URUGUAY.

226 Pages·2021·4.364 MB·English

by  ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT.

OECD Investment Policy Reviews
URUGUAY

OECD Investment Policy
Reviews: Uruguay
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Please cite this publication as:
OECD (2021), OECD Investment Policy Reviews: Uruguay, OECD Investment Policy Reviews, OECD Publishing, Paris,
https://doi.org/10.1787/1135f88e-en.
ISBN 978-92-64-92617-2 (print)
ISBN 978-92-64-48945-5 (pdf)
OECD Investment Policy Reviews
ISSN 1990-0929 (print)
ISSN 1990-0910 (online)
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Foreword
The Investment Policy Review of Uruguay assesses the investment climate in Uruguay and discusses the
challenges and opportunities faced by the government. Capitalising on the OECD Policy Framework for
Investment, the Review takes a broad approach to investment climate reforms in Uruguay and its
continuous transition towards higher levels of development and well-being. Individual chapters are devoted
to the overall economic performance and foreign investment trends, the reform of the state and state-
owned enterprises, foreign investment regulations, the legal and institutional framework for investment
protection, tax policy, investment promotion and facilitation, and policies to promote and enable
responsible business conduct (RBC).
The Investment Policy Review of Uruguay was undertaken under the aegis of the OECD Investment
Committee. The Ministry of Economy and Finance led the process within the Uruguayan government and
established and convened an ad hoc inter-ministerial task force to assist in the process. This publication
draws on the report supporting the assessment by the Investment Committee of Uruguay’s ability to comply
with the principles of openness, transparency and non-discrimination and RBC practices and its policy
convergence with the OECD Declaration on International Investment and Multinational Enterprises, with
the aim to adhere to this instrument. The Investment Committee meeting took place in July 2020 via virtual
means in the presence of a delegation from Uruguay led by the Ministry of Economy and Finance. The
Review has been completed thanks to the engagement of two successive governments of Uruguay,
showing the country’s commitment to the reform process.
The Review was prepared by a team led by Andrea Goldstein and Monika Sztajerowska and comprising
Fernando Mistura, Joachim Pohl and Nicolas Rousselot from the Investment Division at the OECD
Directorate for Financial and Enterprises Affairs; Marie Bouchard, Nicolas Hachez, Coralie Martin and
Germán Zarama from the OECD RBC Centre; as well as Gioia de Mello and Luisa Dressler from the OECD
Centre for Tax Policy and Administration. Ana Novik, Head of the Investment Division, provided overall
guidance and Stephen Thomsen and Frédéric Wehrlé from the Investment Division and Froukje Boele
from the OECD RBC Centre, provided additional guidance and comments. At various stages of
preparation, the Review benefitted from inputs, comments and suggestions from other parts of the OECD
Secretariat, including the Global Relations Secretariat (GRS) as well as colleagues at the Inter-American
Development Bank (IDB), in particular Federica Gómez Decker and Christian Volpe Martincus from the
Integration and Trade Sector and Tomás Serebrisky from the Infrastructure and Environment Department,
and at the World Bank, in particular Eduardo Olaberria from the Macroeconomics and Fiscal Management
Global Practice.
The Review was prepared with the financial support of the European Commission, through the Transition
in Development Facility (TDF). This support and the engagement of the European Commission’s
Directorate-General for International Cooperation and Development (DEVCO) and the European Union
(EU) Delegation in Montevideo are gratefully acknowledged.

OECD INVESTMENT POLICY REVIEWS: URUGUAY © OECD 2021

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Table of contents
Foreword 3
Abbreviations and acronyms 11
Executive summary 13
1 Assessment and recommendations 15
Assessment 16
Overall recommendations 25
References 28
Notes 29
2 Economic trends and the role of investment 31
Introduction 32
Uruguay’s economic development 32
Foreign investment trends 35
Outlook and policy recommendations 51
References 51
Notes 52
3 Uruguay in transition – Ongoing reform of the state 55
Enterprise reform 56
Encouraging private participation in infrastructures 61
Public governance reforms and fight against corruption 67
Outlook and policy recommendations 72
References 73
Notes 75
4 Business establishment and operations 77
Uruguay is open to foreign direct investment 79
Uruguay has few exceptions to national treatment of foreign-controlled enterprises 82
Starting and operating a company remain cumbersome according to business surveys 84
Outlook and policy recommendations 86
References 87
Notes 87
5 Protection of investment 89
The domestic legal framework 90
International investment agreements 95
OECD INVESTMENT POLICY REVIEWS: URUGUAY © OECD 2021
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Outlook and policy recommendations 100
References 105
Notes 106
6 Tax policy for investment 109
Tax revenue in Uruguay 110
Corporate tax system 113
Tax incentives for investment: description and assessment 118
The use of tax incentives 126
Governance of tax incentives: description and assessment 131
Outlook and policy recommendations 137
References 138
Notes 141
7 Investment promotion and facilitation 145
National strategy and the institutional set-up 147
Investment promotion agency in Uruguay relative to OECD and LAC economies 155
Investment facilitation and administrative simplification efforts 164
Outlook and policy recommendations 176
References 178
Notes 179
8 Promoting and enabling responsible business conduct as a strategic choice 185
Uruguay’s plans for establishing an NCP 187
Policies to promote responsible business conduct 191
Policies in specific areas covered by the OECD Guidelines 192
The State as an economic actor 200
Outlook and policy recommendations 202
References 204
Notes 208
Annex A. Uruguay’s exceptions to the National Treatment instrument 215
Annex B. Measures reported for transparency by Uruguay 217
Annex C. Additional tables and figures 219

Tables
Table 3.1. The “Leviathan reach” in Uruguay and its peers 57
Table 3.2. SOEs in Uruguay 2018: The gender dimension 60
Table 3.3. Uruguay’s performance on the Logistics Performance Index 62
Table 3.4. The state of ICT infrastructure – Uruguay in comparative perspective 62
Table 3.5. Main wind power generation projects in Uruguay 64
Table 5.1. Statistics on patent and trademark applications in Uruguay, 2016-2018 92
Table 6.1. Composition of tax revenue in Uruguay, 2017 112
Table 6.2. Summary of main corporate tax provisions 114
Table 6.3. COMAP regime scoring matrix 119
Table 6.4. Tax expenditure from tax incentives for investment, measured as a share of GDP 127
Table 6.5. Tax expenditure from incentives for investment, measured as a share of total tax revenue per tax
type 128
Table 6.6. Investment approved by COMAP, by sector of activity 129
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Table 6.7. Free zones in Uruguay – main features 130
Table 7.1. List of selected sector-specific investment schemes in Uruguay 154
Table 7.2. Overview of Uruguay’s priority economic sectors 154
Table 7.3. Dealing with construction permits in Uruguay relative to OECD and LAC countries 166
Table 7.4. Registering property in Uruguay relative to OECD and LAC countries 166
Table 7.5. The ease of starting a business in Uruguay and benchmark economies, 2019. 170
Table 7.6. Overview of different characteristics of one stop shops for business registration 170
Table 7.7. The use of Regulatory Impact Assessment (RIA) in Uruguay and OECD and LAC 174

Table A C.1. Product structure of merchandise trade in 2017, by processing stage 219
Table A C.2. Trade structure by geographical destinations 220
Table A C.3. Private property in Uruguay’s Constitutions 221
Table A C.4. Tax incentives for specific sectors 222
Table A C.5. Number of days required to start a business in Uruguay, 2019. 223

Figures
Figure 2.1. GDP growth and GDP per capita in Uruguay, 2004-2018 32
Figure 2.2. GDP per capita in Uruguay as a share of the OECD GDP per capita level, 2004-2018 33
Figure 2.3. Gross Fixed Capital Formation as a share of GDP, 1970s-2018 34
Figure 2.4. The share of trade to GDP and the level of average applied import tariffs in Uruguay 35
Figure 2.5. FDI stock in Uruguay, 2011-2018 36
Figure 2.6. Inward and outward FDI stock as a share of GDP in Uruguay and selected LAC countries, 2018 36
Figure 2.7. FDI assets and liabilities as a share of GDP in Uruguay and selected LAC countries, 2012-2018. 37
Figure 2.8. Share of inward FDI flows as a share of GDP in Uruguay and LAC, 2012-2018. 38
Figure 2.9. Share of inward FDI flows as a share of GDP in Uruguay and selected LAC countries, 2012-2018 38
Figure 2.10. Annual FDI flows in Uruguay, 2012-2018 39
Figure 2.11. Quarterly FDI flows in Uruguay, 2016-2019 39
Figure 2.12. FDI flows in Uruguay, by instrument, 2012-2018 41
Figure 2.13. Number of entries of exporting foreign-owned firms in Uruguay by mode of entry 42
Figure 2.14. Greenfield FDI Performance Index for Uruguay and selected LAC countries, 2005-2018 42
Figure 2.15. Top five sectors for FDI inward inflows, average, 2014-2018. 43
Figure 2.16. Top five source countries for FDI inward inflows, average, 2014-2018. 44
Figure 2.17. Inward FDI positions by resident SPEs and non-SPEs in selected OECD countries, 2017 45
Figure 2.18. FDI stock in Uruguay, by source region, 2018 45
Figure 2.19. Inward FDI stock in Uruguay, by source country, 2018 46
Figure 2.20. Value of investment supported through the Law on Investment Promotion (COMAP), by source
country and sector, 2018. 49
Figure 3.1. Overview of state-owned corporations in Uruguay, 2019 57
Figure 3.2. Number of semi-autonomous public bodies created in Uruguay, 1920-present 58
Figure 3.3. Electricity generation by source, Uruguay 1995-2017 64
Figure 4.1. OECD FDI Regulatory Restrictiveness Index 81
Figure 4.2. OECD FDI Regulatory Restrictiveness Index, by sector 81
Figure 4.3. Overview of Uruguay’s scores on labour market regulations, 2019 85
Figure 5.1. Degree of confidence in the judicial system in Uruguay and selected LAC economies 93
Figure 5.2. Evolution of Uruguay’s investment treaty relations 96
Figure 5.3. Approximate evolution of Uruguay’s inward and outward FDI stock coverage by international
investment treaty cohort 97
Figure 5.4. Different approaches to residual treaty validity 102
Figure 5.5. Projection of the temporal validity of Uruguay’s investment treaties 103
Figure 6.1. Total tax revenue in Uruguay compared to OECD and LAC averages, 1990-2017 111
Figure 6.2. Composition of tax revenue in Uruguay, 1990-2017 112
Figure 6.3. Composition of tax revenue in Uruguay, LAC and OECD, 2016 113
Figure 6.4. Standard corporate income tax rates across LAC countries 113
Figure 6.5. Investment projects approved under the COMAP regime, 2000-2018 129
Figure 7.1. Overall satisfaction with investment climate in Uruguay 146
Figure 7.2. An illustrative overview of selected institutions involved in investment promotion and facilitation in
Uruguay 149
Figure 7.3. Overview of the National System for Productive Transformation in Uruguay 150
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Figure 7.4. Estimates of fiscal costs of tax investment incentives in Uruguay and selected economies in Latin
America and the Caribbean 150
Figure 7.5. Share of total investment promoted via the Law on Investment (COMAP) and the Free Economic
Zones regime (Zonas Francas) in Uruguay 151
Figure 7.6. Evolution of legal regimes for investment incentives in Uruguay, 1974-2018 153
Figure 7.7. Number of laws and sectoral decrees introduced and the incidence of elections in Uruguay. 155
Figure 7.8. Overall Investment Promotion Agency Scorecard: Uruguay XXI 157
Figure 7.9. Total budget of Uruguay XXI, 2007-2018 158
Figure 7.10. Distribution of staff of Uruguay XXI across different programmes, 2019 158
Figure 7.11. Number of offices abroad of agencies in different OECD and LAC countries, 2017. 159
Figure 7.12. The share of IPAs conducting different investment facilitation and aftercare services in Uruguay
relative to OECD and LAC 162
Figure 7.13. Importance of different aftercare services to foreign investors in Uruguay 163
Figure 7.14. The share of IPAs conducting different policy advocacy activities in Uruguay relative to OECD
and LAC 163
Figure 7.15. Overview of Uruguay’s score on WEF’s Global Competitiveness Index, 2012-18. 164
Figure 7.16. Main reasons for concern regarding business climate in Uruguay 165
Figure 7.17. Overview of Uruguay’s score on World Bank’s Doing Business Indicators, 2019 165
Figure 7.18. Number of administrative procedures covered in the Uruguay’s Single Window for Trade (VUCE),
2013-2017 167
Figure 7.19. Overview of Uruguay’s scores on OECD Trade Facilitation Indicators 168
Figure 7.20. Composite indicators: ex post evaluation of primary laws, 2018 171
Figure 7.21. Overview of World Governance Indicators scores for Uruguay, 1996-2018 173

Boxes
Box 1.1. Policy recommendations 27
Box 2.1. Key concepts and definitions in FDI statistics 40
Box 2.2. Special purpose entities: why do they matter for FDI statistics? 44
Box 2.3. Examples of recent investment projects in Uruguay 47
Box 2.4. Foreign investment in the cannabis industry 48
Box 2.5. Multilatinas from Uruguay 50
Box 3.1. Improving SOE governance: Examples from Chile and Paraguay 60
Box 3.2. An example of reforms in the electricity market in Uruguay: the boom of renewables 63
Box 3.3. Examples of private sector’s involvement in the transport sector in Uruguay 65
Box 3.4. Levels of government in Uruguay 69
Box 4.1. The OECD National Treatment instrument for foreign-controlled enterprises 78
Box 4.2. The OECD FDI Regulatory Restrictiveness Index 80
Box 5.1. Two approaches to specifying and limiting the FET provision 98
Box 5.2. Designs of temporal validity provisions in IIAs 102
Box 5.3. Responsible Business Conduct in International Investment Agreements 104
Box 7.1. Strategic objectives of investment promotion and facilitation policy in Uruguay 148
Box 7.2. Overview of regimes for tax incentives in Uruguay 152
Box 7.3. The OECD-IDB survey of IPAs 156
Box 7.4. Does investment promotion work? 161
Box 7.5. Facilitating trade in goods in Uruguay: The case of the Single Window for Trade 168
Box 7.6. Recommendation of the OECD Council on Regulatory Policy and Governance 171
Box 7.7. Regulatory Impact Assessment (RIA) 173
Box 7.8. SME support schemes in Uruguay 174
Box 7.9. The Consultative Committee on Corporate Development 176
Box 8.1. Understanding the OECD Guidelines for Multinational Enterprises 186
Box 8.2. Promoting integrity in the corporate sector: the case of Uruguay’s main exporter 198

OECD INVESTMENT POLICY REVIEWS: URUGUAY © OECD 2021