Uruguay
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Why invest in the Uruguayan agriculture?

The recent global economic crisis, associated with the New World Order in a globalized economy, has created many investment opportunities in emerging countries. Newly emerging countries such as “the BRICS” (Brazil, Russia, India, China and South Africa) are playing an ...

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The agricultural business in Uruguay

Successive increases in the price of land in the last decade suggest that the purchase and improvement of land is a good deal. That is, the possession of land under favorable conditions constitutes a good of rapid capitalization.
Uruguay´s political and legal security, even under policy changes, has proven ...

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What are CONEAT groups?

CONEAT groups are not strictly basic soil cartographic units, but they are homogeneous areas defined by their productive capacity, measured in terms of bovine and sheep meat, as well as wool on the hoof (Section 65 of ...

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Uruguay´s profile

Official name: República Oriental del Uruguay
Geographic location: South America, bordering Argentina and Brazil
Capital: Montevideo
Surface area: 176,215km², 95% of the territory has soil suitable for agriculture and livestock activities
Population (2010): 3.3 million
Population growth (2010): 0.35% (annual)
Per capita GDP (2010): US$11,996
Currency: Uruguayan peso ($)
Literacy rate: 98%
Life expectancy at birth: 77 years
Type of government: Democratic republic with presidential system
Political divisions: 19 departments
Time zone: GMT-03.00
Official language: Spanish

General characteristics

Uruguay offers a high degree of safety and comfort for living.
The weather is pleasant throughout the year, summer being the peak season for tourism.
For many years, Uruguay has had a strong ...

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Legal aspects

Act No. 18.092 of January 2007, as amended by Act No. 18.172 of August 2007, prohibit companies with bearer shares to own rural property and carry out agricultural activities.
Sub-section 2 of section 1 declares that the owners of rural property and agricultural holdings shall be...

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Traceability

Uruguay is the only country in the world that has an electronic traceability system of the entire stock of cattle.
Uruguay has a system of traceability of the beef chain, which offers the possibility to find and follow all production stages, processing and distribution of meat.
The main objective of this system is to ...

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Why invest in the Uruguayan agriculture?
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The recent global economic crisis, associated with the New World Order in a globalized economy, has created many investment opportunities in emerging countries. Newly emerging countries such as “the BRICS” (Brazil, Russia, India, China and South Africa) are playing an important role worldwide.
Since its beginnings, Uruguay has been a purely agricultural country. This tradition, associated with its constant improvement, has enabled it to achieve a leading international place as a high-quality beef producer.
Uruguay is the only country in the world that has a mandatory electronic traceability system of the entire stock of cattle.
Uruguay is the only country in Latin America that has gained access to export high-quality beef to the US (link), and is currently going through the procedural stages to enter the Korean market.

 

 

 


 

There are also competitive advantages in what regards taxation, being Uruguay a member of MERCOSUR trade agreement, and because of the existing bilateral tax agreements with the US.
According to the US Department of State, Uruguay offers American firms significant advantages as a distribution platform for the MERCOSUR area.(link)
Uruguay is characterized by its strong legal framework that promotes investments, and is considered a serious and reliable country by international organizations such as the World Economic Forum. (link)
Uruguay has obtained its INVESTMENT GRADE, according to Moody's and Standard & Poor's rating agencies.
As for the business model and investment exploitation, there are different ways of working the land: some are riskier and offer a higher rate of return than others.
Uruguay: a reliable country. (link)

 

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The agricultural business in Uruguay
.
   

Successive increases in the price of land in the last decade suggest that the purchase and improvement of land is a good deal. That is, the possession of land under favorable conditions constitutes a good of rapid capitalization.
Uruguay´s political and legal security, even under policy changes, has proven that Uruguay is a reliable country in which the rules of the game do not suffer sudden changes.
Uruguay has developed an efficient national cadastre system, which allows identifying each property and being certain of its dimensions and location.
Public notaries act in all transfers of ownership right, and there is a Registry controlled by the State.
Reports from the World Trade Organization (WTO) reveal that the demand for food will be higher every year due to population growth.
A staff with wide experience in this field and capacity to plan and foresee alternatives to changing scenarios will allow for satisfactory results for investors.
These reasons, coupled with the openness of Uruguayan beef to world markets and the high demand for grains, make investment in land for agriculture and livestock a low-risk and profitable business.
Given the existence of few profitable business opportunities in a global economy with growth constraints, we believe that it is difficult to find businesses with these characteristics.



 

 

 

 

Land has been appreciating for the last decade, every year, at a rate greater than 10%. As seen in the chart below, the purchase of land, per se, can be considered an investment because of its steady recovery. Regardless of the number of hectares sold, the price per hectare expressed in US dollars has been increasing annually.

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General characteristics
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Uruguay offers a high degree of safety and comfort for living.
The weather is pleasant throughout the year, summer being the peak season for tourism.
For many years, Uruguay has had a strong political and social stability, supported by a consolidated democracy.
The political system is based on a democratic republic with a presidential system. Presidential and parliamentary elections take place every five years, and there are multiple political parties.
The legal system is based on laws passed by Parliament and promulgated by the Executive Branch. There are special judges for civil affairs, customs, bankruptcy, commerce, labor, and criminal courts specialized in organized crime and family affairs.



 

 

 

People who visit the country only require a valid passport. There are some exceptions which require further visas. MERCOSUR citizens only require an identity document.

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Legal aspects
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Act No. 18.092 of January 2007, as amended by Act No. 18.172 of August 2007, prohibit companies with bearer shares to own rural property and carry out agricultural activities.
Sub-section 2 of section 1 declares that the owners of rural property and agricultural holdings shall be individuals or legal entities whose corporate capital is represented by nominative quotas or shares owned entirely by individuals. Therefore, only individuals or legal entities who have the owners’ authorization shall proceed.
Act No. 17.703 of October 2003 regulates trusts which are legal tools suitable for investing in agricultural activities.
The trust allows one individual to place assets in the hands of another individual or legal entity, usually for the benefit of a third individual to fulfill a specific purpose.

 

 

 

 

The assets transferred in trust belong to the trust itself, making up an independent capital funding, both from the trustor and from the trustee. Thus, the risk is limited exclusively to the enterpreneurship without compromising the participants’ assets.
If the trustor were a foreign legal entity, with legal address in Uruguay and had bearer shares, the shareholders should be registered in the Registry of the Central Bank of Uruguay (Banco Central del Uruguay).
However, if the trustor were a foreign legal entity with no legal address in Uruguay, the shareholders should not be registered, even though they had bearer shares.
It must be taken into consideration that, since these regulations have been recently passed (Act No. 18.390 of July 17, 2012), there are no judicial decisions yet.

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Traceability
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Uruguay is the only country in the world that has an electronic traceability system of the entire stock of cattle.
Uruguay has a system of traceability of the beef chain, which offers the possibility to find and follow all production stages, processing and distribution of meat.
The main objective of this system is to provide a mechanism that allows being aware of the animal´s health and therefore, food safety.
In this regard, Article 14 from Regulation (CE) No. 178/2002 of the European Parliament, established that to determine whether food is safe, information provided to consumers, which is included on the label and refers to the prevention of specific adverse health effects of a particular product, should be taken into account.
This system has allowed Uruguay to position itself as a reliable world supplier of beef, responding to the new demands of the global market.

 

 

 

Uruguay has begun a gradual path towards incorporating an individual traceability system aimed at meeting the growing demands of foreign markets and domestic consumers.

 

What is traceability?
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It is important not to confuse traceability with animal identification. The latter constitutes a means to achieve traceability. Some of the most common definitions of traceability are:
- The technical capacity to identify the animal, from birth to the end of the commercialization chain.
- The ability to identify the origin of an animal or its products, so far in the production sequence as necessary, according to the purpose for which traceability was developed.
There are two types of traceability systems: product traceability system or process traceability system.
Product traceability system refers to the process of following the animal footsteps, from birth to slaughter. This system provides information about the animal date of birth and place of birth, its owner, its sex and race, its movement, and the place of slaughter or death.
Process traceability system includes product traceability and incorporates information related to the animal production process and health-related issues.
We conclude that product traceability system will be an additional requirement to gain access to the most demanding markets, while process traceability system will contribute to product differentiation and will add value to the final product.

Livestock traceability

The concept of individual traceability erupted in the meat industry, especially in countries from the European Union, associated with consumers’ increasing demand concerning food origin and sanitation.

 

 

 

 

 

This issue gained importance after 1986 with the appearance of the “mad cow disease” in London, also known as the bovine spongiform encephalopathy (BSE).

In 1996, atypical types of the Creutzfeldt-Jakob (CJ) disease were verified in humans, associated with the consumption of meat affected by BSE. The epidemiology of this disease determined the need to accurately identify the origin of all animals, both for sale among facilities or for slaughter, as a way to control the disease and prevent its spread to humans. Other reasons that determined that traceability has gained momentum are consumers’ demand and awareness on animal welfare and environmental issues.
For these reasons, traceability has been raising as a requirement from European countries to other countries to have access to those markets.
Regulation 820/97 of the European Union requires its member states to implement an individual traceability system for all their animals and a meat labeling system, to ensure the origin and other information conditions.
To date, Uruguay has access to the European Union’s meat market through an individual traceability system implemented in March, 1998 by the Livestock Comptroller Division (División Contralor de Semovientes, DICOSE) of the Ministry of Livestock, Agriculture and Fisheries.
Stricter controls were imposed after the last appearance of the “foot and mouth disease”, which determined the need to individually apply ear tags to all animals intended for slaughter, before shipment.

Source: Sistema Nacional de Identificación Ganadera (National Livestock Identification System).

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What are CONEAT groups?
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CONEAT groups are not strictly basic soil cartographic units, but they are homogeneous areas defined by their productive capacity, measured in terms of bovine and sheep meat, as well as wool on the hoof (Section 65 of Act No. 13.695). This capacity is expressed as an index (“CONEAT index” or soil productivity index) relative to the average productive capacity of the country, which is equal to 100.

These groups were characterized by photo interpretation at a scale of 1:40,000, field verification and physical-chemical analysis of soils.

From the edaphological viewpoint, productivity is considered to be the initial capacity of the soil to produce a certain yield per hectare and per year, which may theoretically be expressed as a percentage of the optimal yield obtained from the soil under the most favorable conditions with a given technology. This definition refers to a potential productivity concept and covers all agricultural areas. There is a methodology for its estimation, which is applicable in accordance with the availability of information for all the areas. This may be possible through continuous and in-depth research on soil mapping and agricultural production, in terms of its individual areas and their integration in the production systems.

 

  Productivity indices correspond to 188 groups of soils with similar productivity (from 0 to 263), resulting from the interpretation of its suitability to produce meat and wool.

CONEAT groups are described by defining dominant and associated soils according to the Soil Classification of Uruguay (Ministry of Livestock, Agriculture and Fisheries, 1976). These groups are related to the units of the Uruguayan Soil Map at a scale of 1:1,000,000. Some important soil properties and landscape associated features are indicated for each group. The nomenclature of CONEAT groups is correlated with the Soil Use and Management Zones of Uruguay (Investment and Economic Development Commission [CIDE], 1967).

The groups of soils overlap the rural parcel and are represented in the CONEAT cartography at a scale of 1:20,000.

Source: PRENADER.

 

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