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October
2012
Foreign Direct Investment in Uruguay
End date of the report October 25, 2012
URUGUAY XXI Investment and Export Promotion Agency
Table of Contents
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
IX.
SUMMARY.............................................................................................................. 3
FDI IN LATIN AMERICA.............................................................................................. 4
FDI IN MERCOSUR ................................................................................................ 7
EVOLUTION OF FDI IN URUGUAY ................................................................................. 9
URUGUAYAN FDI PER COUNTRY OF ORIGIN ..................................................................11
URUGUAYAN FDI PER ACTIVITY SECTOR.......................................................................16
LEGISLATION TO PROMOTE INVESTMENT AND BUSINESS CLIMATE IN URUGUAY ....................18
MAIN INVESTMENT PROJECTS IN URUGUAY ..................................................................21
PERSPECTIVES FOR URUGUAYAN FDI...........................................................................24
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URUGUAY XXI Investment and Export Promotion Agency
I. Summary
In a highly unpredictable global context, Latin America is becoming one of the most dynamic
regions in terms of Foreign Direct Investment (FDI) attraction. Prospects indicate there is
reason to believe that this trend will continue in coming years. Brazil is the main recipient of
FDI in Latin America, and Uruguay occupies the 9th place among the 20 countries that make up
the block.
FDI flows in Uruguay have increased significantly during recent years. Since 2008, Uruguay has
been experiencing a major growth with regards to foreign investment attraction, and has been
receiving an average investment of over US$ 2.0 billion per year since then. This has allowed
the FDI stock to reach a total of US$ 15.16 billion in 2011, leading Uruguay to present one of
the highest ratios in the region when considering FDI stock in relation to GDP.
The main origins of Uruguayan FDI in 20101 are Argentina, England, Brazil, Spain and Belgium,
which together represent almost half of the FDI attracted by Uruguay. In recent years a strong
process of productive FDI inflows has been taking place. These inflows are mainly allocated to
Construction and Agriculture sectors (mainly farming and forestry) and the manufacturing
industry.
Uruguay has a very favorable legal framework to promote investments. In addition to new
regulations to Law 16.9062, two other laws were passed with the aim to boost investments in
infrastructure in 2011, which is absolutely necessary for Uruguay's sustainable economic
growth. On the one hand, the “Law on Public-Private Partnerships” which aims to carry out
infrastructure, road, rail, port, airport, energetic infrastructure, waste treatment and social
infrastructure works (such as prisons, health centers, educational centers, among others.). On
the other hand, the “Law on Social Housing”, which promotes private investment in affordable
housing through the granting of tax exemptions. These laws were designed specially to boost
the private sector, fulfilling the agility and transparency requirements that ensure clear rules
for investors.
Despite the complex international scenario, FDI flows are expected to continue growing in the
region in the coming years. Likewise, we expect Uruguay to continue to be immersed in this
process and continue to attract productive investments. The undertakings in Uruguay- in
particular the construction and operation of Montes del Plata cellulose plant and the Aratirí
mining project- ensure a sustainable investment flow for the following years. Likewise, the
existence of other important projects-such as the Deep Water Port, Regasification Plant, and
an eventual third cellulose plant- also ensure excellent perspectives for Uruguayan investment
in the medium term. However, it is necessary to continue to improve the legal framework to
promote investments and the investment climate in our country.
1
2
This is the last data available from the central Bank of Uruguay (CBU) up to the date of completion of this report.
Investment Promotion and Protection Law.
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URUGUAY XXI Investment and Export Promotion Agency
II. FDI in Latin America
Over the last decade, Latin America has been consolidating as an important region for Foreign
Direct Investment (FDI) attraction. According to the last report submitted by the Economic
Commission for Latin America and the Caribbean (ECLAC)3, the FDI flows towards the region in
2011 registered an increase of 31% compared to 2010, reaching US$ 153.45 billion. 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 billion.
The underlying reason for such dynamism is to have taken advantage of 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 from
these in to other nations who are also emerging.
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$ 17.2 billion), Colombia (US$ 13.24 billion) and Uruguay (US$ 2.61 billion)4.
The FDI sectorial 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
5
the total FDI) , 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 mergers and acquisitions carried out by foreign companies were Japanese
and Chinese.
3
Foreign Direct Investment in Latin America and the Caribbean, 2011.
At the time of preparing the report of ECLAC, FDI attracted by Uruguay reached a total of US$ 2.52 billion. This
amount was later revised by the Central Bank of Uruguay to US$ 2.61 billion in 2011.
5
Due to its status as a hub for investments carried out from foreign countries.
4
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URUGUAY XXI Investment and Export Promotion Agency
Chart II. 1 – FDI in Latin America per country of origin (% share)
Others 38%
20%
The Netherlands
7%
USA
21%
23%
18%
Spain
9%
Latin America
9%
Japan
14%
9%
3%
United Kingdom
8%
4%
Canada
4%
5%
China
4%
2%
40%
20%
1%
0%
2006-2010
20%
40%
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 sector6. 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$)
50
45
40
35
30
25
20
15
10
5
0
2010
2011
Source: URUGUAY XXI based on ECLAC
6
Some of the main investments carried out in Colombia: Itochu, acquisition of assets of mining company
Drummond (US$ 1.52 billion); BHP Billiton y Xstrata, expansion of coal mines (US$1.30 billion); DHL, logistic center
(US$ 1.30 billion).
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URUGUAY XXI Investment and Export Promotion Agency
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 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
Chile
7.1%
Uruguay
5.6%
Peru
4.3%
Brazil
4.1%
Colombia
4.1%
Paraguay
2.4%
Argentina
1.2%
0%
2%
4%
6%
8%
Source: URUGUAY XXI based on Central Banks of each country
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URUGUAY XXI Investment and Export Promotion Agency
III. FDI in MERCOSUR
In the last decade, the flows of FDI into MERCOSUR have follow 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.
In 2011, FDI in MERCOSUR exceeded the value recorded in 2010 by 31%, reaching a record
high of US$ 76.58 billion, after the decrease in 2009 experienced as a result of the fall of
global FDI. The volume of FDI relative to GDP increased, reaching 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)
US$ billions
80
76.58
57.21
60
57.55
3,0%
2,5%
42.57
40
20
3,5%
26.03
25.00
22.64 21.23
18.94
12.24
31.77
2,0%
1,5%
1,0%
0,5%
0
2001200220032004200520062007 2008200920102011
0,0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: URUGUAY XXI based on ECLAC
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 resources,
manufacturing and services.
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URUGUAY XXI Investment and Export Promotion Agency
Chart III.2- Distribution of FDI in MERCOSUR (%)
100%
80%
100%
1%
3%
80%
60%
60%
40%
11%
9%
40%
20%
20%
0%
0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Argentina
Uruguay
Paraguay
Brazil
2002
Argentina
2011
Paraguay
Uruguay
Source: URUGUAY XXI based on ECLAC
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URUGUAY XXI Investment and Export Promotion Agency
IV.
Evolution of FDI in Uruguay
In recent years Uruguay has positioned itself as a reliable and attractive destination for foreign
investors, thus multiplying FDI by eight in the last decade. In 2011 the levels of FDI flows in
terms of GDP enabled Uruguay to position itself as the second largest recipient of investments
after Chile, with 5.6%.
Uruguay's FDI inflows have registered a growing behavior after the significant volume
attracted in 2005; that was due to a strong investment associated to the setting up of a
cellulose plant7. In fact, FDI in terms of GDP has increased from 2.8% during the 2001-2004
period to 6% during 2005-2011(on average).
After the fall recorded as a consequence of the 2008 global financial crisis, in 2011 the FDI flow
recorded its maximum historic value, US$ 2.61 billion. It is important to mention that in 2010
another important investments was carried out, once again associated to another cellulose
plant8. This investment will have a strong impact in the FDI figures of following years.
Likewise, as a consequence of the construction of the plant in 2012 and the beginning of
operations in 2013, this investment will have an estimated impact in the Uruguayan GDP in the
order of one percentage point in 2012 and 2013.
Chart IV.1 - Uruguayan FDI (Millions of US$ and GDP %)
US$ millions
GDP %
3000
8%
2,614
2500
2,289
2,106
6%
2000
1,493
1500
1,415
4%
847
1000
500
1,529
1,329
297 194
416 332
0
2%
0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 I Sem
2012
Source: Uruguay XXI based on CBU
Methodological Note: Uruguayan FDI information is gathered from Balance of Payments quarterly publications
issued by the Central Bank of Uruguay (CBU) 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 of 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.
7
Investment made by Botnia (currently UPM) was approximately US$ 1.2 billion, which were ascribed to FDI
between 2005 and 2006.
8
Investment made by Montes del Plata is estimated in US$ 1.9 billion 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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URUGUAY XXI Investment and Export Promotion Agency
As shown in chart IV.I, since 2008, Uruguay has been experiencing a major growth with regards
to foreign investment attraction, and from that year on receiving an average investment of
over US$ 2.0 billion per year.
On the other hand, Uruguay presents one of the highest ratios in the region when considering
the FDI stock in relation to GDP. Particularly in 2011, the FDI stock reached a total of US$ 15.16
billion, which is equivalent to 32% of the GDP. This ratio is superior to the one recorded by
Argentina (21.3%), Brazil (27.1%) and Colombia (20.3%), although it is inferior to Chile (63.6%).
Table IV.2-Stock of FDI in Uruguay (Billion US$ and %GDP)
Year
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
US$
Billions
1.41
1.82
2.11
2.84
3.90
6.36
7.90
10.67
12.58
15.16
FDI Stock
/GDP
10.3%
14.9%
15.4%
16.4%
19.9%
27.1%
26.3%
35.0%
31.9%
31.8%
Source: Uruguay XXI based on CBU
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URUGUAY XXI Investment and Export Promotion Agency
V. Uruguayan FDI per Country of Origin
The main origins of Uruguayan FDI inflows are the countries from the MERCOSUR, Europe and
NAFTA.
At the start of the first decade of 2000, with the exception of 2001, investments in Uruguay
came mainly from European countries, explaining more than one third of the amount of the
received FDI. However, this situation changed in recent years. During the period 2006-2010
European participation dropped to 16%, subsequently the MERCOSUR became the main
source of investments.
This change in the origin of FDI is in line with the global trends regarding investment flows, in
which developed countries are losing their prominent role and emerging countries are the
ones who are investing more heavily, mainly in countries within the same region. In 2005
European countries were responsible for 80% of global FDI; in 2010 this percentage dropped
to 36% and in contrast the participation of emerging countries went from 14% in 2005 to 25%
in 20109.
Chart V. 1 – Uruguayan FDI per country of origin 2001-2010 (% share)
100%
80%
55%
61%
60%
40%
14%
25%
20%
32%
13%
0%
2001
2002
2003
2004
MERCOSUR
2005
EUROPE
2006
2007
NAFTA
2008
2009
2010
OTHER
Source: Uruguay XXI based on CBU
After the significant decline in 2003 as a result of the regional crisis, MERCOSUR investments
started to record a gradual recovery from 2004 until they reached a relatively stable level
during the period 2007-2010 (about 35% of the total FDI), becoming the main source of foreign
investment. Finally, in 2010 its participation reached 32% of the total FDI inflow. Argentina is
the country with the highest incidence within the block. In 2010 its participation exceeded 80%
of the total invested by the MERCOSUR.
Note: Companies that were found to be unique to a country are included in "other sources” for the purpose of
respecting statistical confidentiality.
9
Source: World Investment Report 2011, UNCTAD. The Central Bank of Uruguay has FDI data, by country and
sector, available only up to 2010.
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URUGUAY XXI Investment and Export Promotion Agency
Argentina is the main origin of FDI in Uruguay and has historically
been within the top three main sources of FDI received by the
country, with an average participation of 23% during the period
2001-2003. Since 2006 the inflow of Argentine capital has been
more intense, reaching record levels near US$ 600 million in 2010.
The dynamism of recent years is explained mainly by investments
in the agricultural sector and in real estate and hotels.
Over 30 countries
choose Uruguay as
the main destination
for their investments,
Including; Argentina,
Spain, England and
Brazil
Some examples of companies in the agricultural sector are, among others, Agroland: Agroindustrial Company with projects in the forestry, livestock, vine and olive producing sectors,
and El Tejar, one of the main producers and exporters of commodities in the world with
presence in Brazil, Bolivia and Uruguay. In the real estate sector, several companies have
decided to invest in the country, basically in the construction of sumptuary towers in the
seaside resort of Punta del Este and through the modality of “Condo Hotels” in Montevideo.
In 2005, Brazil began to have more participation in the overall FDI flow received by the
country, reaching in 2008 the maximum percentage of the period (9%). In 2009 and 2010 its
participation decreases although it still remains within the top five main origins. In recent
years, Brazilian capitals have been invested mainly in the agro-industrial sector seeking to
complement their productive chains by acquiring major national companies. These
acquisitions were carried out mainly in the meat, beverages, rice, chemical and plastic
industries.
In the meat industry Marfrig Group stands out, owning five meat processing plants and 51% of
Zenda Leather tannery. For its part, the company Camil acquired the Uruguayan rice company
SAMAN in 2007 for a total amount of US$ 160 million. In the beverage sector, the AB InBev10
group of Belgium, Brazilian and US capital, produces and markets the leading beer brands in
Uruguay. In the chemical sector the acquisition of the American Chemical ICSA by the Brazilian
group Ultrapar Participações S.A for a total amount of US$ 79 million is noteworthy11. In the
plastic sector, LEB -a Uruguayan and Brazilian owned company- manufactures film stretch and
PET pre-casts.
With regards to investments from European countries, although they have slowly recovered
after the drop recorded in 2006, they remain at levels below the first years of the period. Part
of the explanation for this decline is the economic slowdown in some cases and even the
recession in other cases.
Spain is one of the main origins, despite having lost some relevance in recent years as a result
of its delicate economic situation. In fact, during the period 2001-2010, it was the second
origin of Uruguayan FDI with an average participation of 8%. In 2009 and 2010 the amount of
FDI inflow dropped significantly reaching only 3% of the total FDI in 2010. The service sector,
mainly contact centers, financial, construction and infrastructure are the ones that attract
10
Anheuser-Busch InBev (AB InBev) was formed through the acquisition of Anheuser-Busch (US owned-company)
by InBev, which in turn was formed through the merger of AmBev (Brazilian owned-company) with Interbrew
(Belgian owned-company). The company announced on June 29, 2012, that Anheuser-Busch InBev had entered
into an agreement under which they would acquire the remaining stake in Grupo Modelo in a transaction valued at
US$ 20,1 billion (at present AB InBev has an existing economic stake of more than 50% of Grupo Modelo).
11
At the time of preparation of this report said operation is subject to due diligence.
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URUGUAY XXI Investment and Export Promotion Agency
more Spanish capital. Within the service sector, two of the world's leading companies for
customer service and Business Process Outsourcing (BPO), Atento and Avanza, chose Uruguay
for the setting up of contact center platforms.
In the financial services sector it is worth mentioning the acquisition of the local brand of ABN
AMRO Bank by the Santander Bank for a total amount of US$ 250 million in 2008 and the
purchase of the local subsidiary of Credit Agricole S.A by the BBVA for a total amount of US$
125 million.
Another important investment in the service sector relates to the Codere Group, the main
referent in the private gaming sector in Europe and Latin America. In 2002, this group acquired
through Hípica Ríoplatense S.A.12 the exploitation of Maroñas Racecourse in our capital city,
betting locations and gaming machines for an investment amount of more than US$ 80 million.
Subsequently, in 2009 the Codere Group added to its portfolio of activities, jointly with the
French hotel chain Sofitel, the reconstruction and management of the Hotel Casino Carrasco in
Montevideo, with an estimated investment of US$ 75 million13.
In the construction and infrastructure sector, Teyma, a Spanish company incorporated as a
subsidiary of the international company Abengoa, has established in Uruguay with different
business units such as; construction, forest harvesting and urban waste management.
Likewise, in 2011 Teyma was one of the companies that won the tender for the construction of
a 50 MW wind farm, with an estimated investment of approximately US$ 100 million14.
With regards to investments from NAFTA, there was a significant drop in 2010, recording a
negative net flow. While in 2009 the FDI flow was of US$ 167 million, in 2010 it was of US$ -36
million. This was due to capital withdrawals from the United States (USA).
In 2001 the U.S. was the second origin with a share of 25%, but in 2004 its share descended to
0.4%. However, in 2009 it regained its dynamism –representing 11%- but dropped again in
2010 presenting at that point capital withdrawal. Investments from the United States have as
their final destination a wide range of sectors, with the services and industry sectors as the
most significant ones.
When analyzing the source of FDI we must highlight the recent dynamism of Asian capital.
Although these sources are not directly identified by the CBU's15 statistics, important
investments have been made by these countries.
Countries like India, Japan, South Korea and China are responsible for major Greenfield16
projects in Uruguay within the secondary and tertiary sector.
In the services sector, particularly in outsourcing, Tata Consultancy Services, India's leading
company in BPO, consultancy and information services has established in Uruguay. TCS
12
Hípica Rioplatense S.A. is a group formed by Sociedad Argentina de Medios S.A. of the Latin American Association
of Investment and CODERE.
13
The Municipal Government of Montevideo awarded the reconstruction and a 30-year concession of the Hotel
Casino Carrasco to the consortium consisting of Codere, the Argentine company AGG, the Hotel chain Sofitel and
other international investors.
14
Teyma and Inabensa form the stock company Palmatir which was assigned with the tender.
15
The Central Bank of Uruguay, for the purpose of respecting statistical confidentiality, includes these investments
in “other sources” since these investments were made by companies that turnout to be unique for the country.
16
Greenfield projects are those that are carried out from zero.
13
URUGUAY XXI Investment and Export Promotion Agency
Uruguay Global Delivery Center began operating in Uruguay in 2002 as the first center of the
company in Latin America.
The automotive industry has been one of the most attractive sectors for Asian investors. The
Japanese group Takata has an industrial plant in Uruguay for the manufacturing of airbags in
order to supply the assembly plant that operates in Brazil. It is also worth mentioning the
presence of Yazaki, which was set up in 2006, producing auto parts and subsequently in 2010
expanding its production with the setting up of a second factory. In addition to these
companies we must add the presence of Geely International, the largest private automotive
company in China and the Korean company Kia Motors; they both entered into agreements
with Nordex S.A Company for the manufacture of vehicles in Uruguay for the later exportation
to member countries of MERCOSUR17.
Chart V. 2 – Major countries of origin of Uruguayan FDI 2001-2010 (% share)
100%
80%
60%
40%
20%
0%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
-20%
Argentina
England
Brazil
Spain
Belgium
Other
Source: Uruguay XXI based on CBU
Below we present the main origins of Uruguayan FDI for the year 2010, including Argentina,
England, Brazil, Spain and Belgium as the top five origins representing 42% of the total FDI.
17
Geely International through an industrial corporation agreement with Nordex Uruguay invested in the
construction of an assembly plant inside Nordex property. This work will be completed by early 2013. Kia Motors
made an agreement with Nordex S.A for the assembly of the lightweight Bongo truck.
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URUGUAY XXI Investment and Export Promotion Agency
Chart V. 3 – Major countries of origin of Uruguayan FDI
2010 (% share)
Argentina
26%
England
6%
Brazil
5%
Spain
3%
Belgium
2%
Venezuela
2%
Bahamas
2%
France
2%
Paraguay
1%
0%
10%
20%
30%
Source: Uruguay XXI based on CBU
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URUGUAY XXI Investment and Export Promotion Agency
VI.
Uruguayan FDI per Activity Sector
At the time of analyzing which are the main sectors that
receive foreign investments in our country, we can consider
two different phases with regards to the dynamism of FDI18.
On the one hand, the 2003-2006 period where agriculture,
livestock and forestry were the sectors that attracted most
investments –with an average share of 34%. Starting in 2007,
the construction sector took this place with an average share
of approximately one third of total FDI.
Over half of the foreign
capital inflows are
concentrated on
Agriculture, Livestock
Construction and the
Manufacturing Industry
In the agriculture, livestock and forestry sector, the agriculture and livestock sub-sector was
the one with the highest incidence in 2003 and 2004, while in 2005 and 2006 it was the
forestry and timber extraction sub-sector, due to the strong development of the forestry
sector in Uruguay.
The growth of the construction sector was explained mainly by the construction and setting up
of cellulose plants and the dynamism of real estate investment in Punta del Este.
It is also worth mentioning the growth of FDI in the manufacturing industry during the period
2006-2009. In 2010, the industrial sector had already scaled down its participation significantly
representing only 6% of FDI during that year. Within this sector, the main sub-sectors include
the manufacture of food products and beverages, due to the strong investment inflows in the
meat processing industry and in the agro-industries mentioned earlier and the manufacture of
chemical substances and products.
Finally, it is noteworthy the increase registered in the hotel and restaurant sector in 2010, with
a US$ 206 million investment, thus occupying the third position in the ranking of the main
sectors of FDI attraction.
This behavior during the last couple of years has generated a change in terms of investment
from the point of view of the institutional sector, as real estate investments increased to the
detriment of investment in land. However, these two sectors together still represent near 40%
of FDI inflows, while the remaining 60% belong to non-financial corporations.
18
Note: “Other origins” include those companies which resulted to be exclusive for a country for the purpose of
respecting the data secret.
16
URUGUAY XXI Investment and Export Promotion Agency
Chart VI.1- FDI in Uruguay per activity sector 2001-2010 (%share)
100%
80%
60%
40%
20%
0%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
-20%
Agriculture, cattle-raising and forestry
Manufacturing Industries
Construction
Wholesale and retail commerce
Hotels and restaurants
Transport, storage and communications
Financial brokerage
Others
Source: Uruguay XXI based on CBU
In short, in recent years a strong process of productive FDI inflow has been taking place, they
are mainly destined to the Construction, Agriculture and industrial sectors. Even though the
origins of these investments have become more diversified, they continue to have an
important participation in the region, particularly, Argentina.
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URUGUAY XXI Investment and Export Promotion Agency
VII. Legislation to Promote Investment and Business
Climate in Uruguay
Since 2007, the Uruguayan FDI phenomenon increased with the approval of Decree 45519
which regulates chapter III of the Investment Promotion and Protection Law (Law No. 16.906),
generating an even more attractive and favorable environment for investment in the country.
This law encourages productive investment through tax benefits granted to business that
generate Corporate Income Tax, whatever the amount invested, sector or legal nature of the
company. Favored investments are those that generate employment, increase exports, use
cleaner technologies, invest on research, development and innovation, promote
decentralization, or that score in diverse sectoral indicators. Currently, Decree 2/01220 is in
force and encourages projects that produce quality employment (depending on the wage
level), that employ groups with major employment issues, that promote entrepreneurship
throughout the whole country (particularly in those departments that have fewer resources)
or in Montevideo’s less developed neighborhoods, among others.
In addition to the Investment Promotion and Protection Law, Uruguay has other several
regimes that make the Uruguayan legal framework even more attractive for investments.
These other regimes include, the Free Trade Zone Law21, Free Ports and Airports22, Industrial
Parks23, Temporary Admission24, Bonded Warehouses25, Law on Public-Private Partnerships26,
Law on Social Housing27 and specific regulations of each sector (see chart VIII.I).
It is worth mentioning two advances in the Uruguayan regulatory framework aimed to attract
and promote investments in infrastructure, which is absolutely necessary to sustain Uruguay’s
economic growth process.
On the one hand, the law on “Public-Private Partnership Contracts for the performance of
infrastructure works and related services (PPP)” passed on July, 2011. With these new
regulations the expectations are to be able to perform road, rail, port, airport, energetic
infrastructure, waste treatment and social infrastructure works (such as prisons, health
centers, educational centers, social housing, sports complexes, etc.). The following paragraph
presents some of the projects that are already underway and others that are planned to be
developed under the framework of this law.
On the other hand, in August, 2011 the “Law on Social Housing” was approved, which also
constitutes an attractive regulatory framework for foreign investments since it promotes
private investment in social housing through the granting of tax exemptions.
19
November, 2007
February, 2012
21
Free Zone Law
22
Free Ports and Airports Law
23
Industrial Parks Law
24
Temporary Admission
25
Bonded Warehouses
26
Law on Public-Private Participation
27
Law on Accommodation for Social Interest Purpose
20
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URUGUAY XXI Investment and Export Promotion Agency
Box VII.I
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 Energies 28: 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 Industry29: 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 centers30: activities such as services rendered by telemarketers receiving or making
phone calls, Internet messages and other kind of communication channels.
Condominium Hotels31: destined to offer lodging services in order to attract the tourism demand.
Tourism32: 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 Manufacturing33
Another aspect that enables investors to consider Uruguay as a great destination to invest, has
to do with the excellent business climate, evidenced by the outstanding position of the country
in various international rankings. Among them, Uruguay is first in the Economic Climate Index
in Latin America -elaborated in partnership by the Brazilian Institute of Economics at the
Getulio Vargas Foundation and the Institute of Economic Research at the University of Munich
(January 2012). Also, according to the latest Doing Business 2012 report prepared by the
World Bank, Uruguay climbed 17 positions for its favorable business climate in terms of doing
business, standing at the 90th position among 183 analyzed countries .
Also, the guarantee of free convertibility of profits to foreign currency and the absence of
barriers in terms of capital movements are key elements that foreign investors value when
setting up in Uruguay.
28
29
30
31
32
33
Decree Nº 354/009 and General operating basic criteria of the COMAP
Decree Nº 532/009 and subsequent modification Decree Nº 127/011 and Decree Nº 58/09
Decree No. 207/008 and subsequent modification Decree Nº 379/011, Annex VII
Decree No. 04/010 and subsequent modification Decree Nº 59/012, Annex X
Decree No. 175/003
Decree No. 6/010, subsequent Decree Nº 6/010 and General operating basic criteria of the COMAP
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URUGUAY XXI Investment and Export Promotion Agency
Finally, the business environment of the country has become more attractive after the
recovery of its Investment Grade (IG). Standard & Poor's granted Uruguay with this rating in
April, 2012 followed in July by the credit-rating agency Moody´s34. This reflects the confidence
generated by the institutional framework of the country and the conduct of economic policy,
with a very organized management of the macroeconomic policy. This has several implications
for Uruguay. Worth mentioning are: the expansion of potential investors, both for financial
investment (purchase of Uruguayan public securities and Uruguayan private companies
securities) and for productive investments, as well as better financing conditions for our
country, both in installments as well as in fixed rates. Likewise, the improvement of the
Uruguayan credit-rating begins to expand to Uruguayan private and public companies which
also achieve the investment grade35.
34
The rating granted by Standard & Poor´s is BBB- and Baa3 by Moody´s (July 2012). In July 20, 2012 the Japanese
organization Rating and Investment Information upgraded Uruguay`s rating to BB+ with a stable outlook.
35
In particular, the Banco República improved the rating of its foreign currency deposits over the short and long
term, both at global and national level.
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URUGUAY XXI Investment and Export Promotion Agency
VIII. Main Investment Projects in Uruguay
As mentioned earlier, the regulations and business climate that Uruguay has been developing
is showing results measured by the growing number of investment projects of great
importance, some of which are of significant relevance to the future growth of the country.
Below are some of the main projects in progress and others which are planned for the future36.
Public-Private Partnership Projects – PPP Law (Nº 18.786)
•
National Road Network- Road Corridor 21 and 24 (in progress)37.
• Prison Facility (in progress)38.
• National Road network (other six road corridors for an estimated amount of US$ 1.0 billion,
(future).
• Rail Network (four railway branch line circuits, future).
• Deep Water Port (under study)39. The Government has recently approved the
recommendations contained in the report of the inter-ministerial Commission for the study of
the Deep Water Port (CIPAP) - created for the analysis of technical, environmental, economic
and legal aspects regarding the construction of the deep water port in Rocha - and enabled the
Commission to promote and to monitor the necessary processes for the development of the
port through the PPP Law40. For this purpose, on August 13 the Government opened a tender
for interest in participating in the Data Room concerning the design, construction, operation
and financing of the project. It is expected that by the end of 2012 the Government will make a
public international call for tender in order to participate in the competitive dialogue. This
process takes six months, time at which the call for tender, evaluation and subsequent
adjudication and contracting will take place. Works are expected to begin in 2014 and the
estimated investment is between US$ 800 million and US$ 1.0 billion.
The port will be multipurpose with a carrying capacity of vessels of up to 20,000 tons. For its
construction, the CIPAP developed a plan in stages. During the first stage an initial breakwater
will be built for the development of grain activity for minerals and cereals, enabling an initial
protection zone for the mooring of vessels, and the terminal may begin to operate with an
initial investment of nearly US$ 400 million. The next stage would be the construction of a
second breakwater that will generate a broader protection area and that will allow the
establishment of more berthing lines for liquid bulk cargo.
36
Source: Uruguay XXI based on secondary sources, news, sites, among others. The list is not exhaustive.
Source: Ministry of Economics and Finance
38
Source: Ministry of Economics and Finance
39
Source: Presidency and “El País” newspapers
40
Decree 195/1
37
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URUGUAY XXI Investment and Export Promotion Agency
•
LNG Regasification Plant (under study)41. On August 16, the Government submitted the
international bidding documents for the construction of a Liquefied Natural Gas Regasification
Plant and by the end of September proposals from companies will be received. There will be
three additional calls, one for the dredging of an access channel to Puntas de Sayago to enable
the mooring of vessels that transport the LNG. Another, for the work that will involve the
construction of floating installations, deposits and a breakwater as well as a gas pipeline that
will link the floating plant with the ground facilities and another one for the LNG contract. The
established contract is a Boot type contract modality in which the company is responsible for
the construction and operation of the plant and after a specific period of time it transfers
ownership to the State. In the case of the Regasification plant, the company charges a fee for
the operation of the plant and in a 15-year period the company transfers the plant back to the
State. The plant will have a capacity of 10 million cubic meters. The estimated investment will
be of US$ 900 million.
•
Trade Ports (in progress)42: Puntas de Sayago Port (future). The institutional project foresees
the creation of a Logistics Port located on 103 hectares of land in Puntas de Sayago coastal
zone, near the Port of Montevideo. The project expects the operation of a free port, free zone
and an industrial pole. Last May, the call for tenders was launched for the first 10 hectares of
the project that will be used for transit cargo warehouses from and to Montevideo.
Other projects
Convention Center “El Jaguel” –Punta del Este (under study)43. On August 28th an
international call for tenders was opened for the construction and management of the
Convention Center and Fairgrounds in Punta del Este for a total concession period of 19 years.
Those interested will we able to present their projects within a period of 90 days. The
construction will start in 2013 and will be operating in 2014. The estimated investment will be
of US$ 23 million. The Convention Center will have a plenary session room with capacity for
2,600 people and 4 rooms for up to 300 people each. The Exhibition Center that will have
more than 6,000 m2.
•
•
Housing Projects (Law Nº 18.795). Law 18.795 promotes investment in social housing through
the granting of tax exemptions to investors, and subsidies to buyers or tenants44. This law will
enable, in the coming years, the construction of medium-size and affordable towers go from
50.000 m2 per year to 150.000 m2 per year45.
Since the adoption of the law, there have been 78 projects submitted of which 46 have already
been promoted. According to estimates from the National Housing Agency, it is expected that
by 2013 accumulated investments promoted by this law will reach US$ 180 million.
41
Source: Presidency
Source: Presidency
43
Source: The National Development Corporation
44
Source: National Housing Agency
45
Source: Julio Villamide “La situación del mercado en la actual coyuntura internacional” - Julio Villamide
42
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URUGUAY XXI Investment and Export Promotion Agency
Private Projects
•
Aratirí Mining: Aratirí is a firm created by Zamin Ferrous group dedicated to the prospecting,
exploration, extraction, processing and export of iron ore in Uruguay. The productive,
industrial and logistic project of Aratirí would enable the exploitation of the Valentines
deposits for 20 or 30 years. The project consists of five components: Mining complex,
46
beneficiation plant, concentration pipeline and a port terminal . The required investment will
be approximately US$ 3.0 billion. Between 2006 and 2011 the company has already invested
US$ 170 million in research and development.
•
Third Cellulose Plant (under study)47. The government recently announced the installation of a
new cellulose processing plant in Cerro Largo or Durazno. The construction will begin in 2016
and is expected to work by the end of 2018.
•
Cement Plant48: The construction of a new cement plant is expected to be operating by 2014
in the department of Treinta y Tres and will produce 750,000 tons. The required investment
will be US$ 160 million, this investment will be divided between three companies; the
Cementos Artigas (60%), the Brazilian Group Votorantim (20%) and Ancap (20%).
46
Source: www.aratiri.com.uy/institucional
Source: “El País” newspaper
48
Source: Presidency
47
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URUGUAY XXI Investment and Export Promotion Agency
IX.Perspectives for Uruguayan FDI
The complex international scenario, mainly due to the critical situation of European economies
and the scarce growth of the United States, generates uncertainties and may reduce but not
stop the flow of foreign investment.
As shown by growth projections, emerging countries are the ones who will boost global
growth in coming years. This trend will be accompanied by a larger attraction of investment
flows from developed countries and also from emerging countries, which have in turn made an
important progress in regulatory issues and in the improvement of their business climate.
In this context, Latin America is a region that will have growth rates exceeding 4% in coming
years, which shows a favorable outlook for this region, in a context where the global economy
has experienced a slowdown. If we add to this situation the growing trend of investment
inflows towards the region, it is likely to expect that FDI incomes will continue to grow in
following years. According to ECLAC projections, FDI in Latin America will increase 8% in 2012
in contrast to 201149.
In relative terms, Uruguay has been one of the main recipients of FDI in Latin America. FDI
flows have increased significantly in recent years, with an annual average of US$ 2.0 billion
since 2008. The most important projects that are in progress- in particular the construction
and operating of Montes del Plata cellulose plant and the Aratirí mining project- ensure a
sustainable investment flow for the following years that will consolidate a decade of strong
foreign investment income.
Despite the complex international scenario, the FDI flows are expected to continue to grow
towards the region in upcoming years. Likewise, we expect Uruguay to continue to be
immersed in this process and continue to attract productive investments. In order for this to
happen, it is necessary to continue to improve the legal framework to promote investments
and the investment climate in our country.
49
“Foreign direct Investment in Latin America and the Caribbean”. ECLAC (2011).
24