Uruguay: unfazed by its towering neighbours Argentina and Brazil

February 27, 2023

Uruguay: unfazed by its towering neighbours Argentina and Brazil

Uruguay, a small South American country with 181,034 km2 is often overshadowed by its larger, more well-known, and rowdy neighbours, Argentina, and Brazil. The country however stands out in the region by offering a welcoming macro-economic, political, and business environment for foreign investment.

Uruguay’s small but robust economy, with a GDP of about $97 billion and one of the highest GDP per capita in South America, is primarily driven by agriculture, services, and tourism. Its stable political system, with a multi-party democracy and a long tradition of social democracy, yields business-friendly governments. Its high level of human development translates into a peaceful, tolerant, and progressive society with a strong human rights record. Businesses looking to set up operations in the country benefit from predictable legal and tax systems (offering a range of incentives for foreign investors, including exemptions from income tax and import duties); low levels of corruption; and access to a skilled, educated workforce.

Argentina and Brazil, in contrast, have historically suffered from tumultuous economic histories marked by high inflation, political instability, and social unrest due to their complex, unpredictable political and business environments. Argentina's economy has been in a state of crisis for decades, with multiple defaults on its sovereign debt and high levels of inflation. It continues to experience frequent changes of government and struggles to address social and economic issues such as poverty and inequality. Its unpredictable policy changes, protectionist trade policies, and high levels of corruption make it challenging for foreign companies to do business in the country. While larger and more diversified, Brazil's economy has remained hampered by frequent high profile corruption scandals and continued political turmoil.

Uruguay thus stands out in the region as a stable and prosperous country with a favourable business environment for businesses and investors looking to expand their operations in South America.

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