Investing in infrastructure in Uruguay

Why invest in Uruguay?

Uruguay has gained international recognition as a reliable country with high transparency. Thanks to its solid political and social stability, supported by a long-established democracy and strong legal certainty, Uruguay consistently remains at the top of the main rankings.

Ease of doing business

The favorable investment environment and its sustained economic growth in the past 12 years have positioned Uruguay as a reliable and attractive destination for foreign investors. In addition, the legal and regulatory framework oters multiple facilities for investors.

Human resources are multilingual and qualified, with highly competitive wages. Uruguay stands out for its high quality and accessibility to basic, technical and university level education; as well as for the flexibility and ease of Uruguayan workers to adapt to new production and technology processes.

Uruguay has the highest literacy rate in Latin America reaching 98%. The State guarantees free access to education, from preschool to university.

Incentives to the investor

Uruguay has a wide range of incentives which adjust to dierent types of activities, from industrial to commercial and service activities intended to be performed in the country. The main incentives are the Investment Law, industry incentives, free zones, free port and free airport schemes, public-private partnership agreements, industrial parks and temporary admission.

Benefits offered by the Investment law

Companies operating in any sector of activity that submit an investment project which is further promoted by the Executive Branch will be eligible for additional benefits:

  • Wealth Tax exemption: during service life of movable assets, for eight years in the case of civil works intended for Montevideo, and ten years for civil works intended for the rest of the country.
  • Exemption from duties or taxes on the import of machinery and equipment (new or used) declared to be non-competitive with the domestic industry. This is in addition to the benefits of Temporary Admission.
  • VAT refund for exporters who acquire materials and services in the local market intended for civil works.
  • Corporate Income Tax (IRAE) exemption for a maximum amount and term which will result from applying an array of indicators, which weight employment creation (30%), decentralization (15%), increase in exports (15%), cleaner production and/or R+D investment (20%) and industry indicators (20%). The exempted tax will be between 20% and 100% of the amount which was actually invested in the fixed or intangible assets included in the declaration of promotion. The exemption period is established according to a predetermined formula and cannot be less than 3 years.

Gateway to the Latin American market

  • Its strategic location in a regional market of over 250 million people allows Uruguay to promote itself as the best entrance and distribution option of the Atlantic coast of Latin America.
  • The main production and consumption centers are interconnected by the densest national road network in Latin America. A regional system of modern waterways, port and airport terminals ease the international transit of goods.

Infrastructure and logistics features

  • The thrust of the value-added services in the logistics industry comprises traditional warehousing, packaging, labeling, assembly and installation activities, among others.
  • Modern service platforms in warehouses allow the incorporation of value in the supply chain, keeping inventories nearby consumer markets.

Competitive advantages

  • Modern port, airport infrastructure and competitive facilities make Uruguay an excellent choice for the transport of cargo destined for the Mercosur and the region.
  • Favorable legal framework for transportation and logistics activities, including free zone, free port and airport, customs warehouses and temporary admission regimes.
  • Uruguay has streamlined its international trade operations through the adoption of the "customs without paperwork" port system and the Single Window for Foreign Trade (VUCE, for its Spanish acronym), thus speeding up and simplifying customs procedures.
  • The National Institute of Logistics (INALOG, for its Spanish acronym) meets and coordinates the public and private community in order to help consolidate the country as an international logistics platform.
  • The high quality of the logistic services supply chain reduces transit times, cutting inventory costs with a lower turnover of stock, optimum delivery times and competitive international freight.
  • In the PPP modality, the Public Administration entrusts a private entity (transferring certain risks according to a criterion of eiciency) for a specified period, the design, the construction and the operation of infrastructure or any service thereof and eventually its funding. Other modalities include the concession and hiring of private entities by way of tender, calls for bids, trusts and other modalities with which Uruguay has vast experience. In all of the above, the definition and management of each risk is key in the same way the financial structuring is a crucial chapter.

Investment in infrastructure in Uruguay

The Uruguayan government has established the investment in infrastructure as a priority, in order to ensure the sustainability of growth and productivity levels of the Uruguayan economy. This will be undertaken with both Public Budget and private funding. The reported plan has been included below:

Investment Modalities

It is estimated that 1/3 of these investments will be made through Public-Private Partnership (PPP) Contracts. For the remaining 2/3, entering into contracts with private entities, under other modalities, will be also possible.

Funding Availability

Among the stakeholders who provide funding are:

  • Institutional investors: the Administrators of Social Security Savings Funds (AFAPs) have steadily grown in terms of membership and savings and they need to diversify their investment portfolio in long-term assets and securities with high credit ratings.
  • Infrastructure funds: funds of USD 500 million managed by the CAF, who provides 10% of the funding for public projects with private sector involvement.
  • Commercial banks: interested in financing infrastructure projects. They have the soundness, liquidity and also the experience in similar infrastructure projects (e.g. Energy projects in Uruguay).
  • Multilateral organizations: they include the funding in infrastructure projects within a broader framework of support for structural reforms in the country (IDB, World Bank, CAF).
  • Local retail market: expressed interest in channeling public savings towards stock market instruments (Montevideo Stock Exchange, Bolsa Electrónica de Valores SA, Private equity funds, others).
  • Foreign investors: great interest in investing in Uruguay, a stable country with investment grade rating.

Long-term Public sustainability (only for PPP projects)

Two tax rules are required by law for PPP contracts:

  • The net present value of the payments cannot exceed 7% of the GDP
  • Annual payments cannot exceed 0.5% of the GDP
Sustainability for projects executed under traditional modalities is also guaranteed by the five-year budget passed by Law.

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