In addition to being a member of the WTO, Uruguay is also a member of the Latin American Integration Association (Spanish acronym: ALADI) and Mercosur. While a Trade Investment Framework Agreement (TIFA) exists with the United States, Uruguay and the United States do not have a Free Trade Agreement.
ALADI
ALADI is a Montevideo-headquartered trade association that includes ten South American countries plus Cuba, Mexico, and Panama. Under ALADI’s economic agreements, Uruguay enjoys and grants special preferential access to trade with Bolivia, Chile, Colombia, Cuba, Ecuador, Mexico, Peru, and Venezuela. ALADI’s general regional tariff preference mechanism (PAR, by its Spanish acronym) applies to goods traded between all member countries resulting in a reduction to the percentage of applicable tariffs.
Mercosur
Uruguay is a founding member of Mercosur, the Southern Cone common market composed of Argentina, Brazil, Paraguay, and Venezuela (Venezuela was suspended from Mercosur in December 2016 for failure to incorporate membership requirements). Mercosur entered into force in January 1991 and later Bolivia, Chile, Colombia, Ecuador, and Peru joined the pact as associate members. Mercosur’s headquarters and parliament are located in Montevideo.
Mercosur—Andean Community of Nations (Bolivia, Colombia, Ecuador, and Perú)
The agreement between these two organizations (Acuerdo de Complementación Económica No. 59) took effect in October 2004 with the goal of liberalizing 80 percent of trade between the blocs.
Mercosur–Mexico
In July 2004, Mercosur accepted Mexico as an “observer country” within the bloc, with a view to its future inclusion as associate member.
Mercosur–European Union
After more than 20 years of negotiations, Mercosur and the European Union concluded a comprehensive trade agreement in June 2019. Prior to entering into force, the European Parliament and the parliaments of individual Mercosur countries must ratify the agreement. Under the Agreement, Mercosur will remove tariffs on 91 percent of the goods imported from the EU, including key exports such as vehicles (35 percent) and machinery. In return, the EU will exempt duties on 95 percent of goods imported from Mercosur, along with 83 percent of agricultural imports.
It is unclear when or whether this agreement will be ratified. A growing number of member states of the EU have expressed strong reservations about ratifying the agreement, due to farming and environmental concerns. However, based on press reports, the Russian invasion of Ukraine may have revitalized negotiations, with some potential movement in 2023.
Mercosur–EFTA
In 2019, Mercosur also closed a trade agreement with EFTA (European Free Trade Association) the European Free Trade Association (Iceland, Liechtenstein, Norway, and Switzerland). One of the most significant results is the reduction and elimination of tariffs for agricultural and agro-industrial goods. EFTA also grants exclusive access quotas to Mercosur for meat, honey, rice, wine, and olive oil.
Mercosur–Southern African Customs Union
In December 2000, the founding countries of Mercosur (Argentina, Brazil, Paraguay, and Uruguay) signed a framework agreement towards the creation of a free trade area between Mercosur and the Southern African Customs Union (Botswana, Lesotho, Namibia, South Africa, and Swaziland). In 2016, a preferential trade agreement entered into force.
In 2019, Mercosur also made progress in negotiations with other partners such as Korea, Canada, and Singapore, with the intent of reaching trade agreements with markets that represent high trade potential. Mercosur has FTAs signed with other countries such as Egypt (which entered into force in September 2017) and Israel (which entered into force in December 2009).
Free Trade Agreements
In 2004, Uruguay and Mexico deepened a 1999 agreement, which resulted in Uruguay’s first comprehensive trade agreement with a non-Mercosur country. In April 2019, Uruguay and Chile ratified a free trade agreement that expanded on an existing agreement.
Over the past decade, Uruguay has faced major problems in exporting to Argentina due to import restrictions and has diversified its exports away from its Mercosur partners. In addition to Mercosur there are separate bilateral agreements with Argentina and Brazil providing for administered trade of certain products, mainly vehicles.
In 2021, the Government of Uruguay announced its desire to negotiate Free Trade Agreements with the People’s Republic of China (PRC) and Turkey. In July 2022, the GOU announced that they had concluded a prefeasibility study and were prepared to move forward with negotiations on a FTA with the PRC, despite concerns raised by Mercosur partners.
In April 2022 the GOU signed reference terms for a potential FTA with Turkey which would include a mutual investment promotion and protection agreement.