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- GDP (PPP):
- $73.5 billion
- 1.5% growth
- 3.7% 5-year compound annual growth
- $21,507 per capita
- Inflation (CPI):
- FDI Inflow:
Uruguay’s economy stands out in the region because of its relative openness, supported by a strong commitment to maintaining the rule of law. Uruguay is considered the least corrupt country in Latin America. The majority of Uruguayans enjoy economic prosperity, and poverty has been dramatically reduced over the past decade.
Reforms in recent years to improve the regulatory environment have made Uruguay an attractive location for foreign investors, but the government recently made starting a business more expensive by increasing incorporation costs. Government spending continues to be a problem as budget deficits have remained around 3 percent of GDP in recent years, pushing up public debt.
Uruguay’s political and labor conditions are among the freest in Latin America. Public outrage at the Tupamaros, a violent 1960s Marxist guerrilla movement, facilitated a military takeover of the government in 1973. Civilian rule was not restored until 1985. The 2004 election victory of the center-left Frente Amplio Coalition (FAC) party ended 170 years of political control by the center-right Colorado and Blanco parties. President Tabaré Vázquez of the FAC began his second (nonconsecutive) five-year term in 2015 but has faced a significantly tougher political landscape because of a regional economic slowdown that has forced spending cuts in programs that are popular with his political base.
Private property is generally secure, expropriation is unlikely, and contracts are enforced. The judiciary is transparent and relatively independent, but the courts function slowly. Uruguay surpassed Chile as the least corrupt country in Latin America in Transparency International’s 2015 Corruption Perceptions Index. A three-member Advisory Economic and Financial Board works to promote government transparency and implement anticorruption measures.
The top individual income tax rate is 30 percent, and the top corporate tax rate is 25 percent. Other taxes include a value-added tax and a capital gains tax. The overall tax burden equals 26.9 percent of total domestic income. Government spending has amounted to 31.9 percent of total output (GDP) over the past three years, and budget deficits have averaged 3.1 percent of GDP. Public debt is equivalent to 61.8 percent of GDP.
Recent reforms have considerably enhanced regulatory efficiency and reduced the cost of completing licensing requirements. The nonsalary cost of employing a worker is relatively low. The government has eliminated most price controls, but it continues to fix prices for electricity, fuels, interdepartmental transport, medicines, natural gas, pasteurized milk, taxi fares, tolls, and water.
Trade is moderately important to Uruguay’s economy; the value of exports and imports taken together equals 45 percent of GDP. The average applied tariff rate is 4.7 percent. The economy is relatively open to foreign investment, but state-owned enterprises distort the economy. Although the financial sector continues to evolve, capital markets are underdeveloped and concentrated in government debt. The state continues to influence the allocation of credit.