Latin American Economic Outlook 2022

Uruguay

1. Recent trends

Poverty in Uruguay increased from 3.6% in 2016 to 5.2% in 2020, partly owing to the impact of the COVID-19 pandemic, but remains substantially lower than the Latin America and the Caribbean (LAC) average of 26.3%. Extreme poverty increased in that period from 0.2% to 0.3%, also far below the LAC average (8.7%). The population living in completely informal households decreased by almost half – from 28.5% in 2008 to 16.3% in 2018 – bringing it far below the LAC average of 36.3% in 2018. Regarding environmental indicators, in 2019, greenhouse gas (GHG) emissions per capita were 10.4 tonnes of carbon dioxide equivalent (t CO₂e), higher than the averages for LAC (6.3) and countries belonging to the Organisation for Economic Co-operation and Development (OECD) (9.1). That year, the share of the population exposed to air pollution levels that pose risks to human health (PM2.5 at more than 10 µg/m³) was 26.5%, substantially lower than 95.4% for LAC and 61.0% for the OECD. The marine protected area of Uruguay accounted for 0.75% of its territorial waters in 2021, far below 7.3% for LAC and 18.6% for the OECD. On the fiscal side, environmentally related tax revenue was 1.8% of gross domestic product (GDP) in 2020, above LAC (1.0%) but slightly below the OECD (2.1%). Total tax revenues as a percentage of GDP in 2020 (26.6%) remained higher than the average for LAC (21.9%) but below the OECD (33.5%).

2. Long-term development policies for a green transition

At the institutional level, the Ministry of Environment was created in 2020 as the first state secretariat to deal exclusively with environmental and institutional concerns. The National Climate Change Plan (2017) and the Long-Term Climate Strategy (2021) lay the foundations of the national environmental policy.

With respect to its mitigation measures, Uruguay places a specific focus on the energy, agricultural, transport and industrial sectors. In transport, Uruguay relies on legal incentives, for example by subsidising investments in electric public transport buses (Budget Law No. 19.670), promoting investments in electric mobility (Decree 268/020), and reducing taxes for hybrids and electric vehicles (Decree 321/021). In the agricultural sector, Uruguay aims to reduce emissions through productivity gains thanks to investments and the adoption of new technologies. In terms of energy production, Uruguay has managed to generate over 98% of its electricity from renewable sources (mainly hydropower, wind, solar, biofuels and biomass) and has launched a Green Hydrogen Roadmap in 2022. Among its adaptation policies, Uruguay has developed three national adaptation plans (NAPs) focused on agriculture (2019), cities and infrastructure (2021), and coastal adaptation (2021). For the protection against negative impacts of climate change, Uruguay established a National Emergency System (SINAE) for integrated disaster risk management.

In its international partnershipswithin LAC, Uruguay attaches particular importance to the transport sector. It developed the VERNE project in 2020, in partnership with the Inter-American Development Bank (IDB), to support creation of a hydrogen ecosystem to decarbonise the transport sector. In collaboration with the United Nations Development Programme (UNDP), Uruguay has created a sustainable and efficient urban mobility system (Movés). The country among other regional partnerships also launched a joint programme with Honduras in capacity building for electric mobility. Beyond LAC, Uruguay closely collaborates with the European Union (EU) through the EUROCLIMA+ programme which runs 15 mitigation and adaptation projects in the country, the EU AL-INVEST Verde programme which promotes the green transition, and a bilateral association that strengthens strategic dialogue. Lastly, the Partnership for Action on Green Economy, led by five United Nations agencies, supports Uruguay’s efforts to incorporate the green economy in public policies of key economic sectors.

Regarding green finance, Uruguay’s central bank joined the Network for the Greening of Financial Systems. The Economy and Finance Ministry joined the Coalition of Finance Ministers for Climate Action and adopted the Helsinki Principles for climate action. Uruguay is a member of the United Nations Joint Sustainable Development Goal Fund and is the only LAC country selected to receive funding from it for its decarbonisation efforts and energy sector transition. The programme will establish a Renewable Energy Innovation Fund to support Uruguay’s second energy transition. Uruguay is also planning to issue an innovative sovereign bond that will tie its interest rate to environmental goals.

Key indicators – Uruguay

	Uruguay		LAC		OECD
Social
	2016	2020	2016	2020	2016	2020
Extreme poverty	0.2	0.3	8.1	8.7	N/A	N/A
Poverty	3.6	5.2	25.9	26.3	N/A	N/A
Share of Internet users (% of population)	66.4	86.1	53.7	68.1	81.8	88.0
	2016	2020	2016	2020	2016	2019
Gini index	39.7	40.2	46.3	45.3	34.9	34.2
	2008	2018	2009	2018	2009	2018
Share of total population in informal households (%)	28.5	16.3	43.4	36.3	N/A	N/A
Share of total population in informal households, upper-income quintile (%)	17.1	2.2	24.5	13.6	N/A	N/A
Share of total population in informal households, lower-income quintile (%)	56.5	48.0	70.4	72.0	N/A	N/A
	2016	2019	2016	2019	2016	2019
Health expenditure (% of GDP)	8.7	9.3	6.5	6.8	8.7	8.8
SIGI index	N/A	22.2	N/A	25.4	N/A	17.5
	2015	2018	2015	2018	2015	2018
PISA score in science	435	426	411	407	489	487
Productivity and innovation
	2016	2021	2016	2021	2016	2021
Labour productivity (% of the United States)	38.9	38.0	29.0	26.6	69.9	67.2
	2016	2020	2016	2020	2016	2020
High-tech exports (% of manufactured exports)	10.6	9.8	8.4	7.2	16.5	16.2
	2016	2019	2016	2019	2016	2019
R&D expenditures (% of GDP)	0.4	0.5	0.3	0.4	1.8	2.0
Citizens’ perceptions and institutions
	2016	2021	2016	2021	2016	2021
Share of population satisfied with efforts to preserve the environment (%)	57.9	48.8	46.2	42.0	55.3	51.2
Share of population with confidence in national government (%)	42.3	48.6	34.2	39.4	40.3	46.3
Share of population that thinks corruption is widespread throughout government (%)	54.3	50.7	74.5	70.0	59.0	54.9
Share of population satisfied with the education system (%)	58.0	68.8	64.9	54.3	67.0	66.8
Share of urban population satisfied with the availability of quality health care (%)	70.9	69.4	49.2	48.9	68.2	69.5
Environment and the green transition
	2004-19		2004-19		2004-19
Loss of natural and semi-natural vegetated land (%)	0.5		1.5		1.3
	2016	2019	2016	2019	2016	2019
GHG emissions per capita excluding LUCF (t CO2e)	10.8	10.4	6.3	6.3	9.6	9.1
Air pollution – exposure to PM2.5 (annual average exposure to more than 10 µg/m3, % of population)	33.2	26.5	95.5	95.4	61.3	61.0
	2016	2020	2016	2019	2016	2020
Contribution of renewables to total primary energy supply (%)	58.8	58.6	34.2	33.4	19.7	22.9
	2016	2021	2016	2021	2016	2021
Marine protected areas (% of territorial waters)	0.72	0.75	2.5	7.3	16.5	18.6
Fiscal position
	2016	2020	2016	2020	2016	2020
Environmentally related tax revenue (% of GDP)	1.7	1.8	1.1	1.0	2.4	2.1
Total tax revenues (% of GDP)	25.6	26.6	22.2	21.9	33.6	33.5
Share of VAT (% GDP)	7.1	7.0	5.8	5.6	6.6	6.7
Share of PIT (% GDP)	3.0	4.1	2.1	2.2	7.8	8.3
Share of CIT (% of GDP)	2.6	2.7	3.3	3.4	2.9	2.7
Perception of tax evasion (%)	N/A	32.6	N/A	27.3	N/A	N/A
Debt service (% of total tax revenue)	9.5	9.6	11.3	13.0	5.6	5.2
	2016	2020	2016	2020	2016	2019
Social expenditure (% of GDP)	14.8	16.7	11.5	13.6	20.0	19.9

Note: See the Reader’s Guide for definitions and sources.

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