Argentina and Uruguay

Argentina remains the third largest economy of Latin America despite its economic turmoil of recent years, while Uruguay remains stable that makes it an attractive gateway to Mercosur.

Markets with great potential in energy, industry and technology

Argentina is the third largest economy of Latin America, with a GDP of approximately USD 640 billion. The country has abundant natural resources, is one of the main agriculture producers, has important lithium and gas reserves, and has huge potential in renewable energy.

Uruguay stands out in Latin America for its stability and for having the largest middle-class of the Americas and the Caribbean, representing over 60% of its population, as well as for its high per capita income and its low levels of inequality and poverty.

The GDP of Argentina is expected to shrink 3.3% in 2024, before growing 2.7% in 2025. The high year-on-year inflation of 289.4% (between April 2023 and April 2024) places the country in the top three countries with the highest price increases in the world. Considerable fiscal adjustment and political uncertainty will hamper consumer spending and investment during most of 2024.

The economy is expected to recover in Uruguay 2024 and reach 3.2%. This growth would be driven by exports and by consumer spending, underpinned by improvements to the labour market and inflation within the Central Bank of Uruguay’s target of between 3 and 6%.

In 2024, Argentine’s trade balance is expected to show significant improvement, achieving a surplus of approximately USD 15 billion. This forecast is due to several key factors: agricultural recovery and the turnaround of the energy shortfall thanks to the Néstor Kirchner gas pipeline coming into service, and higher mineral exports, mainly lithium. Imports are expected to fall, due to the economic recession and the hike in import prices.

Uruguay envisages a surplus in its trade balance for 2024, based on the recovery of agricultural production following the serious droughts of 2023 and the improved energy trade balance.

There are different business opportunities in both countries. Investment in energy is a common denominator to both. On the one hand, Argentina has booming lithium exploitation and natural gas sectors. Uruguay is an attractive country for investments in the renewable energy sector, particularly solar and wind power, where investments in clean energy infrastructure, technology and projects are highly viable. Despite its permanent economic crisis, Argentina is an attractive country for software development thanks to the high level of training of its population, creating a favourable environment for business investments related to technological innovation and web application development.

Argentina is a market with a solid industrial base, a broad consumer market and a great wealth of natural resources; it is a major exporter of agricultural products, cars and chemicals. The country is experiencing serious problems due to a huge devaluation of its currency and three-figure inflation.

In turn, Uruguay’s economy is expected to slow down due to higher interest rates, increased inflation and a drop in external demand. Economic growth will mainly be based on rising consumer spending. Uruguay is a very attractive country for investors due to its being included in numerous free trade agreements and its proximity to many Latin-American countries.

Argentina’s government interferes in different sectors, which hinders investment in certain industries of the country. The current tax system is complex and cumbersome, and corporation tax is also very high. Milei’s government is under pressure to increase the country’s currency reserve; corporation tax is therefore not expected to be cut in the short term. The main barrier to investment is the high inflation rate, which makes the market not very attractive.

The Uruguayan market is more attractive for international investors due to a competitive and efficient tax system, better than that of its neighbouring countries. The country’s business climate is expected to improve after the Urgent Consideration Act was rjected. The failure to pass this legislation is expected to create confidence among investors, as that new legislation would have led to barriers to investment.

Argentina exports agricultural products to a large range of countries. The country’s economy is highly dependent on the imports of many products, such as chemical and industrial items or complex machinery. This dependency makes Argentina highly vulnerable to any potential problems on international markets. The country is experiencing serious economic difficulties, such as the devaluation of its currency and rising inflation. Therefore, companies that want to sell in the country should know that the domestic market has been highly impacted.

Uruguay offers a relatively open market, with different trade partners, some free trade agreements and bound tariffs. The Uruguayan market is strategically positioned between two of the largest Latin-American economies, Brazil and Argentina, and is used as an entry point to both markets due to its logistical connections and its trade policies. The Uruguayan economy is expected to grow due to an increase in exports and growth of domestic demand.

The policies of former President Macri (2016-2020) sought to lower trade barriers and increase investment; even though international trade did grow slightly, Argentina continues to be one of the countries with the highest tariffs of Latin America (average rate of 7.35%). Those tariffs make the country uncompetitive when compared to other countries of the region, and is among the 15 countries with most obstacles to imports. The most common tariffs range from 0% to 20% (with an average of 13.4% on goods), and in the case of some products, such as vehicles, they can be as high as 35%. However, less red tape and streamlined formalities for foreign trade are expected with the arrival of the new government (Milei).

As regards Uruguay, the country continues to have relatively high tariffs despite several free trade agreements. Even though its tariffs are rather high, Uruguay has the lowest of the Mercosur region and is therefore a good country to enter the market. Uruguay is an interesting country for investors, mainly due to its diverse market with multiple partners in the region.

Argentina’s red tape is complicated, which means it is usually costly and time-consuming for companies. The legal system is subject to specific governmental strategies that are highly dependent on the legislative branch. The legal system is slow, ineffective and vulnerable to corruption. This panorama of the judicial and legal system means that the protection of intellectual property rights in the country is an area that requires improvement to be able to attract new investments.

Uruguay is a market with low corruption rates and there is a sustained effort through different governmental policies to reduce it even further. Its robust, transparent and independent judicial system is efficient when it comes to protecting investors.

Contact office

Roberto Caride

Business Manager

BASQUE COUNTRY DELEGATION IN ARGENTINA – MERCOSUR

Av. Alicia Moreau de Justo 846 3º, C1107AAT Cdad. Autónoma de Buenos Aires, Argentina

+54 9 11 5099 7033

+54 9 11 2351 7013

+54 11 4331 4026

rr-caride@euskadi.eus

* Office hours:

Monday to Friday: 8.00 a.m. to 5.00 p.m.

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