Learn about barriers to market entry and local requirements, i.e., things to be aware of when entering the market for this country.
Drawbacks to doing business in Uruguay include its small market size (3.5 million inhabitants, approximately half of which reside in the capital, Montevideo), lack of trade financing, and inflexible labor laws. In terms of Global Competitiveness, the World Economic Forum’s 2019 Global Competitiveness Index ranked Uruguay 54 of 141 countries with businesses citing hiring and firing practices, limited flexibility in setting wages and tripartite salary council influenced wage inflation as challenges to doing business in the market.
Other challenges include Uruguay’s high duties and taxes on imported products. According to the Doing Business Index 2020, in the “trading across borders” category, Uruguay was ranked 150th of 190 countries, primarily due to the high costs associated with international trade. Uruguay’s market price structure reflects world market prices plus import tariffs, taxes, and transportation costs. Local taxes, like the value-added tax (VAT) and excise tax (IMESI) apply on retail sales prices. VAT and IMESI can significantly increase the prices on certain imported products. Products that are subject to IMESI rates are alcoholic beverages, tobacco, refined petroleum, cosmetics, and cars. Rates vary according to the item.
Products from nearby Mercosur countries Argentina, Brazil, and Paraguay enjoy the advantage of no tariffs applicable on most products traded with Uruguay and significantly lower transportation costs. This gives a comparative advantage to Mercosur’s products over products from the United States, Europe, and Asia.