Background Notes For Uruguay
U.S. Department of State
Background Notes: Uruguay, March 1998
Released by the Bureau of Inter-American Affairs.
Official Name: Oriental Republic of Uruguay
PROFILE
Geography
Area: 176,000 sq. km. (68,000 sq. miles); slightly smaller than
Oklahoma.
Cities: Capital--Montevideo (est. pop. 1.4 million).
Terrain: Plains and low hills; 84% agricultural.
Climate: Temperate.
People
Nationality: Noun and adjective--Uruguayan(s).
Population (1996): 3.15 million.
Annual growth rate: 0.6%.
Ethnic groups (est.): European descent 88%, mestizo 8%,
African descent 4%.
Religions: Roman Catholic 66%, Protestant 2%, Jewish 2%, non-professing
or other 30%.
Language: Spanish.
Education: Literacy--96%.
Health: Life expectancy--72.4 yrs. (75 yrs. female; 69
yrs. male). Infant mortality rate--18.9/1,000.
Work force (1996, 1.33 million): Manufacturing--19%. Commerce--19%.
Services (except banking)--35%. Banking--6%. Construction--7%.
Transportation & communications--6%. Agriculture--4%.
Other--4%.
Government
Type: Republic.
Independence: 1828.
Constitution: December 1996.
Branches: Executive--president (chief of state and head
of government). Legislative--General Assembly consisting
of a 99-seat Chamber of Deputies and a 30-seat Senate. Judicial--Supreme
Court of Justice.
Administrative subdivisions: 19 departments with limited autonomy.
Political parties/coalitions: Colorado Party, Blanco (National)
Party, Frente Amplio (Broad Front), New Space Party.
Suffrage: Universal at 18.
Economy (1996)
GDP: $19 billion.
Annual growth rate (1997): 6.3%.
Per capita GDP: $6,000.
Natural resources: Arable land, hydroelectric potential, granite,
and marble.
Agriculture (10% of GDP): Products--beef, wool, grains,
fruits, vegetables.
Industry (18% of GDP): Types--meat processing, wool and
hides, textiles, shoes, handbags, leather apparel, tires, cement,
fishing, food and beverages, petroleum refining.
Services: (47% of GDP)
Trade: Exports--$2.4 billion: meat, wool, hides, leather
and wool products, fish, rice, furs. Major markets--Southern
Cone Common Market (MERCOSUR) 47% (Argentina 20%, Brazil 26%,
Paraguay 1%); EU 20% (Germany 6%); U.S. 7%. Imports--$3.3
billion: fuels, chemicals, machinery, metals, vehicles. Major
suppliers--MERCOSUR 50% (Argentina 24%, Brazil 26%, Paraguay
less than 1%); EU 19%; U.S. 12%.
Exchange rate (March 1998): 10.14 Uruguayan pesos=U.S.$1.
PEOPLE
Uruguayans share a Spanish linguistic and cultural background,
even though 25% of the population is of Italian origin. Most are
Roman Catholic. Church and state are officially separated. Uruguay
is distinguished by its high literacy rate, large urban middle
class, and relatively even distribution of income. The average
Uruguayan standard of living compares favorably with that of most
other Latin Americans. Metropolitan Montevideo, with about 1.4
million inhabitants, is the only large city. The rest of the urban
population lives in about 20 towns. During the past two decades,
an estimated 500,000 Uruguayans have emigrated, principally to
Argentina and Brazil. As a result of the low birth rate and relatively
high rate of emigration of younger people, Uruguay's population
is quite mature.
HISTORY
The only inhabitants of Uruguay before European colonization of
the area were the Charrua Indians, a small tribe driven south
by the Guarani Indians of Paraguay. The Spanish discovered the
territory of present-day Uruguay in 1516, but the Indians' fierce
resistance to conquest, combined with the absence of gold and
silver, limited settlement in the region during the 16th and 17th
centuries. The Spanish introduced cattle, which became a source
of wealth in the region. Spanish colonization increased as Spain
sought to limit Portugal's expansion of Brazil's frontiers. Montevideo
was founded by the Spanish in the early 18th century as a military
stronghold; its natural harbor soon developed into a commercial
center competing with Argentina's capital, Buenos Aires.
Uruguay's early-19th century history was shaped by ongoing fights
between the British, Spanish, Portuguese, and colonial forces
for dominance in the Argentina-Brazil-Uruguay region. In 1811,
Jose Gervasio Artigas--who became Uruguay's national hero--launched
a revolt against Spain which resulted in the formation of a regional
federation with Argentina. In 1821, Uruguay was annexed to Brazil
by Portugal, but Uruguayan patriots declared independence from
Brazil in 1825. With the support of Argentine troops and after
three years of fighting, they defeated Brazilian forces.
The 1828 Treaty of Montevideo brought Uruguay independence, and
the nation's first constitution was adopted in 1830. The remainder
of the 19th century under a series of elected and appointed presidents
saw interventions by, and conflicts with, neighboring states,
political and economic fluctuations, and large inflows of immigrants,
mostly from Europe.
Jose Batlle y Ordoñez, president from 1903 to 1907 and
again from 1911 to 1915, set the pattern for Uruguay's modern
political development. He established widespread political, social,
and economic reforms, such as a welfare program, government participation
in many facets of the economy, and a plural executive. Some of
these reforms were continued by his successors.
By 1966, economic, political, and social difficulties led to constitutional
amendments, and a new constitution was adopted in 1967. In 1973,
amid increasing economic and political turmoil, the armed forces
closed the Congress and established a civilian-military regime.
A new constitution drafted by the military was rejected in a November
1980 plebiscite. Following the plebiscite, the armed forces announced
a plan for return to civilian rule. National elections were held
in 1984; Colorado Party leader Julio Maria Sanguinetti won the
presidency and took office in 1985.
The Sanguinetti Administration implemented economic reforms and
consolidated democratization following the country's years under
military rule. Sanguinetti's economic reforms, focusing on the
attraction of foreign trade and capital, achieved some success
and stabilized the economy. In order to promote national reconciliation
and facilitate the return of democratic civilian rule, Sanguinetti
secured popular approval of a controversial plebiscite which granted
general amnesty for military leaders accused of committing human
rights violations under the military regime, and sped the release
of former guerrillas.
The National Party's Luis Alberto Lacalle de Herrera won the 1989
presidential election. President Lacalle executed major economic
structural reforms and pursued further liberalization of trade
regimes, including Uruguay's inclusion in the Southern Cone Common
Market (MERCOSUR) in 1991. However, economic adjustment and privatization
efforts provoked political opposition. Thus, while the country
achieved economic growth under the Lacalle Administration, social
problems and austerity measures combined to foster increasing
popular discontent and further political polarization by 1992.
The result was the overturn of some reforms by referendum. In
the November 1994 presidential and legislative elections, Colorado
Party candidate and former President Sanguinetti won a new term
of office which he began on March 1, 1995. President Sanguinetti
has used his second term to consolidate Uruguay's economic reforms
and integration into MERCOSUR, increasing economic growth and
reducing inflation.
GOVERNMENT AND POLITICAL CONDITIONS
Uruguay's 1967 constitution institutionalizes a strong presidency,
subject to legislative and judicial checks. The president's term
is five years. Twelve cabinet ministers, appointed by the president,
head executive departments.
The Constitution also provides for a bicameral General Assembly
responsible for enacting laws and regulating the administration
of justice. The General Assembly consists of a 30-member Senate,
presided over by the vice president of the Republic, and a 99-member
Chamber of Deputies.
The highest court is the Supreme Court; below it are appellate
and lower courts and justices of the peace. In addition, there
are electoral and administrative ("contentious") courts,
an accounts court, and a military judicial system.
Following the 1994 elections, no single party had a majority in
the General Assembly. Distribution of seats was as follows: Colorado
Party 33%, National Party 33%, Frente Amplio (Broad Front) 30%,
and New Space Party 4%. As a result, the National Party joined
with the Colorado Party in a coalition government. Working with
this coalition, President Sanguinetti secured important reforms
aimed at improving the electoral system, education, social security,
and public safety.
National Security
The armed forces are constitutionally subordinate to the president
through the Minister of Defense. By offering early retirement
incentives, the government has trimmed the armed forces to about
16,100 for the army, 4,200 for the navy, and 3,400 for the air
force. As of November 1997, Uruguay has about 105 soldiers deployed
in UN peacekeeping missions, with the largest group (around 60)
in the Sinai peninsula.
Principal Government Officials
President--Julio Maria Sanguinetti
Minister of Foreign Affairs--Didier Opertti
Ambassador to the United States--Alvaro Diez de Medina
Ambassador to the United Nations--Jorge Perez
Ambassador to OAS--Antonio Mercader
Uruguay maintains an embassy in the United States at 1919 F Street,
NW, Washington, DC 20006 (tel. 202-331-1313). Consulates are also
located in Miami, Los Angeles, and New York.
ECONOMY
Uruguay's economy remains dependent on agriculture. Although agricultural
production accounts for 10% of the gross domestic product (GDP),
it comprises more than 50% of exports. The industrial sector,
which produces 18% of GDP, is largely based on the transformation
of agricultural products. Leading industrial sectors include meat
processing, agribusiness, leather production, textiles, leather
footwear, handbags, and leather apparel.
The country's strategy to stimulate growth and meet its debt service
obligations is based on exports. The bulk of its trade is with
its neighbors and partners in MERCOSUR. Uruguay is committed to
an open financial system and maintains a floating exchange rate;
the government intervenes in the exchange market to maintain a
peso devaluation rate of about 1% per month.
The government has carried out a cautious program of economic
liberalization similar to that of many other Latin American countries.
The program has included lowering tariffs, eliminating deficit
spending, controlling inflation--reduced from 129% in 1990 to
an estimated 1997 rate of 15%--and reducing the size of government.
But weak public support, the conservative nature of the Uruguayan
people, and the fragmented political system suggest continued
slow modernization.
The Lacalle Administration failed to reform completely the bloated
and inefficient public sector. Privatization stalled when 72%
of voters rejected the sale of the state telephone company, ANTEL,
in a December 1992 referendum. However, the government continued
implementation of those parts of the 1991 state enterprise reform
law not overturned in the 1992 referendum.
Port services were privatized, improving efficiency and reducing
prices. In May 1994, the state relinquished its monopoly on automobile
insurance. Other activities which have been transferred to the
private sector either under contract, concession, or sale, include:
ground services and operation of the cargo terminal at Montevideo's
Carrasco International Airport, the national airline (PLUNA),
gas distribution, road construction and maintenance, construction
and operation of the sewage and water supply systems for the zone
east of Punta del Este, and operation of a mobile telephone system.
The Sanguinetti Administration has deepened reforms, including
partial privatization of the social security system.
FOREIGN RELATIONS
Uruguay has strong political and cultural links with the democratic
countries of the Americas and Europe. Uruguay supports constitutional
democracy, political pluralism, and individual liberties. Its
international relations historically have been guided by the principles
of non-intervention, respect for national sovereignty, and reliance
on the rule of law to settle disputes.
The government seeks export markets and financial support. Uruguay
is a member of the Southern Cone Common Market (MERCOSUR) with
Argentina, Brazil, and Paraguay. Uruguay also is a member of the
Rio Group, an informal group of Latin American states which deals
with multilateral regional issues. It is a party to the Inter-American
Treaty of Reciprocal Assistance (Rio Treaty), the World Trade
Organization (formerly the General Agreement on Tariffs and Trade),
and the Latin American Nuclear Free Zone.
Uruguay's location between Argentina and Brazil makes close relations
with these two larger neighbors particularly desirable. The three
countries have been working closely on integrating their economic
systems and improving relations. Uruguay also has been working
with Brazil, Argentina, Paraguay, and Bolivia--under terms of
the River Plate Basin Treaty--on an economic integration plan
whose centerpiece is the development of the River Plate Basin
as a major shipping and commercial transportation link known as
Hidrovia.
U.S.-URUGUAYAN RELATIONS
U.S.-Uruguayan relations traditionally have been based on a common
outlook and emphasis on democratic ideals. Uruguay works with
the United States bilaterally and internationally to foster economic
and political cooperation and to improve regional cooperation.
More than 90 U.S.-owned companies operate in Uruguay, and many
more market U.S. goods and services.
An early proponent of the Enterprise for the Americas Initiative,
Uruguay also is a leader in the follow-up process to the 1994
Summit of the Americas. It serves as a "responsible coordinator"
for two Summit actions: tourism and invigorating civil society.
The Uruguayan Government cooperates with the United States on
law enforcement matters, such as regional efforts to reduce drug
trafficking.
Principal U.S. Embassy Officials
Ambassador--Christopher C. Ashby
Deputy Chief of Mission--Nancy M. Mason
Political/Economic Counselor--Jonathan D. Farrar
Commercial Attache--Stephen K. Keat
Consul--Denise A. Boland
Chief, Administrative Section--Robert D. Goldberg
Public Affairs Officer (USIS)--Peter M. Brennan
Chief, Office of Defense Cooperation--Col. Mario K. DiPrimo, USAF
The U.S. Embassy in Uruguay is located at Lauro Muller 1776, Montevideo
(tel: 598-2-203-6061 or 598-2 408-7777; fax: 598-2-408-8611).
The mailing address for the embassy is UNIT 4500, APO AA 34035.
The embassy also has an Internet web page at www.embeeuu.gub.uy.
OTHER CONTACT INFORMATION:
U.S. Department of Commerce
Trade Information Center
International Trade Administration
14th and Constitution Avenue, NW
Washington, DC 20230
Tel: 800-USA-TRADE
Home page: http://www.ita.doc.gov
American Chamber of Commerce in Uruguay
Plaza Independencia 831, Oficina 209
Edificio Plaza Mayor
11100 Montevideo, Uruguay
Tel: (5982) 908-9186
Fax: (5982) 908-9187
E-Mail: amcham@zfm.com
Home Page: http://www.zfm.com/amchamuru
TRAVEL AND BUSINESS INFORMATION
The U.S. Department of State's Consular Information Program provides
Travel Warnings and Consular Information Sheets. Travel Warnings
are issued when the State Department recommends that Americans
avoid travel to a certain country. Consular Information Sheets
exist for all countries and include information on immigration
practices, currency regulations, health conditions, areas of instability,
crime and security, political disturbances, and the addresses
of the U.S. posts in the country.
Public Announcements are issued as a means to disseminate
information quickly about terrorist threats and other relatively
short-term conditions overseas which pose significant risks to
the security of American travelers. Free copies of this information
are available by calling the Bureau of Consular Affairs at 202-647-5225
or via the fax-on-demand system: 202-647-3000. Travel Warnings
and Consular Information Sheets also are available on the Consular
Affairs Internet home page: http://travel.state.gov
and the Consular Affairs Bulletin Board (CABB). To access
CABB, dial the modem number: (301-946-4400 (it will accommodate
up to 33,600 bps), set terminal communications program to N-8-1
(no parity, 8 bits, 1 stop bit); and terminal emulation to VT100.
The login is travel and the password is info (Note:
Lower case is required). The CABB also carries international security
information from the Overseas Security Advisory Council and Department's
Bureau of Diplomatic Security. Consular Affairs Trips for Travelers
publication series, which contain information on obtaining passports
and planning a safe trip abroad, can be purchased from the Superintendent
of Documents, U.S. Government Printing Office, P.O. Box 371954,
Pittsburgh, PA 15250-7954; telephone: 202-512-1800; fax 202-512-2250.
Emergency information concerning Americans traveling abroad
may be obtained from the Office of Overseas Citizens Services
at (202) 647-5225. For after-hours emergencies, Sundays and holidays,
call 202-647-4000.
Passport Services information can be obtained by calling
the 24-hour, 7-day a week automated system ($.35 per minute) or
live operators 8 a.m. to 8 p.m. (EST) Monday-Friday ($1.05 per
minute). The number is 1-900-225-5674 (TDD: 1-900-225-7778). Major
credit card users (for a flat rate of $4.95) may call 1-888-362-8668
(TDD: 1-888-498-3648).
Travelers can check the latest health information with
the U.S. Centers for Disease Control and Prevention in Atlanta,
Georgia. A hotline at (404) 332-4559 gives the most recent health
advisories, immunization recommendations or requirements, and
advice on food and drinking water safety for regions and countries.
A booklet entitled Health Information for International Travel
(HHS publication number CDC-95-8280) is available from the U.S.
Government Printing Office, Washington, DC 20402, tel. (202) 512-1800.
Information on travel conditions, visa requirements, currency
and customs regulations, legal holidays, and other items of interest
to travelers also may be obtained before your departure from
a country's embassy and/or consulates in the U.S. (for this country,
see "Principal Government Officials" listing in this
publication).
U.S. citizens who are long-term visitors or traveling in dangerous
areas are encouraged to register at the U.S. embassy upon arrival
in a country (see "Principal U.S. Embassy Officials"
listing in this publication). Registering with the embassy may
help you to replace lost identity documents or help family members
contact you in case of an emergency.
Further Electronic Information:
Department of State Foreign Affairs Network. Available
on the Internet, DOSFAN provides timely, global access to official
U.S. foreign policy information. Updated daily, DOSFAN includes
Background Notes; Dispatch, the official magazine of U.S.
foreign policy; daily press briefings; Country Commercial Guides;
directories of key officers of foreign service posts; etc. DOSFAN's
World Wide Web site is at http://www.state.gov.
U.S. Foreign Affairs on CD-ROM (USFAC). Published on an
annual basis by the U.S. Department of State, USFAC archives information
on the Department of State Foreign Affairs Network, and includes
an array of official foreign policy information from 1990 to the
present. Contact the Superintendent of Documents, U.S. Government
Printing Office, P.O. Box 371954, Pittsburgh, PA 15250-7954. To
order, call (202) 512-1800 or fax (202) 512-2250.
National Trade Data Bank (NTDB). Operated by the U.S. Department
of Commerce, the NTDB contains a wealth of trade-related information,
including Country Commercial Guides. It is available on the Internet
(www.stat-usa.gov) and on
CD-ROM. Call the NTDB Help-Line at (202) 482-1986 for more information.
[end of document]
Uruguay History
Chapter 1. Historical Setting
The territory now occupied by the Republic of Uruguay was discovered in 1516 by Juan Diaz de Solis, leader of a Spanish expedition which, looking for a route to the Indies via the New Continent, sailed up the Rio de la Plata. Noticing the presence of nat
ives in the shore, he landed at the head of his men and was immediately killed. Then, and throughout the whole period of the conquest, the natives put up such a brave resistance that even today the Uruguayans are proud to call themselves "charruas" in me
mory of the indomitable spirit and the total refusal to surrender to the foreign invaders manifested by the tribe which inhabited the southern part of the country.
The territory took a long time to conquer, not only because of the strong resistance of the natives, but also by reason of a lack of interest on the part of the Europeans who did not discover there the precious metals they had found in Peru. In 1617 Hern
ando Arias de Saavedra (Hernandarias), Governor of the Rio de la Plata, realized that the region´s real assets lay in its extensive prairies and its inexhaustible reserves of water, together with its relative flatness and splendid climate, all offering gr
eat possibilities for livestock farming. It was the Governor himself who introduced the first bovines; they bred remarkably rapidly, soon spreading all over the country and establishing the bases for its future economy. Later, England and Portugal came
to envy Spain this prosperous colony.
With the passing of the years the descendants of the early settlers -- criollos -- felt their freedom restricted under the Spanish administration which denied them self-government and prevented them from enjoying a flourishing economy and improving their
social status. Gradually, and under the influence of the American and French revolutions, this dissatisfaction led to a revolutionary movement which erupted in 1811. It was then that Jose Gervasio Artigas came on the scene, a military officer who gained
popular recognition and became the leader of the revolution. His ideas on independence, republicanism and democracy very soon marked him as one of the greatest statesmen of the American Continent.
The struggle extended over several years, first against the Spaniards, who after a series of victories were definitively defeated in 1814, and then against the Portuguese. Betrayed by several of his allies, Artigas retired to Paraguay, where he died far
from the battlefields. But the flame of patriotism which he had kindled on the soil of his own country was revived in the hearts of thirty-three men who, commanded by Juan Antonio Lavalleja, embarked upon the Crusade of Liberation which, backed by the pe
ople as a whole, reached its climax in the Declaration of Independence in 1825 and the creation of the State of Uruguay in 1828.
In 1830 the first Constitution of the Republic was proclaimed and General Fructuoso Rivera was elected President. During the first few years of its existence the new State, like nearly all other American countries, had to cope with considerable difficult
ies, the major ones being the maintenance of internal peace, the promotion of the economy, and the solution of numerous international problems. But as the years passed the country settled down and began to prosper in all fields, reaching its high point i
n the late nineteenth and early twentieth centuries. At that time, very advanced social legislation was introduced, and production was encouraged to the point where the national currency became stronger than the dollar. In the cultural field, figures em
erged who achieved world-wide fame.
This sound economic and social situation enabled Uruguay to survive the crisis of 1929 without encountering the serious difficulties which assailed the rest of the world.
From the 1930s (and until the mid1970s), Uruguay followed an import substitution policy coupled with extensive intervention by the Government in the economic affairs of the country. The Government imposed pervasive controls over domestic goods and financial
markets in the form of high tariffs, quantitative trade barriers, price controls and subsidies, and exchange and interest rate restrictions. The Government also controlled important areas of the economy, such as communications, railways, air traffic and oil refining and distribution, and developed a comprehensive social security system. The Government's import substitution policy and market controls contributed to inflation and the stagnation of the Uruguayan economy throughout that period.
The Second World War did not disturb the peace of the Uruguayans; the country was directly involved in only one episode, the Battle of the River Plate which resulted in the scuttling of the German battleship Admiral Graf Spee.
The sale of Uruguay´s traditional products -- beef, leather and wool -- continued until after the Korean War (1950-54), maintaining the country´s stability.
But then a serious crisis arose which spared no sector of Uruguayan activity. It led to the stagnation of production, foreign debts, uncontrolled State intervention and paternalism, the inordinate growth of bureaucracy, and permanent inflation. The social consequences were inevitable: unemployment, unrest among workers and students, constant strikes, increasing violence and socio-economic upheaval.
In 1973, amid increasing economic and political turmoil, the armed forces closed the Congress and established a civilian-military regime. In the mid 1970s, in response to its poor economic performance, which was aggravated by a worldwide recession, Uruguay launched a series of reforms designed to reduce the Government's role in the economy, increase efficiency and reduce inflation.
Seeking to reduce inflation, the Government in 1978 introduced a fixed and pre-announced devaluation rate. This new system, however, did not succeed in controlling inflation. A new constitution drafted by the military was rejected in a 1980 plebiscite. In November 1982, the Government abandoned its system of pre-announced devaluations and allowed the peso to float, prompting a further peso-to-U.S. dollar depreciation of over 140% in the period between November 1982 and March 1983.
This was followed by a financial crisis with a severe recession, with real GDP falling by 16.0% in the 1982-84 period. Negotiations were held with representatives of the political parties and a plan for the return to civilian rule was agreed on (national elections were held in 1984 and 1989). A modest economic recovery began in 1985, when real GDP grew by 1.5%. In the following two years, a strong recovery in investment fueled by lower interest rates resulted in growth rates of 8.9% in 1986 and 7.9% in 1987.
In the early 1990s, the Government further opened the economy to market forces, reducing the size and influence of the public sector in the economy. Following a modest 0.9% increase in real GDP in 1990, a new recovery began in mid 1991, and GDP increased steadily between 1991 and 1994 at an average cumulative annual rate of 5.2%. However the level of economic activity showed a negative rate of growth in 1995.
Presently, the political process has solidified and Uruguay has returned to its traditional system of freedom and constitutional government. The last national election was held in Nov. 1994 and the next one will be in Nov. 1999.
The administration of President Sanguinetti has advanced the main economic policies of the preceding administrations, with a view to:
- reducing inflation
- government downsizing
- social security reform
- privatization and deregulation
- reducing budget deficit
- increasing international trade
- increasing foreign investment
1- The inflation rate decreased from 130% in 1990 to 44.1% in 1995, and from 24.3% in 1996 to 15% in December 1997 . The Government chose a gradual approach in battling inflation controlling, through the exchange rate policy, the peso
depreciation against the U.S. dollar and reducing the budget deficit.
2- The Government has begun to overhaul the bureaucracy of Central Government entities eliminating redundant functions and divesting non-essential activities.
3- Prior to the reform, the Social Security deficit was of more than 6% of GDP. The reform implemented in 1996 converted the highly deficit-ridden public system into a solid bifurcated system of public and private providers ( AFAPs ), st
imulating capital market operations and national savings. The reform short fiscal cost was financed primarily by external loans.
4- The uruguayan economy is based on the principle of free enterprise and private ownership.
Since the mid 1980s, Uruguay has encouraged private sector control of the economy, unfettered foreign investment and competitive conditions in its various economic sectors.
At present, the Government owns the state telecommunications company ( ANTEL ), the oil refinery company ( ANCAP ), the electric power utility ( UTE ), and the water and sewage authority, Obras Sanitarias del Estado ( OSE). Other state- owned companies
include Administración Nacional de Puertos ( ANP ), which operates Uruguay's ports, and Administración de Ferrocarriles del Estado (AFE ), which operates railway freight services. The principal state-owned financial institutions are Banco de la República and Banco Hipotecario.
UTE owns and operates all of the hydroelectric generation plants in Uruguay. It also owns and operates several thermoelectric and gas facilities and all of Uruguay's electricity transmission assets.
UTE provides all of the domestic electricity services in Uruguay. In 1995, UTE had a total generation capacity of 2,108 megawatts.
ANTEL has been the traditional provider of domestic and international long distance telephone services in Uruguay.
OSE is Uruguay s largest water company. providing services to most of the country.
ANCAP is the national oil refinery, responsible for processing crude oil imported by Uruguay.
Privatization of port services was completed, together with privatization of the Montevideo Gas Company (1993 ) and 51% of the National airline PLUNA (1995 ).
In addition, during the period 1992-1996, other activities were transferred to the private sector either under contract, concession or sale to operate ports, airports and toll roads. Also concessions were granted over garbage collection and parking ser
vices, maintenance of national roads, operation of railroad passenger service and operation of a cellular telephone system. Also the Government ended the state´s insurance and mortgage monopolies.
5- A fiscal adjustment was implemented in 1995 to lowering the budget deficit from 2.8% of GDP in 1994 to 1.6% of GDP in 1996. This adjustment was focused on increasing public sector revenues through tax reform ( increasing and modifyin
g tax rates ), reducing public sector expenditures through social security reform and the restructuring of the Central Government and the public-sector financial system and stimulating the economy through free-market reforms.
6- In 1996 Uruguay´s exports increased 13.8% ( US$ 2.4 billion ). Imports rose 16% ( US$ 3.1 billion )and the trade deficit was 713 million dollars.
Trade with Mercosur partners also increased. Imports accounted for 44% and exports to mercosur accounted for 48% of total.
7- Foreign investment has an important role to play in the development of the economy and the Government maintains a favorable policy through a number of incentives. There is no discrimination towards investment by source of origin. One
hundred percent of foreign ownership is permitted except where restricted for national security purposes.. The Government does not generally prescribe specific authorization in order to establish an industry, to import and export, to effect deposits and b
anking transactions in any currency, or to obtain credit. No special government authorization is needed to have access to the Industrial Promotion Law, to capital markets or to foreign exchange. Foreign investors, however, may obtain those guarantees unde
r the Foreign Investment Law of 1974.
A new Foreign Investment Law was approved in January 1998.
Uruguay Government
The Republic of Uruguay is the political association of all the people living in its territory. The government takes the republican democratic form and is ruled by the principle of separation of powers: Executive, Legislative and Judicial Powers.
The Executive Power is made up of the President -- elected directly by the people -- and his Cabinet of Ministers; the Judicial Power is headed by an independent Supreme Court of Justice; the Legislative Power (Parliament) is exercised by the National A
ssembly which consists of two bodies: the Senate and the House of Representatives which work conjointly or separately as established in the different provisions of the Constitution.
The Senate has 30 seats and senators are directly elected by the people on a national basis following the system of proportional representation. The Vice President of the Republic (with authority to speak and vote) holds the Chairmanship of the Senate (t
hus bringing the number of members to 31) and that of the National Assembly (Senate and House of Representatives acting conjointly).
The House of Representatives consists of 99 members elected directly on a "departamental" (provincial) basis, according to the system of proportional representation.
The term of office for the President, the senators and the representatives is five years. The President cannot be reelected.
There are four political parties holding seats in Parliament: the Colorado Party, the Blanco Party, the Frente Amplio (Wide Front), and the Nuevo Espacio (New Space).
During the current term (1995-1999) representation in the Senate is as follows:
- Colorado Party 10 seats
- Blanco party 10 seats
- Frente Amplio 9 seats
- Nuevo Espacio 1 seats
Summary of Uruguay´s Institutional Evolution
- Constitution of 1830 (allegiance to the first Constitution sworn on July 18, 1830)
Government system: Presidential
Executive Power: a President elected by the National Assembly (Parliament) remaining
in office during 4 years
Cabinet: 3 Ministers
Legislative Power: Bicameral system
Judicial Power: Alta Corte de Justicia (High Court of Justice)
State Religion: Catholic, but with freedom of worship
Remained in force: 88 years
- Constitution of 1918 (entered into force on March 1, 1919)
Government system: Presidential
Executive Power: Collegiate (a President and a National Council for Administration)
The State becomes secular, and freedom of worship is instituted. Death penalty is abolished.
Remained in force: 14 years
- Constitution of 1934 (entered into force on May 18, 1934)
Government system: Presidential with some parliamentary characteristics
Executive Power: a President
Judicial Power: Supreme Court of Justice
Remained in force: 8 years
- Constitution of 1942 (entered into force on February 15, 1943)
Government system: Presidential, with some parliamentary characteristics
Executive Power: a President
Remained in force: 9 years
- Constitution of 1952 (entered into force on January 25, 1952)
Government system: Presidential
Executive Power: Collegiate (a National Government Council made up of 6 Consejeros)
Remained in force: 15 years
- Constitution of 1967 (entered into force on February 15, 1967)
Government system: Presidential
Executive Power: a President who remains in office for 5 years
Cabinet: 11 ministries
ORIENTAL REPUBLIC OF URUGUAY
1998 GOVERNMENT
PRESIDENT AND MINISTERS
PRESIDENT: DR. JULIO MARIA SANGUINETTI
VICE PRESIDENT: DR. HUGO BATALLA
- MINISTER OF DEFENSE:
Dr. Raul Iturria Igarzabal
Address: Edificio "Gral. Artigas" Avda. 8 de Octubre 2628
Phones: 598-2-470389- 809707 - 472828
Fax: 598-2-814833 - 474425
- MINISTER OF THE INTERIOR:
Mr. Hierro Lopez.
Address: Mercedes 993 Montevideo.
Phones: 598-2-98 90 24 - 921665
Fax: 598-2-901626 - 920167 - 920296
- MINISTER OF EXTERNAL RELATIONS:
Dr. Didier Operti.
Address: Av. 18 de Julio 1205
Phones: 598-2-924094/95/96/97 - 924087/88/89/90 - 921007/08/10
Fax: 598-2-921349
- MINISTER OF PUBLIC HEALTH:
Dr.José Raúl Bustos Alonso
Address: Av. 18 de Julio 1892
Phones: 598-2-401086- 405001- 400101-04
Fax: 598-2-485360
- MINISTER OF FINANCE:
Ec. Luis Mosca Sobrero
Address: Colonia 1089 P.3
Phones: 598-2- 921017 - 920863 - 920443
Fax: 598-2-921277
- MINISTER OF TRANSPORTATION AND PUBLIC WORKS:
Ing. Lucio Cáceres Behrens
Address: Rincon 561
Phone: 598-2-960509- 957013 - 958333
Fax: 598-2-961650
- MINISTER OF EDUCATION AND CULTURE:
Cr. Samuel Lichtensztejn
Address: Reconquista 535 c/Ituzaingo
Phones: 598-2-950103 - 961174
Fax: 598-2-901048
- MINISTER OF LABOR AND SOCIAL WELFARE:
Dra. Ana Lia Piñeyrua
Address: Juncal 1511
Phones: 598-2-962681- 962708/09/32 - 957140 - 963703
Fax: 598-2-963442
- MINISTER OF AGRICULTURE, LIVESTOCK AND FISHERIES:
Mr. Sergio Chiesa
Address: Constituyente 1476
Phone: 598-2-404155/59- 413622 - 484723 - 484497 - 482256
Fax: 598-2-499623
- MINISTER OF INDUSTRY AND ENERGY:
Dr. Julio Herrera
Address: Rincón 747
Phones: 598-2-922289 - 902600 - 900231/33- 912942- 908120- 912160- 928225- 913605- 914224
Fax: 598-2-921245
- MINISTER OF HOUSING AND ENVIRONMENT:
Mr. Juan A. Chiruchi Fuentes
Address: Zabala 1427
Phones: 598-2-950211 to 15 - 963989- 965209
Fax: 598-2-962914
- MINISTER OF TOURISM:
Mr. Benito Stern Prac
Address: Av. Libertador Brig. Gral. Lavalleja 1409 P.4, 5 y 6.
Phones: 598-2-913243 - 989105 - 907078 - 917546 - 989105
Fax: 598-2-921624
Uruguay Business Law
Choice of entity
The potential foreign investor is free to choose any desired legal organization form. The most usual types are a corporation and a branch, but a partnership is also possible. A corporation may be wholly owned, and a branch may conduct full business transa
ctions. A partnership also may be wholly owned by foreign individuals or entities.
No investment permits or similar approvals are required. There are no restrictions on the repatriation of capital and earnings, except for investors who choose to be protected under the Foreign Investment Law and within the duration of the investment cont
ract signed with the government.
All companies except individual businesses (sole proprietors) are required to appropriate at least 5 percent of their net earnings of each year to a legal reserve, until the reserve balance reaches 20 percent of the paid-in capital. Since the paid-in capi
tal is main
stained in historical terms, as a consequence of inflation the reserve requirement is in real terms far less than 20 percent of the paid-in capital.
Although the formation procedures are complex and lengthy, a corporation is the typical form of entity used by foreign subsidiary operations, largely because of the availability of "shelf corporations" that have not started operations and that are formed
by local professional firms offering their services to potential investors requiring a legal vehicle. A branch-type organization is also common.
Professional advice
Legal and tax advisers should be retained in the early planning stages. The overall Uruguayan tax burden may be affected by the choice of the legal organization form, depending on the kind of operations and on the size of the business.
Corporation
- Formation requirements
Minimum authorized share capital for a corporation at foundation date is $U257,148, effective January 1995 (approximately US$46,000 at current exchange rates). This amount is adjusted for internal inflation on January 1 of each year but only for new entit
ies being incorporated in the corresponding year. The U.S. dollar equivalent stated above is only an illustrative figure. At least 25 percent of the authorized capital must be paid up at the foundation date.
There should be at least two founder shareholders, but there are no restrictions as to their nationality, except that the founders of radio and television broadcasting companies must be Uruguayan citizens.
Foreign investors have free access to local funding sources and, therefore, can choose the most favorable method of financing their new enterprise.
- Foreign ownership/participation in management
Day-to-day management of a corporation is the responsibility of one or more directors. Employee representation on the board of directors or a supervisory board is not required.
- Kind and transfer of shares
Shares may be common (ordinary) or preferred, without any restriction on the proportion between the two, and may be issued as nominative or bearer shares. Nominative shares are registered but may be freely transferred.
Corporations owning or exploiting rural land or operating radio or television broadcast stations are required to issue only nominative shares, which must be held by individuals. In the case of radio and television, shareholders must be Uruguayan citizens,
and the transfer of shares should be authorized by the Executive Power.
- Tax considerations
Corporations are subject to income tax and, when their shares are to the bearer, also to capital tax. When shares are nominative, the capital tax is assessed to the shareholder.
Branch
- Formation requirements
Branches are formally required to have a minimum assigned capital and a minimum paid-up capital following the type of legal organization adopted by the foreign head office. A branch is not a legal entity in Uruguay and has no formal management structure,
although a branch manager is usually appointed.
- Tax considerations
The manner in which a branch operates may have favorable or adverse effects on its tax liability.
Limited liability partnership
- Formation requirements
Individuals or legal entities domiciled abroad can form a limited liability partnership, which as from January 1995 requires a minimum capital of $U5,716 at foundation date (US$1,000 at current exchange rates), with a maximum capital of $U257,148 (US$46,0
00 at current exchange rates).
- Tax considerations
The modus operands of a limited liability partnership may have a favorable or an adverse effect on its tax liability.
Forms of business enterprise
Law 16.060, effective January 5,1990, substantially changed the rules for business entities, except for sole proprietors, who continue to be ruled by the Commercial Code passed in 1865. The more important entities commonly found in an international busine
ss context are listed below.
- Corporation(Sociedad anonima--S.A.):
This is the most advanced form of Uruguayan company; its shares may be listed and therefore traded on the Montevideo Stock Exchange (this is possible only for "open" corporate organizations). Foreign subsidiaries usually adopt this legal form but rarely t
he "open" corporate mode.
- Limited liability partnership (Sociedad de responsabilidad limitada--S.R.L.):
This legal form is usually adopted by small and medium-size business entities, typically a partnership among family members or friends working together. It is not authorized for banks and finance companies. The personal liability of each partner is limi
ted to the capital subscribed by that partner. The number of partners may not exceed 50. If it does, the partnership must be transformed into a corporation within two years or be dissolved.
- General partnership (Sociedad colectiva):
A general partnership is constituted by two or more partners, jointly and severally liable, without limit, for the obligations of the partnership. Each partner may take part in the management.
- Limited partnership:
A limited partnership may take the form of a simple partnership (sociedad en comandita) or a limited partnership with share capital (sociedad en comandita por acciones). Limited partnerships are constituted by active partners, who are jointly and sever
ally liable for all the obligations, and limited or "sleeping" partners, whose liability is limited to the amount of their capital. In the case of a partnership with share capital, the capital of the limited partners can be represented by bearer or nomina
tive shares.
- Branch of a foreign corporation:
To engage in business in Uruguay on their own, foreign companies must set up a branch. Formation of branches is subject only to registration at the Public Trade Register and to publication of related documents in the Official Gazette. The foreign compa
nies (head offices) remain fully liable for all debts and obligations of the branch and for all acts of the local manager.
- Foreign investment corporations (holding companies):
Foreign investment corporations or holding companies are defined by law as corporations (sociedades andnimas) whose main activities are to invest abroad in securities, bonds, shares, commercial paper, debentures, commodities, and property on their own
account or on behalf of others. The activities of these corporations may include trading outside Uruguayan territory on their own account, on behalf of other parties or for other parties. The minimum authorized share capital is the same as for a corporati
on. Only 5 percent must be paid up, as compared with 25 percent for a corporation. Holding companies are therefore the suitable vehicles for performing offshore activities. Under certain conditions these companies enjoy a beneficial tax treatment.
Government control
Government control over corporate entities is exercised by the General de Hacienda (General Inspection of Finance), whose responsibilities include control of formation, approval of bylaws, dissolution, changes of legal organization form, mergers, split-o
ffs, and changes in capitalization. In addition, with regard to open corporations (defined below), this agency exercises control over attendance at shareholders' meetings and approval of annual financial statements before publication.
Foreign enterprise entities
Most foreign subsidiaries in Uruguay operate as corporations (sociedades andnimas). Subsidiaries are typically wholly owned, and minority participation is rare. Branches of foreign companies are also common; in certain circumstances they may offer overall
tax advantages or disadvantages in comparison with a corporate structure.
Corporation
Formation procedures
At present, corporate rules are contained comprehensively in Company Law 16.060, effective January 5, 1990. It contains detailed regulations on the foundation and operation of corporations (sociedades anonimas.A.s). The rules apply fully to already existi
ng corporations. However, modifications of the bylaws to adapt them to the new rules and modifications concerning minimum capital are not required.
There are two kinds of corporations.
- Open corporations:
Open corporations (sociedades andnimas abiertas) are defined as founded through public call for share subscription, or listing and quoting their shares on the local stock exchange, or publicly issuing debentures. Corporations set up in these ways are s
ubject to stricter controls by the General Inspection of Finance than are closed corporations (see "Government control" above).
- Closed corporations:
The shares of closed corporations cannot be publicly subscribed or quoted, and they cannot issue debentures. They are subject to government control only with regard to specific and important events: formation, approval of bylaws, dissolution, changes
of legal organization form, mergers, split-offs, and changes in capitalization.
The founder shareholders of a closed corporation must sign a foundation minute and approve the bylaws before a notary public. Bylaws are subject to authorization of the General Inspection of Finance and should be registered at the Public Trade Register an
d published in the Official Gazette.
In the case of open corporations, the foundation typically starts with the promoters drawing up a foundation program subject to the approval of the General Inspection of Finance. Once the foundation program is approved, the public subscription and payment
of the minimum share capital must be effected. Finally, a founders' meeting is held to form the corporation and to approve its bylaws. Thereafter, the procedure is the same as for closed corporations.
In both cases, the company is in legal existence as from the foundation date. However, until the registration is published, the acting individuals (founders or promoters) are personally and severally liable for transactions and acts executed in the compan
y's name.
The largest single item included in the formation cost is a tax on the formation and capital increases of corporations at a rate of 1 percent on the capital stated in the bylaws. Additional costs include legal and notary fees, costs of publishing notices
and the like. A reasonable acquisition cost estimate for a ready-to-operate, duly formed corporation with a mini mum authorized share capital would be about US$2,000. Incorporation costs of a company with an authorized share capital of US$1 million would
be in the region of US$12,000. These estimates do not include professional fees for advice and other factors not specifically incurred in connection with the formation.
Capital structure
At least 25 percent of the authorized share capital must be paid up. Fully paid shares may be issued at a premium but not at a discount. Partially paid shares must be registered, but fully paid shares can be, and usual~ are, issued anonymously as bearer s
hares. All shares have a par value a specified in the bylaws, but no minimum or maximum par values are required.
There should be at least two founder shareholders. Once formation has been completed, the shares may be transferred, so the minimum number of shareholders may be reduced to one. There is no ceiling to the number. of found in shareholders.
Corporations may issue common (ordinary) shares and may also issue preferred stock. The issuance of nontransferable, nonvoting or plural voting shares is prohibited bv law.
Share capital increases must be resolved by the shareholders at extraordinary general meetings, and such increases can be funded from previous earnings or reserve accounts carried in the balance sheet. Increased of share capital are normally subject to an
approval procedure similar to that of the foundation of the corporation and would be subject to the tax on formation and capital increases of corporations at a rate of 1 percent for an increase of up to 20 times the minimum authorized capital and of 0.5
percent for the excess. Nevertheless, the bylaws can provide for increasing capital up to five times the initial amount without government approval.
Should paid-up capital plus reserves exceed more than twice the amount of paid-up capital, upon approval of the corporate financial statements the reserves must be capitalized so that paid-up capital reaches at least 50 percent of the total. Capital reduc
tions are possible and are usually carried out by companies in financial difficulties in the course of a major restructuring. The reduction procedures are time-consuming.
A minimum of 5 percent of each year's net earnings must be taken to a special reserve until this reserve reaches 20 percent of paid-in capital. The formation of this legal reserve is mandatory before any dividend distribution is proposed.
Both nominative and bearer shares can be transferred, in principle, without any restriction, except in the following cases:
- Corporations owning or exploiting rural land, whose nominative shares must be in the hands of individuals. and
- Corporations operating radio or television broadcast stations, whose nominative shares must be in the hands of Uruguayan citizens, with transfer subject to authorization by the Executive Power.
Shareholders do not, in this capacity, carry any liability for the company's obligations. They can, of course, be liable in other capacities, such as through having acted improperly during the foundation stage or as guarantors.
Relationship of shareholders, directors and officers
- Directors' responsibility and liability
Corporations are governed by one or more directors elected by the shareholders in a general meeting. Directors of a corporation have the following duties and responsibilities.
- Directors are liable for payment of corporate income tax in any case and for payment of other taxes in case of deceitful misconduct and up to the amount of the funds they have handled.
- Directors are jointly and severally liable before the corporation, partners and third parties for the damages caused by their acts executed in violation of the bylaws, laws or regulations.
- In the event of an anticipated liquidation, the directors are responsible for the winding up of the corporation unless otherwise specified in the bylaws.
- Directors are required to submit the corporate financial statements to the shareholders each year.
- Dividends
Corporations are obliged to pay dividends of at least 20 percent of each year's earnings, unless the shareholders' meeting resolves not to pay such dividends on the basis of a duly justified decision and with the approval of shareholders representing at l
east 75 percent of the paid-up capital.
Remuneration of directors paid out of earnings may not exceed 10 percent thereof when there is only one director and 25 percent when there are more than one director, excluding salaries and other amounts received in respect of their permanent administrati
ve or technical functions. When no dividends are paid to the shareholders the above limits are reduced to 5 percent on the year's earnings, and they are proportion ally increased to 10 and 25 percent when all such earnings are distributed.
- Meetings
Shareholders' meetings may be ordinary or extraordinary. A notice convening a shareholders' meeting must be published for at least three days in the Official Gazette and another newspaper between ten and thirty days before the date of the meeting, and it
must specify the ordinary or extraordinary nature and the date, place, time, and agenda of the meeting. Publication may be omitted when 100 percent of the capital is represented at the meeting. Unless otherwise stipulated in the bylaws, resolutions are ap
proved by more than 50 percent of the voting rights of the shareholders in attendance.
The ordinary shareholders' meetings must be held within six months after the year-end in order to discuss the following matters.
- Balance sheet, profit and loss account, proposal for earnings distribution, and business report by the board of directors.
- Appointment of the members of the board of directors.
- Responsibilities of the directors.
Extraordinary shareholders' meetings must be held in order to discuss matters that are out of the scope of the ordinary shareholders' meeting, particularly the following.
- Modification of the bylaws.
Increase of authorized capital within the limits established in the bylaws.(up to five times the initial authorized capital).
- Redemption or reimbursement of share capital.
- Merger; change of legal form of organization; split-up or spin-off of business.
- Dissolution and liquidation of the corporation.
- Issue of debentures.
- Suspension of preference right in the subscription of new shares.
An extraordinary shareholders' meeting is required and a resolution approved by more than 50 percent of the shares with voting rights for the following purposes.
- Merger or splitting of the corporate business.
- Increase or reimbursement of capital.
- Transformation into another legal form of organization.
- Extension of the corporate life period established in the bylaws.
- Anticipated dissolution of the corporation.
- Change of the business object of the corporation.
- Change of domicile to a foreign country.
- Shareholders have the following rights.
- To participate and to vote in the shareholders' meetings.
- To share in the corporate earnings as well as in the proceeds remaining after the liquidation of the corporation.
- To control business operations.
- To have preference in the subscription of new shares and debentures.
- To withdraw from the corporation in the cases provided by law (see below).
- To obtain written information on:
- The names of board members;
- The proposals of the board of directors to the shareholders' meeting;
- The list of shareholders attending the meeting;
- The minutes of the shareholders' meetings; and
- The financial statements.
Each common share has one voting right. The bylaws may require a minimum number of shares, not higher than ten, to grant voting rights in the shareholders' meeting. Shareholders may aggregate (syndicate) their shares in order to reach this minimum by voti
ng through a common representative.
Apart from the rights granted to common shares, the holders of preferred shares may have any of the following rights.
- To receive a fixed dividend or a profit percentage.
- To accumulate the dividend percentage granted to common stock with a fixed dividend.
- Preference in the reimbursement of capital in the event the corporation is liquidated.
- Election of a certain number of directors.
These preferences can be cumulative.
Dissenting shareholders have the right of recess, i.e., withdrawing from the corporation and demanding payment of their equity, which should be determined by the proportion of their share holding to the company's net worth at the date of the event that ca
uses their withdrawal.
Liquidation
The winding-up of a corporation may be voluntary or mandatory. A corporation must be wound up for any of the following reasons.
- If an extraordinary general meeting of shareholders resolves to do so.
- If the corporate business objects have been fulfilled or have come to an end.
- If the corporate life period established in the bylaws has expired.
- If the condition for the existence of the corporation has been fulfilled.
- If accumulated losses have caused net worth to decrease to less than one-fourth of the paid-up capital.
- As a consequence of a merger or split-up of corporate business.
- Persistent carrying out of illegal or prohibited activities.
- Inability to operate caused by the inaction of management or of other corporate bodies.
