Chapter

URUGUAY

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2000
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Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: May 2, 1980.
Exchange Arrangement
CurrencyThe currency of Uruguay is the Uruguayan peso.
Exchange rate structureUnitary.
Classification
Crawling bandThe exchange rate for the Uruguayan peso is determined in the exchange market, where the Central Bank of Uruguay (CBU) intervenes to ensure that the rate remains within a band. The exchange rate band is depreciated daily at a predetermined monthly rate, and the CBU announces its intervention buying and selling rates daily.



The rate of depreciation against the dollar is 0.6% per month and the total width of the band is 3%.
Exchange taxPurchases of foreign exchange by public sector institutions are subject to a tax of 2%, with the exception of those by the CBU and official banks, which are exempt from the tax.
Exchange subsidyNo.
Forward exchange marketNo.
Arrangements for Payments and Receipts
Prescription of currency requirementsAll settlements of balances under the multilateral clearing system are made in dollars.
Payment arrangements
Bilateral payment arrangements
OperativeThere is an arrangement with the Islamic Republic of Iran in effect through July 31, 2000.
InoperativeA bilateral payment arrangement with Cuba is inoperative.
Regional arrangementsPayments between Uruguay and the other LAIA countries may be made through accounts maintained with each other by the central banks within the framework of the multilateral clearing system of the LAIA.
Clearing agreementsYes.
Administration of controlOperations are carried out through authorized banks, finance houses, exchange houses, and the Bank of the Republic. Exchange houses must be authorized by the CBU.
International security restrictionsNo.
Payment arrearsNo.
Controls on trade in gold (coins and/or bullion)
Controls on domestic ownership and/or tradeResidents and nonresidents may freely purchase, hold, and sell financial gold with a fineness of not less than 0.9.
Controls on external tradeResidents may freely import and export gold with a fineness of not less than 0.9. Gold for industrial purposes is subject to the general policy that governs the exportation, importation, and trading of goods.
Controls on exports and imports of banknotesNo.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyYes.
Held abroadYes.
Accounts in domestic currency convertible into foreign currencyYes.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsNo.
Import licenses and other nontariff measures
Negative listImports of used cars are prohibited.
Open general licensesAll imports are subject to registration that is generally valid for 180 days; goods must be cleared through customs during that period.
Import taxes and/or tariffsUnder MERCOSUR, a CET exists among Argentina, Brazil, Paraguay, and Uruguay. There are 11 tax rates. Initially, the maximum rate was 20%. However, a surcharge, imposed in 1997, and whose removal is planned in 2001, raised this maximum to 23%. Uruguay was granted exemption to the surcharge for capital and certain intermediate goods. Regionally produced capital and telecommunications goods are subject to tariffs of 14% and 16%, respectively. Parties to MERCOSUR are permitted to exempt up to 300 goods from the CET until 2001, at which time they are to converge to the CET. In addition, for Uruguay, tariffs on capital goods, telecommunications, buses, and trucks will not converge until 2006.



Import duties among MERCOSUR countries were generally eliminated, with certain exceptions. In Uruguay’s case, exemptions on pharmaceuticals, plastics, automobile parts, textiles, and dairy products remained in place through 1999. Duties on wheat, tires, paper, glass, sugar, textiles, and apparel are computed on the basis of “minimum export prices,” which provide a basis for a sliding surcharge on these goods, depending on the difference between the minimum prices and declared c.i.f. import prices.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirementsNo.
Export licenses
Without quotasOccasionally, and for special reasons (e.g., stock position, protection, or sanitary considerations), certain exports are prohibited or are subject to special requirements.
Export taxesExports of dry, salted, and pickled hides are subject to a 5% tax.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersNo.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital and money market instrumentsThe Capital Market Securities and Negotiable Obligations Law provides a framework in which financial markets are largely self-regulating but supervised by the CBU. Mutual and private pension funds as well as insurance companies are regulated separately. Although private pension funds must hold an implicit legal minimum ratio of 55% in the form of government securities, the transitory maintenance of time deposits with the CBU is permitted without limitations. In the public sector, the type of operations permitted depends on the type of institution. Government agencies are covered by their own bylaws, and the central government and departmental governments are covered by their own procedures, which are more restrictive.
On collective investment securitiesThe Mutual Funds Law defines instruments and contains several requirements regarding conflict of interest and safekeeping.
Controls on derivatives and other instrumentsn.r.
Controls on credit operationsNo.
Controls on direct investment
Inward direct investmentThe Law for the Promotion and Protection of Investment requires identical treatment of domestic and foreign investors and free transfer of capital. It provides for certain exemptions from wealth and value-added taxes and for the reduction of social security taxes to a 3% rate. It establishes national priorities and provides corresponding incentives. It exempts from tariffs imported inputs whose domestic production has been reduced or discontinued.
Controls on liquidation of direct investmentNo.
Controls on real estate transactionsNo.
Controls on personal capital movementsn.a.
Provisions specific to commercial banks and other credit institutions
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsThere is a minimum mandatory reserve requirement (10%) for local currency and another for foreign currency, except for 30- to 180-day deposits, on which the local currency reserve requirement is 4% and the foreign currency reserve requirement is 10%. These reserve requirements are for currency holdings and notes, and demand deposits at the CBU in their respective currencies. Nonresident deposits placed with nonresidents are exempt from the foreign currency reserve requirement. Also, when establishing such reserves, the deposit at the CBU should be in an amount of not less than 50% of the minimum mandatory reserve requirement. There is a minimum interest-bearing mandatory reserve requirement of 10% in local currency on total deposits and other obligations covered by the non-interest-bearing reserve requirement regime. This reserve requirement may be established by a deposit at the CBU. There was also an 11.5% mandatory holding in dollar-denominated treasury notes on foreign currency deposits and liabilities under the reserve requirement regime, excluding those of nonresidents applying to placements with nonresidents. Effective December 1, 1999, this requirement was replaced with an interest-bearing reserve requirement of 11.5% in foreign currency on total deposits and other obligations covered by the non-interest-bearing requirement regime, and it may be established by holding dollar-denominated cetificates of deposit issued by the CBU.
Open foreign exchange position limitsA ceiling on the asset position of foreign or local currency of 150% of the book value equity less administrative fixed assets (i.e., fixed assets, investments, and deferred charges) was established. There is also a ceiling on the asset or liability position of foreign currency-denominated “operations to be settled” (i.e., future contracts and sales of securities subject to repurchase agreements) of 20% of the book value equity less administrative fixed assets.
Provisions specific to institutional investors
Limits (max.) on portfolio invested abroadInsurance companies must hold a maximum of 5% of total assets, except for life insurance contracts, where companies can hold 20% of required provisions. Private pension funds are permitted to invest only in domestic issuer securities, including those issued abroad. These funds must deal in domestic formal markets according to CBU regulations.
Limits (min.) on portfolio invested locallyPrivate pension funds must hold a minimum ratio of total assets of 55% in the form of government securities. In the public sector, the type of operations permitted depends on the type of institution. Government agencies are covered by their own bylaws, and the central government and departmental governments are covered by their own procedures, which are more restrictive.
Currency-matching regulations on assets/liabilities compositionInsurance companies must match assets with liabilities.
Other controls imposed by securities lawsNo.
Changes During 1999
Capital transactions
Provisions specific to commercial banks and other credit institutionsDecember 1. A minimum interest-bearing mandatory reserve requirement of 11.5% in foreign currency on total deposits and other obligations covered by the non-interest-bearing requirement replaced the mandatory holding in dollar-denominated treasury notes requirement.

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