2021 Index of Economic Freedom

Uruguay

OVERALL SCORE69.3
WORLD RANK44
Rule of Law

Property Rights68.1

Judicial Effectiveness66.8

Government Integrity75.7

Government Size

Tax Burden72.6

Government Spending66.9

Fiscal Health80.5

Regulatory Efficiency

Business Freedom72.3

Labor Freedom70.5

Monetary Freedom72.5

Open Markets

Trade Freedom70.8

Investment Freedom85.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 3.5 million
  • GDP (PPP):
    • $82.8 billion
    • 0.2% growth
    • 1.3% 5-year compound annual growth
    • $22,455 per capita
  • Unemployment:
    • 8.7%
  • Inflation (CPI):
    • 7.9%
  • FDI Inflow:
    • $189.2 million

Uruguay’s economic freedom score is 69.3, making its economy the 44th freest in the 2021 Index. Its overall score has increased by 0.2 point, primarily because of an improvement in fiscal health. Uruguay is ranked 4th among 32 countries in the Americas region, and its overall score is above the regional and world averages.

This year, Uruguay’s economy again remains in the ranks of the moderately free where it has generally resided since the inception of the Index in 1995. To make the leap into the mostly free category, the government would have to strengthen the judicial system, cut government spending, lighten labor market regulations, and reduce state interference in and control of the financial sector.

IMPACT OF COVID-19: As of December 1, 2020, 78 deaths had been attributed to the pandemic in Uruguay, and the economy was forecast to contract by 4.5 percent for the year.

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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. President Luis Lacalle of the National Party started his five-year term in March 2020, ushering in a conservative government after 15 years of rule by the left-wing Broad Front. The once-dominant Colorado Party forms part of Lacalle’s administration. The economy, based on exports of such commodities as milk, beef, rice, and wool, suffered in 2019 from the economic recession in Argentina. Traditionally a safe country, Uruguay is experiencing growing rates of homicide.

Rule of LawView Methodology

Property Rights 68.1 Create a Graph using this measurement

Judicial Effectiveness 66.8 Create a Graph using this measurement

Government Integrity 75.7 Create a Graph using this measurement

Uruguay recognizes and enforces secured interests in property and contracts. Expropriation is unlikely. The judiciary is transparent and independent, but the courts function slowly and are subject to intimidation. Transparency International ranked Uruguay the least corrupt Latin American country in its 2019 Corruption Perceptions Index. The government has prosecuted some high-level officials from the executive, parliamentary, and judicial branches for corruption in recent years.

Government SizeView Methodology

The top individual income tax rate is 36 percent, and the top corporate tax rate is 25 percent. Other taxes include value-added and capital gains taxes. The overall tax burden equals 28.6 percent of total domestic income. Government spending has amounted to 33.2 percent of total output (GDP) over the past three years, and budget deficits have averaged 2.6 percent of GDP. Public debt is equivalent to 67.4 percent of GDP.

Regulatory EfficiencyView Methodology

The cost of starting a business has increased, and business freedom has declined for a fifth straight year. The maximum number of days per week that an employee can work has been reduced. The government has eliminated some price controls but still sets prices for electricity, fuels, rents, interdepartmental transport, medicines, natural gas, pasteurized milk, taxi fares, tolls, and water.

Open MarketsView Methodology

Uruguay has eight preferential trade agreements in force. The trade-weighted average tariff rate is 9.6 percent, and 53 nontariff measures are in effect. The economy is relatively open to foreign investment, but major investment reforms have been absent. About 70 percent of adult Uruguayans have formal banking accounts. In 2020, reserve requirements were reduced to maintain the appropriate level of liquidity in the banking system.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Canada77.9-0.3
2Chile75.2-1.6
3United States74.8-1.8
4Uruguay69.30.2
5Jamaica690.5
6Colombia68.1-1.1
7Peru67.7-0.2
8Saint Lucia67.5-0.7
9Saint Vincent and the Grenadines66.3-0.5
10Panama66.2-1.0
11Mexico65.5-0.5
12Barbados653.6
13The Bahamas64.60.1
14Costa Rica64.2-1.6
15Guatemala640.0
16Paraguay62.6-0.4
17Dominican Republic62.11.2
18El Salvador61-0.6
19Honduras59.8-1.3
20Trinidad and Tobago590.7
21Belize57.50.1
22Guyana57.41.2
23Nicaragua56.3-0.9
24Brazil53.4-0.3
25Dominica53-7.8
26Argentina52.7-0.4
27Ecuador52.41.1
28Haiti50.8-1.5
29Suriname46.4-3.1
30Bolivia42.7-0.1
31Cuba28.11.2
32Venezuela24.7-0.5
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