Top 10 challenges of doing business in Uruguay

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Strategically located in the heart of the Mercosur, Uruguay offers multinational firms an idyllic stronghold in burgeoning Latin America, but navigating the complex legal, tax and regulatory requirements can be difficult without local help on board.

Thanks to strong international ties and political stability at home, Uruguay has become the largest common market in Latin America and has increasing flows of foreign direct investment (FDI) as a result. In 2011, Uruguay trialed only Chile as one of the largest recipients of FDI in relation to GDP in the region, and with a framework of sustained economic growth outlined, more of the same can be expected in the future.

Agriculture is still among the top industries attracting FDI thanks to its high quality soils and a good climate, but manufacturing and chemical industries are becoming increasingly favoured, and transport, the commercial sector and entrepreneurship are also about to shine. A recent CEPAL report on FDI in Latin America ranked Uruguay as one of the Latin American countries with the highest growth potential, underlying overseas appetite for expansion.

But despite its bright economic outlook, multinationals often struggle to grow accustomed to the business environment. The World Bank and International Finance Corporation (IFC) rank it below the 100 mark in several categories, most notably taxation (140) and property registration (164), highlighting the importance of having local help on board.

Starting a Business
To start a business in Uruguay one must first select a name from the online portal of the one-stop-shop. Once a suitable name has been found, capital is to be paid into a bank account and the company’s bylaws and signatures must be notarised. The company is then registered at one of the offices of "Empresa en el Día", and fees and taxes are transferred to any local Payment Agency.

Dealing with Construction Permits
Obtaining construction permits is by far the most rigorous aspect of doing business in Uruguay. It takes over 230 days on average to complete and requires navigating some 27 procedures of inspections, registrations and other compliance issues. The Water Authority alone carries out six inspections.

Getting Electricity
For electrical connection, an authorised electrician has to submit in person the connection application to the office of Administración Nacional de Usinas y Transmisión Eléctrica (UTE) and waits for a quote. UTE will then carry out inspections and agreements must be made with the board, such as an assumption of responsibility agreement.

Registering Property
The World Bank and IFC rank Uruguay in 164th place in the world (out of 185 economies) for ease of registering a property. It is a highly bureaucratic procedure and also involves payment of several taxes and fees.

Getting Credit
Uruguay has a relatively modern financial landscape and the ease of getting credit is improved by the information kept in both public and private realms. However, the process can be difficult for multinational firms to become attuned to.

Protecting Investors
Investor protection is often outlined as one of the more concerning aspects of doing business in Uruguay. The World Bank and IFC rank it in 100th place in the world, with relatively weak scores on all its indices.

Paying Taxes
There are a massive 33 corporate tax payments required to be made each year which take up an average of 310 company hours. Many employee levies take a long time to process, such as social security contributions and worker accidents insurance.

Trading Across Borders
Overseas trading is a rather bureaucratic affair, requiring up to eight documents to be prepared which can leave goods in limbo for up to 18 days before being exported or imported. The cost of trading across borders is more competitive than most Latin American counterparts.

Enforcing Contracts and Resolving Insolvency
It takes around 725 days to enforce a contract in Uruguay, involving some 41 procedures. Insolvency cases take 2.1 years, although the recovery rate is higher than most other countries in the region.

Uruguay is quite a utopian country, and the extremes of wealth and poverty found in most other South American countries don't exist. Uruguayans take a pragmatic, utilitarian and materialistic approach to life, and they have an inherent trust of people and a strong belief in social justice. Doing business is a very formal affair, and be ready to present all documents in Spanish.

TMF Group
We have the local knowledge to help you navigate these minefields. Whether you want to set up in Uruguay or just want to streamline your Uruguayan operations, talk to us.