Business Case for Operating in a Free Trade Zone in Uruguay

The advantages of a free trade zone in Uruguay are well known. The challenge lies in demonstrating them to a board of directors or a parent company. That is what a business case is for: a structured comparison of cost, time, and risk across different scenarios. This guide suggests which variables to include and which scenarios to compare.

The Five Components of a Business Case

Tax burden. Includes income, wealth, and Operations taxes in each scenario, as well as the IMCD if the group’s revenue exceeds EUR 750 million. The data is provided by the group’s tax advisor.

Talent. Includes salaries by job profile, hiring time, and expected turnover. The data is obtained from recruitment consulting firms and the operator of campus.

Occupancy. Includes space, security, maintenance, connectivity, and services. The data is derived from the operators' proposals.

Time to operation. This refers to the number of weeks from signing the agreement until the first team is up and running. This is estimated by the operator and the legal advisor.

Risk. This includes the stability of the Regime, capital flows, and operational continuity. It is assessed based on the legal framework and benchmarks from established companies.

Three Scenarios for Comparison

Scenario A: One entity in each country. The company establishes separate entities, one per country. It pays national taxes in each country; profit stability depends on each jurisdiction, and each entity serves only its local market.

Scenario B: A hub in Uruguay operating under the general “ Regime ” framework. There is a single organizational structure. It pays taxes under the general “ Regime ” framework, its stability is governed by current law, and it can serve both Uruguay and international clients.

Scenario C: A hub in a free trade zone. There is also a single legal entity. National taxes on the activity are exempt, except for the IMCD for large groups. The government guarantees the benefit for the duration of the contract, and the Operation can serve both foreign clients and IRAE taxpayers in Uruguay.

Scenario A tends to be more expensive due to duplicate structures. For most companies, the real comparison is between B and C, and it depends on where their customers are located.

Variables Not Included in the Spreadsheet

• Regime's guarantee: Article 25 of Law 15,921 requires the government to be liable for damages if it fails to provide the benefits. This reduces the risk associated with Scenario C throughout the term of the contract.
• The site community: vendors, references, and peers who have already solved the same problems.
• The option to expand: a property with available space means you won't have to repeat the analysis in three years.

What data does Zonamerica provide for the business case?

• Two frameworks to consider: the Free Trade Zone and the Investment Promotion Act (Industrial Park) at campus.
• Space options with varying costs and timelines: turnkey offices, custom-built buildings, warehouses, and lots.
• Talent: Support with hiring, training, and advice on benefits and incentives.
• References: a community of more than 500 companies that accounts for 41% of exports from Uruguay's free trade zones.