Uruguay: An Overview

Uruguay: An Overview

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Updated April 17, 2023
Uruguay: An Overview
Uruguay, with a population of 3.6 million people, is located
Figure 1. Uruguay at a Glance
on the Atlantic coast of South America between Brazil and
Argentina (see Figure 1). The country stands out in Latin
America for its strong democratic institutions; high per
capita income; and low levels of corruption, poverty, and
inequality. Due to its domestic success and commitment to
international engagement, Uruguay plays a more influential
role in global affairs than its size might suggest. Successive
U.S. Administrations have sought to work with Uruguay to
address political and security challenges in the Western
Hemisphere and around the world.
Political and Economic Situation
Uruguay has a long democratic tradition but experienced 12
years of authoritarian rule following a 1973 coup. During

Sources: CRS Graphics, Instituto Nacional de Estadística de Uruguay,
the dictatorship, tens of thousands of Uruguayans were
Latinobarómetro, International Monetary Fund, and Trade Data
forced into political exile, 3,000-4,000 were imprisoned,
and several hundred were killed or “disappeared.” The
Monitor.
country restored civilian democratic governance in 1985,
In August 2022, the government proposed major reforms of
and analysts now consider Uruguay to be among the
the pension and education systems. A key feature of the
strongest democracies in the world.
pension reform is the phased increase of the retirement age
from 60 to 65 for most workers. Although it would bring
President Luis Lacalle Pou of the center-right National
Uruguay closer to the regional norm for retirement age, a
Party took office for a five-year term in March 2020,
March 2023 poll conducted by the Uruguayan firm Cifra
bringing to an end 15 consecutive years of governance by
concluded that 27% of Uruguayans support the reform,
the center-left Broad Front coalition. A former legislator
while 54% oppose it.
and the son of a former president, Lacalle Pou narrowly
defeated the Broad Front’s Daniel Martínez (50.8% to
President Lacalle Pou’s popularity has suffered as a result
49.2%) in a 2019 runoff election. Lacalle Pou’s coalition,
of the political battles over labor and pension reforms,
which, in addition to his National Party, includes the
questions about his cabinet’s role in a corruption scandal
centrist Colorado Party, the right-wing populist Open Town
involving the sale of falsified passports by the presidential
Hall party, and two smaller parties, also won majorities in
head of security, and concerns about rising crime and drug
both houses of the Uruguayan General Assembly. The
trafficking. In Cifra’s March 2023 poll, 44% of respondents
government coalition holds 56 of 99 seats in the Chamber
approved of Lacalle Pou’s performance in office and 42%
of Representatives and 17 of 30 seats in the Senate.
disapproved—an 11-point decline in his net approval rating
compared with February 2022. Uruguay’s next general
Shortly after taking office, Lacalle Pou’s multiparty
elections for a new president and congress are scheduled for
coalition passed a far-reaching legislative package that
October 2024.
enacted many of the market-oriented economic reforms and
hardline security policies included in the president’s
Uruguay’s economy is heavily dependent on agriculture
campaign platform. Among other changes, the legislation
and tourism, with agricultural products accounting for 60%
established a fiscal rule to limit public expenditures, made
of the country’s exports. Uruguay has a small but growing
structural changes to the education system, created a new
information technology sector. From 2003 to 2019,
environment ministry, increased some criminal penalties,
Uruguay experienced the longest economic expansion in
gave greater powers to the police, banned blockades that
the country’s history; per capita gross domestic product
prevent the free movement of persons or goods, and
(GDP) nearly doubled, from $9,000 to over $16,000, fueled
prohibited labor unions from impeding workers or owners
by a boom in commodity prices and the diversification of
from entering businesses during strikes. The political
Uruguay’s trade with Asia and the European Union (EU).
opposition, led by the Broad Front and the national labor
federation, sought to repeal portions of the law through a
The Coronavirus Disease 2019 (COVID-19) pandemic,
national referendum held in March 2022. The referendum
which claimed 7,600 lives in Uruguay (222 deaths per
received nearly 49% of valid votes but fell short of the
100,000 residents), contributed to a steep economic
absolute majority needed to repeal the reforms.
downturn. GDP declined by 6.1% in 2020, pushing the
poverty rate up from 8.8% to 11.6%, according to
government statistics. An emergency government support
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Uruguay: An Overview
package for businesses and households prevented a more
fuels, pharmaceutical products, and machinery were the top
severe spike in poverty and unemployment, and helped
U.S. exports to Uruguay. Meat, wood, and fruit were the
jump-start Uruguay’s economic recovery; GDP grew by
top U.S. imports from Uruguay. According to Uruguay’s
4.4% in 2021 and 3.9% in 2022, according to the
Central Bank, the United States accounted for 11% of
International Monetary Fund (IMF). The IMF forecasts 2%
Uruguay’s total merchandise trade in 2022 and was
economic growth for Uruguay in 2023, amid high
Uruguay’s fourth-largest bilateral trading partner behind
uncertainty due to the effects of a severe regional drought
China (19%), Brazil (18%), and Argentina (14%); the EU
that has hampered agricultural production. The IMF expects
accounted for 15% of Uruguay’s total trade.
inflation, which averaged 9.1% in 2022, to ease in 2023 to
around 7% in response to monetary tightening and the end
According to the U.S. State Department, Uruguay offers a
of pandemic-era economic support measures.
stable investment climate that does not discriminate against
foreign investors. A bilateral investment treaty between the
U.S.-Uruguay Relations
United States and Uruguay has been in force since 2006.
The United States and Uruguay typically have enjoyed
According to the U.S. Bureau of Economic Analysis, the
friendly relations. In November 2022, Assistant Secretary
accumulated stock of U.S. foreign direct investment was
of State for Western Hemisphere Affairs Brian Nichols and
$388 million in 2021 (latest U.S. data available), about a
Uruguayan Foreign Minister Francisco Bustillo convened
fifth of its peak value during the previous decade’s export
the first annual Bilateral Interministerial Dialogue focused
boom. About 150 U.S. firms operate in Uruguay, including
on strengthening cooperation in areas of mutual interest.
in the forestry, tourism, and telecommunications sectors.
The U.S. and Uruguayan delegations discussed, among
other topics, cooperative efforts to expand bilateral trade
Foreign Affairs and Defense Cooperation
and investment, promote regional and global security,
Uruguay is a strong proponent of democracy and human
address climate change, and support democracy and human
rights, the peaceful resolution of disputes, international law,
rights.
and multilateralism, and it often seeks to advance those
values by serving as a consensus builder and mediator in
Trade and Investment Relations
international forums. Since taking office, the Lacalle Pou
President Lacalle Pou took office pledging to better
administration has joined the United States in supporting
integrate Uruguay into the global economy. He has
several U.N. and Organization of American States
repeatedly pushed the Common Market of the South
resolutions condemning human rights abuses and anti-
(Mercosur) customs union, which also includes Argentina,
democratic actions in Cuba, Nicaragua, and Venezuela.
Brazil, and Paraguay, to reduce the common external tariff
Uruguay also denounced Russia’s 2022 invasion of Ukraine
applied to non-Mercosur goods and to adopt more flexible
and joined the United States in cosponsoring a U.N.
trade rules that would allow individual members of the bloc
General Assembly resolution, adopted in March 2022, that
to negotiate trade agreements with external partners.
demanded Russia immediately withdraw its forces.
Although Argentina and Brazil have resisted such changes,
Uruguay has pressed forward unilaterally and is currently
Uruguay is one of the largest per capita contributors of
negotiating free trade agreements with China and Turkey.
forces globally to U.N. peacekeeping missions. As of
Uruguay also has applied for membership in the 11-nation
December 2022, Uruguay had nearly 1,065 military troops,
Comprehensive and Progressive Agreement for Trans-
police, and advisers deployed to seven countries. The
Pacific Partnership (CPTPP), raising further questions
United States has encouraged Uruguay to maintain its
about its future role in Mercosur.
contributions to U.N. peacekeeping missions and has
provided more than $35 million of equipment and training
The United States and Uruguay engage on commercial
to Uruguay through the Global Peace Operations Initiative
issues under a 2007 Trade and Investment Framework
since FY2008, according to the State Department.
Agreement (TIFA) and two protocols to the TIFA related to
trade facilitation and the environment. Since August 2021,
The United States also has provided additional military aid
the countries have been negotiating a new protocol to the
to Uruguay. In FY2022, the United States allocated
TIFA focused on trade rules and transparency. Some
$347,000 of International Military Education and Training
Members of Congress have advocated a deeper bilateral
(IMET) aid to Uruguay intended to enhance the country’s
partnership, including pursuing a comprehensive free trade
peacekeeping, disaster response, and national defense
agreement with Uruguay. Such an arrangement is not
capabilities. The Biden Administration has requested
among the Biden Administration’s trade policy priorities;
$400,000 of IMET aid for Uruguay in FY2024; FY2023
Uruguay is, however, one of 11 other countries
allocations are not yet available. In addition to providing
participating in the Administration’s “Americas Partnership
training, in November 2022, the United States transferred
for Economic Prosperity,” intended to strengthen supply
three Protector Class patrol boats, worth an estimated $8.7
chains, competitiveness, investment, and economic growth
million, to Uruguay under the Excess Defense Articles
in the Western Hemisphere.
program to support the modernization of Uruguay’s naval
fleet.
According to U.S. Census Bureau data, total U.S.-Uruguay
merchandise trade in 2022 reached a record high of $3.8
Peter J. Meyer, Specialist in Latin American and Canadian
billion, continuing a two-year growth trend. In 2022, U.S.
Affairs
exports to Uruguay amounted to nearly $2.9 billion and
Ramon Miro, Analyst in Latin American Affairs
U.S. imports from Uruguay totaled $906 million. Mineral
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Uruguay: An Overview

IF10881

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