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Foreign direct-investment-in-uruguay 052012

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    Foreign direct-investment-in-uruguay 052012 Foreign direct-investment-in-uruguay 052012 Document Transcript

    • May 2012Foreign Direct Investment in Uruguay
    • URUGUAY XXI Instituto de Promoción de Inversiones y ExportacionesI. EXECUTIVE SUMMARY ............................................................................................... 3II. FDI IN LATIN AMERICA.............................................................................................. 4III. FDI IN MERCOSUR ................................................................................................ 7IV. FDI IN URUGUAY ..................................................................................................... 9V. URUGUAYAN FDI PER COUNTRY OF ORIGIN ...................................................................12VI. URUGUAYAN FDI PER ACTIVITY SECTOR .......................................................................15VII. ENQUIRIES RECEIVED BY THE INVESTMENT PROMOTION DEPARTMENT ................................17VIII. PERSPECTIVES FOR FDI IN URUGUAY ...........................................................................18 2
    • URUGUAY XXI Instituto de Promoción de Inversiones y Exportaciones I. Executive SummaryLatin America is consolidating as an important region for Foreign Direct Investment (FDI)attraction. In the last years, this region has increased its participation as global FDI attractionregion. Several countries are acquiring more importance as foreign investment attractiondestination. Uruguay is not an exception. Taking into account FDI data in terms of GDP, it canbe observed that in Uruguay FDI accounts for over 5% the GDP (as of 2011), which reports oneof the highest investment percentages of the region, in relative terms.Uruguayan FDI has experienced a strong growth over the last years, reaching in 2011 US$2,528 millions, a record figure. This means that Uruguayan FDI multiplied by eight in the lastdecade.Considering the origins of Uruguayan FDI (2001-2009 period), the main countries of origin ofour FDI have been Argentina, Spain, United States, Brazil and England, altogether accountingfor less than half the FDI attracted by Uruguay in the period.As regards the different sectors, the largest foreign capital raising sectors in Uruguay havebeen: agriculture, cattle raising, and forestry (afforestation), construction and manufacturingindustry, which altogether account for more than 60% the total FDI of 2001-2009 period.Uruguay XXI’s Investment Promotion Department receives a large number of enquiries fromforeign investors interested in settling in Uruguay. In 2011, more than 260 companies fromover 40 countries have contacted said department. Enquiries received were mainly fromArgentina, Spain and the United States. Furthermore, enquiries from Japan stand out.Enquiries received were oriented to investments mainly in automotive and autopart industries,services (in particular, tourism), agribusiness, energy and construction.Finally, FDI perspectives are introduced. FDI flows towards the region are expected to keeptheir growth in the next years. Moreover, Uruguay is expected to follow this trend andconsolidate as one of the main FDI attracting countries of the region, in relative terms.Therefore, it is necessary to continue the progress towards the improvement of the regulatoryframework in order to promote investments and continue enhancing investment conditions inUruguay. An important milestone is that Uruguay has recovered the Investment Grade Rating(GR) it had lost a decade ago. This shows the trust generated by the country’s institutionalframework as well as by the economic policy management, thus creating an even moreattractive framework to do business in Uruguay. 3
    • URUGUAY XXI Instituto de Promoción de Inversiones y Exportaciones II. FDI in Latin AmericaOver the last decade, Latin America has been consolidating as an important Foreign DirectInvestment (FDI) attractive region. According to the last report submitted by the EconomicCommission for Latin America and the Caribbean (ECLAC)1, the FDI flows towards the region in2011 registered an increase of 31% compared to 2010, reaching US$ 153,448 million. LatinAmerica and the Caribbean (LA&C) was the region with the highest FDI attraction growth ratewith a 10% participation in total global investments. According to the ECLAC forecast for 2012,the region will continue to be an attractive localization, maintaining FDI inflows of around US$150,000 million.The underlying reason for such dynamism is to have taken advantage of the domestic marketsas a consequence of the economic growth in the South region - the high price for rawmaterials that spurred investments in natural resource extraction and processing and anincrease in outsourcing of manufacturing activities and business services by developedcountries). On the other hand, the growth of emerging economies has revealed an increase ininvestments in the South.South America has shown an outstanding performance as the sub-region’s major recipient,with a participation of 80% of the total FDI, with Brazil accounting for over half of the FDIinflow. Furthermore, other Latin American countries achieved historical records; such is thecase of Chile (US$ 17,199 million), Colombia (US$ 13,234 million) and Uruguay (US$ 2,528million).The FDI sector destination varies according to countries of destination. In South Americacompanies invest mainly in natural resources, with the exception of Brazil which has themanufacturing industry as main destination with a focus on the metallurgical industry andfood and beverages. Alternatively, Mexico, Central America and the Caribbean’s major FDI is inthe services and manufacturing sector.In the following chart Latin America’s main FDI origins can be observed for the accumulatedperiod 2006-2010 and the year 2011. Netherlands is the main investor (accounting for 21% ofthe total FDI)2, followed by the United States (18%), Spain (14%) and Japan (8%). An interestingfact worth mentioning is the increase of investments from Asia in 2011. In effect, 9 of the 10major cross-border merges and acquisitions carried out by foreign companies were Japaneseand Chinese.1 Foreign Direct Investment in Latin America and the Caribbean,2011.2 Due to its status as a hub for investments carried out from foreign countries. 4
    • URUGUAY XXI Instituto de Promoción de Inversiones y Exportaciones Chart II. 1 – FDI in Latin America per country of origin (% share) Others 38% 20% The Netherlands 7% 21% USA 23% 18% Spain 9% 14% Latin America 9% 9% Japan 3% 8% United Kingdom 4% 4% Canada 5% 4% China 2% 1% 50% 30% 10% 10% 30% 50% 2006-2010 2011 Source: URUGUAY XXI based on ECLACUruguay appears in the list among the major FDI attracting countries in the region over thepast few years. Brazil is the main FDI recipient in Latin America, followed by Mexico and Chile.Colombia and Venezuela have also attracted greater FDI flows by 92% and 339% respectivelycompared to 2010. The rise in FDI received by Colombia is driven by the investments carriedout in the natural resources sector, particularly mining and oil as well as investments in thetrade and transport and telecommunications sector3. Moreover, the surge recorded inVenezuela corresponds to reinvested earnings and inter-affiliate loans in the oil sector andfinancial activities. Chart II. 2 – Main FDI recipients in the region (In billions of US$) 50 45 40 35 30 25 20 15 10 5 0 2010 2011 Source: URUGUAY XXI based on ECLAC3 Some of the main investments carried out in Colombia: Itochu, acquisition of assets of mining company Drummond (US$ 1,524million); BHP Billiton y Xstrata, expansion of coal mines (US$1,300 million); DHL, logistic center (US$ 1,300 million). 5
    • URUGUAY XXI Instituto de Promoción de Inversiones y ExportacionesComparing the FDI in terms of GDP of different countries of Latin America and the Caribbean,it can be observed that in 2011 the Uruguayan FDI accounts for almost 6% of the GDP. Suchfigure not only shows the significance of FDI in our country but also positions us as one of themajor investment flow recipients in the region, in relative terms, with a significantly largerpercentage than other Mercosur member states. Chart II. 3 – FDI in South America (GDP %) – 2011 Chile 7.1% Uruguay 5.4% Peru 4.3% Brazil 4.1% Colombia 4.1% Paraguay 2.4% Argentina 1.2% 0% 2% 4% 6% 8% Source: URUGUAY XXI based on Central Banks of each country 6
    • URUGUAY XXI Instituto de Promoción de Inversiones y Exportaciones III. FDI in MERCOSUR In the last decade, the flows of FDI into MERCOSUR had followed an upward trend, registering in the period 2001-2011 an average growth rate of 21%. This dynamism has determined an important increase of the MERCOSUR’s share in global FDI flows. In 2010, the share of FDI attracted by MERCOSUR reached the maximum value in the last 10 years - 5% of total global FDI flows, meanwhile in 2001 was 3%-. In 2011, FDI in MERCOSUR exceed the value recorded in 2010 by 31%, reaching a record high of US$ 76,580 million, after the decrease in 2009 experienced as a result of the fall of global FDI. The volume of FDI relative to GDP increased, reached 2.7% in 2011. This value was slightly below the maximum value reached in 2008. Chart III.1- FDI in MERCOSUR (US$ Millions and % of GDP)US$ millions 4%90000 76,580 3%8000070000 3% 57,209 57,54860000 2%50000 42,57340000 31,767 2% 25,004 26,02630000 22,641 21,232 18,943 1%20000 12,23910000 1% 0 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: URUGUAY XXI based on ECLAC Over the past years there have been changes regarding the recipient countries of FDI in MERCOSUR. Brazil continues to stand as the largest recipient of FDI, with a share of over 80%. Argentina was the second recipient but Uruguay begun acquiring greater significance since 2005. In particular, in 2011 Uruguay’s share was 3% of the total FDI received by MERCOSUR. While Paraguay has also increased its participation over the last three years, its share is still around 1%. Regarding sectors, investment flows were mainly directed to natural resource, manufacturing and services. 7
    • URUGUAY XXI Instituto de Promoción de Inversiones y Exportaciones Chart III.2- Distribution of FDI in MERCOSUR (%)100%80% 100% 1% 3% 80%60% 60%40% 11% 40% 9%20% 20% 0% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2002 2011 Argentina Uruguay Paraguay Brazil Argentina Paraguay Uruguay Source: URUGUAY XXI based on ECLAC 8
    • URUGUAY XXI Instituto de Promoción de Inversiones y Exportaciones 4 IV. FDI in UruguayFDI in Uruguay has grown strongly, tripling in the last 7 years. In 2011, FDI reached US$ 2,528millions. Therefore, 2011 is a record year regarding FDI attraction, even surpassing the levelsreported in 2008. Chart IV.1 - Uruguayan FDI (Millions of US$ and GDP %) US$ millions GDP % 3000 10% 2,528 2500 2,358 8% 2,106 2000 1,593 6% 1,493 1500 1,329 4% 1000 847 416 2% 500 297 332 194 0 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Uruguay XXI based on Central Bank of UruguayChart IV.1 shows the significant leap of level experienced as from 2005, when Uruguay startedreporting large investments, basically related to pulp mill setting5. Likewise, the chart showsthe growing trend of FDI flows attracted by Uruguay, which remained at high levels despite2009 international crisis. Furthermore, in 2010 another important investment related to a newpulp mill was materialized6. This important investment will have strong effects in FDI figures ofthis year and the next ones.In fact, in 2006-2011 period, FDI reported an average growth rate of 26%, reaching in 2011unprecedented levels.FDI in terms of GDP has grown considerably over the last years, reaching its highest level in2006 (8% of GDP). In 2011, the FDI reached 5.4% of the GDP.4 Methodological Note: Uruguayan FDI information is gathered from Balance of Payments quarterly publications issued by BCUFinancial Scheduling Department. Contributions of capital, profit reinvestment and net financing between headquarters and theirbranches or subsidiaries, as well as real estate investment in the seaside city Punta del Este are included. As from 2003, directinvestment estimations in the primary sector (land) are included. Such data allows identifying reverse investments, i.e.investments of subsidiaries in their own headquarters.5 Investment made by Botnia (currently UPM) was approximately US$ 1,200 millions, which were ascribed to FDI between 2005and 2006.6 Investment made by Montes del Plata is estimated in US$ 1,900 millions in the plant and US$ 700 millions in land approximately.The plant will begin operations in the first quarter of 2013. This investment will be allotted to FDI in 2011, 2012 and 2013. 9
    • URUGUAY XXI Instituto de Promoción de Inversiones y ExportacionesIt is worth mentioning that this growing trend has deepened as from 2007 with the approval ofDecree 4557 which regulates chapter III of the Law on Investment Promotion and ProtectionNo. 16,906 (Ley de Promoción y Protección de Inversiones) yielding an even more favorable andattractive investment environment in the country. In this issue, it is worth mentioning thatUruguay has an attractive statutory framework to attract investments.Law 16,906 promotes productive investment by means of tax benefits granted to IRAE-generating companies, no matter the amount to be invested, sector or legal nature of thecompany. Benefitted investments are those which create jobs, increase exports, use cleanertechnologies, invest in research, development and innovation, favor decentralization or rate inseveral sector indices.The Decree in force, No. 2/0128, incentives projects which create quality jobs (according to thesalary level), hire groups with more problems finding jobs, promote undertakings outsideMontevideo (basically in departments with less resources) or in less developed neighborhoodsin Montevideo, among other amendments.Apart from the Investment Promotion Law, Uruguay has several systems which makeinvestment in the country even more attractive, such as Free Zones, Free Ports and Airports,Industrial Parks, Temporary Admission, Customs Deposits, among others.In addition, Uruguay presents an excellent business environment, as shown by the outstandingposition of the country in several international rankings. Among them, we can highlight thefirst position in the Economic Environment in Latin America ranking made together with theBrazilian Economy Institute, the Getulio Vargas Foundation and the Economic ResearchInstitute of Munich University (January 2012). Furthermore, according to the last report DoingBusiness 2012 drawn up by the World Bank, Uruguay moved up 17 positions regarding itsfavorable environment to do business, it being ranked in the 90th position among the 183analyzed countries.Last but not least, at the beginning of April 2012, Standard & Poor´s granted Investment Grade(IG) status to Uruguayan sovereign debt, a rating that our country had lost ten years ago. Thisshows the trust generated by the country’s institutional framework as well as by the economicpolicy management, in particular, it reflects a very orderly conduction of macroeconomicpolicy. The recovery of the IG creates an even more attractive framework to do business inUruguay (see section below).7 November 2007.8 February 2012. 10
    • URUGUAY XXI Instituto de Promoción de Inversiones y ExportacionesWhat is the significance of the Investment Grade in Uruguay?It has several effects with different degrees of importance: The Investment Grade widens the range of prospective investors who can invest in Uruguay. This applies both for financial investments (purchase of Uruguayan Government Bonds and securities from Uruguayan private companies) and for productive investments. The IG enhances our position in the current international uncertain scenario, thus assuring that Uruguay will find no difficulty in accessing funding on a risk-averse environment. Finally, IG provides Uruguay with better funding conditions regarding terms and rates. Note that Uruguay already had similar sovereign risk levels to those present in countries of the region with IG. Therefore, no effects on short and medium term rates will be expected; however, there will be long term effects.More Incentives...In the Investment Promotion System framework and with the purpose of energizing some sectors, thegovernment has established tax incentives to companies carrying out activities related to certain specificsectors. Some of these sectors are:Renewable Energies9: activities such as power generation from non-traditional renewable sources, electricalpower generation through co-generation, transformation of solar power in thermal power, nationalmanufacturing of machines and equipment destined to the activities mentioned above, among others.Shipping Industry and Electronics Industry10: ship and water vehicle building, maintenance and repairactivities fall within the shipping industry. With respect to the electronics industry, activities such asproduction of electronic and electric equipments, logic controls, computers, telecommunication equipment,measurement instruments, medical equipment and domestic appliances are promoted.Remote customer service centers11: activities such as services rendered by telemarketers receiving or makingphone calls, Internet messages and other kind of communication channels.Condominium Hotels12: destined to offer lodging services in order to attract the tourism demand.Tourism13: investments related to civil works corresponding to Tourism Projects, including activities destinedto offer lodging, cultural, commercial, congress, sports, recreational, amusement or health services orinvestments related to the acquisition of goods destined to fitting out Tourism and Hotel Projects, ApartHotels, Motels and Tourism Farms.Machinery and Agricultural Equipment Manufacturing14:9 Decree No. 354/009 http://archivo.presidencia.gub.uy/_web/decretos/2009/08/245%20.pdf10 Decree No. 532/009 http://archivo.presidencia.gub.uy/_web/decretos/2009/11/ASUNTO413%20.pdf11 Decree No. 207/008 http://archivo.presidencia.gub.uy/_web/decretos/2008/04/951_19%2010%202007_00001.PDF12 Decree No. 04/010 http://archivo.presidencia.gub.uy/sci/decretos/2010/12/mef_889.pdf13 Decree No. 175/003 http://www.mef.gub.uy/inversor/decreto_175_03.pdf14 Decree No. 6/010 http://archivo.presidencia.gub.uy/_web/decretos/2009/08/ASUNTO3682%20.pdf 11
    • URUGUAY XXI Instituto de Promoción de Inversiones y Exportaciones V. Uruguayan FDI per country of origin15The countries of the region, Europe and NAFTA are the main countries of origin of UruguayanFDI, reporting an irregular behavior regarding their relative participation each year. Withrespect to investments from MERCOSUR member countries, a capital reduction in 2002 andsubsequent recovery as from 2003, reaching 38% of total FDI in 2009 can be observed. It isimportant to point out that more than one third of overall Uruguayan FDI in the 2001-2009period corresponds to investments made by countries of the region.On the other hand, investments from Europe have remained relatively stable over the lastthree years, after an important drop reported in 2006. On average, they account for 18% thetotal Uruguayan FDI.Regarding investments from NAFTA countries, they reported a recovery as from 2005,accounting for 10.5% of overall FDI in 2009 and the amount invested in such period onlyreached to US$ 575 millions out of US$ 8,608 millions. Chart V. 1 – Uruguayan FDI per country of origin 2001-2009 (% share) 100% 90% 26% 80% 34% 70% 60% 26% 11% 50% 17% 40% 13% 30% 20% 36% 38% 10% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 MERCOSUR EUROPA NAFTA OTROS Source: Uruguay XXI based on Central Bank of UruguayAt country level, it is worth mentioning that there are more than 30 countries which chooseUruguay as destination for their investments. In such sense, the main five countries of eachyear accounted, on average, for 60% of overall Uruguayan FDI in the 2001-2009 period.Argentina stands out in the first place. This has been one of the main countries of origin withan average share of 20% in the 2001-2009 period. Although between 2002 and 2005 it was nolonger ranked first as country of origin (resuming its position as of 2006), it is always among15 FDI data per country and per sector available only until 2009 by the BCU.Note: “Other origins” include those companies which resulted to be exclusive for a country for the purpose of respecting the statesecret. 12
    • URUGUAY XXI Instituto de Promoción de Inversiones y Exportacionesthe first 3 countries of origin of Uruguayan FDI. The major investment sectors of Argentina are:agribusiness, manufacturing industries and services.In the second place, it is worth mentioning the importance of Spain, with an average share of9.5% in overall Uruguayan FDI in the 2001-2009 period. However, its share decreased last year(2009), only accounting for 3% of the total FDI. Spanish investments are basically directedtowards financial and call center services and industries, in particular due to investments in thetimber industry.In the third place, there appear investments from United States and Brazil. As for UnitedStates, while in 2001 its share was of 25% (ranking second) in 2004 it reports a lower share ofonly 0.4%, recovering its dynamism in 2009. Investments from United States are directedtowards a wide range of sectors, the most relevant ones being audiovisual, hotel andrecreation services and industry. As for Brazil, there has been a significant increase since 2007with an average incidence of 7.4% in overall FDI. Brazil’s main investment sectors areagribusinesses, agro-industries, financial and hotel and recreation services.Lastly, investment flows from England, which in the 2002-2008 period was one of the 5 maincountries of origin of Uruguayan FDI, stand out. In 2009 this situation was reverted and it wasranked 13th. Chart V. 2 – Major countries of origin of Uruguayan FDI 2001-2009 (% share) 100% 80% 34% 43% 54% 60% 7% 7% 26% 7% 40% 24% 11% 20% 35% 29% 12% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 -20% Argentina Estados Unidos Brasil Holanda España Otros Source: Uruguay XXI based on Central Bank of Uruguay 13
    • URUGUAY XXI Instituto de Promoción de Inversiones y ExportacionesIn short, in the period under study (2001-2009), the main countries of origin of Uruguayan FDIhave been Argentina, Spain, United States, Brazil and England, altogether accounting for lessthan half the FDI attracted by Uruguay in the period. It is also worth mentioning theimportance of Netherlands in 2009, with an investment of US$ 110 millions, basically relatedto the purchase of a company by a Dutch group. Chart V. 3 – Major countries of origin of Uruguayan FDI 2001-2009 period (% share) Holland France Belgium 2% 2% 1% Bermudas 3% Bahamas 3% England Argentina 3% 23% Brazil 5% United States Spain 6% 9% Source: Uruguay XXI based on Central Bank of Uruguay 14
    • URUGUAY XXI Instituto de Promoción de Inversiones y Exportaciones VI. Uruguayan FDI per activity sector16The largest foreign capital attraction sectors in Uruguay have varied over time, althoughagriculture, cattle raising, and forestry (afforestation), construction and manufacturingindustry altogether account for more than 60% the overall FDI of the 2001-2009 period.In the 2003-2006 period, the sector with the largest investment attraction was Agriculture,cattle raising and forestry, with an average share of 34%. Within this sector, agriculture andcattle raising subsector has been the most significant one in 2003 and 2004, while in 2005 and2006, the most significant one was the forestry and timber extraction subsector as a result ofthe strong development of the timber sector in Uruguay. As of 2007 this sector was no longerthe main FDI recipient, leaving this place to the Construction sector.The construction sector increased its share significantly as of 2006, from 11% the overall FDI inthe 2001-2005 period to 28% in the 2006-2009 period. This situation is both explained by thebuilding and setting up of pulp mills and by the real estate investment dynamism in Punta delEste.On the other hand, two events which took place in the last years are worth mentioning. Firstly,the sustained growth of FDI in manufacturing industries as from 2006, upon the slowing-downreported as from 2003, accounting for 16% the total investment in 2009. Within this sector,the main subsectors are: Food and Beverage Product Manufacturing due to the stronginvestments received by the cold storage industry and agro industries and, on the other hand,Manufacturing of Chemical Substances and Products. At the same time, investments in thewholesale and retail trade sector have increased - the wholesale trade being responsible forthis important growth. In 2009, this sector attracted investments for a total of US$ 269millions, the second most important sector in the investment attraction.16 FDI data per country and per sector available only until 2009 by the BCU. 15
    • URUGUAY XXI Instituto de Promoción de Inversiones y Exportaciones Chart VI.1- FDI in Uruguay per activity sector 2001-2009 (%share) 100% 25% 8% 80% 39% 16% 60% 6% 16% 61% 40% 17% 31% 20% 4% 32% 12% 14% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 -20% Construction Wholesale and retail commerce Manufacturing Industries Agriculture, cattle-raising and forestry Transport, storage and communications Financial brokerage Other Source: URUGUAY XXI based on Central Bank of UruguayLastly, it is worth mentioning the decrease in the relative share of the financial brokeragesector. While in the 2001-2006 period its average share was 24.4%, in the last three yearsunder study, it was only 3.6%. 16
    • URUGUAY XXI Instituto de Promoción de Inversiones y Exportaciones VII. Enquiries received by the Investment Promotion DepartmentIn 2011, Uruguay XXI’s Investment Promotion Department has received a large number ofenquiries by foreign investors interested in settling in Uruguay. Specifically, more than 260companies have contacted said department in the year.Enquiries received during 2011 came fromseveral countries, in its great majority from Chart VII.1- Enquiries per country of origin (2011, %)Argentina (16%), Spain (14%) and USA(14%). At the same time, Japan had anoutstanding participation (5% of theenquiries), highly above the participationreported previously. Finally, the enquiriesreceived from other countries of the regionwere important, fundamentally Brazil (9%).India, China, Canada and several Europeancountries also contacted said department.Overall, more than 40 countries worldwidemade investment-related enquiries. Source: Uruguay XXIThe chart shows that, like FDI flows in thecountry, enquiries come mainly fromArgentina, USA, Spain and Brazil.Enquiries received were to make investments in several sectors: industrial sector (39%) andwithin this sector, the automobile and auto parts sector stand out (10%). Other sectorsenquired were services (31%) – within this, tourism stand out (6%) -, agro-business (8%),construction and engineering (5%) and energy (4%). Chart VII. 2- Enquiries per region of origin Chart VII. 3 – Enquiries per sector (2011, %) (2011, % share) Not Oceania specified and 2% Africa Industrial Asia 2% 9% Services 15% South 4% America 5% Agribussines 34% 5% 39% North Construction and America 8% Engineering 17% Real-estate Europe Energy 30% 31% Other Source: Uruguay XXI 17
    • URUGUAY XXI Instituto de Promoción de Inversiones y Exportaciones VIII. Perspectives for FDI in UruguayIn the current context, characterized by worldwide uncertainty, it is difficult to forecast futureFDI flows. However, in spite of the doubts regarding economic recovery of developedcountries (in particular, United States and the European Union), emerging countries appear tocontribute most to world growth. In such sense, global FDI flows for the next years areexpected to be driven by economic growth and improvements in the emerging countries’business environment.Latin America is a booming region with growth perspectives over 3% in 2012. Adding thegrowing trend of investment flows to this, ECLAC estimates that FDI income to Latin Americaand the Caribbean could increases 8% compared with 2011 flows. Therefore FDI flows willremain high in the region in 201217.FDI flows in Uruguay have had a strong growth in the last years and according to perspectives,this trend will be consolidated. For the next years, Uruguay is expected to keep its conditionsto continue attracting FDIs. In 2011, Uruguayan economy grew 5.7%, thus consolidating theninth consecutive growth year and perspectives for 2012 indicate that the Uruguayaneconomy will grow 4%, consolidating a steadily growing decade. Furthermore, according toindexes recently disclosed by the World Bank, Uruguay has substantially improved its businessenvironment.However, it is worth pointing out that Uruguay’s ability to continue attracting FDIs andpromoting a sustained economic growth is translated into investments in infrastructure (inparticular, land and rail transportation, maritime and fluvial ports), energy and education,among others. Therefore, it is enhancing its regulatory framework in order to fosterinvestments. In such sense, in July 2011 “Law of public/private participation agreement for theperformance of infrastructure works and provision of related services (PPP)" was enacted.These agreements shall be executed by and between any state authority and person subject toprivate law. This regulation provides for road, rail, port, airport, energetic infrastructure, wastetreatment and social infrastructure (prisons, health centers, educational centers, socialinterest houses, sport centers, etc.) works. In the framework of this new Law, approximatelyUS$ 750 millions are expected to be executed in the 2011-2014 period. Moreover, inSeptember 2011 the "Law on Accommodation for Social Interest Purposes” (Ley de Vivienda deInterés Social) was enacted, which is also a beneficial statutory framework to attract foreigninvestments since it promotes private investment in houses with social interest through thegranting of tax exemptions.In short, despite the uncertain international context, it is expected that FDI flows towards theregion keep on growing in the next years. Moreover, Uruguay is expected to follow this trendand consolidate as one of the main FDI attracting countries of the region, in relative terms.Therefore, it is necessary to keep on making progress towards the improvement of theregulatory framework in order to promote investments and continue improving investmentconditions in our country.17 “Foreign direct investment in Latin America and the Caribbean”, ECLAC (2011). 18