Uruguay is party to the Mercosur Regional Trade Agreement with Brazil, Paraguay, Argentina and Venezuela, which aims to promote trade and fluid movement of goods, people, and currency. Uruguay hosts the Mercosur Secretariat.
Uruguay is a relatively small economy compared to its large neighbours, Brazil and Argentina, based largely on an export-oriented agricultural sector. Uruguay's exports are dominated by agricultural products, in particular meat (beef) and offal. Uruguay's main trading partners are its fellow Mercosur members Argentina and Brazil, and also China.
New Zealand and Uruguay have an affinity based on similarity of size, southern hemisphere co-location and the role of agriculture in external trade. As a fellow dairy exporter, Uruguay shares common interests with New Zealand on international dairy access issues. There is also significant New Zealand agribusiness investment in Uruguay.
Two-way trade between New Zealand and Uruguay was NZ$18.2 million in 2012. Commodity exports to Uruguay totalled NZ$14.5 million, while imports were NZ$3.7 million. The main items exported were agricultural / horticultural machinery, dairy produce, animal products, seeds, fruit, and paper-based packaging. There has been significant New Zealand agribusiness investment in Uruguay as well. PGG Wrightson has an important seeds business in Uruguay, along with other investments in rural services.
Facts about Uruguay's economy
- Uruguay has a reported GDP of US$46.7 billion (2011).
- Economic activity is dominated by the services sector, with the country having a long history of being an offshore banking centre.
- Agriculture is one of the most important contributors to the Uruguayan economy, with agricultural-related products accounting for more than half of the country's exports.
- Uruguay's economy is based on free enterprise and private ownership but the state still plays an important role, either owning or partly owning companies in a number of sectors, including insurance, telecommunications, airlines, railways and banking.
- Uruguay has strong laws to prevent bribery and corruption, and ranked 20th in Transparency International's 2012 Corruption Perception Index (one of the top countries in Latin America).
Opportunities for New Zealand businesses
Uruguay has set New Zealand as a model in the development of their agribusiness sector. In recent years, the country has gained access to several new export markets for beef, sheep meat and dairy exports. New Zealand genetics and farm management already have a footprint in Uruguay's production systems and both private and public sectors are making investments to encourage growth in production and productivity. It has a uniformly temperate climate similar to that found in New Zealand's Northland. The majority of the landmass is flat and offers semi-productive pastoral land. The Government actively encourages and incentivises investment in the country's agricultural industry.
Uruguay is one of the best regarded economies to do business with in South America. If a company is locating to gain better access to supply and service customers in Mercosur countries and to avoid high import tariffs, then Uruguay is a good option worth exploring to set up manufacturing. Uruguay provides an advantage for New Zealand companies willing to set up in the region, with zero tariff access to the Argentine and Brazilian markets.