism Farms.

Machinery and Agricultural Equipment Manufacturing14:

http://archivo.presidencia.gub.uy/_web/decretos/2009/08/245%20.pdf

http://archivo.presidencia.gub.uy/_web/decretos/2009/11/ASUNTO413%20.pdf

http://archivo.presidencia.gub.uy/_web/decretos/2008/04/951_19%2010%202007_00001.PDF

http://archivo.presidencia.gub.uy/sci/decretos/2010/12/mef_889.pdf

http://www.mef.gub.uy/inversor/decreto_175_03.pdf

http://archivo.presidencia.gub.uy/_web/decretos/2009/08/ASUNTO3682%20.pdf


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V. Uruguayan FDI per country of origin15

The countries of the region, Europe and NAFTA are the main countries of origin of Uruguayan

FDI, reporting an irregular behavior regarding their relative participation each year. With

respect to investments from MERCOSUR member countries, a capital reduction in 2002 and

subsequent recovery as from 2003, reaching 38% of total FDI in 2009 can be observed. It is

important to point out that more than one third of overall Uruguayan FDI in the 2001-2009

period corresponds to investments made by countries of the region.

On the other hand, investments from Europe have remained relatively stable over the last

three years, after an important drop reported in 2006. On average, they account for 18% the

total Uruguayan FDI.

Regarding investments from NAFTA countries, they reported a recovery as from 2005,

accounting for 10.5% of overall FDI in 2009 and the amount invested in such period only

reached to US$ 575 millions out of US$ 8,608 millions.

Chart V. 1 – Uruguayan FDI per country of origin 2001-2009 (% share)

36% 38%

13%17%

26% 11%

26%34%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2001 2002 2003 2004 2005 2006 2007 2008 2009

MERCOSUR EUROPA NAFTA OTROS


At country level, it is worth mentioning that there are more than 30 countries which choose

Uruguay as destination for their investments. In such sense, the main five countries of each

year accounted, on average, for 60% of overall Uruguayan FDI in the 2001-2009 period.

Argentina stands out in the first place. This has been one of the main countries of origin with

an average share of 20% in the 2001-2009 period. Although between 2002 and 2005 it was no

longer ranked first as country of origin (resuming its position as of 2006), it is always among

15

FDI data per country and per sector available only until 2009 by the BCU.

Note: “Other origins” include those companies which resulted to be exclusive for a country for the purpose of respecting the state secret.


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the first 3 countries of origin of Uruguayan FDI. The major investment sectors of Argentina are:

agribusiness, manufacturing industries and services.

In the second place, it is worth mentioning the importance of Spain, with an average share of

9.5% in overall Uruguayan FDI in the 2001-2009 period. However, its share decreased last year

(2009), only accounting for 3% of the total FDI. Spanish investments are basically directed

towards financial and call center services and industries, in particular due to investments in the

timber industry.

In the third place, there appear investments from United States and Brazil. As for United

States, while in 2001 its share was of 25% (ranking second) in 2004 it reports a lower share of

only 0.4%, recovering its dynamism in 2009. Investments from United States are directed

towards a wide range of sectors, the most relevant ones being audiovisual, hotel and

recreation services and industry. As for Brazil, there has been a significant increase since 2007

with an average incidence of 7.4% in overall FDI. Brazil’s main investment sectors are

agribusinesses, agro-industries, financial and hotel and recreation services.

Lastly, investment flows from England, which in the 2002-2008 period was one of the 5 main

countries of origin of Uruguayan FDI, stand out. In 2009 this situation was reverted and it was

ranked 13th.

Chart V. 2 – Major countries of origin of Uruguayan FDI 2001-2009 (% share)

35%

12%29%

26%

11%7%

7%

7%

24%

34%54%

43%

-20%

0%

20%

40%

60%

80%

100%

2001 2002 2003 2004 2005 2006 2007 2008 2009

Argentina Estados Unidos Brasil Holanda España Otros



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In short, in the period under study (2001-2009), the main countries of origin of Uruguayan FDI

have been Argentina, Spain, United States, Brazil and England, altogether accounting for less

than half the FDI attracted by Uruguay in the period. It is also worth mentioning the

importance of Netherlands in 2009, with an investment of US$ 110 millions, basically related

to the purchase of a company by a Dutch group.

Chart V. 3 – Major countries of origin of Uruguayan FDI

2001-2009 period (% share)

Argentina23%

Spain9%

United States6%

Brazil5%

England3%

Bahamas3%

Bermudas3%

Holland2%

France2%

Belgium1%



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VI. Uruguayan FDI per activity sector16

The largest foreign capital attraction sectors in Uruguay have varied over time, although

agriculture, cattle raising, and forestry (afforestation), construction and manufacturing

industry altogether account for more than 60% the overall FDI of the 2001-2009 period.

In the 2003-2006 period, the sector with the largest investment attraction was Agriculture,

cattle raising and forestry, with an average share of 34%. Within this sector, agriculture and

cattle raising subsector has been the most significant one in 2003 and 2004, while in 2005 and

2006, the most significant one was the forestry and timber extraction subsector as a result of

the strong development of the timber sector in Uruguay. As of 2007 this sector was no longer

the main FDI recipient, leaving this place to the Construction sector.

The construction sector increased its share significantly as of 2006, from 11% the overall FDI in

the 2001-2005 period to 28% in the 2006-2009 period. This situation is both explained by the

building and setting up of pulp mills and by the real estate investment dynamism in Punta del

Este.

On the other hand, two events which took place in the last years are worth mentioning. Firstly,

the sustained growth of FDI in manufacturing industries as from 2006, upon the slowing-down

reported as from 2003, accounting for 16% the total investment in 2009. Within this sector,

the main subsectors are: Food and Beverage Product Manufacturing due to the strong

investments received by the cold storage industry and agro industries and, on the other hand,

Manufacturing of Chemical Substances and Products. At the same time, investments in the

wholesale and retail trade sector have increased - the wholesale trade being responsible for

this important growth. In 2009, this sector attracted investments for a total of US$ 269

millions, the second most important sector in the investment attraction.

16

FDI data per country and per sector available only until 2009 by the BCU.


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Chart VI.1- FDI in Uruguay per activity sector 2001-2009 (%share)

12% 14%

32%

17%

4%

16%

31%

16%

6%

8%

61%

25%39%

-20%

0%

20%

40%

60%

80%

100%

2001 2002 2003 2004 2005 2006 2007 2008 2009

Construction Wholesale and retail commerce

Manufacturing Industries Agriculture, cattle-raising and forestry

Transport, storage and communications Financial brokerage

Other

Source: URUGUAY XXI based on Central Bank of Uruguay

Lastly, it is worth mentioning the decrease in the relative share of the financial brokerage

sector. While in the 2001-2006 period its average share was 24.4%, in the last three years

under study, it was only 3.6%.


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VII. Enquiries received by the Investment Promotion Department

In 2011, Uruguay XXI’s Investment Promotion Department has received a large number of

enquiries by foreign investors interested in settling in Uruguay. Specifically, more than 260

companies have contacted said department in the year.

Enquiries received during 2011 came from

several countries, in its great majority from

Argentina (16%), Spain (14%) and USA

(14%). At the same time, Japan had an

outstanding participation (5% of the

enquiries), highly above the participation

reported previously. Finally, the enquiries

received from other countries of the region

were important, fundamentally Brazil (9%).

India, China, Canada and several European

countries also contacted said department.

Overall, more than 40 countries worldwide

made investment-related enquiries.

The chart shows that, like FDI flows in the

country, enquiries come mainly from

Argentina, USA, Spain and Brazil.

Enquiries received were to make investments in several sectors: industrial sector (39%) and

within this sector, the automobile and auto parts sector stand out (10%). Other sectors

enquired were services (31%) – within this, tourism stand out (6%) -, agro-business (8%),

construction and engineering (5%) and energy (4%).

Source: Uruguay XXI

Chart VII. 2- Enquiries per region of origin

(2011, %)

Chart VII. 3 – Enquiries per sector

(2011, % share)

South America

34%

Europe30%

North America

17%

Asia15%

Not specified

2%

Oceania and

Africa

2%

39%

31%

8%

5%

5%4%

9%

Industrial

Services

Agribussines

Construction and EngineeringReal-estate

Energy

Other

Chart VII.1- Enquiries per country of origin (2011, %)

Source: Uruguay XXI


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VIII. Perspectives for FDI in Uruguay

In the current context, characterized by worldwide uncertainty, it is difficult to forecast future

FDI flows. However, in spite of the doubts regarding economic recovery of developed

countries (in particular, United States and the European Union), emerging countries appear to

contribute most to world growth. In such sense, global FDI flows for the next years are

expected to be driven by economic growth and improvements in the emerging countries’

business environment.

Latin America is a booming region with growth perspectives over 3% in 2012. Adding the

growing trend of investment flows to this, ECLAC estimates that FDI income to Latin America

and the Caribbean could increases 8% compared with 2011 flows. Therefore FDI flows will

remain high in the region in 201217.

FDI flows in Uruguay have had a strong growth in the last years and according to perspectives,

this trend will be consolidated. For the next years, Uruguay is expected to keep its conditions

to continue attracting FDIs. In 2011, Uruguayan economy grew 5.7%, thus consolidating the

ninth consecutive growth year and perspectives for 2012 indicate that the Uruguayan

economy will grow 4%, consolidating a steadily growing decade. Furthermore, according to

indexes recently disclosed by the World Bank, Uruguay has substantially improved its business

environment.

However, it is worth pointing out that Uruguay’s ability to continue attracting FDIs and

promoting a sustained economic growth is translated into investments in infrastructure (in

particular, land and rail transportation, maritime and fluvial ports), energy and education,

among others. Therefore, it is enhancing its regulatory framework in order to foster

investments. In such sense, in July 2011 “Law of public/private participation agreement for the

performance of infrastructure works and provision of related services (PPP)" was enacted.

These agreements shall be executed by and between any state authority and person subject to

private law. This regulation provides for road, rail, port, airport, energetic infrastructure, waste

treatment and social infrastructure (prisons, health centers, educational centers, social

interest houses, sport centers, etc.) works. In the framework of this new Law, approximately

US$ 750 millions are expected to be executed in the 2011-2014 period. Moreover, in

September 2011 the "Law on Accommodation for Social Interest Purposes” (Ley de Vivienda de

Interés Social) was enacted, which is also a beneficial statutory framework to attract foreign

investments since it promotes private investment in houses with social interest through the

granting of tax exemptions.

In short, despite the uncertain international context, it is expected that FDI flows towards the

region keep on growing in the next years. Moreover, Uruguay is expected to follow this trend

and consolidate as one of the main FDI attracting countries of the region, in relative terms.

Therefore, it is necessary to keep on making progress towards the improvement of the

regulatory framework in order to promote investments and continue improving investment

conditions in our country.

17 “Foreign direct investment in Latin America and the Caribbean”, ECLAC (2011).

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