2017 Index of Economic Freedom

Uruguay

overall score69.7
world rank38
Rule of Law

Property Rights70.2

Government Integrity70.3

Judicial Effectiveness66.8

Government Size

Government Spending69.4

Tax Burden77.5

Fiscal Health77.2

Regulatory Efficiency

Business Freedom74.8

Labor Freedom62.9

Monetary Freedom71.3

Open Markets

Trade Freedom80.6

Investment Freedom85.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 3.4 million
  • GDP (PPP):
    • $73.5 billion
    • 1.5% growth
    • 3.7% 5-year compound annual growth
    • $21,507 per capita
  • Unemployment:
    • 7.3%
  • Inflation (CPI):
    • 8.7%
  • FDI Inflow:
    • $1.6 billion
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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.

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Background

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.

Rule of LawView Methodology

Property Rights 70.2 Create a Graph using this measurement

Government Integrity 70.3 Create a Graph using this measurement

Judicial Effectiveness 66.8 Create a Graph using this measurement

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.

Government SizeView 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 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.

Regulatory EfficiencyView Methodology

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.

Open MarketsView Methodology

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.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Chile76.5-1.2
2Colombia69.7-1.1
3Uruguay 69.70.9
4Jamaica 69.52.0
5Peru68.91.5
6Panama 66.31.5
7Saint Vincent and the Grenadines65.2-3.6
8Saint Lucia65-5.0
9Costa Rica 65-2.4
10El Salvador 64.1-1.0
11Dominica63.7-3.3
12Guatemala 631.2
13Dominican Republic62.91.9
14Paraguay 62.40.9
15Trinidad and Tobago61.2-1.7
16The Bahamas61.1-9.8
17Nicaragua 59.20.6
18Honduras 58.81.1
19Belize58.61.2
20Guyana58.53.1
21Barbados54.5-13.8
22Brazil52.9-3.6
23Argentina50.46.6
24Haiti49.6-1.7
25Ecuador49.30.7
26Suriname48-5.8
27Bolivia47.70.3
28Cuba33.94.1
29Venezuela 27-6.7
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