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Economy of Uruguay

Uruguay's economy remains dependent on agriculture and services. Agriculture and agri-industry account for 12% of GDP, and for about 70% of total exports. Leading economic sectors include commerce, agriculture and agri-industry (meat processing, wood pulp, rice, soybeans, and wheat) and construction. Though still small, the information software industry is growing rapidly. There are 12 free trade zones, three of which are dedicated to services (for example, financial, software, call centers, and logistics). Uruguay offers U.S. firms significant advantages as a MERCOSUR-region distribution platform.

In 2002, Uruguay went through the steepest economic and financial crisis in recent history, which developed mostly from external factors. Devaluation in Brazil in 1999 made Uruguayan goods less competitive, and an outbreak of foot and mouth disease in 2001 curtailed beef exports to North America. Starting in late 2001, an economic crisis in Argentina undermined Uruguay's economy, with exports to Argentina and tourist revenues falling dramatically. In mid-2002 Argentine withdrawals from Uruguayan banks started a bank run that was overcome only by massive borrowing from international financial institutions. This, in turn, led to serious debt sustainability problems. A successful debt swap helped restore confidence and significantly reduced country risk.

Uruguay's economy resumed mild growth in 2003--with a 0.8% rise in GDP--and has grown robustly since then, with annual average rates of 6.5% in 2004-2008. Growth has been led by private consumption--which followed the recovery in employment and wages--and exports, partially due to strong commodity prices. The global financial crisis slowed growth, but Uruguay managed to avoid a recession and keep a positive growth rate of 2.9% in 2009. Robust growth of over 8.0% is expected for 2010, and the Government of Uruguay forecasts annual growth of about 4.0% for 2011-2015.

Uruguay has traditionally favored substantial state involvement in the economy, and privatization is still widely opposed. Recent governments have carried out cautious programs of economic liberalization similar to those in many other Latin American countries. They included lowering tariffs, controlling deficit spending, reducing inflation, and cutting the size of government. Uruguay's economy is based on free enterprise and private ownership. In spite of some de-monopolization over the past several decades, the state continues to play a major role in the economy, owning either fully or partially companies in insurance, water supply, electricity, telephone service, petroleum refining, airlines, postal service, railways, and banking.

Uruguay has largely diversified its trade in recent years and reduced its longstanding dependency on Argentina and Brazil. It is a founding member of MERCOSUR, the Southern Cone trading bloc also composed of Argentina, Brazil, and Paraguay. The MERCOSUR Secretariat is located in Montevideo.

Uruguay enjoys a positive investment climate, with a strong legal system and open financial markets. It grants equal treatment to national and foreign investors and, aside from very few sectors, there is neither de jure nor de facto discrimination toward investment by source or origin. Investments are allowed without prior authorization, and there is fully free remittance of capital and profits. A decree passed in 2007 provides significant incentives to local and foreign investors. Domestic investment and foreign direct investment (FDI), which have been traditionally low, increased significantly in recent years. About 100 American firms operate in Uruguay and, according to the U.S. Department of Commerce, the stock of U.S. direct investment amounted to $2.9 billion in 2009.

Gross domestic product (GDP): $40.7 billion (2010, IMF); $31.5 billion (2009); $31.2 billion (2008); $23.9 billion (2007); $19.8 billion (2006); $17.4 billion (2005).
Annual growth rate: 2.9% (2009); 8.9% (2008); 7.6% (2007); 4.6% (2006); 7.5% (2005).
Per capita GDP: $12,129 (2010, IMF); $9,457 (2009); $9,357 (2008); $7,209 (2007); $5,977 (2006); $5,254 (2005); $4,146 (2004).
Natural resources: Arable land, pastures, hydroelectric power, granite, marble, fisheries.
Agriculture (9% of GDP): Products--beef, wool, rice, wheat, barley, corn, soybeans, fish, forestry.
Industry (14% of GDP): Types--food processing, electrical machinery, wool, textiles, leather, leather apparel, beverages and tobacco, chemicals, cement, petroleum products, transportation equipment.
Services: Commerce, restaurants and hotels--14% of GDP. Construction--7% of GDP. Other services--56% of GDP.
Trade: Exports (2009, f.o.b.)--$5.5 billion ($6.5 billion including exports of cellulose pulp and beverage concentrates from free trade zones): beef, rice, dairy products, wood, soy and leather. Major markets--Brazil, Argentina, China, Russia, Venezuela, U.S. Imports (2009, c.i.f.)--$6.9 billion: oil, planes, telephony equipment, insecticides, vehicles, paper, plastics. Major suppliers--Brazil, Argentina, China, United States, Venezuela.

Geography of Uruguay

Uruguay is one of the smallest of the South American republics. It is bounded to the north by Brazil, to the southeast by the Atlantic, and is separated from Argentina in the west and south by the River Uruguay, which widens out into the Rio de la Plata estuary. The landscape is made up of hilly meadows broken by streams and rivers. There is a string of beaches along the coast. Most of the country is grazing land for sheep and cattle. Montevideo, the most southern point of the nation, accommodates more than half of the population. About 90% of the land is suitable for agriculture, although only 12% is used in this way. Uruguay is known as the 'Oriental Republic' because it stands on the eastern bank of the Rio de la Plata. Location: Southern South America, bordering the South Atlantic Ocean, between Argentina and Brazil Map references: South America Area: total area: 176,220 sq km land area: 173,620 sq km comparative area: slightly smaller than Washington State Land boundaries: total 1,564 km, Argentina 579 km, Brazil 985 km Coastline: 660 km Maritime claims: continental shelf: 200-m depth or to the depth of exploitation territorial sea: 200 nm; overflight and navigation guaranteed beyond 12 nm International disputes: short section of boundary with Argentina is in dispute; two short sections of the boundary with Brazil are in dispute - Arroyo de la Invernada (Arroio Invernada) area of the Rio Cuareim (Rio Quarai) and the islands at the confluence of the Rio Cuareim (Rio Quarai) and the Uruguay River Climate: warm temperate; freezing temperatures almost unknown Terrain: mostly rolling plains and low hills; fertile coastal lowland Natural resources: soil, hydropower potential, minor minerals Land use: arable land: 8% permanent crops: 0% meadows and pastures: 78% forest and woodland: 4% other: 10% Irrigated land: 1,100 sq km (1989 est.) Environment: current issues: substantial pollution from Brazilian industry along border; one-fifth of country affected by acid rain generated by Brazil; water pollution from meat packing/tannery industry; inadequate solid/hazardous waste disposal natural hazards: seasonally high winds (the pampero is a chilly and occasional violent wind which blows north from the Argentine pampas), droughts, floods; because of the absence of mountains, which act as weather barriers, all locations are particularly vulnerable to rapid changes in weather fronts international agreements: party to - Antarctic-Environmental Protocol, Antarctic Treaty, Biodiversity, Climate Change, Endangered Species, Environmental Modification, Hazardous Wastes, Law of the Sea, Nuclear Test Ban, Ozone Layer Protection, Ship Pollution, Wetlands; signed, but not ratified - Marine Dumping, Marine Life Conservation

Government of Uruguay

Uruguay's 1967 constitution institutionalizes a strong presidency, subject to legislative and judicial checks. The president's term is 5 years. The term is non-consecutive, but former presidents may run again later in subsequent elections. Thirteen cabinet ministers, appointed by the president, head executive departments. The constitution provides for a bicameral General Assembly responsible for enacting laws and regulating the administration of justice. The General Assembly consists of a 30-member Senate, presided over by the vice president of the republic, and a 99-member Chamber of Deputies.

The highest court is the Supreme Court; below it are appellate and lower courts and justices of the peace. In addition, there are electoral and administrative ("contentious") courts, an accounts court, and a military judicial system.

Principal Government Officials
President--José Mujica
Vice President--Danilo Astori
Minister of Foreign Affairs--Luis Amalgro
Ambassador to the United States--Carlos Alberto Gianelli Derois
Ambassador to the United Nations--Jose Luis Cancela
Ambassador to the OAS--Lujan Flores

Uruguay maintains an Embassy in the United States at 1913 "I" Street NW, Washington, DC 20006 (tel. 202-331-1313, fax 202-331-8142). Uruguay maintains consulates in Chicago, Miami, Los Angeles, New York and San Juan, Puerto Rico.

Type: Constitutional republic.
Independence: August 25, 1825.
Constitution: First 1830, current 1967, most recently amended January 1997.
Branches: Executive--president (chief of state and head of government). Legislative--General Assembly elected by proportional representation consisting of a 99-seat Chamber of Deputies and a 30-seat Senate. Judicial--Supreme Court of Justice.
Administrative subdivisions: 19 departments with limited autonomy.
Political parties/coalitions: Colorado Party, Blanco (National) Party, Frente Amplio, Independent Party.
Suffrage: Universal and compulsory at 18.

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History of Uruguay

The only inhabitants of Uruguay before European colonization of the area were the Charrua Indians, a small tribe driven south by the Guarani Indians of Paraguay. The Spanish discovered the territory of present-day Uruguay in 1516, but the Indians' fierce resistance to conquest, combined with the absence of gold and silver, limited settlement in the region during the 16th and 17th centuries. The Spanish introduced cattle, which became a source of wealth in the region. Spanish colonization increased as Spain sought to limit Portugal's expansion of Brazil's frontiers. Montevideo was founded by the Spanish in the early 18th century as a military stronghold; its natural harbor soon developed into a commercial center competing with Argentina's capital, Buenos Aires. Uruguay's early 19th century history was shaped by ongoing fights between the British, Spanish, Portuguese, and colonial forces for dominance in the Argentina-Brazil-Uruguay region. In 1811, Jose Gervasio Artigas, who became the Uruguay´s hero, launched a successful revolt against Spain. In 1821, the Provincia Oriental del Rio de la Plata, present-day Uruguay, was annexed to Brazil by Portugal. The Provincia declared independence from Brazil in August 25, 1825 (after numerous revolts in 1821, 1823, and 1825) but decided to adhere to a regional federation with Argentina. The regional federation defeated Brazil after 3-year fight. The 1828 Treaty of Montevideo, fostered by the United Kingdom, gave birth to Uruguay as an independent state. The nation's first constitution was adopted in 1830. The remainder of the 19th century under a series of elected and appointed presidents saw interventions by--and conflicts with--neighboring states, political and economic fluctuations, and large inflows of immigrants, mostly from Europe. Jose Batlle y Ordoñez, president from 1903 to 1907 and again from 1911 to 1915, set the pattern for Uruguay's modern political development. He established widespread political, social, and economic reforms such as a welfare program, government participation in many facets of the economy, and a plural executive. Some of these reforms were continued by his successors. By 1966, economic, political, and social difficulties led to constitutional amendments, and a new constitution was adopted in 1967. In 1973, amid increasing economic and political turmoil, the armed forces closed the Congress and established a civilian-military regime. A new constitution drafted by the military was rejected in a November 1980 plebiscite. Following the plebiscite, the armed forces announced a plan for return to civilian rule. National elections were held in 1984; Colorado Party leader Julio Maria Sanguinetti won the presidency and served from 1985 to 1990. The first Sanguinetti administration implemented economic reforms and consolidated democratization following the country's years under military rule. Sanguinetti's economic reforms, focusing on the attraction of foreign trade and capital, achieved some success and stabilized the economy. In order to promote national reconciliation and facilitate the return of democratic civilian rule, Sanguinetti secured public approval by plebiscite of a controversial general amnesty for military leaders accused of committing human rights violations under the military regime and sped the release of former guerrillas. The National Party's Luis Alberto Lacalle won the 1989 presidential election and served from 1990 to 1995. President Lacalle executed major economic structural reforms and pursued further liberalization of trade regimes, including Uruguay's inclusion in the Southern Cone Common Market (MERCOSUR) in 1991. Despite economic growth during Lacalle's term, adjustment and privatization efforts provoked political opposition, and some reforms were overturned by referendum. In the 1994 elections, former President Sanguinetti won a new term, which ran from 1995 until March 2000. As no single party had a majority in the General Assembly, the National Party joined with Sanguinetti's Colorado Party in a coalition government. The Sanguinetti government continued Uruguay's economic reforms and integration into MERCOSUR. Other important reforms were aimed at improving the electoral system, social security, education, and public safety. The economy grew steadily for most of Sanguinetti's term, until low commodity prices and economic difficulties in its main export markets caused a recession in 1999, which continued into 2003. The 1999 national elections were held under a new electoral system established by a 1996 constitutional amendment. Primaries in April decided single presidential candidates for each party, and national elections on October 31 determined representation in the legislature. As no presidential candidate received a majority in the October election, a runoff was held in November. In the runoff, Colorado Party candidate Jorge Batlle, aided by the support of the National Party, defeated Broad Front candidate Tabare Vazquez. The legislative coalition of the Colorado and National parties that held during most of Batlle´s administration ended in November 2002, when the Blancos withdrew their ministers from the cabinet. Throughout most of his administration, President Batlle had to handle Uruguay´s largest economic crisis in recent history, which impacted on poverty and led to increased emigration. Aside from successfully addressing the crisis, Batlle increased international trade, attracted foreign investment and tried to resolve issues related to Uruguayans who disappeared during the military government. The two traditional political parties, the National ("Blanco") and Colorado parties, which were founded in the early 19th century, in the past garnered about 90% of the vote but have seen their share decline over the past decades. At the same time the share of the Frente Amplio, a coalition of various left-of-center factions that became the largest political force in 1999, was on the rise. In October 2004 presidential elections, Tabare Vazquez ran against the Blanco candidate Jorge Larranaga, a former state governor and senator who got 34.3% of votes, and against the Colorado candidate, former Interior Minister Stirling who got 10.4%. President Vazquez won the elections in the first round, with 50.5% of ballots, and his party achieved parliamentary majority. The Frente Amplio has ruled Montevideo since 1990. During its first 3 years in power, the Vázquez administration made good on its campaign promise to re-examine the human rights abuses committed during the period of military dictatorship and uncovered important forensic evidence. Bilateral relations with Argentina were strained by an ongoing dispute over the construction in Uruguay of a large wood pulp mill on a shared river. Legislation, including a controversial tax reform bill, tended to pass easily as the Frente Amplio enjoyed majorities in both houses of congress.

People of Uruguay

Uruguayans share a Spanish linguistic and cultural background, even though about one-quarter of the population is of Italian origin. Most are nominally Roman Catholic although the majority of Uruguayans do not actively practice a religion. Church and state are officially separated. Uruguay is distinguished by its high literacy rate, large urban middle class, and relatively even income distribution. The average Uruguayan standard of living compares favorably with that of most other Latin Americans. Metropolitan Montevideo, with about 1.3 million inhabitants, is the only large city. The rest of the urban population lives in about 20 towns. During the past 2 decades, an estimated 500,000 Uruguayans have emigrated, principally to Argentina and Spain. Emigration to the United States also rose significantly. As a result of the low birth rate, high life expectancy, and relatively high rate of emigration of younger people, Uruguay's population is quite mature. Nationality: Noun and adjective --Uruguayan(s). Population (July 2010): 3.5 million (CIA World Factbook). Annual population growth rate (est.): 0.466% (CIA World Factbook). Ethnic groups (1997): European descent 93.2%, African descent 5.9%, indigenous descent 0.4%, Asian descent 0.4%. Religions: Roman Catholic 66%, Protestant and other Christian 2%, Jewish 1%, non-professing or other 31%. Language: Spanish. Education: Literacy (2007)--98%. Health (2007): Life expectancy --76.36 yrs. Infant mortality rate (2006)--10.5/1,000. Work force (1.6 million, 2008): Commerce, restaurants, and hotels --21%; manufacturing, gas, and electricity --14%; agriculture, fishing, and mining --11%; construction --7%.