Uruguay - Market ChallengesUruguay - Market Challenges
Drawbacks to doing business in Uruguay include its small market size (3.4 million inhabitants, approximately half of which reside in the capital Montevideo), lack of trade financing, and inflexible labor laws. These labor laws give unionized labor the right to occupy workplaces and disrupt company operations. In 2018, some companies were forced to close due to high production costs and labor conflicts.
Related to labor inflexibility, the World Economic Forum’s 2016-2017 Global Competitiveness Index ranked Uruguay 131th of 137 countries, echoing many domestic and foreign investors´ concerns about management-employee relations. There are labor challenges in the areas of hiring and firing practices, limited flexibility in setting wages, wage inflation resulting from the work of tripartite salary councils, and the effects of significant taxation and social contributions on the individual’s incentive to work.
Uruguay has high duties and taxes on imported products; the government raised both in 2017. According to Doing Business Index 2018 and in relation to the “trading across borders” category, Uruguay was ranked 151st of 190 countries, due high export and import costs.