In a region marked by political upheaval and economic problems, Uruguay has gained a reputation as a bastion of stability. The country of 3.5 million people is one of Latin America’s most advanced economies and is known for maintaining the rule of law. 

Even throughout the pandemic, it has avoided the mandatory lockdowns, social unrest and spiralling death tolls seen elsewhere. After shrinking 5.9% in 2020, the economy is forecast to grow 3.5% in 2021. Data from fDi Markets shows foreign greenfield investment is on track to hit $1.39bn by year-end, marking Uruguay’s third-highest volume in more than a decade. 


The country’s minister of economy and finance, Azucena Arbeleche spoke with fDi about the country’s recovery, government support for sustainable investment, and her plans as chair of the IMF and World Bank’s Development Committee.

Q: What is driving Uruguay’s economic rebound? 

A: Economic activity has been supported by large-scale foreign direct investment (FDI), infrastructure projects, commodity exports and strong manufacturing production. A swift Covid-19 vaccination strategy has also allowed for faster renormalisation of business activity. At mid-November, more than 74% of the population had received two doses. 

Q: What’s behind the pick-up in FDI and infrastructure projects?

A: Last year, we modified the investment promotion law by introducing tax exemptions for projects that create a certain level of employment. We also issued a decree offering tax exemptions for big-ticket construction. These incentives to promote private investment are helping the private sector lead the way to recovery. 

Q: Uruguay is not known as an easy place to do business. Are there plans to improve this?

A: Clearly there is room for improvement, especially in removing bottlenecks for private sector development. This includes costs associated with regulatory compliance in the tradable sector, tax burdens, licensing and permitting procedures, plus the cost of registering properties. We are also moving forward with reforms to state-owned enterprises that will improve efficiencies and support post-pandemic investment. 

Q: Renewable power is one of Uruguay’s top two sectors for FDI. Is the government prioritising sustainable investment? 

A: Uruguay is at the forefront of environmentally friendly policies. We’ve transformed our energy matrix over the past decade, and 94% of our electricity is now generated using renewable sources.

Now we are launching a ‘second-generation’ transformation in line with our goal of reaching net-zero carbon dioxide emissions by 2050. This opens up lots of business opportunities for sustainable-focused investors. Clean energy projects can also take advantage of tax exemptions and rebates created by last year’s changes to the investment promotion law.

Q: Is this second generation of sustainability focused on certain sectors?

A: This is a two-branch approach. We’ve launched a new roadmap for developing green hydrogen and have set our sights on becoming an exporter of hydrogen in the medium-term. In parallel, we are making great strides in electric mobility. We are providing strong incentives for the adoption of electric cars, including 0% import taxes. But we are, of course, open to much more than this. Agribusiness is another sector where we need to make progress in terms of a more sustainable approach.  

Q: As chair of the World Bank and IMF Development Committee, you want to link the cost of government loans from multilaterals to their progress towards the Paris Agreement targets. Do you believe this will be adopted?

A: I’m confident about this. To move towards a low-carbon future we need practical proposals and this can be done by using financial incentives and innovation. Financial incentives are very powerful. Multilateral development banks are uniquely placed to ensure countries with good environmental performance are rewarded by subsidising their interest rates. Authorities at the World Bank, Inter-American Development Bank and UN have been quite receptive to this idea.

This article was first published in the December 2021/January 2022 edition of fDi Intelligence magazine. Read the online edition here.