2018 Index of Economic Freedom

Uruguay

overall score69.2
world rank38
Rule of Law

Property Rights69.3

Government Integrity71.6

Judicial Effectiveness67.0

Government Size

Government Spending68.6

Tax Burden78.0

Fiscal Health71.1

Regulatory Efficiency

Business Freedom74.4

Labor Freedom64.4

Monetary Freedom70.7

Open Markets

Trade Freedom80.4

Investment Freedom85.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 3.5 million
  • GDP (PPP):
    • $74.9 billion
    • 1.5% growth
    • 2.8% 5-year compound annual growth
    • $21,527 per capita
  • Unemployment:
    • 8.2%
  • Inflation (CPI):
    • 9.6%
  • FDI Inflow:
    • $953.1 million
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Uruguay’s economic freedom score is 69.2, making its economy the 38th freest in the 2018 Index. Its overall score has decreased by 0.5 point, with lower scores for the fiscal health and property rights indicators overwhelming improvements in labor freedom and government integrity. Uruguay is ranked 4th among 32 countries in the Americas region, and its overall score is above the regional and world averages.

Although economic growth in Uruguay recovered in 2017, the government faces the need for fiscal consolidation following deterioration in the fiscal accounts from 2014–2016 and plans to make structural reforms to lessen the burden on the economy caused by an inflexible labor market and high taxes. 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 Latin America’s least corrupt country, ahead even of Chile.

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Background

Uruguay, Bolivia, and Paraguay were established in the 19th century as buffers between regional powers Brazil and Argentina. Public outrage at Marxist guerrilla violence in the 1960s facilitated a military takeover of the government in 1973. Civilian rule was restored in 1985. The center-left Frente Amplio Coalition’s election victory in 2004 ended 170 years of political dominance by the center-right Colorado and Blanco parties. President Tabaré Vázquez of the FAC will complete his second, nonconsecutive five-year term in 2020. Pressures on government revenue have forced cuts in programs popular with his political base. The economy is still based largely on exports of such commodities as milk, beef, rice, and wool and has suffered from lower prices for those agricultural products.

Rule of LawView Methodology

Property Rights 69.3 Create a Graph using this measurement

Government Integrity 71.6 Create a Graph using this measurement

Judicial Effectiveness 67.0 Create a Graph using this measurement

Secured interests in property and contracts are recognized and enforced. Mortgages exist, and there is a recognized and reliable system for recording them. The judiciary is transparent and relatively independent, but the courts function slowly. The law provides criminal penalties for corruption by officials, and the government generally implements the law effectively.

Government SizeView Methodology

The top individual income tax rate is 30 percent, and the top corporate tax rate is 25 percent. Other taxes include value-added and capital gains taxes. The overall tax burden equals 26.0 percent of total domestic income. Over the past three years, government spending has amounted to 32.4 percent of total output (GDP), and budget deficits have averaged 3.7 percent of GDP. Public debt is equivalent to 60.9 percent of GDP.

Regulatory EfficiencyView Methodology

Uruguay’s stable democracy and transparent regulatory system are conducive to operating a business. The labor market functions relatively well, although there have been concerns recently about the quality of public education. Uruguay has eliminated most price controls, but the government continues to fix prices for electricity, fuels, and many other staples.

Open MarketsView Methodology

Trade is moderately important to Uruguay’s economy; the combined value of exports and imports equals 42 percent of GDP. The average applied tariff rate is 4.8 percent. Nontariff barriers impede some trade. Government policies do not significantly interfere with foreign investment. The financial sector is evolving, but capital markets are underdeveloped and consist mostly of 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
1Canada77.7-0.8
2United States75.70.6
3Chile75.2-1.3
4Uruguay 69.2-0.5
5Jamaica 69.1-0.4
6Colombia68.9-0.8
7Peru68.7-0.2
8Saint Vincent and the Grenadines67.72.5
9Saint Lucia67.62.6
10Panama 670.7
11Costa Rica 65.60.6
12Mexico64.81.2
13Dominica64.50.8
14Guatemala 63.40.4
15The Bahamas63.32.2
16El Salvador 63.2-0.9
17Paraguay 62.1-0.3
18Dominican Republic61.6-1.3
19Honduras 60.61.8
20Nicaragua 58.9-0.3
21Guyana58.70.2
22Trinidad and Tobago57.7-3.5
23Belize57.1-1.5
24Barbados572.5
25Haiti55.86.2
26Argentina52.31.9
27Brazil51.4-1.5
28Ecuador48.5-0.8
29Suriname48.10.1
30Bolivia44.1-3.6
31Cuba31.9-2.0
32Venezuela 25.2-1.8
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