After gaining a general overview of Uruguay in our first post, today we delve deeper into the heart of the country: its economy. Economy of Uruguay stands out for its remarkable robustness and diverse opportunities, making it an attractive destination for investors, entrepreneurs, and digital nomads.
Uruguay’s Economic Structure: Small but Mighty
Uruguay boasts a small and open economy, which has experienced significant growth in recent decades. In 2023, its GDP (Gross Domestic Product) reached an impressive 77,244 million US dollars. The GDP per capita in 2023 was 22,430 US dollars, positioning Uruguay as the country with the highest per capita income in Latin America.
The Uruguayan economy has traditionally been strongly influenced by the primary sector (agriculture, livestock, forestry), which accounted for 5.8% of the GDP in 2023. Despite this share, its importance to the economy is far greater, as it supplies most of the raw materials for the manufacturing industry.
However, the economy has successfully diversified. The tertiary sector (services) is now the largest component of GDP, representing 68.4% in 2023. It also employs the majority of the workforce (73.4% as of February 2024). This shift towards services demonstrates the adaptability and modernization of the Uruguayan economy.
(Online Enrichment: Look for the latest GDP growth forecasts and inflation rates from the Banco Central del Uruguay (BCU) or the International Monetary Fund (IMF) to keep this data up-to-date.)
Economy of Uruguay: Key Industries and Diversification
In addition to its traditionally strong agribusiness, which produces food for over 30 million people despite the country having only 3.5 million inhabitants, strategic sectors such as services have developed significantly. Uruguay is an important producer and exporter of agri-food products and cellulose. Key export goods include bovine meat (18.1% of exports in 2023), cellulose (16.8% of exports in 2023), and dairy products (7.2% of exports in 2023).
Within the service sector, areas like Information Technology (IT), logistics, transport, financial services, call centers, and shared service centers have shown substantial growth. Global service exports accounted for 72% of total service exports in 2021, highlighting the resilience of this sector even during crises.
The manufacturing industry is also significant, with food and beverages (47%), wood, paper and related products (18%), and the chemical industry (12%) being the most important areas (based on 2019 data).
Economy of Uruguay: Open Economy and Foreign Trade
As an open economy, foreign trade plays a central role in the development of local production. Uruguay is a full member of the Mercosur bloc (along with Argentina, Brazil, and Paraguay), which provides access to a significant regional market.
The country also has numerous trade agreements in force with 18 economies worldwide. Uruguay exported goods to 153 countries in 2021, underscoring the versatility of its trade relationships. Key export partners in 2023 include China (21.4%), Brazil (19.0%), and the United States (7.6%). For imports, Brazil (25.0%) and China (21.8%) dominate.
Uruguay’s trade policy is geared towards promotion: exports are generally not subject to any taxes, and there are various instruments to promote exports, such as a zero VAT rate and reimbursement of internal taxes.
Strategic Location as a Regional Hub
Uruguay’s strategic location in the Southern Cone of the continent is a decisive advantage. It is just one hour from Buenos Aires and two hours from Asunción, Santiago de Chile, and São Paulo. This proximity to the region’s largest economies – approximately 70% of Brazil’s GDP, 60% of Argentina’s GDP, and 50% of Chile’s GDP are generated in the area surrounding Uruguay – makes it an ideal location for logistics and distribution activities.
The country’s port facilities are strategically located along the Atlantic Ocean and the Paraguay-Paraná fluvial waterway, providing access to both overseas locations and the interior of the continent. This geographical position and well-developed infrastructure position Uruguay as a relevant site for the development of logistical, industrial, and commercial activities.
Uruguay has thus established itself as a country that not only captivates with its natural beauty but also with a robust and forward-looking economy, offering diverse opportunities for all who wish to live and invest here.
This is the second post in our series on Uruguay. In the next post, we will delve into the legal framework for company formation and the broader business environment in Uruguay.
