Invest in Uruguay

December 2010

• Strongest democracy and social and political stability in Latin America

• Continued growth and investment despite global slump

• Best labor value for money in the region

• Highest internet and PC penetration in Latin America

• New law to make investment even more attractive

Uruguay: LatAm’s Best-Kept Secret

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Rio de Janeiro2400km/1490mi

72-96 hrs

São Paulo1970km/1225mi

72-96 hrs

Porto Alegre870km/540mi

24-48 hrs

Montevideo

Buenos Aires250km/155mi

24 hrs

Asunción1550km/960mi

72-96 hrs

Santiago1900km/1180mi

72-92 hrs

Uruguay:A safe, reliable and

competitive location, providing an unbeatable

logistics base in the heart of the wealthiest region of

South America

Gateway to the Region

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Access to a Large and Wealthy MarketAccess to a large and growing consumer market due to our

membership in MERCOSUR and our open economy

Uruguay MERCOSUR

Population (millions) 3.3 242

Area (km2) 176,215 11,878,244

GDP 2009 (US$ billions) 31.6 2,144

GDP per capita 2009 (US$) 9,458 8,859

GDP growth rate 2009 (%) 2.9 0

4

Sources: Central banks and national statistics institutes

Political and Social Stability

Factor Uruguay in South America

Low Corruption(Transparency International 2010)

2

Democracy Index(The Economist Intelligence Unit 2010)

1

Economic Freedom Index(Heritage Foundation 2010)

2

Quality of Living(Mercer Eco-City Ranking 2010)

1

Low Cost of Living (Mercer Cost of Living City Ranking 2010)

4

5

Political and Social Stability

6

Democracy Index (Economist Intelligence Unit 2010)

Norway 1

New Zealand 5

Ireland 12

US 17

Spain 18

South Korea 20

Uruguay 21

Costa Rica 24

Portugal 26

Italy 29

South Africa 30

France 31

Chile 34

Brazil 47

Argentina 51

Colombia 57

Economic Freedom Index (Heritage Foundation 2010)

New Zealand 4

Ireland 5

US 8

Chile 10

South Korea 31

Uruguay 33

Spain 36

Norway 37

Costa Rica 54

Colombia 58

Portugal 62

France 64

South Africa 72

Italy 74

Brazil 113

Argentina 135

Low Corruption(Transparency International 2010)

New Zealand 1

Norway 10

Ireland 14

Chile 21

US 22

Uruguay 24

France 25

Spain 30

Portugal 32

South Korea 39

Costa Rica 41

South Africa 54

Italy 67

Brazil 69

Colombia 78

Argentina 105

1.7%2.6%2.8%3.3%

4.0%5.0%5.0%

7.5%7.5%

8.3%8.5%

9.7%10.5%

0% 5% 10% 15%

EurozoneUSA

JapanGermany

RussiaChile

MexicoBrazil

ArgentinaPeru

UruguayIndia

China

7

5.0%

7.5%

4.6%

7.6%

8.9%

2.9%

8.5%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

2004 2005 2006 2007 2008 2009 2010 E

Cumulative Annual Growth Rate (2004–2009): 6.1%

Sources: Central Bank of Uruguay ; 2010 E: IMF, World Economic Outlook, October 2010

GDP growth in constant values

Source: FMI, World Economic Outlook, October 2010

Estimated GDP growth in 2010

A Strong Economy

Booming Foreign Direct Investment

FDI in South America(2009, % of GDP)

Uruguay’s FDI flows(US$ millions)

8

194 41

6

332

847

1493

1330

1840

1267

0

500

1000

1500

2000

2500

2002 2003 2004 2005 2006 2007 2008 2009

FDI increased considerably in 2002–2009

1.1%

1.2%

1.5%

1.6%

3.5%

3.8%

4.0%

0% 2% 4% 6%

Argentina

Ecuador

Colombia

Brazil

Peru

Chile

Uruguay

Source: Economic Commission for Latin America and the Caribbean (ECLAC)

Source: ECLAC

Goods and Services (2009, % of total exports)

Strong Growth in Exports

Source: BCU and TradeMap. Data in USD millions

9

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

2002 2003 2004 2005 2006 2007 2008 2009

Services

Goods

Exports have tripled in the past 6 years

Goods

75%

Services

25%

Uruguayan Exports(US$, millions)

Sources: Central Bank of Uruguay (BCU) and TradeMap

Sources: BCU and TradeMap

Main Destinations of Goods Exports2009

10

MERCOSUR32%

Asia19%

European Union15%

Rest of South America

13%

Rest of Europe7%

North America7%

Africa5%

Central America and the

Caribbean

2%

Source: National Customs Administration

Export Break-OutMain products and services (2009)

Goods Services

11

Meat20%

Cereals, Rice14%

Oil, Soybeans and Seeds

8%Dairy

products7%

Wood products, Cellulose

6%

Plastics3%

Milling products,

Malt3%

Wool tops3%

Other34%

Tourism61%

Transport16%

Other company services

9%

IT8%

Financial services

4%

Other2%

Other 34%Leather 3%Fish 3%Automobiles, Auto parts 2%Pharmaceuticals 2%Fats, Oils 2%Livestock 2%Fruits 2%Rest 19%

Sources: Central Bank of Uruguay (BCU) and Trademap; Uruguay XXI’s calculations

19

1

21

0 25

9

27

3

30

9 35

3 40

2

35

1

29

3 33

4

42

5

45

5 51

9 59

6 67

5

58

8

0

100

200

300

400

500

600

700

800

2002 2003 2004 2005 2006 2007 2008 2009

Th

ou

san

ds

of

un

its

Containers TEUS

Goods in transit:2008: 50.5% – 2009: 47.3%

Platform for the RegionMovement of containerized cargo in the port of Montevideo

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Source: National Ports Authority (ANP)Note: Includes imports, exports, transit and transfer

Modern Infrastructure

• World-class port facilities in Montevideo, a regional hub par excellence for South America’s Southern Cone region

• Boasts Latin America’s most dense highway network

• 2009: new airport terminal, Colonia ferry port and Montevideo ring road

• Reliable electric supply (mostly from renewable sources)

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Quality of electricity supply (ranking)

US 23

Ireland 25

Chile 30

Spain 36

Uruguay 37

Hungary 46

Italy 47

New Zealand 56

Brazil 63

Argentina 93

Source: World Economic Forum’s Global Competitiveness Report 2010-2011

Highest Ranked in LatAm in Use of Modern Communications

Mobile telephone subscribers

Fixed telephone lines

Internet usersInternet access

in schools

Rank Rank Rank Rank

Argentina 25 Costa Rica 38 Uruguay 41 Uruguay 26

Uruguay 44 Uruguay 48 Colombia 47 Chile 42

Chile 64 Argentina 53 Brazil 57 Costa Rica 64

Colombia 74 Brazil 62 Costa Rica 66 Brazil 72

Brazil 76 Chile 63 Chile 68 Colombia 88

Mexico 93 Mexico 72 Argentina 74 Mexico 89

Costa Rica 119 Colombia 77 Mexico 85 Argentina 111

Source: World Economic Forum’s Global Competitiveness Report 2010-2011

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• Only country in world to meet goal of full countrywide coverage of school-age children and teachers

• Students covered: 380,000

• Teachers trained: 18,000

• Total free Wi-Fi spots in Montevideo: 250

• Thanks to the plan, 220,000 households (out of 1,280,000) received their first computer; half of them belong to the poorest 20% of the population

One Laptop Per Child (Plan Ceibal)Helping our future workforce eliminate the technology gap

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Quality of Life

• Free from natural disasters

• Tolerant country: no ethnic, racial or religious conflicts

• Excellent sanitary level. Child mortality rate: 9.5 every 1,000 (2009), vs. 22.8 in Latin America (2007)

• Third safest country in Latin America, evidenced by the booming second home market (Latin Business Chronicle 2009 Index)

• Ranked among the first countries, with the Scandinavian countries and Japan, in US-based Freedom House’s Freedom in the World Survey 2009

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Global Peace Index (ranking)

New Zealand 1

Ireland 6

Uruguay 24

Spain 25

Chile 28

Italy 40

Argentina 71

Brazil 83

US 85

Source: Economist Intelligence Unit 2010

Tourism and Entertainment

• Uruguay is the champion in tourism in LatAm according to Latin Business Chronicle's Latin Tourism 2010 Index

• Over 2 million tourists per year (≈60% of the population)

• Tourism represents over 6% of GDP

• Four Seasons, Conrad, Radisson, Sheraton operate in Uruguay

• Continued investments: - Setai Group, US (US$ 80 M) - Sofitel, France (US$ 63 M)- Fasano, Brazil (US$ 50 M)- Pestana, Portugal (US$ 15 M)

• US$ 1.5 billion were invested in tourism-related real estate over the last 5 years

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• State provides free education through college and invests 4.5% of the GDP in education

• 100% of 15 year-old high school students have finished at least 3 years of English and 2 of computer science

• 21% of university students study accounting, finance or business administration

• 17% of university students study science and technology

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Tertiary education enrollment (ranking)

US 6

Spain 17

Argentina 19

Uruguay 24

Ireland 33

UK 35

Chile 43

Switzerland 48

Brazil 65

Source: World Economic Forum’s Global Competitiveness Report 2010-2011

Labor: Best Value For Money Adult literacy rate

(%)

Ireland 99.0

Switzerland 99.0

UK 99.0

US 99.0

Uruguay 97.9

Spain 97.9

Argentina 97.6

Chile 96.5

Brazil 90.0

Source: United Nation’s Human Development Report 2009

Labor: Best Value for Money

19

285

147131 130

120

100

242

106 102 107118

100

232

104 10494 98 100

0

50

100

150

200

250

300

Brazil Chile Argentina Colombia Costa Rica Uruguay

CEO

CFO/ Finance Director

IT Manager

Total annual costs for the company in Uruguay (US$):

Source: Uruguay XXI based on data from Wages Councils and remuneration polls by PwC, as at March 31, 2010

SeamstressJunior

MechanicIT Manager HR Manager

ProductionManager

CFO/ FinanceDirector

Sales Manager

CEO

6,600 12,200 84,339 88,938 103,037 104,464 109,988 185,707

Net annual salary costs comparison:

Source: Uruguay XXI based on data from PwC. Base: Uruguay = 100

Beneficial Promotion Systems

• The government recognizes the important role of the FDI and maintainsa favorable investment climate

•Uruguay has a track record of attracting large investments in agricultural, industrial, services and infrastructure

• Investment Law (Nº 16,906) - January 1998:

Domestic and foreign investors are treated equally

Foreign investments do not require prior authorization or registration

Free transferability of capital and profits overseas

• In 2008 the government created a one-stop shop to assist investors and an automatic, predictable, transparent and effective mechanism that benefits a broader base of firms and specifies objective criteria for granting incentives

Comprehensive legal framework for investment

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• Exemption from Corporate Income Tax* for up to 100% of the amount invested and for a period of up to 25 years, which depend on a matrix of targets and indicators, and the size of the project.

Indicators

o Employment creation

o Territorial decentralization

o Export growth

o Increased added value

o Increased research, development and innovation

o Use of clean technologies

o Impact of the project on the national economy

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Beneficial Promotion SystemsTax benefits

* Corporate Income Tax exists only at the national level (25%)

* Approximate amounts; ranges depend on the value of the UI (indexed unit)

Income Tax Exemption Depends on the Size of the Investment:

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Project size(denomination)

Project size*

(in US$ millions)Maximum % of investment to be deducted from taxes

Maximum period(years)

Small Up to 0.3 60 5

Medium S1 Up to 1.3 70 15

Medium S2 Up to 6.7 80 20

Large S1 Up to 13 90 25

Large S2 Up to 48 90 25

Large S3 Up to 670 100 25

Very Large More than 670 100 25

• Exemption of Wealth Tax on civil works, for 8 years in Montevideo and for 10 years in other regions, and on fixed assets throughout their life.

• Exemption of import taxes and fees on fixed assets declared non-competitive with the domestic industry.

• 100% refund of VAT, under the exporters regime, on the acquisition of materials and services for civil works in the domestic market.

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Beneficial Promotion SystemsOther tax benefits

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Temporary Admission is the tax-free introduction of foreign goods to the domestic market from outside the national customs territory, with a specific purpose other than consumption, to be exported, within 18 months, in the state in which they were introduced or after having been subject to certain processing, manufacturing, repairing or value added processes, with effective occupation of labor. The Temporary Admission regime also applies to machinery and equipment from any source, entering temporarily for maintenance, repair or upgrade.

Temporary Admission(similar to the drawback regime)

Free Trade Zones

•Users 100% exempt from:

• Corporate Income Tax

•Wealth Tax

• Import levies

•Any other tax created or to be created in the future*

• Can develop industrial, commercial or service activities

• Technology and service-oriented business parks operating as FTZs in Montevideo:

• Aguada Park

• Zonamerica

• Parque de las Ciencias (2011)

• World Trade Center Free Zone (2011)

2525

*Companies within the FTZs must pay social security contributions for their Uruguayan employees.

Free Ports and Free Airports

• Only free ports on South America’s Atlantic coast

• Free transit of goods, no authorizations or formal procedures are required

• Within port facilities, goods are exempt from:

oall import taxes or charges

oall domestic taxes (e.g. VAT)

• Services rendered are exempt from VAT

• Foreign registered companies are exempt from wealth tax and income tax

• Diverse operations may be performed on the merchandise, including warehousing, repackaging, relabeling, classification, grouping, ungrouping, consolidation, deconsolidation, manipulation or fractioning as well as value adding tasks that do not modify the nature of the product

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Examples of foreign investments

27

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Examples of foreign investments

In Summary

These are exciting times for Uruguay:

• Our economy is growing

•We top many Latin American rankings

• Investments are pouring in

•We are carrying out many innovative programs

Do business with us!

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Thank You!

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www.uruguayxxi.gub.uy

invest@uruguayxxi.gub.uy