Economic growth for Uruguay was robust, enjoying an average growth between 2004 and 2008 of almost 10%, a rate that could beat all but China.
The 2008-2009 global financial crisis distorted Uruguay's path of vigorous growth that decelerated in 2009 to 2.9% at US$ 45 billion, which was still very remarkable when most economies of the world contracted. Akin to China, Uruguay managed to be away from a recession and keep positive growth rates, mainly through higher public expenditure and investment. Real GDP growth exceeded 8% in 2010 and unemployment reached a record low of 5.4% in December 2010, that's also similar to China, the world's fastest growing economy. According to IMF estimates, Uruguay is likely to achieve growth in real GDP of 5% in 2011 and 4% in subsequent years.
In 2009, GDP per capita is approximately US$ 13,000, in line with the level of a middle-income nation. Uruguay enjoys a slightly higher standard of living than most of its Latin American neighbors, this is reflected in the fact that social spending and level of education (the country boasts of a 97% literacy rate) are especially high.
Uruguay's economy is largely driven by the service industry revolving around offshore financial services and high-end IT, which employ about 70% of the workforce. Trade is led by agriculture, particularly cattle, which accounts for around 40% of total exports.
Offshore finance has been conventionally one of the competitive service export sectors of the country. Uruguay was once dubbed the Switzerland, whose banking industry is under escalating pressure to unveil account secrecy (whilst Uruguay's isn't), of South America, mainly for its banking and offshore financial services sector. The largest bank in Uruguay is Banco Republica. Almost 20 private banks, mostly branches of international banks, say, Banco Santander, ABN AMRO, Citibank, operate in the country. There are also a myriad of brokers and financial-services providers, among them are Ficus Capital, Galfin Sociedad de Bolsa, Europa Sociedad de Bolsa, Dario Cukier, GBU, Hordenana and Asociados Sociedad de Bolsa, etc. Uruguay has fully recovered from the financial crisis that had resulted in a run on its banks.
Possessing a well-educated, English-speaking, lower-than-international wage workforce, Uruguay has rapidly become Latin America's information technology outsourcing hub. In 2005 Uruguay became the first exporter of software in South America. Important developers and consultants include De Larrobla & Asociados, Greycon and Quanam. Many of these companies have established in Zonamerica Business & Technology Park.
The prominent Latin American IT park belongs to a Uruguay-unique form of incorporation, the Uruguayan Free Trade Zone Corporation, which offers the possibility to set up an offshore or onshore company on its premises. Companies therein are exempted from all Uruguayan taxes inclusive of the income tax, which is 25% of the corporate income (with a further 7% to be levied upon the distribution of dividends) for ordinary companies in contrast.
The types of incorporation could be eithers Corporation, which is normally considered to have offshore activities, or Branch/Representative Office of Foreign Company, or a Limited Liability Company. The most frequently used type of incorporation by international offshore investors in Uruguay is the Corporation with bearer shares. Aside from being completely tax-free, corporations are entitled to a removal of the need to file accounts, free movement of capital, free foreign currency conversion, and free circulation of precious metals, bonds, or any type of commercial/financial papers, to name a few.
The most alluring Uruguayan glamour for offshore investors might be that the incorporation of offshore banks is allowed there. The minimum share capital for an offshore bank is US$ 500,000. The bank is exempt from any tax on any activity, line of business, income or its assets. Interestingly, it also does not require a local registered agent. Uruguayan offshore banks can carry out any form of banking activity, such as offering all types of current and deposit accounts, including foreign currency accounts. The only restriction is that they can merely conduct business with non-residents.
In the past couple of years, the relations between China and Uruguay have warmed up. China is nowadays Uruguay's third export market, and one that is growing strongly. Bilateral trade last year reached a record US$ 2.63 billion, a rise of nearly 70 per cent over 2009, and in the first quarter this year, bilateral trade had soared 47 per cent compared with the first quarter of 2010, according to China's official Xinhua news agency. Chinese companies signed deals to buy nearly US$ 530 million in Uruguayan soy, wool, dairy products and other goods during a June visit to the South American country by Chinese Vice President Xi Jinping, which was to reciprocate Uruguayan Vice President Danilo Astori's August 2010 visit to China, during which an agreement on economic and technological cooperation between the two nations was signed in Beijing.
Uruguayan government and businesses alike are now striving to help Chinese investors settle in their nation. Services to facilitate Chinese companies penetrating the Latin American market, setting up offshore entities and doing offshore financial planning are easily available in Uruguay.
Up to the first half of this year, Uruguay had signed treaties to avoid double taxation with respect to taxes on income and capital in line with the information exchange standard of the OECD with Germany, Mexico, Spain, Portugal, France, Liechtenstein, Switzerland, Malta and Finland. Having signed all these agreements recently, Uruguay adopted the international standards and technical recommendations from the OECD.
Uruguay had once been blacklisted as a tax haven by the OCED and was subsequently moved to the "grey list," Uruguay needs just one more treaty to be removed from the OECD "grey list," said upliftingly Nelson Hernandez, the newly appointed head of the Uruguayan Tax Advisory under its Ministry of Economy. This is on the forefront, and with major breakthroughs with India; Uruguay is expected to sign the last treaty with this Asian economic powerhouse.
With the aforementioned warm-up of relations between Uruguay and China in the past couple of years, the Latin American offshore jurisdiction will probably ink one with the world's fastest growing, second largest economy in the not too distant future.
