Entrepreneurs in the manufacturing sector have long turned to Latin America to add value to raw materials, either to sell in LATAM markets or to export to other nations around the world. Mexico, for example, is one of the world’s biggest manufacturers of motor vehicles, whilst Brazilian manufacturing plants have also seen significant investment over the past decade.
However, if you’re considering expanding into the market and want to start a manufacturing company, then Uruguay should be your top choice. Below, we offer just some of the reasons why the country is the manufacturing hub of Latin America and share some guidance on how to enter into the market and maximize your return on investment through clever planning…
Uruguay is the Manufacturing Hub of Latin America – Free Trade
One of the biggest reasons why Uruguay has become a Latin American manufacturing hub is because of its free trade zones. It’s suggested that free trade zones in the country have encouraged more than USD$5.7 billion in foreign investment in the past ten years alone. This demonstrates the sheer scale of the country’s recent growth. Businesses operating in a free trade zone are exempt from some customs duties, and as well as tax exemptions for operators. Additionally, foreign currency can be introduced, transactions do not need to be approved by the Central Bank, and there is no exchange control. Of course, there are restrictions to operating in FTZs. Businesses established within one cannot fulfil normal business activities outside of FTZs, and some industries require approval or certain regulations followed. Working with an experienced back-office support business before forming a company in Uruguay will ensure complete compliance with local regulations.
Uruguay also boasts a Mercosur membership, offering duty-free export to a market of more than 400 million citizens. With groups like the European Union looking to strengthen their relationship with Mercosur, the trade bloc is only set to become more lucrative in the coming years. Incorporating and exploiting such opportunities in manufacturing before your competitors get there first makes sense – the chances are you’re not the only player.
Uruguay’s capital Montevideo is served by airlines in Europe and the Americas, which makes it easily accessible to entrepreneurs by air and through local connections in neighbouring Chile, Brazil, and Argentina. The country has strong transport infrastructure and relatively low costs of living, which means CEOs of manufacturing plants are able to visit the country on an expense account without spending thousands of dollars. In 2011, Carrasco International Airport was named one of the world’s best designed by Frontier Awards, and the country has the heaviest road transport flow in Latin America – great for local distribution.
The huge increase in globalized economies has made Uruguay more competitive, with the country positioning itself as a transit point for international trade. Indeed, Uruguay is now considered to be the ‘regional hub’ in the Southern Cone, with strong infrastructure and two ports on the Parana-Paraguay-Uruguay Waterway. Its port is the only one on the South Atlantic coast that operates under a Free Port system, offering further advantages.
Uruguay has a range of competitive tax incentives designed to encourage foreign direct investment and create jobs. The country has 20 double taxation agreements and 30 Investment Promotion and Protection Agreements in force to offer investors more security and flexibility when expanding internationally. Furthermore, the good news is that there is no withholding tax on payments to domestic companies in Uruguay. The current withholding tax for distributing dividends to non-resident shareholders is 7%, which is low when compared with some Latin American companies. Of course, working with an experienced Uruguayan accountant when incorporating and distributing assets will help to reduce your tax bill. It will also ensure you’re only paying the necessary taxes and fees on your profits and dividends.
As the world continues to turn its attention to renewable energy sources, it’s promising that Uruguay has one of the most reliable electricity supplies in the whole of Latin America, with 98% coming from renewable sources. The country is primarily powered by hydropower (60 pper cent with the rest coming from wind, solar, and biofuels. In just under a decade, the country was able to reduce its carbon footprint and lower electricity costs for businesses and citizens in the country. This was all achieved without the need for government subsidies, proving that investment and infrastructure are rife in Uruguay.
One of the biggest reasons why renewable energy is such a big topic is because Uruguay wants energy independence, reducing or eliminating the need to import electricity from other countries. As a manufacturer, that means access to low-cost, reliable energy sources that protect the planet, adding value to your products.
Once you have incorporated a company in Uruguay, the next step is recruitment and finding local manufacturing experts who can produce high-quality goods for you to sell on. Whilst we always recommend training and development, Uruguay is home to qualified and experienced manufacturing staff. In fact, the country employs more than 250,000 people in the manufacturing sector, according to Nations Encyclopedia, with major companies such as VELCRO and BONSET establishing manufacturing plants to operate in Latin America.
Let Biz Latin Hub Help
At Biz Latin Hub, we offer a wide range of back office support services for firms wishing to expand into Uruguay’s manufacturing hub. Covering everything from representation to company formation, visa processing, and legal services, we’ve helped businesses around the world make their mark on markets such as Uruguay, and we’d love to help yours too.
To find out more, aquí, and a member of our Uruguay-based team will get back to you with a personalized solution that can take your business to new heights.
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