RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/TPR/G/163 
12 April 2006 
 
 (06-1685) 
Trade Policy Review Body Original.  Spanish 
  
 
   
 
TRADE POLICY REVIEW 
 
Report by 
 
URUGUAY 
 
   
Pursuant to the Agreement Establishi ng the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), the policy statement by Uruguay is attached. 
 
 
Note: This report is subject to restricted circ ulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Review Body on Uruguay. Uruguay WT/TPR/G/163 
 Page 3 
 
 
 CONTENTS 
 
  Page 
I. MACROECONOMIC ENVIRONMEN T AND ECONOMIC POLICY ...................................5  
A. INTRODUCTION ...........................................................................................................................5  
B. MACROECONOMIC OUTLOOK 2006-2009 ...................................................................................5  
C. ECONOMIC POLICY FRAMEWORK ...............................................................................................5  
II. TRADE ENVIRONMENT AND TRADE POLICY..................................................................8  
A. TRENDS IN EXTERNAL TRADE AND INVESTMENT .......................................................................8  
B. TRADE POLICY AND INTEGRATION .............................................................................................9  
C. RELATED POLICIES ....................................................................................................................10  
(i) Investment regime........................................................................................................10  
(ii) Competition policy and bankruptcy legislation ...........................................................11  
(iii) Customs reform............................................................................................................12  
(iv) Tax reform ...................................................................................................................12  
D. URUGUAY AND THE WTO.........................................................................................................14  
(i) Uruguay and the multilateral trading system ...............................................................14  
(ii) Uruguay's position on the D oha Development Round.................................................15  
III. CONCLUSIONS .................................................................................................................... ..16 
 
 
 Uruguay WT/TPR/G/163 
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 I. MACROECONOMIC ENVIRONMENT AND ECONOMIC POLICY 
A. INTRODUCTION  
1. In the course of 2004, the Uruguayan economy cons olidated its recovery which had begun in 
early 2003, when it found a way out of the crisis in its financial system and came up with a solution to 
the concentration of public debt maturity dates. Thus, overall production of goods and services grew 
sharply in 2004 – 12.3 per cent – recovering much of the ground it lost between 1999 and 2002.  In 
this context, tax revenue rose cons iderably, and coupled with the control of public spending, this led 
to a significant increase in the primary fiscal surplu s, which far exceeded the targets agreed with the 
International Monetary Fund (IMF) .  Meanwhile, the Central Bank of Uruguay continued to pursue a 
set of monetary policy objectives in a floating exchange  regime, enabling it to bring the retail inflation 
rate down to below 10 per cent. 
2. In 2005, the Uruguayan economy maintained its growth trend (6.6 per cent from January to 
September 2005) thanks to a relatively favourable external environment and a climate of increasingly 
positive expectations.  In particular, the agreemen t reached between the new Government and the IMF 
and the commitment shown by the authorities to th e process of fiscal consolidation contributed to 
dispelling any uncertainties and strengthening the confidence of international investors in the 
Uruguayan economy.  Meanwhile, the production sector  was marked by the continued buoyancy of 
fixed investment, a key element in ensuring sustai ned growth.  As regards prices, the continued 
decline in the inflation rate enhanced  the climate of macroeconomic stability. 
3. Against this background the process of strengtheni ng of the financial system that had begun 
in 2003 was further consolidated, and there w as a significant improvement in the soundness and 
liquidity indicators of the fina ncial intermediation institutions. 
B. MACROECONOMIC OUTLOOK 2006-2009 
4. The macroeconomic outlook for the next few years continues to be favourable.  In terms of 
activity, the economy is expected to continue gr owing at a good pace between 2006 and 2009.  Gross 
domestic product (GDP) in particular is expected to increase by 4 to 5 per cent in 2006, and by 3 to 
3.5 per cent in the years that follow.  In terms of  demand, growth in production is expected to be 
sustained by an expansion in cons umer spending and exports.  A signifi cant recovery is also expected 
in fixed investment, which is essential to en suring continued medium-term economic growth. 
5. The predicted expansion in cons umer spending would be based on the recovery of real wages 
and employment, assuming exports continue growing in a favourable regional and international 
context.  Although the recovery of investment in machinery and equipment and in building would 
essentially be driven by the private sector, the public  sector has also made the improvement of the 
current low level of investment one of its priorities. 
6. As regards prices, it is assumed that the mone tary authority will succeed in its objective of 
bringing inflation down.  This being the case, in an economic growth context, as from 2006 and for 
the foreseeable future average pri ces in dollars are expected to continue increasing at a rate that is 
more in line with international inflation. 
C. ECONOMIC POLICY FRAMEWORK  
7. Stimulation of investment is one of the corn erstones of the development strategy drawn up by 
the Government, which will encourag e the coordination of efforts with actors in the private sector in WT/TPR/G/163 Trade Policy Review 
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 order to generate a climate conducive to the deve lopment of business.  In order to achieve this 
objective the Government has set the following prior ities:  (i) to preserve property rights, protecting 
the rights of debtors and creditors through the fulfilm ent of contracts;  (ii) to develop the capital 
market;  (iii) to strengthen the framework fo r restructuring companies, revising the law on 
bankruptcy;  (iv) to improve the management of State enterprises;  (v) to revise the investment 
promotion schemes. 
8. Although not in itself sufficient, economic stability is a prerequisite to equitable growth.  The 
consolidation of the economic growth process calls for the implementation of  macroeconomic policies 
that are coherent and sustainable over time, a nd the adoption of long-term reforms aimed at 
stimulating investment and reducing the stru ctural vulnerabilities of the Uruguayan economy. 
9. Stability in the broad sense of the term is also  fundamental to reduci ng poverty and improving 
the distribution of income.  The recurring crises have  been the main factor in spreading poverty and 
social exclusion.  History has shown that it takes many  years to repair the deep cracks that a crisis will 
tend to produce in the social structures.  In additio n to building up a social protection network that 
attends to the most vulnerable segments of the popula tion, there is a need fo r economic policies that 
reduce critical situations to a minimum.  Wit hout economic stability and sustained growth in 
production, and without a more equitable distributio n of the fruits of growth, we cannot achieve any 
sustained improvement in the standard of living of our population, and our  country's economic and 
social stability could be threatened. 
10. In the light of the above considerations, the Government's economic po licy will aim to create 
the conditions required for sustained growth in the leve l of activity, to consolidate fiscal and financial 
stability, to reduce the structural fragility of the economy and to contribute to restoring the country's social welfare. 
11. The policy of international integration will take account of the fact that the chief objective of 
external negotiations is to achieve stable and pr edictable market access conditions at all levels, 
regional, bilateral, and multilate ral.  A small economy can only hope to achieve scale through export 
integration, and hence, access to foreign markets.  External negotiations constitute a single whole, and 
the different negotiating processes cu rrently under way will be regarded  as complementary rather than 
mutually exclusive.  Uruguay has insisted on c onsolidating the customs union within MERCOSUR 
while remaining fully aware of the importance of negotiations with the other countries and blocs in 
achieving the primary objective of open regionalism, set forth in the Treaty of Asunción of 1991. 
12. The objective of Uruguay's monetary and exchange  policy will be to provide a stable and 
consistent framework for the development of business and for operators to make decisions.  Inflation 
is a tax that is ultimately paid by workers and the weaker segments of the population with fixed 
incomes, or those that receive no direct monetary in come.  Consequently, it is important to maintain 
the stability that has been achieved, and indeed, to work towards reducing inflation even further in the 
future.  The floating exchange regime provides gr eater flexibility to a small and open economy like 
Uruguay's when it comes to facing external shocks, a nd at the same time, it helps to curtail speculative 
capital movements. 
13. Reforming the financial system is essential to ensuring sustained economic growth.  Bank 
loans and capital markets are called upon to play a fundamental role in financing new institutions 
which will be crucial to generating employment and growth.  In December 2005, the Government 
handed Parliament a proposal to reform the charter of the Central Bank and create the Corporation for 
the Protection of Bank Savings (COPAB) as an agen cy independent of the Central Bank.  The law Uruguay WT/TPR/G/163 
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 provides for greater autonomy for the Central Bank, the strengthening of financial supervision and the 
creation of a deposit insurance administration entit y (independent of the Central Bank of Uruguay). 
14. In spite of the progress achieved over the past two years in the supervision and operation of 
the financial system, there are still a number of pend ing issues which need to be addressed in order to 
reduce its vulnerability:  (i) completion of the restructuring of the Banco de la República  (Bank of the 
Republic - BROU) and the Banco Hipotecario  (Mortgage Bank - BHU);  (ii) establishment of a clear 
distinction between the commercial and promotional functions of the BROU;  (iii) moving forward on 
the restructuring of the domestic debt on a case- by-case basis, distinguishing between good debtors 
and bad debtors;  (iv) promotion of the development of instrument s in indexed units;  (v) improved 
regulation and supervision of the financial sector ;  (vi) implementation of deposit insurance. 
15. Fiscal policy will seek to progressively reduce the ratio between the public debt and GDP to 
sustainable levels.  Fiscal consolidation is curren tly the main instrument for reducing macroeconomic 
uncertainty, and is a key to improving Uruguay's lo ng-term economic growth prospects.  A reduced 
public debt in GDP terms would alleviate the bur den of interests, guarantee continued access to 
capital markets and reduce the sovereign risk while at  the same time paving the way for an increase in 
social expenditure and in the rate of i nvestment in physical and human capital. 
16. The Government is currently in the process of  preparing a tax reform. Uruguay has a fairly 
high tax burden in comparison to countries with a si milar level of per capita income so that any 
increase in taxes would appear to be  unwise.  The planned changes in the tax system will be geared 
towards expanding the tax base and reduc ing the high level of tax evasion. 
17. The Government is also involved in revising the investment promotion schemes and sectoral 
incentives in order, if possible, to achieve greater transparency, to simplify the system, and to ensure 
compliance with international commitments.  At the same time, and in the same context, the indirect 
export tax refund system is being evaluated. 
18. Public spending priorities will be geared toward s the achievement of greater social equity.  
For the Government to implement its plan in the curr ent context of fiscal restraint, it must reallocate 
public spending and give priority to certain objec tives.  With the ongoing deterioration of social 
conditions, fiscal efforts must focus on responding specifically and immediately to emergency situations facing a significant portion of the population without losing sight of the continuing social policies that form part of an overa ll economic development strategy.   
19. It is in this context that the Plan de Atención Nacional de la Emergencia Social  – PANES 
(National Attention Plan for the Social Emerge ncy) was developed with a view to organizing 
assistance and promotion activities to satisfy the b asic needs of the weakest and most vulnerable 
sectors of society and improving their poten tial for economic and social integration. 
20. Wage policy in the public sector must be cons istent with the above-mentioned priorities.  
Increases in the remuneration of State employees must be contingent on the evolution of government 
revenue and must take  account of the need to concentrate on PANES, social expenditures (particularly 
on education), the lowest central government salar ies, and essential infrastructural investments. 
21. It is also important, in the medium term, to reform the social welfare system, since 
demographic trends point to an increase in the de mand for benefits that is  likely to put pressure on 
public finances.  The social security deficit must be kept under control in order to ensure the 
sustainability of public finances and to free up re sources for objectives that have been defined as 
social priorities.   WT/TPR/G/163 Trade Policy Review 
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22. It is important to push forward the State refo rm needed to enhance the return on existing 
fiscal resources, as this would help to satisfy soci al needs and overcome infrastructural deficiencies.  
Shortcomings in these areas are aggravated by the c onsiderable inefficiency and the seepages that go 
hand in hand with a weak institutional framework th at is vulnerable to individual interests.  Any 
society that wishes to grow and become more eq uitable must reform the State to improve the 
performance of its institutions. 
23. Another important issue is empl oyment policy, particularly since unemployment is the main 
factor behind the spread of poverty and social excl usion.  The high level of unemployment contributes 
to the development of informal la bour relations which threaten social cohesion.  In order to achieve 
steady growth in employment and gr adually improve job quality, it is  essential to develop a sustained 
growth strategy based on productive investment, hi gher levels of education, training, and the 
promotion of technological innovation. 
24. As a means of promoting the development of labour relations, wage c ouncils were set up in 
early May 2005 to help create an environment conduc ive to collective bargaining and participation.  
At the same time, there was a call for proposals to conclude a national agreement that would 
supplement and extend this tripartite negotiating forum.   It is essential that the parties should agree on 
fair criteria for the remuneration of the factors of production, capital and labour. 
25. In the short term, the government will be implementing programmes for the promotion of 
micro enterprises in an effort to  achieve three objectives:  (i) improved social integration;  
(ii) extended formalization of economic activities;  (iii) increased SME exports.  In the long term, the 
Government will seek to develop a strategy of innovation, research and technological development 
aimed at creating more stable and higher value adde d jobs, while at the same time working to improve 
the functioning of the labour market, a task which is closely linked to the strengthening of the 
educational system at every level. 
II. TRADE ENVIRONMENT AND TRADE POLICY 
A. TRENDS IN EXTERNAL TRADE AND INVESTMENT  
26. The severe economic crisis that struck the country in 1999 had a sharp impact on the figures 
for Uruguay's external trade in goods and services and on investment from the rest of the world. 
27. From that year onwards, with a slight rebound in 2000, both exports and imports of goods and 
services began to fall with the result that in 2002 e xports were 33.7 per cent lower in current dollars 
than in 1998 while imports, again in current dollars, were also down by some 44.3 per cent. 
28. In 2003, the economy began to recover, and by the end of 2005 goods exports had reached 
US$3.4 billion, an increase of 20 per cent on the historical maximum of 1998. 
29. With the intensification of the crisis in 2002 and the rapid economic r ecovery that began in 
the following year the balance of trade in goods  and services, which had been negative during the 
Nineties, went into surplus thanks, in particular, to  the considerable increase in goods exports.  As far 
as the composition and destination of the exports ar e concerned, the most notable trends between 
1998 and 2005 were the decline in terms of vol ume and relative importance of MERCOSUR as an 
export destination (from 55.3 per cent to 22.9 per cent,  i.e. 751 million current dollars less) and the 
growth in sales to the United St ates market, especi ally after it was opened up to sales of Uruguayan Uruguay WT/TPR/G/163 
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 beef, which rose from 5.8 per cent of goods exports in 1998 to 22.4 per cent in 2005 (an increase of 
603 million current dollars). 
30. Foreign direct investment flows also suffered the consequences of the growing recession 
recorded between 1999 and 2002 and only began to recover in 2003. 
B. TRADE POLICY AND INTEGRATION  
31. Trade policy, that is to say, the system of  instruments and measures that determine the 
external integration of an economy, is subordina te to national economic development objectives and 
strategies.  A fair and sustainable growth strategy calls for the creation of the right conditions for the 
expansion of productive investment, which in the case of an economy such as that of Uruguay, 
presupposes an export drive to achieve the scale that makes efficient production possible.  In this 
respect, the priority objective in terms of external in tegration is, at the external level, improved market 
access for Uruguayan products and, at the internal level, the production of a range of exports that 
satisfy the nature and requirements of the foreign demand.  
32. Consequently, Uruguay has fixed as a basic objective of its external negotiations the 
achievement of stable and predicta ble market access conditions at all levels:  regional, multilateral and 
bilateral.  In this respect, the economic-commercia l dimension of the integration process is critical 
from the standpoint of its growth strategy, and the various negotiations in progress (WTO, 
MERCOSUR, EU, FTAA, etc.) are not mutually exclusive but complementary.  External strategy should seek to achieve competitive integration into  both regional and world economies at the same 
time, by promoting the marketing of both products  with static comparative advantages and products 
with a greater technological content that expl oit Uruguay's dynamic comparative advantages. 
33. The new Government, in keeping with the basic objective of external integration, has defined 
as one of its priorities the expansion of MERCOSU R, which should improve access to both regional 
and extra-regional markets, in the latter instance through the process of joint negotiations with third 
countries.  The fact is that the construction of th e customs union has two components, one internal and 
the other external, which need to be developed simultaneously. 
34. Uruguay has not been able to create the conditions  for attracting investment in manufacturing, 
where efficiency depends on scale.  This would help to diversify and add value to Uruguay's 
competitive exports which traditionally consis t of natural-resource- intensive products. 
35. In these circumstances, it is al so essential to explore the individual possibilities of improving 
access to other markets through the conclusion of bilate ral agreements with a trade content, capable of 
creating opportunities for attracting investment a nd hence for promoting growth, creating jobs and 
reducing poverty.  By these means Uruguay is also trying to ensure that domestic industry has a competitive supply of inputs, which will help it to  find outlets in the rest of the world. 
36. A good example of a recent bilateral agreemen t is the Free Trade Agreement with Mexico, 
signed on 15 November 2003, since it marked a qualitativ e change in bilateral relations by improving 
access to the respective markets for goods and services. 
37. It should also be noted that Uruguay is holding trade talks with the United States within the 
framework of the Joint Commission on Trade and Inv estment established in 2002 with a view to 
strengthening the economic and trad e links between the two countries. WT/TPR/G/163 Trade Policy Review 
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 38. In the multilateral context, Uruguay is seeking to promote its offensive trade interests in 
pursuit of the gains to be made from commitments on subsidy policies and, in particular, the lowering 
of barriers to market access. 
39. In areas not strictly belonging to the sphere of trade negotiations, work is in progress on 
agreements to protect and promote investme nt and on double taxation agreements, on the 
understanding that they could help to expand the opportunities for production by facilitating the 
incorporation of technology and improving access to foreign markets. 
C. RELATED POLICIES  
(i) Investment regime 
40. The investment regime is based on Investment Law No. 16.906 of 7 January 1998.  The main 
objective is to promote and protect investment, both domestic and foreign, with a commitment to 
non-discriminatory treatment on the part of the State.  The legal provisions clearly define the freedom to invest, without any need for registration, and the freedom to transfer capital and profits abroad. 
41. The promotion of investment by agricultural a nd industrial enterprises is based on two laws:  
the Investment Law and the Industrial Promoti on Law, Decree Law No. 14.178 of 28 March 1974.  
The regime applies to those agricultural and industr ial enterprises that pay industrial and commercial 
income tax (IRIC), agricultural income tax (IRA) a nd tax on transactions involving agricultural goods 
(IMEBA).  
42. This general objective is supplemented by more  specific goals such as greater efficiency, 
export expansion and diversification, the establis hment of new enterprises and the strengthening of 
existing ones, encouragement for technological development and support services for industry, 
increased productive employment,  integration of ac tivities, promotion of small and medium-sized 
enterprises, and geographical decentralization. 
43. The regime itself and other legal provisions defi ne a system of automatic and general tax and 
tariff concessions for commercial enterprises.  Mo reover, within this regime, the Executive is 
empowered to grant other benefits.  Finally, the investment promotion regime authorizes the 
Executive to grant promotional concessions additional  to those mentioned ab ove to enterprises that 
submit investment projects which the Executive declar es to be worthy of promotion, provided that 
their activities contribute to the sp ecified objectives of the regime. 
44. Businesses interested in being promoted must submit an investment project, which must be 
technically evaluated in order to be declared wo rthy of promotion and eligible for the additional 
concessions.  The evaluation may be public or pr ivate, at the discretion of the enterprise. 
Table 1:  Projects declared worthy of promotion 
Year Number of projects Investment, in thousands of US$ 
1997 54 311.0 
1998 82 220.7 
1999 82 679.0 
2000 51 286.7 
2001 62 685.8 
2002 25 76.6 
  Table 1 (cont'd) Uruguay WT/TPR/G/163 
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 Year Number of projects Investment, in thousands of US$ 
2003 20 77.5 
2004 47 179.6 
2005 50 178.4 
Source: Investment Law App lication Commission. 
45. Two cellulose plants are currently in the deve lopment stage and are expected to come into 
operation in 2007.  Together they repr esent an investment of US$1.5 billion. 
46. Further evidence of the degree of openness and the non-discriminatory treatment that 
characterize national foreign investment policy is the fact that since the last review Uruguay has 
ratified three agreements granting pre-establishmen t to investments and investors from the countries 
concerned, namely, the Investment Promotion and Protection Agreements (IPPAs) with Canada and 
the United States and the Investment Chapter of the Free Trade Agreement with Mexico.  
(ii) Competition policy and bankruptcy legislation 
(1) Competition policy 
 47. The Executive has submitted a draft competition law which seeks to promote competition and 
repress anti-competitive practices in Uruguay.  The na me of the bill itself, namely, "Draft Law on the 
Promotion and Protection of Competition", is already suggestive of what is planned. 
48. It is intended to achieve these objectives by im proving the definition of  prohibited practices 
prosecuted under the rule of reason and directly inco rporating elements of economic efficiency into 
the investigation of these practices.  In addition,  the implementing body is being relocated and 
removed from the orbit of the Ministry of the Economy and Finance to become a decentralized agency of that ministry, which should give it great er independence from the political sector.  Although 
the regulatory bodies will retain their particular pow ers, their respective spheres of activity are being 
more clearly defined.  Finally, a decision-making tribunal is being created. 
49. Where the promotion of competition is concerned, the implementing body will incorporate 
the committees previously set up by the Planning and Budget Office for advising the Executive on the 
possible anti-competitive consequences of various pi eces of legislation.  One of the objectives on 
which the draft lays particular emphasis is that of penalizing behaviour that impedes or restricts access 
or entry to markets, which, along with the forma tion of cartels, is a tactic sometimes employed, as a 
last resort, by established enterprises to stifle effective competition. 
50. Moreover, the legislation would incorporate a system of prior notification of mergers and 
acquisitions.  Considerations of efficiency in an economy which is already concentrated and where the 
State is a producer in markets with the charact eristics of a natural monopoly suggest a prudent 
approach to the application of structural policies and an intensified effort to repress and discourage 
both concerted practices and the abuse of dominant market position. 
51. The legislation is being examined by the Legi slature which is expected to approve it next 
year. 
 WT/TPR/G/163 Trade Policy Review 
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  (2) Legislation on bankruptcy 
 
52. Competition policy needs to be supplemente d by rules and regula tions on commercial 
bankruptcy.  A strong competitive system depends on th e existence of efficient legal mechanisms that 
enterprises can employ if they get into financial difficulty.  In Uruguay, this system has remained 
substantially the same since 1926 and is clearly obsol ete:  enterprises facing problems of liquidity or 
solvency resort to it only at a late stage and for the purpose of delaying their inevitable exit from the 
market. 
53. Although this is not a problem directly linked w ith the protection of competition, there can be 
no denying that the situation of enterprises in fi nancial difficulty has an impact on the level of 
competition in the markets and on the competitiven ess of their constituent enterprises.  Moreover, 
legislation that prevents economically non-viab le companies from going out of business makes it 
more difficult for new and more efficient undertakings  to gain access to the market, insofar as these 
regimes tend to offer specific concessions with resp ect to creditors which translate into a certain 
degree of unfair competition. 
54. Thus, efforts are being made to enable enterpri ses to achieve a rapid legal resolution of their 
problems and at the same time to distinguish those enterprises that are economically viable from those 
that are not, while ensuring that the latter are prom ptly liquidated.  The present system allows some 
enterprises to die a slow death, which creates difficu lties of access for others in various sectors of the 
economy. 
55. The draft would incorporate elements that sep arate the ownership of the enterprise from the 
production unit and, in the last resort, allow the en terprise to survive despit e the intentions of its 
owners, subject to certain requirement s being met.  At the same time, the aim is to incorporate market 
mechanisms that enable the viability of an enterprise to be quickly determined and, if it is found not to 
be viable, allow for its rapid liquidation. 
(iii) Customs reform  
56. The reform of the National Customs Directorate forms part of the strategy of international 
integration and improved conditions for greater comp etitiveness in the production of goods.  In its 
turn, this presupposes adaptation to the trends in inte rnational trade, in the areas of trade agreements, 
security, cargo risks, sanitary and environmen tal conditions, and the trade supply chain. 
57. Customs will move beyond its traditional role of controlling imports and collecting duty to 
play a significant part in trade facilitation, both in exploiting the advantages for more competitive 
suppliers and in reducing the access risks resulting from trade negotiations.  Given the possibility of 
Uruguay's acting as a distribution and transit centre for the region, Customs should facilitate smooth 
and secure trade flows, in total compliance with  customs and fiscal regulations and sanitary and 
security requirements, thereby making it possible to  generate new activities and sources of income 
and employment.   
(iv) Tax reform 
58. The tax reform programme being undertaken by the new administration is based on justice, 
with the emphasis on a fairer distribution of the tax bu rden and a greater role fo r direct taxes; a more 
efficient tax system; and consistency with th e creation of appropriate incentives for productive 
investment. Uruguay WT/TPR/G/163 
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 59. Thus, the present tax system will be simplif ied by reducing the number of taxes and 
eliminating distortionary taxes that produce little re venue, the existing exceptions and exemptions will 
be reviewed, and personal income ta x will be gradually introduced.  Pe rsonal income tax is in keeping 
with precisely the idea of fairness, that is to say, those who have more should pay more.  
60. Moreover, these reforms are being supplemented  by an ongoing process of modernization of 
the Tax Administration.  This will provide fo r closer coordination between the tax-collecting 
agencies, particularly between the Directorate Gene ral of Taxation (DGI), the Social Security Bank 
(BPS) and the National Customs Directorate (DNA).  The simplicity of most of the instruments facilitates joint controls and cross training be tween officials of the different agencies. 
61. The proposed tax schedule, with lower rates of taxation, greater simplicity, greater sectoral 
fairness, and improved audit facilities, will promot e the formalization of the economy and discourage 
evasion, which will further the process of reducing th e individual tax burden on the honest taxpayer.  
The greater fairness with respect to sectors and s ources of income will improve the transparency of 
the system. 
62. A choice has been made in favour of a dynamic approach to fiscal responsibility, so as to 
avoid undesirable interruptions in the public accoun ting process and the functioning of the State, 
while at the same time making it possible to reduce the tax burden as receipts permit. 
63. In particular, effective implementation of the proposed reforms will ensure that the State 
continues to meet its obligations and, in accordance  with the trend in Government income, lead to 
taxes and rates being adapted to a structure suitable fo r the long term.  The idea is to initiate a gradual 
process that will include the following aspects: 
(a) Elimination of distortionary taxes that produce little revenue; 
(b) elimination of specific public sector taxes th at give rise to inefficiencies in the 
functioning of the State; 
(c) reduction of transfers from state-owned enterprises until they are consistent with an 
equivalent distribution of reasonable di vidends in the private sector, thereby 
encouraging investment planning  and lower public service prices; 
(d) reduction of the rate of value added tax. 
64. In short, the main features of tax reform can be grouped on the basis of the following criteria: 
(a) Simplification of the tax structure by thinning out the numerous taxes resulting from 
partial changes prompted by a short-term and piecemeal vision of the system; 
(b) rationalization, to achieve greater consistency between the characteristics of the 
various taxes, starting with a review of the tax bases and the exemptions available; 
(c) gradual introduction of the Personal Income  Tax, as a means of making the overall 
system more equitable, while taking into account the ability of citizens to pay and extending the net to include income on which no tax is currently being paid; 
(d) a dynamic approach to fiscal responsibility that takes a strategic view of the need to 
ensure the provision of public goods by th e State while, at the same time, making it WT/TPR/G/163 Trade Policy Review 
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 possible to establish a virtuous circle based on reducing the tax burden as receipts 
permit. 
D. URUGUAY AND THE WTO 
(i) Uruguay and the multilateral trading system 
65. Uruguay has made a strong commitment to multila teralism in general a nd to multilateralism 
in the area of trade in particular.  In fact, Uruguay was one of the first signatories to the San Francisco 
Charter, as well as a signatory to the Havana Charter,  and joined the GATT at an early stage, in 1953.  
Moreover, it has participated actively in all th e negotiating rounds, occupying important posts on 
various committees.   
66. Uruguay has defended multilateralism as a way of upholding the rights of the less developed 
nations against those of the more powerful and, where trade liberalization is concerned, it has 
supported the view that it contributes to the deve lopment and well-being of the world's peoples.  
67. Thus, Uruguay has always strongly advocated the inclusion of agriculture in the multilateral 
negotiating agenda.  In this connec tion, it should be noted that agricu ltural negotiations were in fact 
included in the agenda of the Round that bears its name, the Uruguay Round, which concluded, for 
the first time, with the approval of disciplines in this highly sensitive sector.  It should be recalled that 
Uruguay is a founding member of the Cairns Group of  agricultural exporting countries which played a 
decisive part in bringing the Uruguay Round to a conclusion.  More recently, Uruguay took the decision to join the G20, a Group which aspires to give agriculture the role it undoubtedly deserves, 
with special account for the needs of the developing countries.  
68. For Uruguay, the agreements concluded during the Uruguay Round, although they have been 
described as insufficient to achie ve the effective opening up of the world to agricultural trade, 
constituted definite progress towards the goal of en dowing agricultural trade with rules subject to 
worldwide acceptance and multilateral supervision. 
69. In the area of dispute settlement, Uruguay regards the WTO mechanism as one of the 
cornerstones of the multilateral trading system, providi ng it with security and predictability, postulates 
which Uruguay has traditionally upheld and promoted.  
70. At the same time, we believe that the practice of reviewing national trade policies and 
regional trade agreements contributes to the predicta bility and transparency wh ich are fundamental to 
multilateral understanding.  Uruguay' s Delegation in Geneva closely follows the meetings of the 
Trade Policy Review Body.  This monitoring body is a vital means of providing transparency and 
improving the flow of information on the multila teral trading system.  The Enabling Clause 
establishing the rights and obligations of the devel oping countries should be left exactly as it is.  
71. Uruguay supports the accession of new members to the WTO, in the belief that it will 
strengthen the multilateral trading system at the sa me time as providing the applicant countries with 
new opportunities for economic and commercial deve lopment.  With regard to the WTO accession 
processes currently in progress, Uruguay has concl uded accession negotiations w ith Russia, Algeria, 
and Vietnam, among others.  Uruguay WT/TPR/G/163 
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 (ii) Uruguay's position on the Doha Development Round 
72. Agriculture is Uruguay's main focus of interest  in the current round of trade negotiations.  
Indeed, the agricultural negotiations are the area in which Uruguay hopes to gain the most benefit in 
terms of market access and the elimination of expor t subsidies and trade-distorting domestic support. 
73. Traditionally, Uruguay has argued for the long-term reform of the agricultural sector, as 
emerges from the mandate approved in Doha.  This  was precisely the priority objective of the 
Uruguayan Delegation, led by the Minister of Fo reign Relations, that attended the WTO's Sixth 
Ministerial Conference held from 13 to 18 December 2005 in Hong Kong.  
74. The  national assessment of the Hong Kong Minist erial is positive, in particular, because it 
renewed the necessary political support for the negotia ting process of the Doha Development Round.  
At the same time, for Uruguay the most notable result was the fixing of a definite and specific date for 
the elimination of export subsidies and other measures with equivalent effect. This has been one of the 
priority objectives of Uruguay's foreign policy in the field of international trade, which has now found concrete expression.  It has also been, from the outset, one of the core principles of the MERCOSUR 
and Cairns Group countries and was at the origin of the creation of the G20. 
75. The timetable agreed at the Hong Kong Ministerial is another fundamental step in the 
negotiating process in that it includes time-limits fo r the various disciplines designed to enable the 
Round to be concluded by the end of this year. 
76. Moreover, in Uruguay's opinion, the question of development - the cornerstone of the Doha 
Agenda - should continue to set the standard fo r the various dimensions of the present round of 
negotiations, without the subject bei ng exhausted on issues of a horizontal nature.  In this respect, 
genuine market access in sectors of the economy of di rect interest to the developing countries is the 
primary means of contributing to development.  In  Uruguay's view, agriculture is the negotiating area 
likely to provide the greatest gains for the developing world. 
77. Uruguay is pursuing its activist agricultural policy through its dual membership in the Group 
of 20, which it joined early in 2005, and the Cair ns Group.  In the present negotiations, belonging to 
these two influential groupings has made it possible to  win support for the positions of the developing 
countries while staying firmly on the offensive in agricultural matters.  
78. Uruguay notes the importance of what was agreed in paragraph 24 of the Hong Kong 
Ministerial Declaration with regard to mainta ining a balance between reduction commitments for 
agricultural and industrial goods in order to ensu re that this Round produces a fair result.  
79. Uruguay has participated actively in the di scussions on services as reflected in the  
negotiating proposals submitted at multilateral level af ter the end of the Uruguay Round.  Thus, the 
country has cosponsored proposals on: the economic needs test; autonomous liberalization; postal 
services;  distribution services;  mode 4;  tourism;  computer and related services; and the negotiating guidelines and procedures provided for in article XIX of the GATS.  It has also taken a proactive 
approach within the context of the Doha Round, having lodged requests with twenty-seven countries 
within the specified time-limit (J une 2002).  In its offer, submitted in March 2003, it a dded substantial 
commitments to its original schedule, with the inclusion of several sectors.  In May 2005, in 
compliance with the "July Package", it improved its offer by extending its horizontal commitments in 
mode 4. WT/TPR/G/163 Trade Policy Review 
Page 16 
 
 
 80. In short, Uruguay believes that it will not be  possible to regard the Round as having been 
satisfactorily concluded unless subs tantial progress is made with the three main pillars of 
liberalization of agricultural trade, as set out in Annex A to the Work Programme of August 2004, which also deals with various aspects of special a nd differential treatment for developing countries in 
respect of the tolerances for domestic support and applied tariff reduction rates.  A substantial 
improvement in market access, a substantial re duction in domestic support and the elimination of 
export subsidies continue to be core objectiv es of the modalities negotiations in progress.  
Nevertheless, the preservation of the multilateral in stitutional framework is also seen as a principal 
objective. 
III. CONCLUSIONS 
81. At the beginning of this century, Uruguay was f aced with what may well have been the worst 
economic and financial crisis in its history.  Thanks to some judicious  reforms, it was able to reverse 
the process within a relatively short period of time , and now national income is almost back to 
pre-crisis levels, with the prospect of continued progress along the path of sustained growth.  The new 
Government which took office in March 2005 h as addressed itself to reviewing and assessing every 
aspect of economic policy in order to be able  to lay firm foundations for national economic 
development.  In carrying out this task, the Go vernment is keeping the country's international 
commitments clearly in view, at both multilateral a nd more specific levels.  These objectives are the 
source of all the reforms in process of implementati on cited in the course of this report.  Uruguay's 
trade policy forms part of this effort to bring a bout improvements and to adapt to the aforementioned 
national objectives and international commitments.  
82. Uruguay is committed to multilateralism, as is apparent from its efforts at World Trade 
Organization level and, above all,  in connection with the current Doha Development Round.  At the 
same time, it is putting its faith in its complex external agenda, by strengthening its commitment to 
open regionalism and seeking at every possible opportunity to use the trade policy tool for the economic development and we ll-being of its people.  
83. With respect to the future orientation of tr ade policy, Uruguay will continue its process of 
integration into the world economy in accordance with the agreed rules, by intensifying integration at 
multilateral and regional levels and seeking to speed up progress with preferential relationship 
agreements.  
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