Uruguay: Homework For 2018 - A Free-Trade Agreement And A New Cellulose Plant

Last Updated: 19 January 2018
Article by Mark Teuten

Uruguay has two important pending agreements that require approval and further legal/practical changes in 2018:

  1. A Free-Trade Agreement (FTA) with Chile, signed by the government in October 2016.
  2. A pre-contract with Finnish company, UPM, setting out the conditions to enable the construction of a cellulose plant in the Rio Negro region of Uruguay.

Free-Trade Agreement with Chile:

Under the Uruguayan Constitution, the FTA already signed with Chile is subject to ratification by parliament and to date this has not happened.

Strangely (if you are not from Uruguay), it is being held up by the sitting government's own parliamentarians and not by the opposition.

Uruguay at present has only one FTA, signed (and ratified) with Mexico in 2004.

Twice, Uruguay has passed up the possibility of even negotiating a FTA with USA. This is mainly because of political differences within the government itself – a left wing coalition called the Frente Amplio ("FA"). Many of its members view FTA's as a liberal/capitalist means to undermine small countries' sovereignty, with particularly issues in areas such as employment and intellectual property law.

The agreement with Chile seemed relatively non-controversial. The government did not anticipate any problems when they signed up to it in 2016. However, it has been held up in commissions for over a year, amid concerns that signing this would be the start of a slippery slope leading to pressure to sign other FTA's, with more "contentious" requirements.

It appears the government itself has almost given up hope of the FTA with Chile being approved as there is no public push behind it. Interestingly though the government continues to make noises about a FTA with China (!) and the EU, in which case the Chile agreement would certainly have to be ratified first.

Pre-contract for the development of a new cellulose plant in Uruguay's interior:

The construction of a cellulose plant in Uruguay's Rio Negro region depends on compliance with the terms of a pre-contract with the Finnish company, UPM.

The pre-contract establishes a long list of legal and practical guarantees that the company requires from the Uruguayan government, before it will commit to build the new plant.

UPM already has one plant in Uruguay which is working well. However, in part because of some of the issues that arose during construction of that plant, UPM has sought specific guarantees before it will agree to build the second plant.

UPM's first cellulose plant in Uruguay, located in Fray Bentos, is successful and profitable.

The company has been flirting with the idea of building a second plant for several years on a site in the interior of Uruguay on the Rio Negro river. However, UPM has been reluctant to commit unless and until the Uruguayan government deals with a number of issues which they see as essential before they will agree to build the plant.

This means that even if the government does comply with all the requirements, there is still a possibility that the company decide not to proceed.

The proposed agreement sets out the problem areas and time limits for dealing with them as follows:

  1. Infrastructure – Uruguay's roads, railways and port all need serious up-grading if a plant in the interior is to be able to function. The railway is a particular concern. At present Uruguay's railway system is basically non-existent.

The contract says that work on the railway must have been started by November 2018 and finished by February 2022. The company will have specific priority rights to use the track.

  1. Labour issues – construction of the first plant was beset by labour issues, with frequent strikes and occupations. The agreement signed requires that the main unions agree to a Protocol governing the construction period, to ensure that it is built on time. There is also an obligation for the unions, government and UPM to agree on rules affecting the right to strike, occupy the site, etc.

It states that at least 75% of the labour force must be Uruguayan and sets out plans to train Uruguayans in the specialized tasks needed.

  1. Tax-free zone – the Agreement requires that a new Tax-Free Zone be established where the company finally decides to build the plant. This requirement was inevitable given that the first UPM plant in Uruguay has this status, as well as another plant built and operated by a separate Swedish/Chilean consortium.
  2. Administrative delays – there is particular concern that the government deals promptly with all necessary permits for the plant to be able to operate.

While Uruguayan bureaucracy is not known as corrupt, it can be infuriatingly slow. Foreseeing this, the agreement establishes that the government will appoint a specific liaison person in the Environment Ministry to deal with their applications and sets out time periods by which the various applications must be dealt with.

  1. Environmental issues –  UPM agrees to monitor the quality of the water in the Rio Negro and actually to improve water quality over its present level. Other emissions will also be controlled. The forestry which will need to produce lumber for the plant will likewise be subject to agreed controls.

Direct effects if the cellulose plant agreement is implemented:

The plant is projected to produce between 1.9-2.4 million tons of cellulose per annum. It would be the largest private investment in country's history and add 2% to Uruguay's GDP.

Exports would be 100 million US dollars p.a. and tax revenues would be 120 million US dollars p.a. (even after all the requested tax breaks are taken into account).

During construction, the plant will employ between 3000-5000 people. Once complete, it should create 4000 permanent jobs.

Indirect effects if the cellulose plant agreement is implemented:

If implemented the plant would provide a massive economic boost to Uruguay's interior. By improving/creating infrastructure and skills, it would also act as a strong attraction for other investments in similar or related fields.

Also, it will be difficult for the government to change labour rules just for UPM. So, if rules are changed, then the changes should benefit everybody.


Uruguay has in many ways been stuck in a semi-socialist 1960/70's past. However, the FA government, which has now been in power for over 13 years, has always managed to avoid the excesses/outright stupidities of some other governments in Latin America.

Hopefully, the inexorable passing of time will lead to more enlightened leadership going forward, together with a bit of help from general worldwide economic forces – as illustrated by these two agreements.

If Uruguay can address some or all of the issues raised by the UPM agreement and the Chile FTA, then it could have an exciting economic future.




Note: This article is for information purposes only and should not be relied upon as legal advice. Please consult with a lawyer as to your particular circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions