Uruguay is one of the countries in the region that receives the most FDI in relation to the size of its economy

Publication date: 08/12/2017

Between 2006 and 2016, FDI as a percentage of GDP averaged 4.9% per year. This figure places Uruguay among the countries in the region that received the most FDI in relation to the size of its economy in the last decade.

In this sense, Uruguay has positioned itself as a reliable and attractive destination for foreign investors. The favorable environment for investment and the good economic performance of the country in the last decade have contributed to this. The flows of Foreign Direct Investment (FDI) have grown considerably explaining part of the strong growth experienced in this period.

At the regional level, during the year 2016, foreign direct investment income decreased by a total of US $ 167,043 million in 2016, 7.9% less than in 2015.

Although in 2016, the country experienced a decrease in the Foreign Direct Investment received; it is expected that FDI flows will pick up in 2018 and 2019, reflecting that public investment will resume dynamism and also private investment, mainly real estate investment - associated with the regional impulse - and UPM's second plant Project

In comparison with the region, Uruguay stands out for the high percentage of profits reinvested by foreign companies that are installed in the country. In this period of FDI boom, companies spent an average of 58% of the profits generated each year to reinvest them, while the rest turned it into dividends.

Regarding the origin of Foreign Direct Investment in Uruguay, it comes mainly from the countries of the Southern Cone, especially Argentina with 29% of FDI. Next in importance are some European countries and the United States. Most of the investments go to the sectors of construction (28%), industry (25%) and agriculture (17%).

In the current international context, China stands out as an important new player in terms of direct investment. The FDI issued by this country has gained participation in regional and global FDI flows. In a decade, its participation as a world origin of FDI went from 1% (2005) to 13% (2016). In this way, China positioned itself as the second largest FDI global issuer in 2016. Although Uruguay has not yet received significant FDI flows from China, it is expected that the Asian giant will begin to play a more important role as a source of investment for our country.

Among the effects generated by FDI in the country, it stands out that it is the engine for innovation, favoring the introduction of technological advances and improvements in production processes, producing a spill to the rest of the economy to the extent that other companies invest in technology and that the country encourages this type of investment.

In addition, FDI in Uruguay has given an important boost to the export sector, since many foreign companies invested in sectors oriented abroad and have helped to diversify the country's export basket.


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