Note: This post is a collaboration between Nadim Curi, the Uruguayan cofounder of CityCop and me. Thanks to Nadim for taking the time to help out with this post!
The small country of Uruguay, wedged between its two much larger neighbors, Argentina and Brazil, is home to 3.4 million people and has been on the forefront of many innovative reforms. Uruguay ranks first in Latin America for democracy, peace, lack of corruption, e-government, and press freedoms.
Despite it’s small size, Uruguay has a unique culture and interesting achievements that have inspired Uruguayans to believe that anything’s possible. This attitude may be best epitomized by its national soccer team, which has won two World Cups, two Olympic gold medals, and 15 Copa Americas (more than any other South American country).
Besides football, Uruguay has a great quality of life and was ranked first in Latin America in democracy, peace, lack of corruption, press freedom, size of the middle class and prosperity.
The Economist named Uruguay ‘country of the year’ in 2013 for, among many reasons, the country’s dedication to personal rights and inclusion. Uruguay has an innovative policy of legalizing the production, sale and consumption of cannabis, and first nation in the world to fully legalize the production and sale of marijuana for recreational use.
Same-sex marriage and abortion are also legal, leading Uruguay to be regarded as one of the most progressive nations in the world. Uruguay has a low crime rate and a high level of English speakers, making it a somewhat unknown but good place to do business.
Uruguay did endure a civil-military rule from 1973 – 1985, but nothing like on the scale of its neighbor Argentina. In 1985, Uruguay became democratic again, and the country began to implement social reforms to better the lives of citizens. When Tabaré Vázquez came to power in 2004, he tripled foreign investment, reduced poverty and unemployment, and cut public debt from 79% of GDP to 60%.
Uruguay experienced one of the biggest economic and financial crisis in its history around 2002, principally as a cascade effect from economic problems in the region. Inflation, which had been a mere 3.59% in 2001, hit 24% by September and was expected to increase to about 40% by the end of the year. The economy contracted by 11%, and unemployment climbed to 21%. The Financial Times reported that Uruguay “will need a miracle similar to its World Cup victory in 1950 to survive” and quoted 100 to 1 odds at that.
Despite of this, Uruguay’s financial indicators remained more stable than those of its neighbours, a reflection of its solid reputation among investors and its investment-grade sovereign bond rating, one of only two in South America.
After this crisis, the locally-owned banks are more well capitalized and safe. In 2009, when most of the world’s economy was suffering from the global recession, Uruguay posted an economic gain and GDP increased 3%.
In 2009, Uruguayans elected José Mujica, who had spent 15 years in prison during military rule. During his time, the country legalized abortion, same-sex marriage, and the use of cannabis.
Many people might recognize Uruguay because of former President José Mujica, often noted as “the world’s humblest president,” who would donate 90% of his $12,000 USD per month salary to organizations and persons in need.
In 2014, Tabaré Vázquez won the presidency once again. For startups and entrepreneurs, Uruguay may be small, but it’s an interesting place to consider doing business more as a base to attack other markets, rather than in its small local market.
Advantages of Doing Business in Uruguay
Uruguay provides tax exemptions to software companies who choose to export their products and services, which is why the country is the largest software exporter in the region (greater than both Brazil and Argentina).
Uruguay’s government welcomes foreign investment by individuals. The country has a favorable legal system, and the investment climate does not discriminate against foreign investors. Roughly 130 U.S. firms operate in Uruguay. Uruguay XXI is an organization that promotes imports and exports of Uruguay. The organization wants to see Uruguay as an investment destination, so they provide useful information for companies that want to expand to Uruguay, as well as information for investors looking at Uruguay for opportunities.
For instance, Uruguay is also a popular place to invest in real estate because foreigners can buy, own, and sell property with the same rights and protections as a Uruguayan citizen.
The country has a favorable legal system, and the investment climate does not discriminate against foreign investors. Roughly 130 U.S. firms operate in Uruguay. Uruguay XXI is an organization that promotes imports and exports of Uruguay. The organization wants to see Uruguay as an investment destination, so they provide useful information for companies that want to expand to Uruguay, as well as information for investors looking at Uruguay for opportunities.
Government programs help entrepreneurs across the country. The National Agency for Investigation and Innovation, a state-run organization, hosts conferences and events for the startup community, as well as offers resources and supports for entrepreneurs all over Uruguay.
Many coworking spaces, like Sinergia Cowork and daVinci, are popping up, mostly around Montevideo, that foster cohesiveness and an active startup community, including Ingenio, the first tech incubator in Uruguay.
With the support of the government with ANII through these incubators, and global organizations such as Endeavor, Uruguayan entrepreneurs are having much more incentives and support to start a business than 15 years ago, and they’re producing amazing global products and services that are being used all over the world.
Today probably the most well known Uruguayan startup success is PedidosYa. Founded in October 2009, the company expanded all over Latin America and was acquired by Delivery Hero.
Tryolabs, which has offices in Montevideo and San Francisco, helps startups and enterprises create natural language processing (NLP) and build AI-based products. The company even created a scholarship program for Uruguayan students studying computer science.
Another Uruguayan startup worth noting is Bankingly, who helps financial institutions around the world provide their customers with easy access to digital offerings and services
CityCop, a social GPS application for community watch, originated in Uruguay and has expanded all over Latin America to help individuals take part in curbing crime. Another GPS-startup from the region is GPSGay, the largest network for the LGBT community across Latin America, who won a Seedstars competition, along with Uruguayan startup Sur3D, who helps retail environments offer custom product creation experiences live in store.
Additionally, Uruguay has high level software engineers that can be hired at a relatively lower hourly rate compared to the US (US$30-$40 an hour). Along with the multitude of Uruguayan startups, Argentine startups and companies alike end up in the country for economic stability.
Disadvantages to Doing Business in Uruguay
Though it may seem as though this country is the perfect business climate, there are some drawbacks. The pace of doing business is slower and the market is smaller, which can cause some people frustration when working in the country. From ATMs running out of cash to suppliers not showing up, foreigners can have a hard time when trying to work efficiently in Uruguay.
In the World Bank’s Doing Business report, Uruguay ranks 90 (out of 190). There are some issues where Uruguay ranks considerably low:
- Dealing with construction permits: 163
- Registering property: 110
- Trading across borders: 146
- Paying taxes: 113
- Enforcing contracts: 111
These numbers suggest the business climate isn’t particularly to navigate, especially for operating in the local market.
Uruguay is a very progressive country that welcomes the influx of startups. Anyone planning on relocating to the region should be aware of the slower pace of doing business, especially compared to the United States. However, the government is putting incentives in place for entrepreneurship and making an effort to keep its anti corruption, pro-business reputation, which has historically been up there with Chile in the region.