Uruguay among Greatest Promoters of Regional Integration

CAF—development bank of Latin America—, presented the 2021 Economy and Development Report (EDR 2021) in Uruguay entitled “Pathways for Integration: Trade Facilitation, Infrastructure and Global Value Chains,” which argues that, in terms of trade facilitation, Uruguay is among the most advanced countries in the region.

The report highlights the importance of the progress made, but emphasizes the need to achieve better trade integration in the region, stressing the need to reduce customs costs, improve infrastructure, lower international costs and address social, environmental and climate issues.

The event was opened by the Minister of Foreign Affairs, Francisco Bustillo, and CAF representative in Uruguay, François Borit.

“At CAF, we propose to work more on sustainable comprehensive infrastructure, borders and physical infrastructure, striving for greater energy and digital integration. To this end, we will seek to facilitate trade, in border development, with goods and the improvement of goods and services. We will also develop renewed agents of climate change and biodiversity, which adds to our support for infrastructure development in the country,” Borit said.

In this regard, Minister Bustillo expressed the importance of CAF’s support for the planning of the waterway in Laguna Merín (Uruguay-Brazil) and the construction of the Monte Caseros-Bella Unión international bridge (Uruguay-Argentina). “These initiatives boost the economy between neighboring countries to facilitate trade opening and trade of products,” he said.

 “The report carefully explores the hypothesis that the low labor insertion of companies in Latin America is partly due to the limited use of regional space to underpin an export expansion strategy,” said the minister.

The paper, presented by Lian Allub, chief economist at CAF’s Socioeconomic Research Directorate, explores the hypothesis that the low international insertion of companies in Latin America in general, and Uruguay in particular, is partly due to the limited use of regional space as to underpin a global export expansion strategy. To achieve a greater regional and global insertion, the report proposes to act on three specific areas: trade facilitation, physical infrastructure and productive integration.

The trade facilitation index built by the OECD, which measures 11 dimensions of trade, ranks Uruguay among the highest in the region.

CAF’s report highlights that one of the sectors that showed great dynamism in Uruguay was exports of technological services, which in 2005 accounted for 1% of sales abroad, and close to 10% in 2019.

In terms of energy integration, Uruguay stands out for its investment in non-conventional renewable energies (NCRE), becoming a net exporter of energy and generating more than 40% of its energy from NCRE.

However, the country has room for improvement in terms of appeal procedures, procedures in general and cooperation with the internal border agency.

In reference to transport, the nation increased air connectivity compared to 2009, in particular as regards international connectivity, and performs well in maritime connectivity, with a maritime connectivity index slightly higher than the Latin American average, and a waiting time for ships in ports close to the regional average.

In terms of land infrastructure, Uruguay performs well according to market access metrics. Despite the good performance in terms of indicators, Uruguayan companies, especially exporters, continue to consider transport infrastructure as a barrier to proper development of their activity.

As for its participation in regional and global value chains, Uruguay has a similar participation in both, with an emphasis on being a process finisher rather than a supplier of raw material; in any case, its participation is relatively low.

The report concludes that one of the great challenges facing Uruguay, like other countries in the region, is to incorporate greater added value into its exports. This could be achieved by adding value from the services sector to manufacturing exports. Currently, the share of the services sector in the domestic value added of manufacturing exports is around 25%, while countries such as New Zealand stand close to 40%.

After the presentation of the report, a panel discussion was held featuring professor of International Trade of UdelaR Marcel Vaillant, Director of Trade Policy of the Ministry of Economy Juan Labraga, president of UTE Silvia Emaldi, researcher and professor at IECON-UdelaR Adriana Peluffo, and the president of the Confederation of Business Chambers, Juan Martínez.

The event was adjourned by CAF’s Director of Socioeconomic Research, Ernesto Schargrodsky.