When it comes to conducting business, making anÂ investment or buyingÂ a second residence abroad, Uruguay’s emerging economy is a veryÂ positive alternative.Â PerhapsÂ you visitedÂ Panama, Colombia, Ecuador,Â or another Latin country, just donâ€™t stopÂ until youâ€™ve visited Uruguay.
Itâ€™s a small country of about 3 million inhabitants, but offers a lot of value.Â It’s one of the fewÂ European cultures in Latin America, second only to Buenos Aires and one of the safest countries to roam and discover new places.Â The country’s population possesses a 98% literacy rate.Â If you have not visited Uruguay, then you may have missed something important.
Geographically, Uruguay fits nicely between Argentina and Brazil.
Traditionally Uruguay’ emerging economyÂ has beenÂ oneÂ based upon agriculture and banking but now there are many other different industries and businesses growing.Â Uruguayâ€™s agriculture principal focus is cattle, dairy, and soybeans.Â There’s plenty of water and grasslands.
I reported last year from a previous blog â€œUruguay: Farmland Opportunity,â€ that there are relatively good farmland opportunities in Uruguay.
Today in Uruguay, the current agricultural economy continues to grow.
Based upon Uruguayan government statistics, the law firm of Fischer & Schickendantz (http://www.fs.com.uy/) in Montevideo reports that:
â€œUruguayâ€™s agricultural sector is setting new records in 2013: the soybean harvest produced a record 3.15 tons of grain; in livestock, 3 million births are expected in the next quarter; and in the dairy sector, 2 billion liters of milk production are expected.
Uruguay is the worldâ€™s 5th exporter of dairy products, the 6th exporter of soybeans, and 5% of global beef exported is from Uruguay.â€
For more information on farmland investing in Uruguay visit Fischer & Schickendantzâ€™s website at:Â www.uruguayfarms.com.
But there is more to Uruguay than agricultural opportunities and that is where the real positive shift has occurred.
Transparency International has ranked Uruguay alongside Chile as the least corrupt country in Latin America, ranking it 20th in the world which is comparable to European nations.Â The U.S.A. is 19th.Â Transparency International ranks 176 countries on the level of perceived corruption.Â Here are their global rankings:Â http://www.transparency.org/cpi2012/results
Uruguay has a solid and transparent banking system.Â Â In the “Switzerland of South America,” many Argentines and Brazilians still deposit their money in Uruguayan banks for investment and safe keeping away from their governmentâ€™s reach.Â Argentines in particular deposit their cash to avoid the devaluation of their own currency.
According to Fischer & Schickendantzâ€™s report, here are some key economic indicators that are continuing to improve in Uruguay:
1. GDP per capita:Â USD 14,374 which makes it #1 in Latin American for 2012 2. GDP growth:Â 3.9 % for 2012 3. Unemployment rate under 6% for 2012 4. Uruguayan Peso rose 17% against the USD: 20.70 Uy Pesos=1 USD (2006 25 Uy =1 USD) 5. Current interest rate paid on one year CD in Uruguayan Pesos is 6% (BROU Bank)
Real estate prices have appreciated also:
1. 2Â BR Apartment Â rents central downtown Montevideo can cost USD 650 (USD 450, 2006)
2. 2 BR Apartment rents Central Montevideo Coast near Pocitos USD 850 (USD 650, 2006)
3. Â 2 BR Apartment to purchase Central Downtown Montevideo USD 115,000 (USD 80,000, 2006)
4.Â 2 BR Apartment to purchase Central Montevideo Coast at Pocitos USD 170,00 (USD 115,000, 2006)
5. Average Annual Residential Property Taxes:Â 0.4%
â€œUruguay released statistics for the investments that obtained tax benefits in 2012. The figure was a record USD 3.38 B worth of investments, divided among 900 projects. This number represents a 12% increase from the previous year, and comprises 25% of the overall private investment made in the country. One of UruguayÂ´s key investment regulations consists of Investment Promotion Law # 16.909 (originally passed in 1998, and updated in 2007), which establishes that investments of any size are eligible for exemptions on Corporate Income Tax (up to 100% of the amount invested), Value Added Tax on goods purchased, and Asset Tax.
In order to obtain the benefits, the investor must file a plan before a committee within the Finance Ministry, known as COMAP, which studies the project and grants the tax breaks based on the impact on certain factors, mainly: the creation of new jobs, the generation of exports, the incorporation of new technology, and the use of clean energy technologies. The benefit is open to local and foreign investors alike, and to ventures of any size and industry. In 2012, the breakdown of investments that were benefited, by industry, was: industrial production 30%, services 18%, tourism 10%, commerce 8%, and agricultural sector 6%. Uruguay will improve its Free Zones (Zonas Francas) regulation in 2013, overhauling the legislation that has been in place since 1987.
The three main changes will consist of lowering the percentage of national labor required (currently, 75% of the workforce employed by a company operating within a free zone must be Uruguayan); making it more attractive to develop new free zones in the countryâ€™s interior (outside Montevideo); and creating theme-based free zones.
Free Zones consist of 13 different areas within the country, all of them privately run, except one. Close to 1,700 companies of different sizes operate in Uruguayâ€™s free zones, and the list includes global banks, financial services firms, auto industry companies, logistics firms, apparel companies, and manufacturers.
Three new Free Zones were authorized in 2011, including one exclusively dedicated to pharmaceutical industries (this free zone was promoted by a consortium of foreign pharmaceutical companies). Business activity in UruguayÂ´s free zones make up 4% of the countryâ€™s GDP. The benefit of setting up a company in a free zone lies in total tax exemption for that company (no import duties, Income Tax, Dividend Tax, Value Added Tax or Asset Tax). The only tax that is levied is social security payment on labor.â€
Again, Uruguay is one of the most stable countries in Latin American where the USD still buys more than in the U.S. for many items.Â Currently, the target inflation rate set by the government is about 6% but real inflation is around 8%.
AnÂ articleÂ from the MontevideoÂ El Pais in entitled: â€œMontevideo con precios y salario mÃnimo de los mÃ¡s altos en region,” the article argues that living in Montevideo in general is the most expensive city to live among a region of nine cities of Bogota, Buenos Aires, Caracas, Ciudad de Mexico, Lima, Quito, Rio De Janeiro, San Juan de Puerto Rico, and Santiago de Chile based upon prices and higher wages.
For example, in Montevideo gas ($6.50 per gallon) and eggs ($3.30 per dozen) are higher than the region.Â Meat is about $6 per kilo, but elsewhere in the region it is about 50% less.Â A cup of coffee is generally more except in Buenos Aires. Bus fare is $0.91.
On the other hand, there are five goods and services cheaper or at the same price.Â For example, the price of milkÂ is the cheapest in the region at a little less than $3.00 per gallon.Â A kilo of chicken will cost about $1.70.Â In terms of services, one of the best deals is free tuition for public universities and short taxi ride will run you about $2.50.
If you areÂ willing to travel a bit outside the capital city, you’ll find many of these goods and serviceÂ even cheaper.
Lastly, average monthly apartment rentals in Montevideo are about $619, which is below the average in the region except Quito.Â Itâ€™s a business friendly country that with the proper legal advice you know exactly where you stand and property rights are secure.Â So if you are consideringÂ creating a newÂ business, making an investment or buying a second residence abroad, you might want to give Uruguay serious consideration.
One could consider the 10 + hour flight from the U.S.A. a drawback compared to places like Panama, the Caribbean, or even Ecuador.Â On the other hand, itâ€™s far enough from the U.S.A. to feelÂ like you’re on a different continent and in a EuropeanÂ styleÂ culture, but uniquely Uruguayan.
Besides, where can you get theÂ combination of a relative small government but functional and business friendly, transparency,Â stability, low taxes, security and for most goods and services your USD will go farther than in the U.S. and Europe?Â There are few places like Uruguay.
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