Why invest in Agribusiness in Uruguay Uruguay grew

Why invest in Agribusiness in Uruguay? • Uruguay grew at an average annual rate of 5. 4% between 2004 and 2014, which made it one of the fastest growing countries in the region. • Foreign investment has reached record levels, and this allowed Uruguay to position itself as the second largest recipient of FDI in South America (5. 6% of GDP) in the last decade. • Global demand for agricultural commodities will remain firm in the coming decades, mainly sustained by Asia’s higher consumption of proteins, fats and sugars. • Uruguay is part of the main food exporting region in the world (together with Argentina, Brazil and Paraguay). • Uruguay has a comparative advantage in food production worldwide. The agribusiness sector accounts for 75% of all goods exported by Uruguay in 2014. • Uruguay has 16. 4 million hectares suitable for agricultural use, about 93% of the total land area of the country. • Land itself has appreciated substantially in Uruguay in recent years, from USD 385 per hectare (ha) in 2002 to USD 3, 934 per ha in 2014.

• Uruguay is well known worldwide for its production process and the quality of several of its agricultural products. In particular, cattle farming in Uruguay boasts a traceability system that allows to know all the product information from the birth of the animal until it reaches the final consumer. • Uruguay has great potential to increase the production of agro-industrial goods. With a population of 3. 5 million people, the country produces food for 28 million and it is expected to reach food production for 50 million people in the coming years. • In Uruguay there are no limitations or restrictions on exports of agroindustrial goods. • Uruguay maintains a strict policy of sustainable agricultural development, which includes a fully computerized system for managing crop rotation. • The agribusiness sector is one of the most innovative. In the production of food and leather, 25% of the total investments were made in innovation and almost 30% of professionals were engaged in innovation activities. • Over 90% of the exports of the agribusiness sector in 2014 were high-tech exports.

2. Economic importance of the Agro-industrial Sector in Uruguay • In the last 12 years Uruguay has had an uninterrupted growth process that led to quadruple its per capita income (measured in current US dollars), which rose from USD 4, 062 (2002) to USD 16, 640 (2014)4. Uruguay's GDP grew 5. 4% per annum in the last decade showing a markedly higher dynamism than in previous decades. • Said dynamism was fostered by the agriculture sector and agro-industrial chains, as they occupy a key role in the economy. The agribusiness sector accounted for about 12. 6% of the GDP in 2014. While the primary sector (agriculture, livestock and forestry) represented 6. 5%, the remaining 6. 1% accounted for industries related to agricultural and cattle farming activities 6. In addition, other sectors like "Construction" and "Transport, storage and communications" are also strongly associated with the development of the national agriculture and agro-industrial sector. • The agro-industrial sector had a major expansion in the last decade. In particular the GDP of "Agriculture, cattle farming, hunting and forestry" grew 3. 3% annual average between 2002 and 2014. • In the agricultural and cattle farming sector the dynamics of the agricultural sector stood out, especially led by the cultivation of soybean.

Foreign Investment • The increase in international commodity prices in the last decade, the appropriate business climate and Uruguay's clear comparative advantage in the production of intensive goods in the use of land had a significant impact on the inflow of Foreign Direct Investment (FDI) in the agricultural and agro-industrial sector. • Between 2003 and 2016 FDI in land totaled more than USD 3, 000 million, including the purchase of land costs associated with the first production. By 2015 (the last year available) said investment accounted for 4% of the total FDI in the country. • When observing FDI per sector, particularly in the case of "Agriculture, cattle farming, hunting and forestry", the cumulative 2002 -2015 reached USD 5, 000 million and accounted for 13% of the total FDI in 2015. • Investments made by Argentine companies stood out in this period, particularly in the agricultural area, in which the incorporation of technology had great impact on grain production. Some of the largest grain traders in the world are also set up in the country (ADM, Bunge, Cargill and Louis Dreyfus, among others). On the other hand, cumulative FDI in the food processing industry amounted to USD 1, 018 million between 2002 and 2013.

PUBLIC-PRIVATE PARTNERSHIP HIGHWAY PROJECTS NEW ROAD CORRIDORS: AN OPPORTUNITY TO INVEST IN URUGUAY Number of Projects: 6 road corridors. Estimated total initial investment: USD 343 million. Total length: 1350 km. Duration of PPP contracts: 20 years. Uruguay has a strategic location to provide access to the region. This factor, together with the growth in exports and a greater mobilization of agro-industrial products, has resulted in the launch of an ambitious plan to improve logistics chains, with an emphasis on a more agile, secure, and eficient infrastructure throughout the country. • On a different note, heavy transport has changed its traditional performance, which has contributed to decentralization and an increased use of side roads. • This new road network requires significant investments in initial work and a reorganization of its maintenance to go with the new _lows of cargo, improve transit times, and increase the users' levels of security and comfort. • • •

• • • Renewable Energies Within the framework of the Investment Law, Decree 354/009 declares the energetic industry is one of the specific promoted activities, which provides this industry with important tax exemptions. The attractive promotion system allows industries investing in renewable energy generation to finance up to 80% of the investment through tax exemptions. Based on the guidelines set forth by the Executive Branch in 2008 and approved by a multi-party committee in 2010, the energy policy in Uruguay is a State policy. The Uruguayan energy policy has made a firm commitment to renewable energies, with significant short term integration goals and material tax benefits. These goals were actually achieved. Uruguay has a privileged location which bestows favorable natural conditions for the generation of solar energy and wind energy, supplementing the capacity of the existing hydroelectric power resource. There also interesting opportunities for biomass generation associated with agribusiness. The legal framework approved in 1997 establishes open energy generation, enabling the entry of private participants to this phase of the electricity market.

• Both the State and private stakeholders have made large investments in the industry: between 2010 and 2015 they have amounted to more than USD 7 billion. This means the country has invested more than 3% of the GDP per year in energetic infrastructure. • The Uruguayan model regarding public-private partnership for the promotion of investments in this sector has proven to be extremely successful and is nowadays applied in several countries. • Several investment and funding schemes have been made available: public ventures and funding, traditional tenders, leasing contracts, public-private partnerships, projects financed by multilateral organizations (IADB, CAF, World Bank), bi-national ventures and public ventures funded by the capital market and pension funds. • Investments made by Uruguay are highly significant compared to other countries. The latest REN 21 report has positioned Uruguay in the fifth place of the world ranking for level of investment in renewable energies as a percentage of GDP. In particular, the incorporation of wind power to the electricity grid stands out. According to this report, in 2014 Uruguay was the country that ranked the highest in the incorporation of wind capacity per capita. Given that in 2015 and 2016 even more MW of wind power will be incorporated into the grid, Uruguay will continue to lead this ranking in the coming years.

• Uruguay's total energy consumption reached an all-time record of 4, 787 ktoe in 2014, a growth of 7% compared to figures reported in 20134. The main sources of the energy supply matrix in Uruguay are oil, hydroelectric power and biomass, which have traditionally accounted for nearly 97% of the total energy supply. • Uruguay's 2005 -2030 Energy Policy has become a State policy setting forth the guidelines in the field of energy at national level with a long term outlook. Upon approval by the Executive Branch in 2008, it was ratified by a Parliamentary Multi-party Energy Commission in 2010. Within the framework of this policy, a strong commitment has been made to the diversification of the energy matrix and to the incorporation of native resources, in particular renewable energies. Multiple purposes have been addressed: achieve energy sovereignty, lower costs, activate the national energy industry and reduce oil dependence. • In line with the purposes of the energy policy a comprehensive Regulatory Framework has been developed focusing on the development of renewable energies. • Uruguay has several natural resources for the development of renewable energies. A vast amount of waterways, constant and predictable winds, uniform solar radiation throughout the country (with seasonal variation) and a thriving agribusiness sector lead to increased opportunities for hydro, wind, solar and biomass power generation.

• The country's natural conditions, the regulatory framework favoring investment, an energy policy with clear objectives and the commitment of the authorities and the political system to continue to make progress in the integration of renewable energies into the energy matrix ensure that in the short and long term significant investment opportunities will continue to arise. • The policy committed to wind energy has been very successful. Between 2008 and 2015, 25 wind farms were set up for a total capacity of 850 MW. By 2016, installed capacity is expected to reach 1, 200 MW, and once all projects become operational, generation capacity will amount to 1, 600 MW. • In the past 5 years investments made in the energy sector exceed US$ 7, 000 million. This means that Uruguay has invested over 3% of its GDP in energy infrastructure per year and has led to an "Investment in energy/GDP" ratio which is 5 times higher than the average for Latin America.

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