Without dramatic spikes and contractions in its GDP but with a stable political scene, Uruguay remains an oddity in a region known for anything but stability. It is also unusual in not being known for large-scale mining projects, a sector many South American countries are reliant upon. That could be about to change, however, as the country moves towards regulating and opening up its mining industry.

In August 2013, the Uruguayan government enacted a law regulating large-scale mining, prompted in large part by plans by London-based mining firm Zamin Ferrous to invest $3bn in the Aratiri project, an open-cast iron ore mine. This is the largest level of foreign investment into mining in Uruguay's history.

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Can this mega-project and the fact that the country sits on 2500 million tonnes of iron ore, which if mined could make it the eighth largest exporter of the mineral in the world, make Uruguay the next big thing in mining? “The new legislation tried to address most of the issues that an ore-exporting country can face,” says Christian Daude, senior economist at the Organisation for Economic Cooperation and Development. “Although there are some minor issues where we would like to see some improvements, overall we think it is a reasonable framework.”

Major players

After passing the legislation, the Uruguayan government now needs to deliver the infrastructure needed for mining projects, says Mr Daude. “To get production out you need roads dedicated specifically to that sector and a deepwater port,” he says, adding that because Uruguay does not have such a port, it remains to be seen whether it will reach an agreement to use one in another country, most likely a fellow Mercosur member, or build one of its own.

And while it is the Aratiri project that prompted a reform of Uruguay’s mining sector, there could be more changes on the horizon, according to John S Leaman, a partner at Guyer & Regules, a Montevideo-based law firm. “Uruguay is also entering into a new phase in the matter of oil treaties as apparently there could be oil reserves, especially in the continental platform,” says Mr Leaman. “There has been a lot of interest in oil drilling in Uruguay. All oil majors are here.”

Whether the majors will continue to invest in Uruguay, and whether the country will establish itself as a new mining destination, depends largely on the success of Aratiri, according to Mr Daude. The project has been delayed, partly because of the opposition to it within Uruguay and partly because Zamin executives want plans for a port development in place. “These things take time," says Mr Daude. “If a country does not have experience of such a big investment in the sector it has to be very careful.”

Additional reporting by Helena Ball.