Economy

Uruguay has a middle income economy, mainly dominated by the State services sector, an export-oriented agricultural sector and an industrial sector. The country relies heavily on trade, particularly in agricultural exports, leaving the country particularly vulnerable to slumps in commodity prices and global economic slowdowns. After averaging growth of 5% annually in 1996-1998, in 1999-2001 the economy suffered from lower demand in Argentina and Brazil, which together account for nearly half of Uruguay's exports. Despite the severity of the trade shocks, Uruguay's financial indicators remained more stable than those of its neighbours, a reflection of its solid reputation among investors and its investment-grade sovereign bond rating - one of only two in South America. In recent years Uruguay has shifted most of its energy into developing the commercial use of IT technologies and has become an important exporter of software in Latin America.

While some parts of the economy appeared to be resilient, the downturn had severe impact on the local population. Unemployment levels rose to more than 20%, real wages fell and the peso devalued. These worsening economic conditions played a part in turning public opinion against the mildly free market economic policies adopted by the previous administrations in the 1990s, leading to the popular rejection of proposals for privatisation of the state petroleum company in 2003 and of the state water company in 2004. The newly elected Frente Amplio government, while pledging to continue payments on Uruguay's external debt, has also promised to undertake a Emergency Plan to attack the widespread problems of poverty and unemployment.

Goods and Services in Uruguay

Natural Resources and Agriculture

• Cattle were introduced to Uruguay before its independence by Hernando Arias de Saveedra, the Spanish Governor of Buenos Aires in 1603. Beef exports in 2006 amounted around a 37% of Uruguayan exports.
• Wool is a traditional product exported mainly to China, followed by the UK and India.
• Rice: Fine varieties are produced in the lowlands in the east of the country close to the Laguna Merín on the Uruguay-Brazil border. The national company Saman claims to be the main exporter in Latin America. Countries it exports to include Brazil, Iran, Peru, South Africa, Chile, Senegal, Argentina, Paraguay, Bolivia, Ecuador, USA, Canada and China.
• Mineral products, including gold, granite and quartz.
• Wood, cork and derivative products.

Services

• Tourism: Several seaside resorts, including Punta del Este, regarded as a jet set destination in South America, is one attraction of Uruguay. International cruises call at Montevideo from October to March every year. Also, Uruguay hosts many year-round international conferences. Montevideo is home to the headquarters (secretariat) of Mercosur, the Common Market of the South, whose full members are Uruguay, Argentina, Brazil, Paraguay and Venezuela, associate members Bolivia, Chile, Colombia, Ecuador and Peru.
• Software and Consulting: Uruguay's well-educated workforce and lower-than-international wages have put Uruguay on the IT map. Both local and international companies operate in the country, some of them with offices worldwide. Many of these companies have established in Zona America Business and Technology Park, in the suburbs of Montevideo.
• Banking & Finance: Despite the recent downturn the banking sector is recovering, many private banks in Uruguay having operated without disruption during the 2002 crisis.

Industry

• Milk and Dairy Products: Conaprole, National Cooperative of Milk Producers is the main exporter of dairy food of Latin America (in 2006) among others national and international companies operating in the market. The area of the country dedicated to the dairy food is located mainly in the south west.
• Tobacco and beverages, including some fine wines.
• Chemical Products: Oil Refinery ANCAP
• Leather and leather products.
• Paper Pulp, Paper, Cardboard and Derivatives: A big pulp mill is due to start operating near the city of Fray Bentos, owned by the Finnish group Metsa Botnia.
• Textiles
• Fisheries
• Ceramics, glass and glass products.
• Electrical Machinery.
• Transport Materials.

Public Sector (Energy, Finance, Transport, Utilities)

The state of Uruguay has an important role in the economy as Uruguay has resisted the trend of privatisation in utilities and state owned enterprises in the region. Several referendums supported the state being in control of the most important utilities and energy companies. Some of the companies have a full monopoly warranted by law (e.g. landline telephone and water companies). Others compete freely with private operators (e.g. insurance, mobile telephone and banking companies). Most of them are dominant in the local market, thus leading to a strong debate in Uruguayan society about their role and future. However, it is important that some of them have made contributions to the Uruguay state treasury.

The most important state owned companies are:

• Republica AFAP (Pension Fund)
• AFE (Uruguay) (railways)
• ANCAP (Energy)
• ANCO Mail
• ANP Ports
• ANTEL (Telecommunications: Telephony
• Mobiles (ANCEL and Data ANTELDATA)
• BHU Mortgage Bank
• BROU (Bank)
• BSE (Insurance)
• OSE (Water & Sewage)
• UTE (Electricity)

Those companies operate under public law, using a legal entity defined in the Uruguayan Constitution called Ente Autonomo (Autonomic Entity). The government also owns parts of other companies operating under private law such as the National Airline Carrier PLUNA, owned totally or partially by the CND National Development Corporation.