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The house in order

Having rebounded from the 2002 regional economic crisis, Uruguay has registered sustained year-on-year economic growth over the past decade. The country has also

striven to tackle inflation and to restructure its ex-ternal debt, which has been slashed to 23% of GDP.

Sound macroeconomic policies have created a vibrant and versatile investment platform, resulting in the country receiving the backing of ratings agen-cies and the international community as a dynamic business center.

Uruguay faced several regional challenges. In light of Argentina’s default and the current static economy of Brazil – its neighbors and both major trading partners – Uruguay needed a complete re-think of import-export priorities, diversification and major reforms of its banking system to safeguard against the risk of contagion.

Exports to the immediate region have been shaved down to 20% of total output from 50% a decade ago, and the financial institutes have undergone a radi-cal overhaul to ensure their solvency and reduce the risk of exposure to any potential knock-on effects from a second Argentinean crisis.

In 2002, the country’s financial sector buckled un-der the weight of demand in the wake of the corralito – the year-long economic measures introduced byEconomy Minister Domingo Cavallo at the end of 2001 to prevent a bank run. The move almost com-pletely froze bank accounts and blocked withdraw-als from U.S. dollar-denominated accounts. Today, however, the Uruguayan financial sector enjoys high liquidity and has significantly reduced the amount of foreign capital held in its banks.

Uruguay has also taken great strides to address its former image as a “South American Switzerland.” A public shareholders’ registry has been imple-mented and secrecy in terms of the exchange of tax information eradicated to the extent that Uruguay enjoys a higher Financial Action Task Force rating than 17 of the G20 nations.

Basel III requirements are being met and interest rates are being managed to bring down the inflation rate from the country’s historical double-digit fig-ures to a recent record low of 8.75% in August 2014.

Therefore, Uruguay is perfectly positioned to weather the effects of the scaling back of the U.S. Federal Reserve’s tapering and the rapidly strength-ening dollar, which in turn is expected to lead to a rise in interest rates. The government acted pru-dently to combat the fallout by pruning its debt-to-GDP ratio and reducing substantially the amount owed in dollars in favor of the peso.

In terms of investment and exports, Uruguay has been expanding its horizons and decreasing its dependence on trade with Brazil and Argentina by exploring other markets, notably Europe, Russia, Southeast Asia and the U.S.

Foreign investment accounts for between 5-7% of GDP and investment incentives, free trade agreements, and a streamlined and open business environment have seen the number of foreign com-panies setting up in Uruguay increase dramatically.

Exports are also on the rise, with diversification away from the traditional staples of beef, soybeans, rice and wood in full flow.

Moreover, numerous free trade zones have been set up in and two key laws enacted to regulate and streamline the investment process: the Public- Private Partnerships Law, which affords overseas in- vestors the similar tax breaks offered to Uruguayan

nationals, and the Investment Promotion and Pro-tection Law.

These have acted to reinforce Uruguay’s interna-tional standing as a beacon of investment stability in the region. This is based on based on the country’s democratic freedom and political stability rating (top in Latin America), its economic freedom, and the 2013 Transparency International Corruption Percep-tion Index rating it number two among Latin Ameri-can nations, and inside the top 20 internationally.

Political stability and eye-catching social policies have placed Uruguay on the international stage in recent years, but the behind-the-scenes hard work

to stabilize the economy, shore up the banking sys-tem against external pressure, and create a lasting platform for growth constitute the country’s real success story.

Unemployment is negligible, the institutions are strong and Uruguay enjoys one of the highest per capita incomes in the Americas. In the space of a decade, South America’s second-smallest nation has been transformed into a regional beacon of good practices and has taken the necessary steps to ensure that it continues to progress along the same impressive fiscal and macroeconomic lines in the future.

while its bigger neighbors are experiencing economic difficulties, prudent macroeconomic policies to make Uruguay

an example of stability in the region

This advertising supplement is produced by Haddock & Associates and did not involve the reporting or editing staff of The New York Times

UruguayCentral Bank sets the tone in

the f ight against inf lat ionPage 2

See this report atwww.haddockassociates.co.uk

Friday, October 10, 2014

Nat iona l deve lopment bank widens f inanc ia l inc lus ion

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Divers i f ied sources of fore ign investment

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Top-t ier products targeted at U.S . market to boost exports

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A regiona l reference point in ICT and back off ice serv ices

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Q. Argentina and brazil are going through a difficult economic patch. how does this affect Uruguay’s position?

A. Obviously one aspect concerns the ex-posure of the Uruguayan economy to the re-gional situation, because the crisis of 2002 carried an element of contagion and there-fore preparations had to be made for the future to reduce vulnerability to what was happening in the region. This was done in a very systematic way; to give some figures, while in 2001, before the crisis, Argentinean deposits in the Uruguayan banking system represented about 40%, today it is about 9%. In 2001-02 that 40% was in reality what was removed during the run on the banks because with the corralito in Argentina, Uruguay’s dollar reserves became greatly valued. The banks didn’t have sufficient li-quidity and that was a good part of how the crisis unfolded.

Today the banks have liquidity of more than 50%. We don’t think it will happen, but if that situation was repeated and Argentin-eans wanted to take their money out of Uru-guay, there isn’t a single bank that wouldn’t be able to provide it instantly. It is the same with credit lines: at that time 20% of all bank loans were extended to Argentinean companies. Now that figure is practically zero, so the exposure of the banking system to what happened in Argentina is absolutely negligible.

Since 2011, Brazil hasn’t grown by more than 2% annually. This year its growth will be below 1%. With luck, Argentina will man-age 0%. Therefore, the situation of being in a context of slow regional growth is nothing new.

Uruguay and Brazil have never had a close financial and banking relationship, among other reasons because historically Brazil has always been closed off finan-cially. And from a commercial point of view, obviously Brazil is an important purchaser of Uruguayan products; only China exceeds Brazil. But as we largely sell commodities

Mr. Bergara discusses Uruguay’s fiscal, economic

and investment policies

interview with Mario bergara,

Minister ofeconomy and

Finance

Project team: Blanca Barajas, Marketing; Santiago F. Ordieres, Journalist

Continues on page 3

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LARGE, profitable, longstanding and multidi-mensional, Banco de la Republica Oriental del Uruguay (or BROU) wears a coat of many colors. It is, first and foremost, a development bank. State-owned, it hands over 80% of its profits to the Uruguayan government each year. Yet it must compete without subsidies in a strong, healthy financial industry with formidable for-eign competitors.

BROU finances large and small projects, and it works to fulfill a mandate of financial inclusion. It also works to meet government objectives, such as increased household savings, which currently represent 79% of its deposits.

In addition, it promotes the growth of exports and industry, and plays a critical role

as a tool for monetary policy. Its anti-cyclical approach in 2009,

when it ramped up lending while credit from private

sector banks was drying up, helped keep Uruguay’s economy afloat.

BROU is, consequent-ly, a partner to the small business and the mul-tinational corporation,

a backer of projects of national proportions and

investor in small enterpris-es. Yet it is also the friendly

neighborhood bank on the cor-ner where more than a third of Uru-

guayans do their banking. Julio César Porteiro, BROU’S president as of

April of this year, says his bank is a commercial bank, a public bank and a retail bank. He calls it a multiple bank.

“The bank has to be profitable, but beyond that, it has to be a driver of financial inclu-sion, the engine of the country’s savings, and it must also foster the development of industry and commerce,” he comments. “It must work for the economic and social development of all Uruguayans.”

It does it well. The country’s premier financial institution has consistently outperformed an al-ready outperforming market (last year, BROU made $290 million). It was Latin Finance’s Uru-guayan Bank of the Year 2013, World Finance’s Best Banking Group in Uruguay 2013 (for the third consecutive year) and ALIDE’s Most Out-standing Development Bank in Latin America and the Caribbean in 2012.

Affirming BROU’s D+ investment grade rat-ing last December, and raising its standalone baseline credit assessment, Moody’s credited the bank’s “well established market positioning and diversified business model” and made spe-cial note of “BROU’s improving financial funda-mentals over the past two years, particularly its earnings generation power, efficiency metrics, its stable and sizeable deposits base, as well as its prudent risk management practices…and ample reserve coverage.” The bank’s outlook, according to the credit ratings agency, is stable on all fronts.

Moody’s also made mention of BROU’S lend-ing appetite. Loan growth last year peaked at 15.3%, following growth of 11.5% in 2012. BROU announced financing of $203 million for 35 in-vestment projects last year, which brought its total in project financing over the past eight years up to $1 billion.

In its role as national development bank, BROU has developed a number of loan products, says the bank’s chief. A $60 million limit per company for larger investment projects is circumvented through partnerships with international finance bodies or multilateral credit funds.

“By the end of May this year, $600 million in in-vestment projects were presented, for which there were requests for $300 million in financing,” says Mr. Porteiro. “We are studying them now according to various criteria, including profitability, the level of development they will contribute to, the num-ber of jobs they will create, their potential boost to exports and environmental impact, and we will announce which are approved in November.”

He adds, “But on a smaller scale, we have worked hard to promote financial inclusion for those who cannot readily access credit. We have a special loans division for small and medium-sized companies. We also have a subsidiary called Microfinance Republic, which we launched a few years ago. Loans are between $1,000 and $5,000. So, with many millions through loans of just a few thousand dollars, we have established a presence in just about every market in the country.”

As of March 2014, BROU had $14.1 billion in assets and equity of $1.25 billion. The bank’s next frontier is the global market: it is now investing some of its excess capital in international secu-rities and has opened branches in New York, São Paolo and Buenos Aires. These branches moni-tor the bank’s foreign investments and serve as a platform for the continued expansion of Uru-guayan business beyond the nation’s borders.

Uruguay / P2

BROU partners in a huge spectrum of projects, from small enterprises to multinational corporations, to spread growth

National development bank widens financial inclusion

HAvING overcome the economic crisis that affected the region from 2002, Uruguay has since enjoyed a decade of expansion with GDP rising to an average 8% growth between 2004 and 2008, and foreign di-rect investment levels that topped $3 billion in 2013. Uruguay found it was able to weather the global financial crisis that struck in 2008 on the back of sound macroeconomic policies and a strong, liquid and solvent financial system, which emerged as a result of important changes in regulation and su-pervision. In this process, the Central Bank of Uru-guay (BCU) played a key role and guided the country through the eye of economic storm.

The main priority of the BCU was to maintain the purchasing power of the Uruguayan peso to prevent inflation from spiraling out of control. For a genera-tion before the 2004 upturn, Uruguay had registered scarcely any growth and inflation had settled into a double-digit rut. The country’s economic turnaround has been little short of staggering over the past 10 years: growth averaged 5.8% between 2004 and 2012, and inflation was down to 8.75% in August 2014, after an average of 32.78% from 1938 until this year. GDP growth is forecast at 3% for 2014 and it is expected to average between 3-4% over the next four years. However, the hangover from the coun-try’s giddy rise – inflation – remains a priority.

Speaking in April, Economy Minister Mario Berg-ara said that labor market inflexibility – Uruguay has registered three years of zero unemployment – and the country’s expanding economy, coupled with do-mestic demand and exports constraints, have made it difficult to combat inflation. Last year Mr. Bergara widened Uruguay’s inflation target range by two per-centage points to 3-7%.

It is a view shared by BCU President Alberto Graña: “Inflation is the stone in our shoe. It’s the note that jars. For that reason we have to work on it, but we have never been in favor of fundamentalist approaches. We want to place the focus on the trend that is convergent within the target range, and we do not consider it prudent – and we have never done so – to look into a crystal ball and predict whether in June or August 2015 inflation will be in that range. The expectations of economic analysts concur with our own, in that inflation will continue to move to-wards the target range within the framework of monetary policy.”

One of the main roles of the BCU is to oversee the supervision of the financial system as a whole, and within this task to streamline the country’s system of payments to create an automated, efficient and above all completely secure internal framework in line with international standards. With this in mind,

the BCU has worked closely with the Economy Min-istry to promote transparency, facilitate the inter-community exchange of tax data, and safeguard the banking system against money laundering and fraudulent practices. At the international level, the central bank’s adoption of Basel II and III require-ments has continued apace, taking Uruguay to the forefront of capital adequacy and risk-prevention in the region. The recent declarations of the Bank of China concerning its interest in entering the finan-cial sector in Uruguay are a real stamp of approval for the policies of the BCU.

The Superintendence of Financial Services (SSF) monitors and provides assistance to listed compa-nies, insurance providers, and wealth manage-ment funds to ensure Basel requirements are met and to protect both small and large-scale investors.

“When implementing mon-etary policy, we have to work to mitigate market imper-fections such as asymmet-ric information, very high transaction costs, market structure, etcetera,” says Mr. Graña. In that sense, one of the BCU’s current objectives is to encourage domestic account-holders to take full advantage of the instruments on offer in order to generate incentives to save.

“We have placed special emphasis on efforts to increase the concept of financial inclusion, placing the spotlight on the importance of generating incentives within the financial sys-tem to achieve the maximum level of accessibility to new personal savings instruments for Uruguayan families. For many non-institutional savers, such as families that are not versed in financial instruments, it is important to take steps through economic and fi-nancial education for their inclusion within the wider financial system, which is one of the main drivers of equality.

“Therefore, we are calling together different agents in the financial system so that they contribute to make these instruments a reality, and in such a way that they are not prohibitive for a working family, due to very high minimum accepted amounts and/or high transaction costs. We have to create new ways for people to save. The response from analysts and financial institutions has been very positive and so we are very optimistic about the success of the initia-tive,” says Mr. Graña.

Solid macroeconomic policies and regulation have enabled the BCU to rein in inflation and inspire a nation of savers

Central bank sets the tone in the fight against inflation

“we have to create new ways for people to save. the response from analysts and financial institutions has been very positive and so we are very optimistic about the success of the initiative”

Alberto graña, President of the Central bank of Uruguay

“the bank has to be profitable [and] has to be a driver of financial inclusion, the engine of the country’s savings; it must also foster the development of industry and commerce”

Julio César Porteiro, President of brOU

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Diversified sources of foreign investment

eCONOMy. Mario Bergara, Minister of Economy and Finance, discusses Uruguay’s fiscal, economic and investment policies

SMART POLICIES and excellent condi-tions – particularly its transparency, legal and political stability, highly edu-cated workforce, and open economy – have Uruguay poised on the threshold of continuing the growth it has expe-rienced over the past decade. Indeed, shifting its focus from financial servic-es, trade and agricultural exports to investments in new technologies and infrastructure, has meant success for the country when it comes to attract-ing foreign investment.

Last year alone saw $2,796 million in foreign direct investment (FDI) come into Uruguay, up 4.1% from 2012.

“Historically in terms of FDI, Uru-guay could expect to receive a half to one percentage point of GDP,” says economy minister Mario Bergara. “In a little over a year the figure rose to two percentage points. Since 2006 it has stood at between 5 and 7% of GDP, and it is not purely because of the ef-fect of megaprojects, but because there has been huge diversification in the sectors into which FDI has been flowing, as well as a diversification in the point of origin of investors.”

There is no doubt the establish-ment of its free trade zones, begin-ning in the early 1990s, has helped position Uruguay as an attractive place for foreign investors. The most recently created zones, in particular Aguada Park and the World Trade Center, provide back-office services for multinationals working in the area as well as IT services and data centers. The country’s top-notch academic institutions generate the highly qualified workforce required to handle all of these services.

Uruguay’s goal to be a logistic hub for the area also makes it appeal-ing to foreign investors, and the de-velopment of the National Institute for Logistics (INALOG) is one step

the country is taking to position itself as just that. Bringing together pub-lic and private sector stakeholders, INALOG analyzes and co-coordinates efforts within the logistics sector for the entire country. It also promotes the brand Uruguay Hub Logístico as a quality hallmark of the country’s logis-tics industry.

One of the main tools at the dis-posal of foreign investors is Uruguay’s investment promotion and protection law, which affords them the same benefits as domestic investors, in-cluding several tax exemptions. Couple this with its strategic location within the Southern Cone of the con-tinent, and Uruguay provides a natural gateway to the Mercosur sub-regional trading bloc of countries, as well as connections to other regions and na-tions around the world.

“In the institutional sphere, we have been working on a program financed by the Inter-American Development Bank, in the areas of global export services in four sec-tors: corporate services, informa-tion technology, biotechnology and pharmaceuticals, and architecture,” says Andrés Pelaez, executive direc-tor of Uruguay XXI. “We are actively seeking investments in these fields while also promoting the export of these services, and one of the coun-tries we are focusing on is the U.S.”

The future remains bright with many projects either already under-way or in the planning stages in need of investors, like a $87 million prison facility, a $200 million highway cor-ridor for routes 21 and 24, a $1 bil-lion deepwater port or others in the mining, renewable energy, cement, retail, global export services, tour-ism and agriculture and agribusi-ness. There is no doubt, the time is right for investors.

IT IS NO SECRET businesses need to be connect-ed and Uruguay’s state-owned telecommunica-tions company is ready to deliver the IT facilities needed by foreign companies willing to use the country as a back office center for their activities in the area.

“Antel is a healthy company, which is ready for the future,” says Antel president Carolina Cosse.

A leading provider of communications services in Uruguay, Antel has recently made changes to address challenges in the industry, such as re-structuring its invoicing to address fixed down-load traffic being uploaded to cell phones and the cost pressures that arise because of this.

“This reconversion has been possible due to an Internet strategy that has proven very suc-cessful and we will continue along those lines,” says Ms. Cosse. “We manage the pressures on the industry well and we also have a lot of faith in the management of our economy ministry, which has been a great success. We expect that will continue.”

Uruguay’s recent advances in fiber optics and fourth generation mobiles have allowed An-tel to implement an intensive investment plan throughout 2013 and 2014. That has included es-tablishing a Tier III data center of 1,000 racks to offer services that go beyond storage.

“This will include platforms in a Latin American country with a democratic brand and a telecom infrastructure that will become a regional refer-ence point,” says Ms. Cosse. “This investment has set Antel up to return to a normal rate of in-vestment for a telecoms company.”

With a turnover of $900 million, Antel antici-pates investing approximately $200 million an-nually in the region.

A primary focus continues to be getting every home in Uruguay connected to the Internet, and since 2011 Antel has developed and implement-ed infrastructure to enable it to deliver its fiber-to-the-home program. With a penetration rate of fiber optic and Internet for home services com-parable to European standards, Antel reports it already has 57% of accessible homes connected.

Ms. Cosse is also a strong supporter of free software, believing it to be a useful tool for de-velopment.

“Free software is an important tool for pro-ducing young programmers, so that children of 13 or 14 years old can gain access to a vast global resource and a global network of high-level programmers who do not charge among themselves, but who download software, modify it, take it to a new level, and then return it,” she says. “Gaining access to this knowledge pool is

a tool the Uruguayan government cannot squan-der.” And it is a knowledge pool foreign investors can tap into along with the strong telecommuni-cations infrastructure the country offers.

“Uruguay is a small country but has a high level of education,” she says. “We incorporate the Ceibal Plan [a program to provide every public school student with a laptop computer] into the curriculum and as a result of all of this we have

a very good telecommunications infrastructure. In terms of information technology, we are break-ing down the fear barriers, with young people and with children, and we are giving them tools.”

Favorable government policies are behind the huge expansionary trend the Uruguayan tele-communications market has seen since 2006 – a trend that is sure to carry on as Antel continues investing to remain a leader in telecommunica-tions on the worldwide stage.

Recent advances in fiber optics and 4G technology are part of an intensive investment plan making Uruguay the ideal back office

Antel creates regional reference point in iCt

and standardized goods, we haven’t experienced reduced demand from Brazil despite the cooling of its economy. And if that was to happen, Uruguay has diversified its markets so much on a global level that we would have no difficulties in reorienting the bulk of our exports to Brazil to other markets.

Q. the Federal reserve’s tapering program is also causing some concern. how might that affect Uruguay?

A. If one had thought that an inundation of dollars, the collapse of the dollar associated with zero interest rates, and the massive buy-up of toxic assets by the Federal Reserve (FED) was going to last forever, one would have taken decisions to incorporate this and adjust the macro-economic parameters accordingly – above all those that are most relevant to small, open, emerging countries.

But our assessment was that this wasn’t going to last forever. In 2008 nobody thought that in 2014 we would still have zero interest rates and that the FED would be ac-quiring still fewer toxic assets; all in all it is a clear signal that we are beginning to disengage from this path.

As a result, the logical reversion of this process also implies the logical reversion of the value of the dollar,

which is strengthening and will continue to do so. But how do we get a grip on this? Whether we are ready or not to confront a world where in the near future the dollar will be stronger, interest rates are going to rise. It all depends on whether we have done our homework and we believe we have done so; we approached the situation of a weak dollar and interest rates from a macro-prudent viewpoint.

Uruguay made the most of this panorama and restruc-tured to radically transform the dimensions of our public debt. In 2002-03 Uruguay’s net debt reached 75% of GDP. Today that figure is 23%. We went through a financial wringer in 2004-05 because we had all the emergency debt from the IMF and World Bank’s crisis fund. It was a large amount, we had to pay it back quickly, and it was dollarized.

Today, through precautionary policies our debt pro-file is completely healthy. Not only have we decreased the debt-to-GDP ratio, but we now also owe the ma-jority in local currency, that is to say we have de-dol-larized the debt substantially. If one looks at the next 15 or 20 years, the servicing of Uruguay’s debt is com-pletely covered.

Q. Uruguay for some time was known as the “switzer-land of latin America.” Few people know the extent of the measures you have taken in that respect…

A. Between 2006 and 2009 many institutional and reg-ulatory changes were implemented. Today Uruguay has one of the best evaluations of compliance with the recom-mendations of the Financial Action Task Force (FATF) in Latin America. If we compare Uruguay with the G20 coun-tries, we have a better FATF evaluation than 17 of them.

Following the spirit of Chilean and German regulations, Uruguay created a public limited company sharehold-ers’ registry and at the same time facilitated the lifting of banking secrecy in the exchange of tax information. This has all been part of a process of following the guidelines of the Global Forum on Transparency; Uruguay is not only no longer considered a tax haven but it is not on the black list, or even the gray list; in fact we have passed Phase I of the forum’s evaluation and we are right now in the Phase II process.

Q. inflation is the only macroeconomic variable that appears to be a worry at the moment.

A. In the short term, yes. What are we doing to combat inflation? various things. In the first instance, consistency in macroeconomic policies, monetary policy, fiscal policy,

deposits, etcetera, in a consistent and credible way. Secondly, a strongly contractive monetary pol-icy. At the moment Uru-guay surely has one of the highest real rates of in-terest in the world and the problem is that Uruguay’s monetary policy cannot be very effective because of all the means of exercis-ing monetary policy in this situation are weak since the financial markets, and above all providers of credit, are not the motors for growth in demand.

We are also implement-ing short-term measures to affect consumer prod-uct prices to try and mod-erate the consumer price index, not by massaging the numbers but by pay-ing the corresponding fis-cal costs.

Q. what is Uruguay do-ing to attract FDi?

A. Uruguay is a bit of a miracle. It was one of the Latin American countries with the highest levels of economic and human de-velopment, but in terms

of investment indicators we were competing with Haiti for last place. The relationship between public and pri-vate domestic and foreign investment was around 13-14% over the past few decades. With luck it will reach 15% within a year. Therefore it was a miracle that such a small country with so little investment and so few savings had the social and economic development levels that it did. Aware of this situation and of how essential the process of investment was for building a new platform for growth and development, we enacted profound reforms and cre-ated an environment for attracting investors.

Now we have significant investment in the areas of hu-man capital, financial services, professional services, software, audiovisuals, etcetera. There is a lot of Japa-nese and Chinese investment in the automobile sector. FDI today is four or five times higher than before the im-plementation of the new initiatives.

Fiscal strength shields country from crises

Continued from page 1

“Uruguay is a bit of a miracle. it is one of the latin American countries with the highest levels of economic and human development, but in terms of investment indicators we were competing with haiti for last place”

Mario bergara, Minister of economy and Finance

Up-and-coming sectors like IT, corporate services and biotech attract new investment

“Uruguay is a small country but has a high level of education”

Carolina Cosse, President of Antel

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together the four aforementioned sectors. We have been participating in several events in the U.S. to promote Uruguay as a destination for this type of in-vestment, and also to advertise our services.”

Some 120 U.S. companies operate in Uruguay and with the FTA signed between the nations in 2005 bearing fruit, the scenario is one of positivity toward Uruguayan penetration of U.S. markets in several areas, while annual average U.S. investment more than tripled to $87 million in the period 2007-2012.

One such growth industry is citrus fruits, which has been a staple of the local economy for half a century and now represents a significant outlet for future expansion. The sector counts around 14,000 hectares and provides 17,000 jobs, with exports reaching $77 million in the first three quarters of 2013. Ministry of agriculture figures recorded in-creases in 2011 and 2012 and despite a drop in pro-duction to 234,000 tons in 2013 – the result of an un-seasonal June freeze – those figures are expected to rise year-on-year in line with demand.

The opening up of the U.S. market is also expect-ed to have a dramatic effect on Uruguay’s citrus pro-ducers: it is estimated that the deal could be worth as much as $20 million annually and provide in the region of 15,000 further jobs.

Mr Pelaez says: “We recently launched a new platform in Uruguay: Siicex, an integrated system containing information about foreign investments and the markets in which, whether the user is Uru-guayan or from abroad, they can access informa-tion based on three pillars: essentially, guides for

importers, exporters and investors, with a step-by-step process. In terms of attracting foreign inves-tors abroad, we participate in trade fairs and local companies come with us. We are opening an office in New York as part of a strategic plan for global de-velopment of the Uruguay Natural brand.”

Uruguay’s international reputation as a provider of the highest quality meat is also a boon on the inter-national markets, especially in light of high-profile news stories such as the 2013 European horsemeat adulteration scandal. This, as Mr. Pelaez points out, is one of Uruguay’s competitive strengths and something the country plans to build upon across the board to retain its place at the top of the high-end export food chain.

“Uruguay is the first country in the world to achieve 100% traceability in its beef production. A consumer can see the origin of a piece of beef, the producer, and all the relevant information,” says Mr. Pelaez. “This system of traceability has also been trans-ferred to other agricultural products. But the idea is to go even further than mere labeling; it is also about how you present the product so it is attractive to the end consumer. The image, the packaging… it is all part of presenting a national brand: Uruguay Natu-ral. For example, when it comes to exports of citrus fruits to the U.S., they are all conducted under the Uruguay Natural brand. The brand has been grow-ing and gaining the backing of associations that want to use the label, so that the national product can be identified and also so that consumers know exactly where their purchases have come from.”

Uruguay / P4

WHEN CONSUMERS think of Latin American wines, they may find their knowledge restricted to a couple of well-known varieties associated with a particular country: Malbec in Argentina, and Carménères from Chile, for example. In the case of Uruguay, that instant recognition goes to Tannat, the country’s signature grape and the driving force behind the emergence of Uruguay as a top-quality producer on the international wine markets.

Participating in wine challenges under the auspice of the International Organization of Wine and vine – including vinalies (France), Sélections Mondiales (Canada), Bacchus (Spain), vinAgora (Hungary) and vinho do Brasil – Uruguayan wines picked up 41 medals: one Great Gold Medal for Narbona’s Tannat Roble 2011, a further 17 Gold Medals and 23 Silver Medals. 85% of the wines presented were Tannats or Tannat blends, with Tannat the dominant grape, and 90% of the prizes awarded were gleaned by these wines.

Introduced to Uruguay in the late 19th century by Basque immigrants who had taken Tannat vines and cultivated them in the Pyr-enees, the variety took to Uruguay’s sub-tropical cli-mate immediately and now leads the country’s export market.

“When we talk in Uru-guay of wine, we talk more than anything about Tan-nat,” says Inavi president José María Lez Secchi. “When we are select-ing a wine to accompany meat dishes, we generally choose Tannat. We have been producing it for 130 years. Like our own his-tory, this wine was born through the inspiration of an immigrant and today it is representative of the country with its vocation ‘for export.’ The vines orig-inated in Maridan, in the south-west of France, and were later cultivated in the Pyrenees. Then they found a new habitat on the other side of the Atlantic Ocean.”

Despite its relatively small size, Uruguay is the fourth-largest wine-producing country in Latin America, producing some 95 million liters annually, says Mr. Secchi. Among the reasons for Uruguay’s expertise in the wine trade is the continuity of the sector, where some 280 win-eries have been run as small-holds in a family tradition dating back to the early settlers.

“Although the history we are all most familiar with about wine in Uruguay dates from a little over 100 years ago, the true beginning has its roots some 250 years ago when immigrants in-troduced viticulture into the country. From 1870 onwards the viticulture industry changes it com-mercial profile thanks to two well-known drivers of the trade: Pascual Harriaque – who introduced Tannat to the country – and Don Francisco vidi-ella, who brought the French variety Folle Noire with him. Currently, Uruguay has almost 8,000

hectares of vineyards of the highest enologi-cal quality. Uruguay is fundamentally a country of small producers of grapes and wine, where almost 100% of the establishments have been family run for more than three generations.”

This intimacy also allows for one of Inavi’s largest and most ambitious projects: the com-plete georeferencing of the country’s wine out-put from the vine to the bottle, including the region and estate where it originated. It is the natural continuation of a process that began in 1903, when the viticulture Law was enshrined, endowing the entire quality control and financial supervision of the sector to the state.

“Today the Uruguayan National Institute of Wine and viticulture [Inavi] is the governing body overseeing national policy. The board con-sists of three government delegates and five members representing the growers, producers and distributors,” notes Mr. Secchi.

Although Tannat is the country’s flagship tipple, Uruguay also produces Merlot, Cabernet, Malbec, Sauvignon, Chardonnay, Semillón and Riesling. And neither is the country’s marketing machine aimed entirely at the top-shelf shoppers. Traditionally Brazil is the largest market for bottled wine form Uruguay with focus on Tannat grape variety. In the past few years when the inter-national trade of bulk wine has been growing, Uruguay took advantage of that opportunity and exported almost 20 million liters to Russia in 2013 for ex-ample. Nevertheless, the focus markets for Uruguay are Brazil and the USA, which nowadays represents 12% of exports but Inavi sees great potential for growth.

“The new international scenario of economic trading blocks, tariff exemptions, and the globalization of the world economy have had a positive effect on the worldwide mar-

ket for wines from new producing countries,” says Mr. Secchi. “Therefore, recent political and socio-cultural changes in the region, such as the creation in 1991 of Mercosur, had an effect on the Uruguayan economy, in that the need to carry out reforms in the structures of produc-tion and marketing became paramount. Uru-guayan wine, with its strengths and advantages, today constitutes one of the new possibilities for consumers in the international market, and in that sense it is already on shelves in more than 30 countries, with the largest distribution in Bra-zil – which accounts for 46% of all wine exports – the USA, Canada, Mexico, France, the U.K. and Poland.”

Wines of Uruguay’s international marketing campaign, called Tannat Tasting Tour, is de-signed to spread the word about the country’s vintage wines across the globe. But perhaps the motif that most parallels Uruguay’s love of life’s finer side is that of the current domestic televi-sion spot: “The important thing is to enjoy it.”

Award-winning Tannat wines now enjoyed worldwide

inavi brings out the tradition and quality of nation’s wines

“Uruguayan wine is already on shelves in more than 30 countries”José María lez secchi, President of the National wine institute, inavi

When ratings agency Standard & Poor’s restored investment grade status to Uruguay in 2012, it was the cul-mination of a decade-long series of

reforms aimed at creating a prudent economic framework and the coordinated efforts of succes-sive governments to increase investor confidence in the country through market-friendly policies. The knock-on effects of the Argentinean default in 2002 resulted in a run on the banks in Uruguay and the devaluation of the peso, battering Uru-guay’s ability to withstand external pressure. The government subsequently sought to de-dollarize its debt and strengthen its balance sheets, which in 2013 resulted in Moody’s and Fitch joining S&P in bestowing investment status on the country, with stable to positive outlooks based on political stability and a high per capita income.

Uruguay’s top five export destinations are Bra-zil, China, its own Nueva Palmira free trade zone, Argentina and venezuela, but the country has successfully managed to diversify its export base, resulting in a decrease in exports to the region from 50% in 2002 to just 20% in 2014. Last year, Uruguay’s total exports reached a record level of nearly $9.2 billion, a figure which rises to over $10 billion if trade completed through free zones is taken into account – a 4.8% rise over 2012 – ac-cording to Uruguay XXI, the one-stop shop for for-eign and domestic investors.

Inaugurated in 1996, Uruguay XXI is responsible for facilitating investment in the country and im-proving competitiveness by meeting the needs of companies and individuals.

A founding member of Mercosur, Uruguay’s

traditional trade routes have been mainly centered on the immediate region and based on its top five export commodities: soybeans, beef, rice, pow-dered milk and timber. However, other important trade partners are emerging, not least the U.S.

Purely in terms of fresh and frozen beef prod-ucts – exports of which reached 216,765 metric tons in 2013, a 3% year-on-year increase – the U.S. market accounted for 17,747 metric tons, a 19% increase over 2012.

“The U.S. is a priority market for Uruguay,” says Andrés Pelaez, executive director of Uru-guay XXI. “We are rolling out a series of promo-tional tools, such as Smart Services, which brings

Uruguay targets the U.s. as a ‘priority market’ for exports

exPOrts. While diversifying its export markets, Uruguay is promoting its top-tier products to U.S. consumers

some 120 U.s. companies operate in Uruguay and with the FtA signed between the nations in 2005 bearing fruit, the scenario is one of positivity toward Uruguayan penetration of U.s. markets in several areas