Uruguay’s entrepreneurial ecosystem is enriched by tax advantages and institutional support, key factors which help maintain and enhance the upward growth trend of a market that is successfully diversifying, excel in ‘fintech’ and break away from its historical dependence on neighbouring countries. Rather than focusing on the limitations of their ecosystem’s size, Montevideo’s entrepreneurs turn it into a strength to, united, look abroad.
Montevideo, the capital of Uruguay, was founded as a stronghold in the 19th century. Over time, the sturdy walls have remained a metaphor for business development in the country: firm and stable. In the face of adversity, the ‘garra charrúa’ is unleashed. The expression became internationally known after the ‘Maracanazo‘, the famous football victory in which Uruguay beat Brazil to win the World Cup in 1950. The financial situation was the other way around. During the 20th century, Latin America’s largest country had, along with Argentina, control of the Uruguayan markets. In recent years, in a ‘garra charrúa’ attitude, that is, overcoming great obstacles, Uruguayan institutions and companies have worked to break away from this dependence on surrounding countries.
As for the entrepreneurial ecosystem, although its pace of development has been slower than that of other markets in the region, Uruguay is currently in a much more favourable situation. Montevideo ranks sixth among the most entrepreneurial capitals in Latin America, according to the ranking by Startup Blink, behind Lima, Buenos Aires, Bogota, Mexico City and São Paulo, capitals that have been mentioned by BBVA Open Innovation in previous articles.
Two of the qualities of the Uruguayan entrepreneurship ecosystem are stability and constant growth, thanks to the support of the public sector which has boosted it in recent years, as stated in the National Development Agency of Uruguay (ANDE), a government organisation focussed on entrepreneurship and small businesses. “The entrepreneurial ecosystem has always been growing steadily and without any major upheavals”, explains Amalia Quirici, ANDE’s general manager. “In addition, the ecosystem, traditionally dedicated to the agricultural sector, has been diversifying towards others, such as ‘fintech'”.
Quirici also highlights the importance for the ecosystem of the conversion of the fintech startup D-Local into the first Uruguayan unicorn in 2020, which subsequently went public on Wall Street. Other companies in the Uruguayan capital have also closed large rounds this year and are establishing themselves as leaders in various sectors. Among them, the technological companies Nocnoc, GeneXus, who are dedicated to software development, or the fintech company Datanomik.
It is precisely the financial sector that is experiencing a boom in the country, according to Sofia Lanza, chief banking officer of the startup Astropay, which has developed a payment system, and is a member of the Uruguayan Fintech Chamber. “The financial markets in Latin America do not work the same way as they do in Europe: there was a need to develop the ‘fintech’ system and Uruguay is taking advantage of that opportunity”, Lanza explains. Amalia Quirici, ANDE’s manager, considers Uruguayan success stories to be very positive in terms of “encouraging the development of the entrepreneurial ecosystem in the country”. Tips from the startups that have succeeded and scaled up are highly valued among the entrepreneurial community. As the Montevideo writer and journalist Eduardo Galeano said, “to be able to give our opinion, first we have to listen”.
With 3.5 million inhabitants, Uruguay is a small country with a large part of its business activity concentrated in Montevideo. Martin Naor, founder and CEO of the fintech startup Bankingly, which aims to boost the digital channels of financial institutions, believes that its size is good for entrepreneurs: “Uruguay has a small market, but it is highly qualified and well-resourced. Our size means that we have a very strong global vocation”, he adds.
The size of the ecosystem also facilitates networking among startups. “There is a philosophy of wanting to give back to the country what the country gave them”, explains Ximena Camaño, manager of innovation and entrepreneurship at the National Agency for Research and Innovation (ANII), which reports to the Uruguayan government.
This innovation community is also well coordinated. ANII’s manager explains it in the following way: “Each new corporation is not trying to overlap others that exist, but to bring something different to the table”. Amalia Quirici of ANDE agrees and believes that it is also an attractive environment for outsiders: “In Uruguay, we always say that we all know each other and the environment is friendly for those who arrive and want to become involved in it”.
Uruguay’s internationally recognised talent is not the only virtue of the country of mate (the traditional drink) and asado (roast). “We have the system of free ports and free trade zones that provide many tax facilities and attract companies”, says ANDE’s Quirici. The port of Montevideo, like other Uruguayan ports, allows the free circulation of goods without the need for authorisations or formal procedures, which explains why the country is the natural gateway for MERCOSUR (Common Market of the South). On the other hand, free trade zones are areas in which industrial or commercial activities can be developed within a favourable legal and fiscal framework. Sofía Lanza, from Astropay, also highlights the tax incentive regime for investments in the country, such as the “free trade zones, the special treatment in the export of software services or simply the trading regime”.
In addition to the low tax burden, Uruguay’s GDP per capita is more than US$17,000, according to the World Bank, which is higher than in Colombia, Mexico or Argentina, thus showing that it is a favourable context for entrepreneurship. In addition, more than 80% of households are connected to the Internet, a factor that demonstrates the degree of digitalisation of the population and favours the aforementioned growth of financial technology. Financial institutions are responding to this reality, and BBVA Uruguay, which launched the first 100% digital salary account a few months ago, is among them.
Both startups in general and fintechs in particular receive government support in Uruguay, according to ANDE’s Quirici and ANII’s Camaño. Sofía Lanza explains that in Uruguay “every policy that is carried out in the entrepreneurial world is developed in conjunction with the entrepreneurs”.
In fact, the Uruguayan entrepreneurial ecosystem has participated in the development of public policies such as the Entrepreneurship Law, which promotes innovation and positions Red Uruguay Emprendedor (Uruguay Entrepreneur Network) as the voice of the ‘hub’. This law also includes the figure of simplified public limited companies, which, according to Quirici, “is a corporate form that quickly allows the generation of capital or capital outflow”.
ANDE’s manager also predicts that Montevideo will be “more cosmopolitan and diverse in an ecosystem that will continue to grow” in the future. Similarly, Camaño considers believes that an effort is being made, both public and private, “so that growth is not sporadic”. The original walls of Montevideo no longer exist in the globalised world. However, the security they offered to the inhabitants or visitors who decided to take shelter in the city is still there. Despite its size and its location behind the major hubs, Montevideo’s entrepreneurial ecosystem occupies an increasingly important place on the region’s innovation map.