Latin Finance - October 2008 - 45

investment in uruguay year-on-year basis and a 60% rise from the 2002 trough, according to Deloitte, which predicts expansion of 7.5% this year, easing to 4.4% in 2009. According to Uruguayan statistics agency INE, retail inflation is running at 7.26% on an annualized basis, much lower than Argentina, which private economists estimate to be at around 25%. Average inflation in South America is around 7.4%, according to the IMF. “Uruguay has been modifying the way it conducts monetary policy, moving gradually from an exchange rate anchor toward an inflation-targeting regime in which the central bank’s goal is to keep overall price increases within a target range,” Marco Pinon, an economist at the IMF, says. Besides improved macro fundamentals, Uruguay has also reduced its need for external funding. It has narrowed the fiscal deficit and made significant improvement to the profile of the public debt, says Alfonso Lema, managing director of Deloitte in Uruguay. Limited local financing, says Ribeiro giant Rio Tinto announced a $300 million development of the port at La Agraciada on the River Uruguay, which will enable it to ship iron ore from the Carumbá mine in Brazil. Rio says it could have located its transshipment port for the mine in Argentina but opted for Uruguay instead. The Stability Factor This backdrop has helped lure blue chip investors. In August, Anglo-Australian mining “We carried out an extensive site survey in both countries,” says Bart Wiersum, project manager for port and river logistics at Rio Tinto. “There is a pool of factors that we must consider: land availability, land costs, transshipment costs, and so on. We also assessed the rule of law and political and economic stability – Uruguay is better than Argentina from that perspective.” Rio Tinto’s $2.15 billion Carumbá investment is a good example of how South American countries can cooperate to magnetize hefty foreign investment. According to the company, the development will involve the longest logistics chain of any mine in the world. This incorporates a 30 kilometer conveyor belt from the project on the Brazilian-Bolivian border to the barge port of Albuquerque on the River Paraguay in Brazil. It continues with barge transfer for 2,500 kilometers downstream along the River Paraguay through Paraguay and along the River Paraná through Argentina, to the La Agraciada port in Uruguay. At La Agraciada, iron ore will be transferred to ocean going vessels, up to Open All Hours in Montevideo ata Consultancy Services Iberoamerica – the IT unit of Indian conglomerate Tata –opted for Uruguay as its start-up location of Latin America. Mario Tucci, vice-president, attributes this to a well-educated local workforce and easy access to the government. The firm arrived in LatAm six years ago as part of a program to diversify into other markets and to have offices in time zones closer to its main clients in the US and Europe. Today, it employs 5,700 people throughout LatAm, 750 based at Montevideo head office. It has invested more than $30 million in Uruguay. “It was our first attempt to enter Latin America and we wanted to set up in a country where we would have a big impact,” says Tucci, country head of Tata for Uruguay and Argentina. “Uruguay embraced Tata, and there was a wide availability of good people.” Tata has some 40 projects being managed from Uruguay, and Tucci lauds the locals’ command of English, the universal language of the IT industry. In LatAm, Tata provides IT solutions, business process outsourcing, and IT helpdesk services for clients globally, including many multinationals. Its regional workforce includes 1,700 people in Brazil, 1,200 in Ecuador and 1,400 in Chile. In India, Tata is a leading auto maker, famous for developing the lowcost Nano car. “The office in Uruguay provides outsourcing services to global clients based anywhere in the world, while offices in the T countries tend to provide solutions to only domestic clients,” Tucci adds. “It’s a 24-hour operation in Uruguay.” He says that since Tata entered the country, it has pushed Antel, the state-owned telecoms operator, to build a new internet cable to Argentina. This would directly connect to the Unisur Cable, the main internet mesh for South America. Antel plans to make the link within the next couple of years. “It is critical for our success that Uruguay has excellent communications, including telecoms and air travel,” says Tucci. “A country must be committed to the world. Tata needs to be able to transfer large amounts of data easily.” He adds that the government must also focus on boosting direct flights to Carrasco International Airport in Montevideo. The seasonal and limited American Airlines service to Miami is not enough, says Tucci. However, Tucci praises Pluna, the national carrier, for developing direct routes from Montevideo to cities in Brazil, such as Curitiba. But he is concerned by recent news that the airline has stopped its direct flights to Madrid because of high oil prices. Local press in September suggested that the flagship airline may have to declare bankruptcy. Nonetheless, the Indian firm is upbeat on the Southern Cone nation. “Overall, Tata is pleased with the performance of its office in Uruguay,” he says. “It has had a very good track record.” -- Jason Mitchell October 2008 LATINFINANCE 45

Latin Finance - October 2008

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