2014 Index of Economic Freedom

Uruguay

overall score69.3
world rank38
Rule of Law

Property Rights70.0

Freedom From Corruption70.6

Limited Government

Government Spending68.0

Fiscal Freedom77.4

Regulatory Efficiency

Business Freedom74.5

Labor Freedom68.1

Monetary Freedom72.1

Open Markets

Trade Freedom82.5

Investment Freedom80.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 3.4 million
  • GDP (PPP):
    • $53.8 billion
    • 3.8% growth
    • 5.6% 5-year compound annual growth
    • $15,911 per capita
  • Unemployment:
    • 6.1%
  • Inflation (CPI):
    • 8.1%
  • FDI Inflow:
    • $2.7 billion
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Uruguay’s economic freedom score is 69.3, making its economy the 38th freest in the 2014 Index. Its score is 0.4 point lower than last year, with declines in fiscal freedom, labor freedom, monetary freedom, and trade freedom outweighing improvements in freedom from corruption, business freedom, and investment freedom. Uruguay is ranked 5th out of 29 countries in the South and Central America/Caribbean region, and its overall score is above the world average.

Over the 20-year history of the Index, Uruguay has advanced its economic freedom score by over 6 points. Improvements in six of the 10 economic freedoms include gains in business freedom, investment freedom, trade freedom, monetary freedom, and rule of law as measured by property rights and freedom from corruption, scores for which have improved by 20 points.

Uruguay typically has been ranked near the upper boundary of the “moderately free” category. Government policies promote engagement in global trade and investment, and the private sector contributes to economic growth to an enhanced degree. However, state interference in the financial sector and other areas still constrains development of more dynamic growth.

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Background

Former guerrilla Jose Mujica was elected president of Uruguay in 2009. After strong growth in 2010 and 2011, the economy has slowed. State involvement in the economy is substantial, and deregulation is needed in telecommunications, energy, and public utilities. Crime and violence are increasing, and drug trafficking is a problem in urban areas. Uruguay is a founding member of MERCOSUR and signed a Trade and Investment Framework Agreement with the United States in 2007. The economy is still based largely on exports of commodities like milk, beef, rice, and wool. Uruguay offers excellent banking services, including branches of some of the world’s largest banks, but an information-sharing agreement with Argentina has reduced consumer confidence in the country as a safe haven for assets.

Rule of LawView Methodology

Property Rights 70.0 Create a Graph using this measurement

Freedom From Corruption 70.6 Create a Graph using this measurement

Uruguay is one of Latin America’s least corrupt countries. A Transparency Law criminalizes a broad range of potential abuses of power by officeholders, including the laundering of funds related to public corruption cases. The judiciary is relatively independent, but the court system remains severely backlogged. Private property is generally secure, and expropriation is unlikely. Contracts are enforced, and regulations protect IPR.

Limited GovernmentView Methodology

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 (VAT) and a capital gains tax. Overall tax revenue constitutes 27.2 percent of the economy. Public expenditures are equivalent to one-third of the domestic economy. Government debt is 54 percent of GDP. Regional drought has pushed up energy costs, widening the budget deficit.

Regulatory EfficiencyView Methodology

It takes five procedures and seven days to incorporate a business, and no minimum capital is required. The cost of completing licensing requirements is about half the level of average annual income. The non-salary cost of employing a worker is low, but restrictions on work hours are not flexible. The government shut down the state-owned oil refinery in 2011, but subsidies to the state-owned electricity company increased in 2012.

Open MarketsView Methodology

Uruguay’s average tariff rate is 3.8 percent. Some imports require licenses. Foreign investors are treated the same as domestic investors under the law, and there generally are no ownership limits. The financial sector continues to evolve, but the government remains heavily involved through ownership and allocation of credit. Capital markets are underdeveloped and concentrate on government debt.

Country's Score Over Time

Bar Graph of Uruguay  Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Uruguay  to other economic country groups

Regional Ranking

rank country overall change
1Chile78.7-0.3
2Saint Lucia70.70.3
3Colombia70.71.1
4The Bahamas69.8-0.3
5Uruguay 69.3-0.4
6Barbados68.3-1.0
7Peru67.4-0.8
8Saint Vincent and the Grenadines670.3
9Costa Rica 66.9-0.1
10Jamaica 66.7-0.1
11El Salvador 66.2-0.5
12Dominica65.21.3
13Panama 63.40.9
14Trinidad and Tobago62.70.4
15Paraguay 620.9
16Dominican Republic61.31.6
17Guatemala 61.21.2
18Nicaragua 58.41.8
19Honduras 57.1-1.3
20Brazil56.9-0.8
21Belize56.7-0.6
22Guyana55.71.9
23Suriname54.22.2
24Haiti48.90.8
25Bolivia48.40.5
26Ecuador481.1
27Argentina44.6-2.1
28Venezuela 36.30.2
29Cuba28.70.2
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