22.4.16

Starting a business in Uruguay

Starting a business in Uruguay is growing in popularity among individuals as well as international companies.

The purpose of this article is to report some of the pluses of Uruguay's business environment. Give you examples of the types of businesses English-speaking expats are running. And to provide you with a few tips if you decide starting a business in Uruguay might be for you.

Reasons to consider starting a business in Uruguay 


Government stability 
  • According to Transparency International, Uruguay is the least corrupt country in Latin America.
  • Uruguay is consistently rated among the top nations in Latin America for political and social stability. 
  • The rules governing business are more predictable and the court system is more objective than other countries in the region.

Good commercial infrastructure
  • Uruguay has an extensive fiber optic network, the highest quality 4G LTE network, and offers the fasted average Internet speeds at the lowest cost in all of Latin America. 
  • Uruguay has the most reliable electrical system in Latin America.
  • The Port of Montevideo is the most modern container terminal in the region.

High “quality of life” standards
  • The Legatum Institute, which rates countries level of prosperity based on a combination of economic and quality of life factors, ranks Uruguay as having the highest level of prosperity in Latin America.
  • Mercer Human Resource Consulting rates Montevideo, Uruguay’s capital, as the city offering the highest quality of life in South America.

Seat of MERCOSUR, a regional trade block
Uruguay is the seat of Mercosur, a common market set up to promote free trade and facilitate the free exchange of goods, people, and money between Brazil, Argentina, Paraguay, and Uruguay.

This trade agreement provides Uruguayan based businesses with potential access to 251 million customers. So, while Uruguay, itself, has a small population, it can be a strategic location for setting up a regional base.

Tax incentives 
Uruguay’s executive branch extends a variety of tax exemptions to specific industries to encourage targeted foreign direct investment.

The purpose of these incentives is to encourage the production of good paying local jobs or certain types of targeted businesses.

Uruguay has a number of free trade zones located throughout the country including a free trade port.

Less currency risk
In Uruguay, you can do business in Uruguayan pesos or US dollars.
You can transfer your investment capital into Uruguay, and transfer your after-tax profits out of Uruguay when you like—without any special government approvals, registrations, or fees.

Uruguay ha several types of business structures to choose from. The most common are:
  • A Sociedad Anonima (often referred to as an "SA") is a corporation with shares 
  • A Sociedad de Responsabilidad Limitada (Often referred to as an "SRL" or Ltda.) is a Limited Liability Company
  • A Unipersonal, like a sole proprietorship sole trader 


Examples of the types of business expats have started in Uruguay


Tourism 
More than a million vacationers come to Uruguay each year, providing a variety of small business opportunities. Expats have started businesses providing various types of tours for English-speaking vacationers.

Real Estate
One of the most popular ways for new immigrants to earn in Uruguay is to buy and then rent out furnished apartments--either as vacation rentals in the popular beach resorts, or as short-term rentals to executives and diplomats in Montevideo.

Some expats living in Uruguay have built successful careers as real estate sales agents and property managers. One English-speaking expat started a business providing carpentry and home repairs for other English-speaking newcomers. And other English-speakers have become involved with land development.

Note: US citizens are required to report their global income to the IRS. In many situations, a tax credit may be used to avoid paying double taxes. However, it's possible to get into a situation where you could be liable to pay social security in Uruguay and in the US. For this reason, you'll notice many US citizens prefer to earn money by renting their own real estate.

(Taxes can be complicated. If you are a US citizen or person for tax purposes, consult with a US accountant, as well as a Uruguayan accountant, to be clear on your potential social security and tax liabilities before starting a business abroad.)

Food and retail businesses 
Some English speakers coming to Uruguay have joined the local economy by operating a restaurant or retail shop.

Agriculture 
Uruguay has some of the highest quality agricultural land in the world. You'll find business opportunities in owning and leasing farmland,, agriculture support businesses, processing agricultural goods, storage, and shipping. A couple of crops that seem to be of popular with newcomers are olives and wine grapes.

Information Technology 
Several expats and international companies have started IT businesses in Uruguay, or have formed partnerships with Uruguayan IT companies.

Tips for starting a business in Uruguay 


Understand a “gap” in the market doesn’t always represents a business opportunity. 
If you’re from a fully-developed country, you’ll likely come upon gaps in the market—that is, goods and services that are proven money-makers where you’re from, but aren’t offered in Uruguay.

Sometimes starting a business that fills a gap works great. Often times, the product or service will need to be adapted to fit Uruguayan culture or other realities of Uruguay. And sometimes an idea that worked where you are from might not work in Uruguay.

So, it's important to not just look for what is missing in the market, but also to pay close attention to what types of businesses are working. Often times, you're better off choosing a business with a proven track record to develop a steady cash flow, and then try new ideas from there.

Learn the basics of the business landscape before plotting your business course.
Starting a business anywhere can be a challenging undertaking. Starting a business in a new country can be especially challenging. The questions isn't if doing business in a new country will be different. It's how different.

All of the following can vary significantly from one country to the next:
  • The cost and time it takes to get government permits and licenses.
  • The requirements and time frame to open a bank account. 
  • The cost of labor, labor output, the attitude of labor, and the cost of ending an employee relationship. 
  • Types of taxes, tax rates, and the cost of tax reporting. 
  • Customer expectations. 
So how do you develop an understanding of the business landscape in Uruguay? There are three ways I recommend:
  1. Make a complete business plan, just like you would anywhere else, except don't make assumptions based on how things are in another country and culture.
  2. Talk with multiple sources to make sure you are getting the full picture. 
  3. Spend time in and around the industry you are planning to become involved with before your start your own business. 

Form relationships with locals and learn how they get things done.
In order to know how to get things done in Uruguay, you will need the help of experienced locals. This might include friends and neighbors, a consultant, or a trusted local business partner.

As a generalization, in the US and the UK, getting things done is more about following set procedures. In Latin America, getting things done can be more about relationships.


If you don’t speak Spanish, now is a good time to start learning. 
While expats who work online can get by without knowing much Spanish, expats who want to operate a local business in Uruguay will need some solid basic Spanish-language skills.

If you haven’t left for Uruguay yet, one of the best things you can do to prepare for success is to begin studying Spanish, either in a class or with a home-learning course.

Then, when you arrive, attend one of the several Spanish schools in Uruguay for a while. In addition to learning to speak Spanish, a Spanish class is a good way to start meeting people and learning about Uruguay’s culture.

Be carefully who you trust 
To run a business in Uruguay, you’ll likely need a business team of professionals, local supporters, and perhaps workers.

In some ways, Uruguay is like anyplace else in the world. You’ll find competent, reliable, and honest people mixed together with people who are dishonest and who will take advantage when they have an opportunity.

The best way I know to find good people for your team  is to look for recommendations of professionals and trades people from other expats who have personal experience using the person they are recommending for like work.

I believe it's also wise to take the time to get references and check the background of any and all employees you hire. An ounce of prevention hiring an employee is be worth a pound of cure firing an employee.

Start small and let your business acclimate before expanding.
When you believe you have a business idea that’s a good match for Uruguay, find ways to test your business concept on a small scale before you risk your security on it.

As an example, if you are offering a service, start working from home before you lease an office space. If you are selling a good, you might sell your product at street fares before you consider leasing a storefront.

Starting small gives you the opportunity to better understand the realities of the local market place, and make tweaks and changes based on real customer feedback.



Note: Are you interested in learning more about Uruguay? If so, sign up to receive my Free Monthly Newsletter, the Uruguay Insider. And when you do, I'll immediately send you a link to download Uruguay in Pictures—a  free PDF guide I've prepared, showing you the top eight places to travel and live in Uruguay.

This post, first published in 2010, has been completely revised and updated in April 2016. 

4 comments:

Christina said...

Great article--very helpful. I would add that if someone is thinking of exporting a product, they should consider import taxes of their destination country. For example, Uruguay and the United States don't have an open-trade agreement and duty can be as high as 16%! Likewise, think about how you will ship out of Uruguay. Shipping is by far the most expensive part of our small company, Textura. If you aren't exporting at a scale that could fill a container (or part of one), it can get pricey.

Thanks!

Paradise Uruguay said...

Christina, That is helpful first hand information. Thank you.

mark teuten said...

A very interesting and well researched article! As one of the people who may be alluded to above, I have to say that you have found an awful lot of information from lots of different sources.
For small businesses they should be aware that setting up a company and then the monthly fixed costs of keeping it going, even with no or very little activity are comparatively high - social security taxes have to be paid even if the company does not trade and are likely to be around U$S150 per month. General bureaucracy can also be a pain, but on the plus side the amount of investment needed to get a business going in Uruguay is generally negligble in comparison to other countries.

Anonymous said...

Say, you got a good article. Much thanks again. Wonderful.