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Uruguay, one of Latin America’s smaller countries, is often overlooked by those drawn to the brighter lights of Argentina, Uruguay’s flamboyant neighbour across the River Plate. However, while Argentina’s economy has floundered and shows little sign of recovery in 2009, Uruguay offers a completely different story.
2008 was a poor year economically for many developed countries, but Latin America had several star performers. According to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), high achievers in 2008 GDP growth were Brazil, Ecuador and Panama, although Uruguay with its 11.5% increase outperformed the other 20 countries in the ECLAC listing.
The 2001-2002 Argentinian crisis hit Uruguay hard and the country fell into recession, but the prudent monetary policy followed since then has meant Uruguay’s economy has boomed while Argentina’s has failed to take off. Uruguay’s secret was to devalue its currency, a move that led to a lower cost of living and an attractive environment for foreign investment. Argentinians have been particularly keen to invest in their neighbouring country and foreign investment in Uruguay generally grew by a massive 25% in 2008. Foreign funds also poured into the country – non-resident deposits in Uruguayan banks increased by over 40% last year.
As in the case in many countries, the future is by no means certain for Uruguay in 2009 and it is unlikely that Uruguay will be immune to the global economic slowdown in 2009. That said, ECLAC predicts 4% GDP growth, far ahead of what most countries expect to achieve this year and still considerably higher than the 1.9% forecast for the region as a whole.
Uruguay’s devalued currency and favourable foreign investment climate makes it a country worth considering when it comes to property investment. Property prices are considerably below those found in Europe and North America, and Uruguay offers the additional advantage of a southern hemisphere winter. This has made Uruguayan beach resorts such as Punta del Este an ideal destination for Europeans and North Americans escaping from the winter cold in their home countries.
“Uruguay is certainly one to look at in a South American property portfolio,” says James Gonzalez, Market Analyst at Obelisk Investment Property. “Its economy is strong and the property market offers interesting investment opportunities. However, flights to Uruguay from Europe and North America are not as frequent as they are to some other destinations in the region.”
Among other investment opportunities are the following trade sectors:
Forestry
Uruguay is emerging as an important forestry centre in the region, presenting opportunities for investors as well as services and equipment providers, and has become an appreciated area for foreign investors.
Energy
The Uruguayan government is committed to increase domestic energy production. Opportunities for companies exist in renewable energy generation projects (biomass, wind, small and micro hydro).
Transport
Port infrastructure is another area drawing investment interests. The government is likely to call soon for bids to expand port facilities over the next few years. In the aviation sector, the Uruguayan national company, Pluna, has been partially privatized and acquired by a consortium of private investors aiming at reconstructing and expanding the business.
Agriculture
Agriculture and livestock are the major industries in Uruguay, accounting for most of the country's exports. The sector is incorporating technology and continues growing as well as attracting regional and international investors. There is interest in this sector in improving productivity, resulting in market opportunities for expertise and products.
Mining
The mining sector has a good potential, particularly in gold mine- and uranium exploration-related projects, as well as exploitation and industrialization of fine precious stones.
Industry
Uruguay offers a very favourable regional context in the automobile assembling sector. Several multinational vehicle-producing plants are considering setting up assembly lines for low series of models in Uruguay. Meat packing plants are attracting foreign investors due to Uruguay's excellent sanitary conditions and the boom of Uruguay's beef exports to the world.