Phase Three Uruguay—More Appealing Than Ever
“I first came to Uruguay in 2004, and I moved here full-time in 2006,” writes Latin America Correspondent Lee Harrison. “Since then, I’ve checked out almost every other country in Latin America, some of them several times. I’ve bought properties in five countries, written hundreds of articles, and a few books.
“So when I say that Uruguay stands up well to the other options in Latin America, it’s not just my sense of hometown pride talking. It’s because I’ve looked long and hard for a better option, and I still find Uruguay hard to beat.
“And that says a lot for Uruguay. Because as a place to live, retire, or own a second home, it has changed quite a bit since I first saw the country. Yet its appeal is bigger and broader than ever.
“Nestled in the Southern Cone of South America, this country of only 3.3 million people has long been well-known for its beautiful beaches and classy resorts, its colonial cities and vast interior of rolling pampas. Uruguay has built its reputation as a great place to vacation and as a great place to retire thanks to its natural beauty, great amenities, and gentle climate.
“It’s also well-known as a banking haven and a good place to invest.
“I’d say that Uruguay has passed through three phases since I first landed here eight years ago. In its first phase, it was a low-cost destination. Back in 2004, when the exchange rate between the Uruguayan peso and the U.S. dollar was a very favorable 30:1, the cost of living in Uruguay was super low. At the time, the country was still recovering from the spillover effects of the Argentine economic crisis and compared favorably with other low-cost destinations, including Ecuador.
“But the decline of the dollar changed all that and ushered in the next phase, which I think of as the lifestyle phase. During this time, Uruguay earned a reputation as a quality of life destination. Thanks to the strengthening peso, it was no longer all that cheap… but, surprisingly, it held a broader appeal.
“The people who came to live and invest during this phase were those who were willing to pay what I call a ‘fair value for an excellent lifestyle.’ And they shared many of the same reasons for choosing Uruguay:
- The burgeoning opportunities in the property market…
- The high standard of living and First World infrastructure
- High education levels…
- Broad middle class, instead of the large rich/poor rift found in most of the region…
- Low levels of corruption…
- And, most important, Uruguay’s low crime rates and record for safety…
“Again, surprisingly, at least to me, Uruguay was more popular at this time than when it was super cheap.
“But the Uruguayan peso continued to gain on the dollar, the euro, and the Argentine peso, which ran up local costs for people dependent on those currencies…not to mention the normal inflation of prices in Uruguayan peso terms, which raised costs even further.
“Then, on top of that, the Great Recession came. This brought on the current phase of Uruguay’s appeal, which is proving to be the most popular phase yet.
“It’s what I call the safe haven phase. And it appeals to people who want a First World environment and a great lifestyle…and who also want to remain below the world’s radar in troubled economic and political times.
“I was worried when the recession began, thinking that Uruguay might be dragged down with North America and Europe. Oddly, it seemed that the worse the superpowers’ economies became, the more people found appeal in Uruguay, a stable commodity-based economy with a sound banking system.
“Same for the political turmoil going on around the world. The crazier things get, the more people seem to seek the solace of Uruguay.
“All the while, property prices have continued to climb, rewarding previous buyers handsomely.
“Bottom line, today, people are coming to Uruguay in record numbers, with residency applications up more than 300% since 2007. Many of these folks are coming from the United States.
“One notable and worrisome development, however, is the current tax trend in this country. Over the past five years, Uruguay has implemented an income tax, a capital gains tax, and a tax on overseas dividends and interest.
“This may sound bad…but, the truth is, these things have had little impact. The income tax is on Uruguayan income only…the capital gains tax is negligible…and, while the tax on dividends and interest is on the books, so far, there have been so many related questions that the country has been unable to implement it.
“Practically speaking, there’s been little change. Aside from a US$125 capital gain tax I paid on proceeds from the sale of a piece of property last year, my taxes in 2011 were about the same as in 2006. Still, this trend to higher taxes is not a good one.
“So, as Uruguay has evolved through three phases, it’s grown more popular than ever…and deservedly so. It still offers a rich and quality lifestyle at a fair price, with excellent infrastructure and super people, while remaining under the world’s economic and political radars.
“If you’re not on a tight budget, you won’t beat it.”
Editor’s note: Lee Harrison will be joining us in Scottsdale for our upcoming Retire Overseas Conference, kicking off April 30. Over the three days of this event, Lee will be sharing the wisdom of his broad experience in most every Latin American country, as well as the know-how he has acquired as a property owner in Uruguay, Ecuador, Colombia, and Brazil.
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