Free trade zone exports grow as new projects materialize.

In 2022, Uruguayan exports from free trade zones increased by 42% compared to the previous year, which implied a historical share of 32% of the country’s total exports of goods. This figure includes products manufactured in free trade zones and products with a free trade zone as an intermediate destination.

The primary goods exported from free trade zones were cellulose, Zona Franca Nueva Palmira grains, beverage concentrates, and pharmaceutical products. China and the European Union were the main destinations of these exports and exceeded 60% of total sales of goods from these areas.

“The main export product is cellulose with a significant spillover throughout the country’s economy, which is also part of a certified and professional employment chain,” explained the executive director of Uruguay XXI, Sebastián Risso.

“All the country’s governments not only maintained, but also improved the free trade zone regime, due to the spillover in employment that they bring and for what they imply in technological innovation,” he added.

Risso also highlighted the recent incentives for this regime, such as the bilateral agreement between Uruguay and Brazil signed last year, which grants total tax exemption to all goods (except for the automotive and sugar sectors) produced in free zones. “It is a great opportunity for Uruguayan companies located in free zones to consider the Brazilian market as an important destination, not only for already installed companies but also for new investments,” he said.

One hundred years of free zones

Uruguay’s free trade zones are special regimes to boost investment, production, and trade of goods and services and have been successful in attracting investment, generating skilled employment, and diversifying exports.
The activities in these precincts cover various economic sectors, such as manufacturing and industry, to export goods. They are also used as logistics centers for storing and distributing goods, taking advantage of customs and logistics facilities. In recent years they have gained relevance as intermediate destinations, with a historical record of sales to these destinations in 2022.

Uruguay has 14 enclosures approved to operate under the free trade zone regime, 12 operational, and two under construction. Between 2019 and 2023, three new permits were granted to use under its regime, including UPM’s second pulp mill and the WTC Punta del Este Free Zone and Zona Franca del Plata (Colonia) projects.

In addition, the Audiovisual Free Zone, which would operate in the Department of Maldonado, is being authorized.

Uruguay’s free trade zones are home to 1,094 companies that mainly carry out trade and global services activities. Sixty-five percent are exporters. In addition, investment from free zones exceeded US$ 780 million in 2020, occupying 9% of the total investment of the economy that year.

The first two free trade zones installed in Uruguay date back to 1923 and were created to develop industrial centers.

The most recent legislation on free zones broadens the activities authorized within the regime; the main change refers to the authorization of thematic zones for services such as audiovisual, leisure, and entertainment.

The activities of users in free zones are exempt from all national taxes, created or to be made, and enjoy other benefits such as tax exemption for dividends paid to shareholders domiciled abroad, the option for foreign personnel to exempt social security contributions in Uruguay, sales and purchases abroad of goods and services are not subject to VAT, nor are sales and services rendered within the free zone. In addition, goods traded between free trade zones and the rest of the world are exempt from customs duties, among other benefits.

Read the complete report on Exports of goods with free trade zones of the Competitive Intelligence Department of Uruguay XXI here.