It is generally recognised that one of Uruguay's main challenges to development is its chronic deficit in access to credit. The gravity of the problem was better perceived by the general public during the last five years of unprecedented economic growth. As a response to this demand, Uruguay approved two pieces of legislation intended to promote better access to financial markets: the reform of the Central Bank and a new bankruptcy law.
Last February's tax reform law underscores the country's reputation for having one of the most equal distributions of wealth in the world. Attorneys there accredit this fact to the nation's successful social programs and relative macroeconomic stability....
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Last February's tax reform law underscores the country's reputation for having one of the most equal distributions of wealth in the world. Attorneys there accredit this fact to the nation's successful social programs and relative macroeconomic stability. But two of Uruguay's most important sectors of the economy – agriculture and offshore services – have recently taken a beating from a regional drought and the economic downturn, respectively.
Last April, the Uruguayan government committed to the OECD tax transparency standards, although many of Uruguay's lawyers quietly support maintaining bank secrecy policies for the vital role they play in the nation's economy. "It is important to keep that secrecy in place for foreign investment in Uruguay," notes one commentator. Additionally, Uruguay has resisted calls by the Argentinean government to reveal investment details of Argentinean companies doing business in Uruguay. Due to the importance of Argentina's private investors to Uruguay's economy, financial lawyers believe the government will sign tax information exchange agreements with countries in North America and Europe, but will remain reticent with regard to its neighbours.
With important ports on the Atlantic Ocean, Uruguay is an active centre for commerce and serves as an important connection between South America's interior and the sea. Last July, Bolivian President Evo Morales met with President Tabaré Vazquez to broker a deal regarding Bolivia's access to Paraguay's ports. As part of the deal, Bolivia will start supplying Uruguay with natural gas.
Additionally, Uruguay's liberal tax and tariff policies make it a choice launching point for exports over its neighbour to the south, where farmers endure crippling internal taxes on agricultural trade. Last year, Argentinean soy farm management company El Tejar halted its investments in its home country, opting to expand operations in Uruguay and Brazil.
Uruguay alternately benefits and suffers from its membership in the Mercosur trade block. With senior Mercosur members Brazil and Argentina leading calls to raise common external tariffs, Uruguay and Bolivia increasingly find themselves the lone dissenters among their peers in the South American regional trade group. As the minimum required four member countries was expected to vote to increase tariffs at a December 2009 presidential summit, Uruguay will likely exercise its right to opt out of the increase and keep its rates unchanged.
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