Presentation Schedule

Presentation Schedule Country profile Recent economic developments Fiscal Performance Social Indicators Policytowardsinvestment MIEM

Transparency International 2007 Source: www.transparency.org

Economic Freedom Index 2007 Factors considered on the Economic Freedom Index  Corruption  Non Tariff Barriers imposed on trade  Tax burden from the government  Respect for the law  Regulatory burden  Restrictions on banks  Job Market regulations  Black Market activities Source: Heritage Foundation

Democracy Index The Economist – “The World in 2007” Survey on Democracy around the world • 5 Categories: • Electoral process and pluralism • Functioning of government • Political participation • Political culture • Civil liberties Full Democracies Flawed Democracies Source: The Economist

Strategic access to the region Asunción 1.550 km Río de Janeiro 2.400 Km Uruguay: A safe, reliable and competitive highway, displaying the best connections to concentrate and distribute goods, in the richest region of the continent. San Pablo 1.970 km Santiago 1.900 km Porto Alegre 870 Km Buenos Aires 250 Km Montevideo

Bilateral Agreements • TIFA Uruguay – USA: • Commercial Agreement, part of the Uruguay – USA Bilateral Investment Treaty. • FTA Uruguay – Mexico: Gives advantages to 90% of all products traded between Uruguay and México. Includes Services and Investments. *TIFA: Trade And Investment Framework Agreement

Special Regimes Free Port - Montevideo: first and only free port of the Atlantic Coast of South America. - Free merchandise transit, no authorizations or formal procedures required. Within port facilities goods are exempted from all import levies. Free Trade Zones - Areas exempted from Capital and Income Tax, as well as from any other tax created (as from 1987) or to be created in the future. - Introduction of merchandise into the FTZ is exempted from all import levies. - Authorized to develop any commercial and service activity.

Presentation Schedule Country profile Recent economic developments Fiscal Performance Social Indicators Policy towards investment MIEM

Growth remains strong. Seasonally adjusted GDP Over 5 years of sustained growth

All sectors are performing well GDP by economic activity - Real growth rates Last 12 months ended in mar-08 2007 Agriculture, fishing and forestry 2,8% 4,2% Manufacturing 8,0% 8,8% Electricity, gas and water supply 11,4% 11,1% Construction 2,5% 4,0% Wholesale & retail trade, hotels and restaurants 10,9% 11,1% Transport, storage and communication 12,3% 16,3% Other 5,6% 5,9% Total 7,4% 8,5%

450 400 350 300 250 200 150 100 50 0 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Investment continued to recover Machinery Investment – Private Sector Cycle-trend, Dec 1995 = 100 Total Excl. Botnia MEF

Goods exports reached maximum levels Merchandise exports, monthly (mill US$) Annual change: Jan-Jul: 48%

Merchandise trade diversification

Imports are also rising strongly Merchandise imports excluding oil products and electric energy (mill US$) Annual change: Jan-Jul: 66,5%

Foreign direct investment has reached maximum levels, even excluding pulp mill’s investment. Foreign Direct Investment US$ million FDI (% of GDP) 0,54% 0,89% 2,15% 5,27% 3,90% Prom 1991-95 Prom 1996-00 Prom 2001-04 Prom 2005-07 Prom 2005-07 excl. Botnia Source: BCU.

External reserve assets have strengthened as a result of capital inflows US$ 6.300 mill.

A cautious expenditure policy has been adopted Non-Financial Public Sector Expenditures (% of GDP)

Fiscal discipline will persist in the next years Projections consistent with fiscal budget

Fiscal discipline is allowing a steady decline in the Public Debt to GDP ratio Debt/GDP (Overall Public Sector) Pre-financing policy

The unemployment rate has substantially decreased to historical minimums… Labour market indicators (rates in %) MIEM

... and wages have substantially recovered Real Private Salary Index December 1995 = 100, moving quarters

As a result, poverty decreased significantly in 2004-2007 Poverty Indigence (% of population) (% of population) 2001 18,8 1,3 2002 24,3 2,0 2003 31,3 3,0 2004 31,9 3,9 2005 29,2 3,4 2,1 26,8 2006 2,1 2007 25,5 Source: INE.

Incentive to investments included in the Tax reform • Reduction of income tax paid by firms: from 30 to 25% • Incentives to reinvest: up to 40% of the net fiscal rent. • Lengthening of the prescription terms of fiscal losses: from 3 to 5 tax years. • Fiscal exemptions of rents related to R&D: biotechnology and software for export.

Incentive to investments included in the Tax reform • Reduction of firms’ financing costs • Elimination of taxes. • Elimination of garantee trust fiscal costs • Complete deduction of interest expenses • Changes in public entreprise taxes that improve competitiveness through lower prices of public services • Consistency in promotional regimes

Other actions taken to promote investment: • Changes introduced in the Investment Promotion Law • Significant investment in public entreprises • Creation of a special Unit at MEF to support private sector developments • Public sector programs to finance asset purchases • Competition Law • Credit Guarantee Fund • Protection of Property Rights • Bankrupcy Law

General Investment Regime • No discrimination between local and foreign investments. • No previous registration or authorization required. • No restrictions on capitals or profit repatriation. Remittance can be made in any currency at any time. • No limits on foreign capital share in companies. • Tax exemptions for investment projects.

General Investment Regime • No price control. • Fiscal and Banking Secrecy. • No exchange rate control. • Intellectual Property Laws in accordancewith WTO Guidelines.

MEF - DSP

Presentation Schedule