Uruguay country brief

Overview

The Oriental Republic of Uruguay is a small country located between Argentina to its west and Brazil to its east. Uruguay is slightly smaller than Victoria and is a relatively low-lying country with fertile plains and low hills, with its highest point, Cerro Catedral, reaching 514 metres above sea level. Uruguay's western border with Argentina is made up entirely by the Uruguay river and the Rio de la Plata Estuary. Uruguay's full name in Spanish means 'the Republic on the east of the Uruguay (River)', from which it gets its common name of 'Uruguay'. Uruguay's capital is Montevideo.

Uruguay's population is approximately 3.4 million (2015 est) and is made up of mainly European (88 per cent) and mestizo (eight per cent) people, with a small black population (four per cent). Roman Catholicism is the largest religion in Uruguay with around 47 per cent of the population identifying as Catholic although some of these identify as non-practising Catholics. Protestantism, Judaism and other faiths are also present. Spanish is the official language of Uruguay.

Uruguay is the number one country in Latin America on the World Prosperity Index (28th overall). Montevideo is the safest city in Latin America (28th safest world-wide). It has an export-oriented knowledge-based services economy with progressive social policies, a skilled workforce and a good track record of establishing new industries. Achievements include producing a sustainable forestry industry in the 1980s, globally competitive software and call centre export industries, and the fourth highest per capita expenditure on renewable energy allowing Uruguay to export electricity to Argentina.

Australia and Uruguay enjoy positive relations based on a number of shared interests and cooperation in a range of multilateral fora. Like Australia, Uruguay is a significant agricultural producer and exporter. Australia and Uruguay are members of the Cairns Group and cooperate in the World Trade Organization to advance global reform of agricultural markets.

Uruguay opened an Embassy in Canberra in May 1958 and Australia's first Ambassador to Uruguay, E.D. Mackinnon presented credentials on 17 July 1968.

Australia has non-resident diplomatic accreditation to Uruguay through the Australian Embassy in Buenos Aires and maintains an Honorary Consulate in Montevideo, which provides consular services to Australians in Uruguay.

Uruguay's political and labor conditions are among the freest on the continent. Uruguay rates highly for most development indicators and is known for its secularism, liberal social laws, and well-developed social security, health, and educational systems. It is one of the few countries in Latin America where the entire population has access to clean water. Uruguay's provision of free primary through university education has contributed to the country's high levels of literacy and educational attainment.

Political overview

The Spanish first arrived in Uruguay in 1516, but resistance from indigenous inhabitants helped postpone full Spanish settlement until the early 18th century. Montevideo, founded by the Spanish in 1726 as a military stronghold, soon took advantage of its natural harbour to become an important commercial centre. Following secession from Spain in 1811, Uruguay was annexed by Portugal to its Brazilian territories. Claimed by Argentina but annexed by Brazil in 1821, Uruguay declared its independence from Brazil in 1825, and in 1828 the country became fully independent under the Treaty of Montevideo. During the rest of the 19th century there was a number of minor conflicts with neighbouring states, coupled with considerable inflows of (mainly European) immigrants.

Throughout much of the 20th century, Uruguay's two main political parties, the centrist Colorado and National (Blanco) parties, alternated in power. However, a military regime assumed control following a coup in 1973, and remained in power until 1985. The legacies of twelve years of military rule included an economy in severe decline and lingering human rights issues. Democracy was re-installed in 1985 and successive governments have worked to consolidate Uruguay's democratic institutions and stabilise the economy. In 2004, the left-of-centre Frente Amplio Coalition won national elections that effectively ended 170 years of political control previously held by the Colorado and Blanco parties.

System of government

Uruguay is divided into 19 "departments" with limited local self-government. The political system is based on a strong central executive branch, subject to legislative and judicial checks. No member of any branch of government can simultaneously perform official duties in another branch. The executive branch comprises the President, Vice-President and Council of Ministers. The President and Vice-President are chosen by direct popular vote for one five-year term (consecutive re-election is not permitted), and the ministers are appointed by the President. The legislative branch consists of a bicameral Parliament, comprising the 31-member Senate (upper house) and the 99-member Chamber of Deputies (lower house).

The next presidential and parliamentary elections will be held in October 2019.

Recent political developments

The ruling "Frente Amplio" coalition was returned by a comfortable margin in late 2014 after successfully campaigning on Uruguay's strong growth in the previous decade of Frente Amplio governments. President Tabaré Vázquez's was inaugurated in March 2015 (previously serving as President in 2005-2010). The Frente Amplio (FA) is a centre-left coalition of 21 political groups. Since March 2015, however, government initiatives have been hampered by an increasingly divided Frente Amplio coalition, that has thwarted attempts to reduce public debt and rein in the fiscal deficit.  Over the past five years inflation has remained at around eight to nine per cent (year on year). Real GDP growth remains modest, at around 1.4 per cent (year on year).

Uruguay has performed competently during its ongoing tenure on the UN Security Council (2016-2017).  Uruguay also hosted the High-Level "Global LGBTI Human Rights Conference on Non Violence, Non Discrimination and Social Inclusion", co-chaired with the Kingdom of The Netherlands, in Montevideo in July 2016. This was the first time that the conference took place in Latin America.

Foreign Policy

Uruguay's most important political and economic partners are its neighbours, in particular Brazil and Argentina. Argentina, Brazil, Paraguay, Uruguay and Venezuela (now suspended) are full members of Mercosur, the Southern Cone Common Market, which also comprises associate members Chile, Colombia, Ecuador, Guyana, Peru and Suriname. Mexico is an observer and Bolivia is in the process of becoming a full member. Together the five Mercosur countries encompass approximately 72 per cent of the territory of South America (12.8 million km2, equivalent to three times the area of the European Union) and close to 70 per cent of the South American population. It totals 285.0 million inhabitants and combined GDP of $3.5 trillion according to World Bank Data (2015).

Membership of Mercosur provides Uruguay with preferential trade access to the markets of Mercosur members and its associates. However, Uruguay has expressed an increasing dissatisfaction with the trading benefits that Mercosur has provided and increased protectionism from some other members, and has mooted external FTAs (an idea opposed by its Mercosur partners as inconsistent with Mercosur rules).

Uruguay is also a member of several regional organisations, including the Union of South American Nations (UNASUR), the Community of Latin America and Caribbean States (CELAC) and the Organization of American States (OAS), that seek to advance a variety of regional political and economic interests.

In 2012, both Uruguay and Australia became observers of the Pacific Alliance, a group of outward-looking pro-trade liberalising Latin American economies comprising Chile, Colombia, Mexico and Peru. In 2013 Uruguay announced its intention to pursue full membership of the bloc, subject to its Mercosur commitments.

Uruguay maintains positive relations with the United States, based on economic ties and regional cooperation aimed at combatting drug trafficking and terrorism. Uruguay and the United States have, in the past, put in place agreements to establish trade and investment relations, including the 2002 Joint Commission on Trade and Investment and a bilateral investment framework agreement, which entered into force in 2006.

Brazil is Uruguay's largest export destination, followed by China and Argentina. Opportunities had been lost with the shelving of education reforms and withdrawal from Trade in Services Agreement negotiations, however a renewed Free Trade Agreement with Chile (October 2016) is likely to attract Uruguay to Chile's services sector, while Uruguay takes advantage of Chile's openness to trade across the Pacific.

Bilateral relations

Australia is expanding its bilateral relationship with Uruguay through trade and people-to-people links, including student exchanges and academic linkages, particularly in the agriculture, energy, mining, and education sectors. There is a 30,000 people strong Uruguayan community in Australia. In 2015 there were 1800 short-term visitor arrivals from Uruguay, an annual growth of 8.7 per cent over five years. Uruguayan student numbers in Australia remain small, with a total of 35 students enrolled in Australian educational institutions as at December 2015. 

In 2017 Deakin University will open its first Latin American office in Uruguay's capital Montevideo, including to support student exchange in the region more broadly. In November 2016 the Australian Studies Centre was launched at ORT University in Montevideo. The Sustainable Minerals Institute of Queensland University has provided advice to the Uruguayan Mining and Environment ministries with regard to environmental best practices and mine safety.

On 8 July 2016 an Arbitral Tribunal ruled in Uruguay's favour on a challenge brought by tobacco company Philip Morris. Australia welcomed the decision of the International Centre for Settlement of Investment Disputes Arbitral Tribunal upholding Uruguay's tobacco regulatory measures and congratulated Uruguay on the outcome of this arbitration.  

In 2012, Australia and Uruguay signed a Work and Holiday Visa arrangement (effective 2013), with a reciprocal quota of 200 visas annually.

Australia and Uruguay also work together on issues relating to the Antarctic, especially in efforts to address illegal fishing through the Convention on the Conservation of Antarctic Marine Living Resources (CCAMLR).

In 2001, the Australian Government established the Council on Australia-Latin America Relations (COALAR) which aims to enhance commercial, political and cultural relations between Australia and Latin America. Since its inception, COALAR has been active in promoting business, education, tourism and cultural links between Australia and Latin America. For updates on COALAR activities and information on the annual grants program, follow COALAR on Facebook.

More information on the Uruguay-born community in Australia can be found at the Department of Social Services Community Information Summary page.

Development assistance

From 2010 to 2014, Australia provided $100 million in development assistance to Latin America, including 250 Australia Awards scholarships. Under this program, five Australia Awards scholarships were awarded to Uruguayan students. From 2012 to 2016 nine Uruguayans have received Australia Award Fellowships. The regional program has now closed, though some activities which have already been funded will continue until 2017.

For further detail on Uruguay's development indicators refer to the World Bank.

Economic overview

At a glance

For latest economic data refer to the Uruguay fact sheet [PDF 38 KB]

Economic outlook

Uruguay's economy is highly dependent on agriculture and the economic cycles of its close trading partners and neighbours, Argentina and Brazil. It was severely affected by the Argentine debt default in 2001 (Uruguay repaid its outstanding debt to the IMF in December 2006). Uruguay's economic ties with Asia, in particular China, have grown substantially. Brazil was Uruguay's principal export destination in 2014 (taking some 17.6 per cent of Uruguay's exports), followed by China (13.3 per cent) and Argentina (4.8 per cent). China surpassed Brazil to become Uruguay's largest import source since 2013, with 18.5 per cent of Uruguay's imports coming from China in 2014, followed by Brazil and Argentina.

The Uruguayan economy has grown strongly since the 2001 Uruguayan banking crisis. Real GDP economic growth in 2013 was 5.1 per cent, dipping to 1.4 per cent in 2016. In 2013, Uruguay's total goods and services exports increased by around 1.4 per cent to reach a historic high of US$13.6 billion. The economy is based on solid macroeconomic fundamentals including strong reserves, low debt, high domestic demand and a diversified production structure. Recent economic growth has been broadly based, and the agriculture and livestock sectors are doing well. Initially this was due to growth in Brazilian and Argentine import demand as these countries recovered from their own economic crises. However, more recently the sectors have been buoyed by growth in the volume and value of Uruguay's agricultural trade with the United States. Uruguay's main exports include beef, oilseeds, cereals, wool, leather, dairy products and wood. Tourism and motor vehicles are also significant components of Uruguay's export sector.

In 2015 the government announced plans to expand Uruguay's wind energy sector and produce 90 per cent of its electricity from renewable sources. In less than 10 years the country has slashed its carbon footprint and lowered electricity costs, without government subsidies.  Wind energy is now cost competitive in the nation, and is displacing the most expensive fossil-fuel generation.

Uruguay's GDP growth, political stability and low corruption levels have made it an attractive destination for investment. FDI has increased substantially in recent years, particularly in utilities, telecoms and finance. Uruguay is expected to continue attracting foreign investment through concerted efforts which include increasing transparency and the public-private partnership scheme. The government of Uruguay has introduced additional incentives for foreign investors including corporate income tax exemptions (of up to 100 per cent of the investment), tax free zones, free ports, free transit of goods and no foreign exchange controls.

Uruguay's economic fundamentals remain solid – especially in terms of regional comparisons.  But Uruguay's exports have taken a hit with the commodity price slump and the ensuing deep recession in major trading partner Brazil, while FDI – after booming over the last decade – has plateaued.  

Largely reflecting these external difficulties, there has been a steep drop in economic activity, with growth of 1.5 per cent in 2015 (down from 3.5 per cent in 2014 and an average 5.3 per cent 2010-2013) and further slowing expected this year. Despite the government's success in securing parliamentary approval of its mostly prudent five-year budget, efforts to rein in creeping inflation (which in February 2016 broke 10 per cent for the first time in many years) through fiscal austerity will be complicated by internal Frente Amplio opposition and are not very encouraging, at least in the short term.

Export earnings fell by 2.26 per cent and import values by 8.56 per cent in the third quarter of 2016, registering more modest declines than in the first half of the year, and suggesting—in conjunction with other positive economic data—that the worst of Uruguay's economic slowdown is over.

Bilateral Trade and Investment

In 2015 Australia's two-way merchandise trade with Uruguay totalled around A$30 million. Australian imports from Uruguay totalled around A$20 million, mainly comprising edible products and preparations. In 2015 Australian exports to Uruguay were approximately A$9 million comprising mainly crude vegetable matter, electrical machinery and parts, and animal oils and fats.

Uruguay offers an attractive trade and investment environment, a very positive disposition to work more closely with Australia, and a history of successful commercial relations through companies such as NuFarm, INCAT and Cochlear and Petrel Energy. Through its geographical location and its membership of the continent's largest regional trading bloc, Mercosur, it provides strong links into regional markets.

Australia signed an MOU on Strengthening Bilateral Trade and Investment with Uruguay in 2010, and in 2011, the Uruguay-Australia Chamber was established. The Chamber, based in Uruguay, operates under the form of a non-profit civil association. It focuses on promoting and developing relations between Uruguay and Australia.

Australia and Uruguay participate in the CER-Mercosur Dialogue, bringing together Australia, New Zealand and Mercosur members (the most recent discussions took place in Brasilia in October 2012). The dialogue was established in 1996 as a mechanism to strengthen cooperation on global trade policy issues and to promote inter-regional trade and investment.

Similarities in the primary exports of Uruguay and Australia present opportunities for the export of Australian agriculture-related technology and services, including animal genetic material. One strategy for Australian companies looking to invest and trade in Uruguay is to extend existing interests they may have in Argentina and Brazil. Australian companies with existing interests in Argentina and Brazil may find that the close commercial ties that these countries have with Uruguay facilitate entry into the Uruguayan market.

New opportunities for Australian investment are opening up in the areas of agriculture, mining and infrastructure. The public-private partnerships initiative presents additional opportunities for Australian companies to invest in Uruguay through infrastructure projects, such as deep-water ports, roads, rail, river transport, energy (oil, gas and wind farms), irrigation dams, tourism infrastructure, recreational ports and marinas, hospitals and jails. Australian company Petrel Energy, in association with US Company Schuepach Energy International, has interests in significant oil and gas discoveries in Uruguay, particularly in the Norte Basin.

High-level visits

2017 will see President Tabaré Vazquez present at the 15th World Congress on Public Health, to be held in Melbourne on 3 April 2017.

In August 2016 Australian Governor-General Sir Peter Cosgrove, and Lady Cosgrove, visited Montevideo, where they attended a state lunch hosted by Uruguay's President, as well as visiting the Uruguay Peacekeeper Training Centre in recognition of Uruguay's active participation in international peacekeeping operations.

In April 2016, Victoria's Speaker of the Legislative Assembly, The Hon Telmo Languiller MLA travelled to Uruguay for the launch of the Australia-Uruguay Cultural House.

In November 2015, Uruguay's Minister for Industry, Energy and Mining, Carolina Cosse participated in the Victorian Government's International Mining and Resources Conference.

In May 2012 the Uruguayan Minister for Industry, Energy and Mining Roberto Kreimerman visited Australia for the inaugural Latin America Down Under conference. He was the first Uruguayan minister to visit Australia since Foreign Minister Enrique Iglesias García visited Cairns for the inaugural Cairns Group meeting in 1986.

In December 2011 the then-Parliamentary Secretary for Pacific Island Affairs Richard Marles attended the XLII Mercosur Summit in Montevideo.

The first bilateral Australian parliamentary delegation visit to Uruguay took place in July 2007. The delegation was hosted by the Uruguayan Parliament.

Last Updated: 6 January 2017