Uruguay as a Hub for Your South American Operations

An overview for UK Businesses

OVERVIEW

Uruguay, with its population of 3.3m people, is much smaller than its giant neighbours Argentina and Brazil. However, for the Southern Cone of South America, Uruguay could be your idea hub base for access to Argentina, Brazil, Chile and Paraguay. It’s important to remember that Uruguay is also in the Mercosur trade bloc together with Argentina, Brazil, Paraguay (and Venezuela), and strategically placed with coasts both on the River Plate and on the Atlantic.

So why Uruguay as your hub?

·         Macroeconomic and political stability

·         Strong regulatory framework and respect for the law

·         Privileged position on the Atlantic with great air links and a deep water port on the River Plate

·         Global trade stats prove that it’s much easier to do business in Uruguay than in Brazil or Argentina; there’s less bureaucracy and more transparency

·         Free Trade Zones framework and Free Port and Free Airport (see below)

Free Trade Zones

There are 13 Free Trade Zones (FTZ) in Uruguay. The framework is complex and should be studied in detail but, in brief:

·         You can hold your stock at a FTZ free of tax until you ship it out

·         This means better stock and financial management

·         This also means shorter lead times to your markets for your products and spare parts - instead of 45 days from Asia, for example, you can be in Argentina in 24 hrs, Chile in 72, South of Brazil in 96 hrs. You can also choose sea freight, and you can choose to use your own freight provider if you have a global contract

·         Shorter lead times can win you business and retain your clients

·         You can also add value to your products in the FTZ; such as customisation (for instance changing software, labelling, brochures, etc)

·         FTZs can also work well if you are selling consolidated shipments to Duty Free Shops in the region

·         FTZs also allow you to show products to buyers from the region – for example, Paraguayan business people taking a flight to Uruguay to see machinery before buying. It also allows you to train people and do demos.

·         You have access to very professional and international staff

·         For some manufacturers, it helps to avoid triangulation, for example, China to UK, UK to South America or Hungary to UK to South America - so you can make cost savings.

·         With the well-known significant problems with importing in Argentina and Brazil; the Uruguay FTZ is an option worth exploring because you can get all your paperwork sorted and then when it's all ready, you ship from very close by, rather than having to wait weeks (and risk a possible legislative/regulatory change in Argentina or Brazil and having to start all over again).

·         Linked to the above: FTZs can also be handy in emergencies. We’ve heard of businesses that had their products stuck at ports in Brazil or Argentina and decided to use a Uruguayan FTZ for cost-effective storage.

·         You can win new markets by seeing logistics as your competitive advantage – you offer added value to the distributor and to your final client

·         Using Uruguay as a hub is not for everyone... but it could be right for you if...

o   You already do lots of business in the region and need to bring in a more efficient approach

o   you’re planning to tackle the region as a whole (Argentina, Brazil, Paraguay, Uruguay, Chile and even Bolivia) whether for goods or services

o   you want to set up your own office to cover South America

The Free Trade Zones all vary slightly; some are more service-based, some more geared up for regional freight, some more manufacturing-based.

Who has chosen to operate in Uruguay in Free Trade Zones? Companies from all over the world, from SMEs to the big corporate, in areas such as:

·         FMCGs

·         pharmaceuticals

·         chemicals

·         capital goods, from trucks to diggers

·         food and drink exporters

·         services from back-office to customer services, architecture, logistics and more

There are different ways of operating in a Free Trade Zone in Uruguay:

·         directly (setting up an operation there)

·         indirectly (through a FTZ provider)

·         simply as a user of one of the logistics companies set up there

Each has different implications for taxes, operations, employment, profit expatriation, re-exports, and it’s vital to check them out properly; for example, the percentage of goods that can be re-exported to Uruguay can vary.

Free Port and Free Airport

You can also benefit from Uruguay's free airport and free port legislation. In a nutshell, this allows you to hold your stock free of tax until you ship it to its final destination in the region.

Both regimes can be particularly convenient because of cutting down freight costs of moving the goods to a further destination. So, for example, if your container arrives at the port in Montevideo and needs to then be sent by sea to another country in South America, it doesn’t have to leave the port. The same applies to goods delivered at the free airport.

One provider in Montevideo free port, for example, offers storage, showroom and sales - so your potential buyers (supermarkets, toy shops, pharma chains, etc) from across the whole region can go, watch, touch your goods, and place smaller orders without having to buy a whole container. The same applies to parts and machinery.

The Free Airport is particularly useful for small high-value products or for emergency deliveries. They can also offer the whole package and sort out the logistics to get your goods to their destination.

This is a short overview of what Uruguay has to offer as a regional hub for goods and services. Sunny Sky Solutions accepts no liability for any errors, omissions or misleading statements in such information and accepts no responsibility as to the standing of any firm, company or individual mentioned. We encourage you to seek professional trade, legal, tax and accountancy advice before making any decisions

Written in April 2014 by Gabriela Castro-Fontoura, Sunnysky Solutions April 2014 - Associate of Strong & Herd LLP

Revised in June 2017

 For more information, visit www.sunnyskysolutions.co.uk

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