Latin Finance - October 2008 - 44

investment in uruguay Uruguay Magnetizes FDI by Jason Mitchell ortucel, the giant Portuguese pulp producer, announced in September that it had signed a memorandum of understanding with the Uruguayan government to invest $3 billion in a pulp mill, a paper factory, a deep water port and an electricity generation plant in the east of the country. The deal, understood to be the biggest foreign direct investment in Uruguay’s history, is one of many hitting the minor South American nation. The exact location has not yet been announced, as developers do not want to attract environmental protestors, but the country is fast-becoming Latin America’s pulp factory: Botnia, the Finnish group, has already invested $1.1 billion in a controversial pulp mill at Fray Bentos, and Spanish paper producer ENCE will plough $1.25 billion into a pulp mill at Punta Pereira. Stora Enso, the Swedish-Finnish pulp producer, is also developing a $1 billion pulp mill on the River Negro. In March, Uruguay’s economy ministry confirmed that Nippon Paper, a Japanese pulp producer, had also acquired land in the country and had started to forest, with a view to installing a new mill. Uruguay has also seized the opportunity to become an agricultural powerhouse, especially while the farming industry of its bigger neighbor, Argentina, was paralyzed by a farmers’ dispute with the government for more than three months this year. Uruguay’s government has announced huge investments in new ports, highways and railways to ensure that soya and beef – in particular – are able to reach overseas markets smoothly. During the first six months of 2008, Uruguay exported 212,000 metric tones of beef, 21% more than Argentina. “Public and private investment is booming in the country,” says Daniel P Uruguay is poised to receive huge investment in infrastructure, keeping it on the path to prosperity. Stable growth and outperformance versus neighboring Argentina are a boon. natural gas field – potentially some 85 billion cubic meters – off its Atlantic coast, which could transform the country from an importer to an exporter of the fuel. Repsol-YPF, Total, Eni and BP have expressed interest in helping develop the field. Stable Expansion According to the UN, total FDI in Uruguay amounted to $880 million last year and $1.4 billion in 2006. At the start of the decade, the country was only drawing around $200 million a year. Investors are beating a path to Montevideo for its stability and educated workforce According to Varese, president of Citi in Uruguay and the IMF, the country of 3.3 million people will vice-president of the US-Uruguayan have a nominal GDP of $26.6 billion this year, against $23.0 billion in 2007. Income is $8,300 Chamber of Commerce. “In per capita terms, Uruguay is on course to become one per head, against $8,500 in Brazil, $8,914 in Mexico, and $10,125 in Chile. of the most prosperous countries in Latin Official data show that in the first America, approaching Chile, the region’s quarter GDP expanded by 2.4% on a leader on a per capita basis.” seasonally-adjusted, quarter-on-quarter Adding to the bullish scenario, in June, Uruguay’s state energy company basis, well ahead of market expectations. Ancap said it had discovered a large This increase represents 10.9% growth on a 44 LATINFINANCE October 2008

Latin Finance - October 2008

Table of Contents for the Digital Edition of Latin Finance - October 2008