Drawbacks to doing business in Uruguay include: its small market size (3.4 million inhabitants, approximately half of which reside in Montevideo Metropolitan Area); lack of trade financing; inflexible labor laws; limited flexibility in setting wages; and a tripartite salary council influenced wage inflation.

Other challenges include Uruguay’s high duties and taxes on imported products.  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 import tariffs which applies to most products traded with Uruguay.  They also enjoy significantly lower transportation costs due to their relative proximity.  This gives a comparative advantage to Mercosur’s products over products from the United States, Europe, and Asia.

Public procurement processes in Uruguay can be a challenge for many companies, with long timelines and delays.  Formal competitor complaints are a common practice and can slow the process significantly.  Companies interested in participating in Uruguay’s public procurement processes should seek competent legal advice prior to submitting an offer.