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Uruguay XXI business climate survey shows improved foreign investor perceptions

by | Mar 18, 2024

The Uruguay XXI business climate survey results reveal progress in creating a favorable business climate for foreign investors in Uruguay.

A  Uruguay XXI business climate survey of foreign investors shows that Uruguay is increasingly favorable to their interests, although some structural challenges persist. This improvement is reflected in the level of global satisfaction with the country to develop business activities: the number of compliant companies expressing a favorable perception of the country’s business climate was 47% in 2018. This figure rose to 84% in 2023, surpassing 2015’s 76%.

The perception is that the country’s economic situation has improved

The report describes the survey’s main findings as “general improvement in perceptions of the country’s economic situation.” The Uruguay XXI Investment Promotion Institute and the consulting firm Equipos carried out the exercise. The Uruguay XXI business climate survey results were released on Wednesday, March 13, 2024.

The improvement in positive evaluations among foreign investors is more pronounced than in the other audiences analyzed. The “high levels of satisfaction” with Uruguay as an investment destination are observed in all business segments. However, they are comparatively lower in large companies that export goods and are linked to the industrial sector.

The Uruguay XXI business climate survey best evaluated the following activity sectors: “Other services” (97%), “Information and communication” (94%), “Infrastructure” (90%), and “Commerce, restaurants and hotels” ( 89%).

Only 5% of the companies surveyed say they are dissatisfied with the country for the development of their activity. The “country cost” and “bureaucracy” are the main reasons for dissatisfaction.

 

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The Uruguay XXI Business Climate Survey cites legal security and stability as important positives

On the other hand, Uruguay’s “very good evaluation” of the investment climate continues to be supported by the country’s legal security and stability. The ranking follows these elements by tax incentives, tax exemptions, and the country’s free exchange market.

The Uruguay XXI business climate survey improves in all specific aspects of the investment climate compared to the previous market study. It stands out positively that 44% of the firms surveyed plan to increase their investment in Uruguay in the next five years.

The United States (22%) and Argentina (21%) are the countries that lead the origin of foreign capital. The installation modality of foreign direct investment is through new ventures (57%), the total acquisition of an established company (20%), and the third most frequently used form is the majority investment in an existing company (6%).

Foreign investors indicated that they are interested in investing in digital transformation (50%), sustainability (49%), and innovation (43%) in the coming years.

Foreign direct investment in Uruguay is at healthy levels

When presenting the data from the Uruguay XXI business climate survey, Foreign Minister Omar Paganini highlighted that in 2022, foreign direct investment stood at USD 31.1 billion and that in 2023, USD 3.7 million entered the country. This means that Uruguay will be reaching “maximum levels” in 2023. “We are in a good moment for foreign investment, which also has to do with the rules of the economic game and the macroeconomic stability that the Ministry of Economy has promoted,” Paganini highlighted at a press conference.

However, Uruguay still maintains evaluated aspects with low satisfaction values (less than 50%) that must be addressed. Some demonstrate structural criticism of the investment climate. These issues refer to “costs,” mainly energy and fuel but also human resources, ports, and airports. Another structural problem of the country is the need for more sufficient air, sea, and river connectivity.

Another criticism is the timing and ease of the procedures and processes for the installation and start-up of a company. Also, there are some questions about the conditions of access to markets and language management in Uruguay.

The Minister of Industry, Elisa Facio, commented that her portfolio is working on the opening of new markets with the rest of the national government.

In conclusion, the Uruguay XXI business climate survey underscores a notable improvement in foreign investors’ perceptions of Uruguay’s business environment, reflecting a positive trajectory in fostering international interest. While challenges persist, particularly regarding costs, bureaucracy, and connectivity, the country’s commitment to legal security and stability remains a cornerstone of its appeal. With a sizable portion of surveyed firms expressing intent to increase investment in the nation over the next five years, coupled with initiatives targeting digital transformation and sustainability, Uruguay stands poised to leverage its strengths and address areas for enhancement in its pursuit of sustained economic growth.

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