TARIFFS AND TRADE GENERAL AGREEMENT ON. Limited Distribution URUGUAY. Until further notice, this document is subject to a press embargo.

Transcription

1 GENERAL AGREEMENT ON TARIFFS AND TRADE RESTRICTED 24 June 1992 Limited Distribution COUNCIL Original: Spanish TRADE POLICY REVIEW MECHANISM URUGUAY In pursuance of the CONTRACTING PARTIES' Decision of 12 April 1989 concerning the Trade Policy Review Mechanism (L/6490), the initial full report by Uruguay is herewith submitted. NOTE TO DELEGATIONS Until further notice, this document is subject to a press embargo

2 Page i CONTENTS Page I. TRADE POLICIES AND PRACTICES 1 A. TRADE POLICY OBJECTIVES 1 B. DESCRIPTION OF THE IMPORT AND EXPORT SYSTEM 3 1. General import régime 3 2. General export régime 4 3. Exceptions to the general import and export régime 4 C. TRADE POLICY FRAMEWORK 6 1. Domestic laws and regulations governing the implementation of trade policy 6 2. Institutional framework Public sector Private sector Trade agreements and their evolution 19 D. TRADE POLICY MEASURES APPLIED AND THEIR EVOLUTION IN THE VARIOUS SECTORS Tariff policy Instruments directed against unfair trading practices Export taxes Tax incentives for exporters 32 II. THE TRADE POLICY ENVIRONMENT 32 A. MAIN IMPORT AND EXPORT TRENDS 32 B. SIGNIFICANT TRENDS IN THE BALANCE OF PAYMENTS, RESERVES, DEBT, EXCHANGE RATES, INTEREST RATES AND OTHER SIMILAR PROBLEMS 34

3 CIRM/G/26 Page ii Page C. INTERNATIONAL MACRO-ECONOMIC SITUATION AND MARKET ACCESS 35 APPENDIX I: APPENDIX II: Statistical information Additional tables 39 47

4 Page 1 I. TRADE POLICIES AND PRACTICES A. TRADE POLICY OBJECTIVES 1. Tariff policy The objective pursued has been to open up the economy through a reduction of import tariffs and also of the dispersion of rates, as follows: Levels at Levels as of 28 February 1990 Present levels 1 January In addition, the Port Handling Charge (Tasa de Movilización de Bultos) and the-consular Fee were eliminated from the Global Tariff Rate (Tasa Global Arancelaria - TGA) and were included in the IMADUNI (Single Customs Duty) and the import surcharge, respectively. The system of payment of the import surcharge was also modified: it will now be paid prior to the numbering and registration of the customs permit. 2. Other measures In order to bring treatment of the motor-vehicle sector into line with the general tariff policy applied, a programme of reduction of the local-content and compensatory-export percentages was established. These requirements will be abolished as from 1 July The export prohibition on hides and 3. Participation in MERCOSUR skins has been eliminated. Under the Treaty of Asunciôn, the four member States undertake to carry out a reciprocal tariff reduction programme in accordance with the following time-table: Date Z tariff reduction (cumulative) 31 December June December June December June December

5 Page 2 The first stage of this time-table has already been completed. The reduction percentage applies to the National Tariff Rate at 1 January 1991, or a lower rate if that rate was subsequently reduced. Consequently, the tariff situation for Uruguay is as follows: April 1992 General régime Regional tariff Regional tariff neral rxglme April 1992 June The reciprocal tariff reduction does not affect the group of tariff items specified by each country in its schedule of exceptions. The national tariff applies to the latter group of goods, even in the case of regional trade. However, the Treaty of Asunción has established a time-table for the gradual elimination of the schedule of exceptions. In the case of Uruguay, the number of items included in the schedule and the time-table for their elimination is as follows: Schedule of Exceptions Number of items: 960 Reduction 10% Date of entry into force of Treaty 10z 20Z Number of remaining items 864 at 31 December at 31 December Z 20Z 20Z at 31 December at 31 December at 31 December 1995 The member countries have also undertaken to adopt a relation to third countries as of 1 January common tariff in

6 rage 3 This common tariff was not laid down by the Treaty but is the subject of negotiations among the governments. Once it has been established, the National Tariff will have to be brought into linewith it, and will be replaced by it at the above-mentioned date. B. DESCRIPTION OF THE IMPORT AND EXPORT SYSTEM 1. General import régime The Tariff is the essential trade policy instrument with respect to imports, and comprises the fiscal charges applied specifically to them. In 1974 Uruguay began a process of progressive and uninterrupted reduction of its import levies, which then had a maximum rate of 300 per cent. The pace of adjustment of the tariff structure was accelerated in April 1990, when the time-table was announced for the reductions in the global tariff rates that would come into force on 1 April 1992 and 1 April The first stage of this liberalization is currently in force, with a three-tier tariff structure comprising rates of 24 per cent, 17 per cent and 10 per cent: as of 1993 these will be reduced to 20 per cent, 15 per cent and 10 per cent. This represernted a substantial opening of the economy towards the region and the rest of the world, an objective firmly pursued by the country, which in turn has the effect of increasing competitiveness in the allocation of production resources. Nominal and effective levels of protection have been clearly reduced, and the tariff dispersion has been narrowed. The present tariff structure does not provide for a zero tariff. However, there are provisions establishing certain exceptions. (a) Capital goods imported by manufacturing enterprises that do not compete with locally produced goods are exempted from payment of import duties only until (b) Agricultural inputs, fertilizers, seeds and inoculants, plant and animal health products, and equipment for animal breeding techniques are exempted from payment of the Global Tariff Rate (TGA). The main goods included in the different tariff bands are as follows: 10 per cent rate of TGA: - Capital goods for the agricultural sector; - Capital goods not produced in the country, and parts thereof; - Raw materials or inputs not normally produced in the country.

7 Page 4 17 per cent rate of TGA: - Intermediate inputs and basic products with little industrial value added. 24 per cent rate of TGA: - Durable, semi-durable and non-durable final consumer manufactures; - Processed industrial products and certain intermediate inputs with high industrial value added (on an exceptional basis). The tariff is applied to the c.i.f. value. in the context of a transparent trade policy, Uruguay does not apply quotas or any quantitative restrictions to imports, and does not require prior permits or deposits or licences. The importer must submit an import declaration for each operation, which is automatically approved in all cases. 2. General export régime Uruguay does not apply any quantitative restrictions on exports, general context of freedom of trade. in the There is a system of refund of indirect taxes and an export financing system through credits granted by the Banco de la Repùblica. 3. Exceptions to the general import and export régime (a) Wheat policy In the case of wheat imports, a certificate of need must now be issued by the Ministry of Livestock, Agriculture and Fisheries, but this is to be eliminated for the 1992/93 harvest. (b) Import prohibitions (i) Import prohibition relating to pyrotechnical devices The sale,, use and introduction into the country of fireworks and all other pyrotechnical devices is prohibited. (ii) Import prohibition relating to certain animal growth or fattening products The import, manufacture, sale and use of products for promoting the growth or fattening of bovine and ovine animals, swine and poultry

8 CiRM/G/26 Page 5 subsequently intended for human consumption, of which the formulae include arsenical and antimonial substances, is prohibited. (iii) Import prohibition relating to certain veterinary medicaments The import, manufacture, sale or use of veterinary medicaments used to promote the growth or fattening of bovine and ovine animals, swine and poultry, of which the formulae include: - substances having an estrogenic hormonal effect or thyrostatic action; - endogenous or natural hormonal anabolic substances, as such or chemically modified; and - estrogenic or androgenic anabolic substances, and gestagen of exogenous origin, either individually or in combinations and in implant form, is prohibited. (iv) Prohibition on the introduction of hazardous wastes The introduction of any type of hazardous waste in any form or under any régime into the areas subject to national jurisdiction is prohibited. The Executive Power may only authorize, in specific cases, the introduction or transit of waste intended for operations for the recovery, recycling or reuse of resources under suitable conditions that guarantee the protection of human health or the environnent. (v) Import prohibition relating to dodder (cuscuta) seeds The import of any tariff item covering seeds that contains seeds of species of parasitical plants generically known as dodder (cuscuta) is prohibited. (vi) Import prohibition relating to chloramphenicol base and salts The importation of chloramphenicol base and salts, alone or in association with other chemicals in raw material form or as finished products or included in animal feedstuffs, is prohibited. (c) Motor-vehicle industry The current provisions establish a system combining compulsory local content and compensatory export. A percentage of the f.o.b. value of each imported vehicle or kit must be exported, or the latter must have the same percentage of local content. However, this régime will be eliminated as of 1 July 1992, with the abolition of all local content and compensatory export requirements, both for kits and for vehicles imported in assembled form.

9 Page 6 (d) Temporary admission régime Under this régime, the importer may obtain a permit for the duty-free entry of specific articles on condition that they are re-exported within a specified period after having been industrially transformed and processed in the country; the benefits of the temporary admission régime are extended to articles re-exported in the form of packaging. (e) Reference prices and minimum export prices These are mechanisms designed to correct distortions created by unfair business practices in international trade. They are set on the basis of commercial parameters in the main markets, and are situated at levels that properly reflect international market values. (f) Drawback régime Under this régime, the importer pays import duties on specific articles and obtains a refund of what he has paid after those articles have been re-exported in the state in which he received them or following industrial processing in the country. (g) Export taxes A system of export taxes exists for certain agro-industrial products with little or no added value. Under this system, a 5 per cent tax is applied to the f.o.b. value of the export. The list of products subject to this régime is revised periodically in order to ensure the smooth domestic supply of such goods, which is the sole objective of the system. The items subject to this régime at present are: - greasy, washed and semi-washed wool - live animals (bovine, ovine and equine) - bovine meat with bone - skins and hides of bovine and ovine animals (dried, salted, pickled and wet blue) - fleshed skins and hides (pickled and wet blue) - bovine fat. C. TRADE POLICY FRAMEWORK 1. Domestic laws and regulations governing the implementation of trade policy The Constitution of the Republic establishes that draft legislation may originate in either Chamber of the Legislative Power or the Executive Power, in accordance with the established requirements and exceptions. The Legisiative Power, exercised by the General Assembly, is responsible, under Article 85, paragraphs 3 and 7, of the Constitution, for enacting laws concerning, among other things, internal and external trade,

10 Page 7 and also for approving or rejecting, by an absolute majority of all members of each Chamber, treaties of peace, alliance and trade, and conventions or contracts or any kind signed by the Executive with other States or international organizations. With regard to tax matters of national scope, in accordance with the principle of legality the Legislative Power is responsible for establishing the necessary contributions to cover the budgets, and for their distribution and the order of their collection and investment; and also for suppressing, modifying or increasing existing contributions. The Parliament is also responsible for establishing customs and export and import duties, which must be adopted by favourable vote of an absolute majority of all members of each Chamber. The Executive has the responsibilities of the central organ for the conduct and orientation of economic policy, with exclusive initiative in this area. The powers entrusted by the Constitution to the Executive Power include that established by Article 168, paragraph 20, whereby the President of the Republic, acting together with the corresponding Minister or Ministers or with the Council of Ministers, is responsible for concluding and signing treaties, which must be approved by the Legislative Power in order to be ratified. The principle of parliamentary approval concerns any international agreement concluded by the Executive Power establishing legal relations governed by public international law, whatever the title or subject matter concerned, and this applies to trade agreements. In cases where the treaty under consideration by Parliament itself establishes as an essential requirement for its entry into force the exchange of instruments of ratification or their deposit in specified number, parliamentary approval in the form of law does not in itself imply entry into force within ten days of publication, as is the case with other ordinary laws; in conformity with the rules of international law, it remains conditional upon compliance with the above-mentioned requirements. Once the international legal instrument concerned enters into force as specified, following ratification it acquires the force and status of domestic law. 2. Institutional Framework 2.1 Public sector The principal public sector bodies that participate in the formulation of trade policy are:

11 Page 8 (a) Ministry of the Economy and Finance This Ministry has responsibilities and powers in the following areas, among others: - conduct of national policy at the highest level in economic and financial matters relating to trade; - monetary, exchange and foreign currency régimes; - taxation and fiscal administration; - customs régime, customs services and customs police; - internal and foreign trade régime and promotion of trade; - trade information and advisory services in the country and abroad; - expansion of exports; - utilization of the commercial services attached to the country's diplomatic or consular missions, without prejudice to the hierarchical dependence of such officials with regard to their heads of mission; - congresses, conferences, exhibitions, fairs and competitions relating to its sphere of competence, and promotion and encouragement of the holding of such events; and - relations with international organizations in the Ministry's sphere of competence. The bodies of this Ministry which are connected with the formulation and review of trade policy are the following: - Directorate-General of Foreign Trade - Directorate-General of Customs - National Directorate of Free Zones - Directorate of Trade Policy - Economic and Financial Advisory Service - Tariff Advisory Committee (b) Ministry of Foreign Affairs Its powers relate to: - foreign policy in all spheres;

12 Page 9 - co-operation as regards the country's foreign trade; - treaties, conventions, contracts and agreements between the State or other national institutions and foreign or international bodies or institutions and States. (c) Ministry of Livestock, Agriculture and Fisheries Among other things, this Ministry is responsible for national agricultural and fisheries policy; matters relating to livestock, agriculture and fisheries, and matters relating to these aspects in the spheres of competence of other Ministries; animal and plant health policies; regulation of agricultural markets and prices, and advisory services, standards and certification in agricultural matters. The Ministry is responsible for sanitary and hygienic control of import and export products for which the presentation of the corresponding certificates is required, and is responsible for issuing such certificates in the case of exports. Under this Ministry, the institutions directly connected with foreign trade are: - National Fisheries Institute (INAPE) - Direct.orate of Grains (DIGRAN) - Directorate of Technical Assistance - Directorate of the Animal Products Industry - Directorate of Testing Laboratories - Directorate of Animal Health - Directorate -f the Farm Plan - National Honorary Commission of the Citrus Plan (d) Ministry of Industry, Energy and Mining The Ministry has responsibilities in the following spheres: - national policy on industry, energy resources and mining resources; - matters relating to industry, energy and fuels; - regulation and supervision of industries; - industrial research and testing;

13 Page 10 - encouragement of employment and application of new industrial technology; - inventor's patents and industrial privileges; - encouragement of foreign investment in the industrial field; - organization of congresses, conferences, exhibitions, fairs arnd competitions connected with the Ministry's sphere of competence and promotion and encouragement for the holding of such events. The Ministry is responsible for inspection, certification, advisory assistance to other bodies, registration, etc., relating to imports of certain categories of goods or imports subject to special régimes. The following institutions connected with foreign trade operate under the Ministry's sphere of competence: - Technological Laboratory of Uruguay (LATU) - Advisory Unit on Promotion of Industry (e) Office of Planning and Budget Article 230 of the 1967 Constitution provides for the creation of this Office for the purpose of assisting the Executive in the preparation of development plans and programmes. Decree No. 573/990 establishes its functions: - to assist the Executive in the definition of short and long-term objectives and policies, and also in their implementation, through the various Ministries; - to provide advice in the preparation of the national budget and its modifications by laws on the presentation of national accounts; - to analyse the draft budgets of bodies covered by Article 221 of the Constitution, and propose modifications to the Executive Power; - to assist the Executive in the evaluation of the management of the entities covered by the national budget and of the autonomous entities and decentralized services in the State industrial and commercial sectors; - to advise the Executive on rate-setting policy for the autonomous entities and decentralized services and for public services in general;

14 (f) Page 11 - to propose priorities for public investment and for the promotion of private investment; to establish the bases for public investment programmes and their financing with a vie'! to formulating the budget guidelines and the corresponding external borrowing requirement; - to advise the Executive on all matters concerning the planning, co-ordination. follow-up and evaluation of activities relating to the implementation of pre-investment studies for the public and private sectors for projects which will have to be financed by public resources or officially guaranteed external credits; - assist the Executive in the definition of technical and economic co-operation policy and in its implementation, co-ordinating execution at programme and project level; - to advise the Executive on integration and sectoral policies and their implementation, co-ordinating the activities of the relevant public bodies; - to assist the Executive in the evaluation of proposals for the reform of the State and co-ordinate their implementation; - to advise the Executive with regard to the conclusion of agreements with foreign governments, international organizations or finance institutions in general and implement those specifically entrusted to it; - to give its opinion on draft laws, decrees and resolutions relating to the above-mentioned matters or to such matters as the Executive Power entrusts to it; - to carry out research, studies and evaluations concerning the country's economic and social situation; - to carry out any other tasks entrusted to it by laws, decrees or resolutions of the Executive. Central Bank of Uruguay The Central Bank of Uruguay was set up in March 1967, by constitutional provision, with the powers previously attributed to the Department of Issue of the Bancc de la República Oriental del Uruguay; this signified the transfer to this new institution of a range of functions established under various provisions. Law 13,608 of 8 September 1967 and other subsequent legislation supplemented the structure and functions of the Central Bank, which is empowered to regulate foreign trade procedures and the ensuing exchange and settlement operations of all kinds. These provisions are compiled in the Bank's publication entitled "Recopilación de Normas sobre Comercio Exterior y Cambios" (Compilation of Provisions Governing Foreign Trade and Exchange).

15 Page 12 (g) Banco de la Republica Oriental del Uruguay This is the State banking institution which is responsible for the financing of external trade and supervises import and export operations, authorizing those that comply with the requirements established by law. Pursuant to its functions under Article 16 of Law 12,670 of 17 December 1959 it controls, through its Foreign Trade Control Division, the physical volumes, coding, prices, surcharges, taxes, certification and so forth relating to import and export products. (h) National Meat Institute (INAC) This is a non-governmental public entity with legal personality which is entirely exempted from all taxation and was set up by Decree Law 15,605 of 27 July Its central objectives are the promotion, regulation, co-ordination and supervision of activities relating to production, processing, marketing, storage and transport of meat. The INAC is responsible for the implementation of the national meat policy laid down by the Executive Power; under Decree of 20 March 1973 it carries out the following activities: - participation in the internal and external marketing of meat; - supervision of the meat-packing industry as regards its management; - analytical studies of the meat-packing industry from the economic and financial standpoints, with an evaluation of the present situation and medium and long-term trends and prospects, to which end it has broad powers of inspection and control; and - technical supervision of industrial, civil, construction and processing engineering in the meat-packing industry. Its special functions are: - orientation of trading activities through the compilation and dissemination of market studies and data, with a view to the expansion of external markets and the co-ordination of freight-rate and storage policies; - registration, prior authorization and supervision of export deals, with a view to the optimization of sales prices and the defence of the nation's image in buyer's markets; in this connection, the Institute sets price guidelines; - establishing quality standards and technical specifications in order to orient exports towards acceptable commercial quality levels. Hence, it is responsible for official control of the

16 Page 13 commercial quality of all kinds of meat and meat products. This control guarantees product acceptability in terms of fitness, in compliance with minimum quality standards, solely for the purpose of authorization of export shipment; - providing technical support to enable users to be guided by quality as the criterion for choice. Its tasks will be to establish the overall guidelines of the National Quality Programme, guide the planning and implementation of the Programme, supervise its execution and carry out the follow-up and periodic evaluation of results achieved. The membership of the National Committee is as follows: The State Secretary of the Office of the President of the Republic is the Chairman; members are the President of the Technological Laboratory of Uruguay (LATU), the Minister of the Economy and Finance, the President of the Agricultural Research Institute (INIA), the Minister of Industry, Energy and Mining, the Minister of Livestock, Agriculture and Fisheries, and the Director of the Office of Planning and Budget of the Office of the President of the Republic. (i) Interministerial Committee for the Southern Common Market (CIMERCOSUR) This Committee was set up by Executive Decree of 1 April 1991; it is directly attached to the Office of the President of the Republic, and comprises the Ministers of Foreign Affairs, Economy and Finance, Livestock, Agriculture and Fisheries, and Industry, Energy and Mining. Its responsibilities are to guide and co-ordinate the integration process in all international and internal aspects, and to propose to the Executive whatever measures it considers necessary for the implementation of the common market. Institutionally, this Committee is underpinned by the joint activity of the Directorate-General for Economic Affairs of the Ministry of Foreign Affairs and the Directorate-General of Foreign Trade of the Ministry of the Economy and Finance, which will be responsible for carrying out the international measures decided on by the Interministerial Committee, as well as discharging two basic tasks: - setting up the necessary sub-groups according to the needs of the international negotiations on relevant issues; - proposing whatever measures are considered necessary in this field to the Interministerial Committee. (j) Foreign Trade and Investment Deregulation Plan On 28 May 1991 the President of the Republic entrusted implementation of the Foreign Trade and Investment Deregulation Plan to the Office of Planning and Budget.

17 Page 14 This was done because it is considered necessary to go further in strengthening private initiative and to facilitate links between the private and public sector, and to this end it is recognized that: - legal provisions and a multiplicity of administrative practices currently exist in the country that hinder the operation of private enterprise, with an ensuing lack of dynamism for economic activity in general; - that it is essential to simplify and modernize the current procedures and legal structures relating to foreign trade and bring them into line with the increasing needs of regional integration and participation in world trade in an open economic framework; and - that as regards investment the need is seen to facilitate promotion mechanisms aimed at fostering a suitable investment climate in the country. Consequently, the Office of Planning and Budget is entrusted with the responsibility for the instrumentation and implementation of the Foreign Trade and Investment Deregulation Plan, which is aimed at facilitating entrepreneurial activity and creating a new framework for private investment. The broad outlines of the Plan are: - formulation of deregulation proposals relating to foreign trade and investment; - review of the legal framework and proposal of appropriate modifications; - rationalization of existing procedures and establishment of new mechanisms; - facilitation of private investment; - carrying out surveys and opinion polls of the private sectors involved; - suggesting necessary inter-agency co-ordination. Members of State bodies which have been requested to participate and private sector representatives designated for the purpose will collaborate in the implementation of the Plan. The Plan will be carried out in co-ordination with the Ministry of the Economy and Finance, the National Debureaucratization Programme and the Investment Development Committee.

18 Page 15 (k) Sectoral Committee for the Southern Common Market (MERCOSUR) This was set up by Decree No. 176/91 of 1 April It has five members: a Director and a Deputy Director, appointed by the Executive Power, a workers' delegate, a private-enterprise delegate and a publicenterprise delegate, all appointed by the Executive Power on the proposal of the sectors concerned. This Sectoral Committee has the following responsibilities: - to advise the Executive Power with regard to the adoption cf internal measures for the application, follow-up and evaluation of the regional integration process; - to co-ordinate and supervise the activities of various working sub-committees also set up by this Decree; - to obtain and disseminate information concerning integration. The Committee, through its Director, may communicate directly with all entities of the Executive Power and all public and private bodies of interest to it. The following working sub-committees have also been set up: - Industry Sub-Committee; - Trade Sub-Committee; - Agriculture Sub-Committee; - Services and Energy Sub-Committee; - Information and Dissemination Sub-Committee; - Finance Sub-Committee; - Science and Technology Sub-Committee. Their function is to support the work of the Sectoral Committee. 2.2 Private sector The main private sector institutions that participate directly or indirectly in foreign trade operations are the following: (a) Uruguayan Exporters' Union (Unión de Exportadores del Uruguay) This is a civil law association constituted in Montevideo on 16 May The object of this private-enterprise trade association is set out in Article 2 of its Articles of Association: "... [its] aim is to unite and draw together all private and public natural and legal persons directly or indirectly concerned with exporting in order better to defend, promote and develop their interests and aspirations, for which purpose it represents them, seeking by all possible means to increase exports in order to boost the country's economic development."

19 Page 16 As a specialized "super-chamber", it was constituted with the membership of the National Chamber of Commerce, the Uruguayan Rural Association, the Rural Federation, the Chamber of Industries, the Chamber of Trade in Uruguayan Products, the Uruguayan Bank Association, the Stock Exchange, the Uruguayan Chamber of Construction, the Uruguayan Construction League and the Farmers' Confederation. It is the private trade association that deals exclusively with promoting the growth of exports, to which end it: - analyses all economic, financial, administrative and legal matters that may affect the development of exports; - proposes to the Government the solutions it considers most desirable, so as to ensure that the framework of laws and regulations governing exports are as practical and suitable as possible for export growth; - acts as correspondent with business Chambers of other countries; - exchanges specialized information with international organizations such as the United Nations, UNCTAD/GATT International Trade Centre, OAS, ECLAC, SELA, LAIA, etc.: - receives and sends information to and from the Uruguayan Embassies abroad and especially their trade departments; - receives requests from abroad which are channelled to the specific exporters concarned; - assists foreign buyers in Uruguay by organizing appropriate agendas of meetings with exporters and providing advice and secretarial services; - acts as the focal point for an export/import information programme set up so as to be able to maintain a data-bank with economic and financial profiles of foreign importing enterprises interested in Uruguayan products; - disseminates various market studies on different products in a number of countries; the studies are analysed and circulated to selected exporters; - informs members, by means of circulars, of developments it considers important; - advises traders on import methods through direct consultancy as well as courses and seminars; - channels information on possible use of specialist fellowships, and accredits suitable candidates;

20 Page 17 (b) - maintains close links with other business Chambers, especially as regards foreign trade matters; - provides assistance on a continuing basis to the private sector in order to help it export in better conditions. Chamber of Industries of Uruguay This is a trade association representing the industrial sector that was founded in Montevideo on 12 November 1898 with the primary objective of promoting the interests of Uruguayan industry, defending its rights and encouraging the country's industrial development. At present, it represents fifty-nine specific industrial associations grouping the majority of Uruguayan industries. It has a Foreign Trade Division, divided into five Departments: (a) The Department of Administration of International Agreements, which is responsible for the administration and control of documentation of various agreements such as the Trade Expansion Protocol, the Argentina-Uruguay Economic Co-operation Convention and so forth, It regulates and issues certificates of origin, re-export and national value added as well as other certifications. It issues statistics on the agreements which it administers and provides advice on formalities and procedures. (b) Department of Foreign Trade Promotion, which deals with planning, organization and holding of trade fairs, exhibitions and missions, and also with foreign importers. (c) (d) Department of Liaison with International Organizations, which is responsible for implementation of the Chamber's projects with various specialized international institutions. Foreign Trade Advisory Department, which deals with negotiations in the LAIA framework and provides general advisory services relating to foreign trade. (e) The Porto Alegre Regional Office (Rio Grande do Sul - Brazil), opened in May 1988 with the following functions: - promotion of trade with the area; - carrying out of market studies and profiles; - follow-up and evaluation of Uruguayan foreign trade with the area covered by the Office; - planning and holding of trade exhibitions and missions; - dealing with visitors and consultations.

21 Page 18 (c) National Chamber of Commerce The National Chamber of Commerce was set up in 1867 with the general objective of watching over the general interests of trade and of the private sector of the national economy. Its areas of activity include: - carrying out economic studies; - promotion of trade developments; - meeting point for business associations; - providing certificates of origin for export goods; - general information and advice. (d) Chamber of Trade in Uruguayan Products This was established on 23 January 1891 for the purpose of encouraging and promoting agricultural and livestock production, marketing, industrialization and export. Its members are the wool, grains and leather trade associations. It issues certificates of origin for Uruguayan export products. It has an agreement with the International Wool Federation, to which it is accredited for national interests in wool marketing and industrialization. (e) Rural Association of Uruguay This is a private trade association concerned with the promotion of agricultural exports. It organizes annually the biggest agricultural livestock fair in Uruguay, with national and foreign trade stands and exhibitors. It is also the correspondent of foreign rural associations. (f) Uruguayan Institute for Technical Standards This is a private institute founded in 1939 with the objective of compiling and distributing information on standardization, quality control and quality certification, as well as the drafting of national standards and their consistency with international standards. It therefore plays a major educational function in addition to its advisory tasks. It is a member of ISO (International Organization for Standardization) and COPANT (Panamerican Commission for Technical Standards), and has agreements with standardization organisations world-wide.

22 Page 19 Through ISO and COPANT it participates in the drafting of international and regional standards. (g) Uruguayan Wool Secretariat (SUL) The SUL is an institution set up to promote wool production and consumption. It is run by a board of directors consisting of wool producers and three public sector representatives. It is affiliated with the International Wool Secretariat and has access to all the latter's technical and specialized assistance. It provides assistance in the form of information for producers and exporters on world price trends for greasy and combed wool in the main world markets. It also provides assistance to industry members with respect to contacts with agents and representatives and information on consumer markets (prices, quality etc.). As regards the latter, it provides early information on designs and fashions for final products. As a member of the International Wool Secretariat, it is responsible in Uruguay for authorizing and controlling the use of the Woolmark, the symbol of high-quality virgin wool products. 3. Trade agreements and their evolution (a) GATT Uruguay acceded to the General Agreement on Tariffs and Trade (GATT) under Law No. 12,019 of 10 December It is now in the process of renegotiating its GATT Schedule of Concessions (Schedule XXXI) under Article XXV:5 of the General Agreement. It is also a party to the Agreement on Interpretation and Application of Articles VI, XVI and XXIII, the Arrangement Regarding Bovine Meat and the International Dairy Arrangement, concluded within the framework of the Tokyo Round. Moreover, it has signed but not yet ratified the convention establishing the Common Fund for Commodities. (b) LAIA As regards preference and regional agreements, Uruguay is a member of the Latin American Integration Association (LAIA), which was established by the Treaty of Montevideo signed on 12 August The Association has eleven members, namely: Argentina, Bolivia, Brazil, Colombia, Chile, Ecuador, Mexico, Paraguay, Peru, Uruguay and Venezuela.

23 CIRM/G/26 Page 20 The new Treaty, which entered into force on 18 March 1981, replaces the 1960 Treaty of Montevideo which created the Latin American Free Trade Association. With respect to its legal structure, as an institution, LAIA replaces LAFTA. In the context of this Treaty, the member countries are classified in accordance with their degree of economic development into: Relatively less economically developed countries: Bolivia, Ecuador and Paraguay. Countries in the intermediate stage of development: Colombia, Chile, Peru, Uruguay and Venezuela. Other member countries: Argentina, Brazil and Mexico. The basic aim is to promote the integration of the region in order to ensure its economic and social development, the long-term objective being to establish a Latin American Common Market. The fundamental principles of the Association are: pluralism, convergence, flexibility, differential treatment (in accordance with the three categories of members) and multiplicity as regards the form taken by the instruments of integration. LAIA is establishing an integrated economic preference area using for that purpose a combination of mechanisms comprising Regional Tariff Preference Agreements, Regional-Scope Agreements, in which all members participate, and Partial-Scope Agreements, in which two or more countries of the area participate. These instruments offer the member countries multiple practical options, whose convergence will make it possible to progress to higher levels of economic integration. The Treaty distinguishes between the following kinds of Regional-Scope and Partial-Scope Agreements: - Trade Agreements; - Economic Complementarity Agreements; - Agricultural Agreements; - Trade Promotion Agreements; and - Other kinds of agreements concerned with, inter alia, scientific and technological co-operation, the promotion of tourism and the protection of the environment. LAIA is not exclusively concerned with trade, its principal functions being:

24 Page 21 the promotion and regulation of reciprocal trade among the countries of the region; the development of the economic complementarity of its members; and the development of economic co-operation contributing to market expansion. The Treaty also permits agreements, multilateral or partial, to be signed with other Latin American countries that are not members of LAIA and with integration areas on the continent. Within LAIA, Uruguay has signed the following agreements: (i) At regional level: (ii) - Regional Tariff Preference (PAR) Agreement, whose Second Amending Protocol has been in effect since 1 January 1991 and benefits Chile, Argentina, Brazil, Colombia, Mexico, Ecuador and Bolivia, in which it has entered into force; - Market Opening Lists Agreement, in connection with which preferences have been granted to Bolivia, Ecuador and Paraguay. Partial-Scope Agreements: - Agricultural Agreement with Argentina; - Agreement on Tourism with Bolivia; - Agreement on Cultural, Educational and Scientific Co-operation with Argentina, Brazil, Colombia, Mexico, Peru, Venezuela, Paraguay, Ecuador, Chile and Cuba; - Agreement on International Road Transport with Argentina, Bolivia, Brazil, Chile, Paraguay and Peru; - Agreement on the Promotion of Tourism in South America with Argentina, Bolivia, Brazil, Colombia, Chile, Ecuador, Paraguay, Peru and Venezuela; - Partial-Scope Agreement No. 23 with Colombia; - Partial-Scope Agreement No. 24 with Ecuador; - Partial-Scope Agreement No. 25 with Venezuela; - Partial-Scope Agreement No. 26 with Chile, Argentina and Paraguay;

25 Page 22 - Partial-Scope Agreement No. 33 with Peru; - Partial-Scope Agreement No. 35 with Brazil; - Economic Complementarity Agreement No. 1 (CAUCE) with Argentina; - Economic Complementarity Agreement No. 2 (PEC) with Brazil; - Economic Complementarity Agreement No. 4 with Chile; - Economic Complementarity Agreement No. 5 with Mexico; - Economic Complementarity Agreement No. 15 with Bolivia; - Partial-Scope Agreement No. 17 with Cuba (Article 25 of the Montevideo Treaty). It has also signed partial-scope trade agreements covering specified sectoral products. These are aimed exclusively at promoting trade between the member countries; their objectives are trade-oriented and they cannot include commitments with respect to the specialization of production. The concessions are automatically extended to the relatively less economically developed countries. Uruguay's participation in these agreements is very limited and involves the following sectors: Agreement No. - 5 Chemical sector, with Argentina, Brazil, Chile, Mexico, Peru and Venezuela; - 7.A Refrigeration and air conditioning sector, with Argentina; - 7.B Household equipment sector, with Argentina; - 13 Phonographic sector, with Argentina, Brazil, Mexico and Venezuela; - 16 Petrochemical sector, with Argentina, Brazil, Chile, Mexico and Venezuela; - 18 Photography sector, with Argentina, Brazil and Mexico; - 19 Electronics and electronic communications sector, with Argentina, Brazil and Mexico; - 21 Chemicals sector (surpluses and shortfalls), with Argentina, Brazil, Chile and Mexico. The Economic Complementarity Agreements have as their general objective the promotion of the maximum utilization of production factors, the stimulation of economic complementarity and the ensuring of equitable conditions for competition. They also seek to intensify and diversify

26 Page 23 reciprocal trade between the signatories while establishing an acceptable level of trade-balance equilibrium. They may be based on tariff reduction or on industrial programming covering one or a number of sectors. They must contain a programme of tariff reduction for the sector or sectors concerned, and may also provide for the elimination or reduction of non-tariff restrictions. The bilateral agreements concluded during the LAFTA period between Argentina and Uruguay (Argentine-Uruguayan Convention of Economic Co-operation or CAUCE, signed on 20 August 1974) and between Brazil and Uruguay (Protocol of Trade Expansion or PEC, signed in 1975) were, in nature and content, consistent with the economic complementarity agreements and correspond to Nos. 1 and 2 respectively. Thus, LAIA gave them comprehensive legal cover. With specific reference to these two agreements: CAUCE - ECA 1 Over and above its general objectives, an agreement of this type aims to co-ordinate the industrial activities of the signatories and improve the efficiency of their national production systems by promoting the maximum utilization of economies of scale. The original instrument came into effect in May 1975, as far as the Argentine concessions are concerned, and on 1 January 1979, with respect to the Uruguayan concessions. The original Agreement starts out by recognizing the different categories to which the two countries belong and tries to find concrete solutions to the problems of Uruguay's situation of chronic deficit vis-à-vis the region and, in particular, Argentina. The aim is to achieve balanced trading relations between the two countries by according Uruguay special treatment. The Act of Colonia, which was signed on 8 August 1985 and came into force on 1 September of that year, significantly modified the original Agreement. In addition to the products selectively negotiated between the two countries in the so-called historical CAUCE, following the Act of Colonia Argentina granted Uruguay total relief from its industrial tariffs (Chapter 24 of the CCCN and onwards) for up to 5 per cent of the corresponding Argentine production recorded for each product in the last year but one.

27 C/RM?G/26 Page 24 This is the general rule but it does not apply to products listed as sensitive, which are allowed a 2.5 per cent production share, or to so-called critical products, which are allowed no preference at all. Uruguay has totally liberalized the importation of capital goods which it does not itself produce. There is a commitment to eliminate non-tariff restrictions completely. Each country has granted more than 2,500 concessions, but the exact number is difficult to estimate because of the Agreement's negotiation mechanism. The trend of trade with Argentina and its importance as a percentage of total and regional Uruguayan trade, together with the impact of ECA No. 1, formerly CAUCE, can be judged from Table 1 ot Appendix I. PEC - ECA 2 The Agreement acquired its present structure, which consists of a programme of selective reductions, on 13 August 1986, but considered on an individual product basis it concerns almost every sector of production, covering a wide range of products whose importation has been liberalized and, in general, freed of non-tariff restrictions. Brazil's concessions are duty-free but associated with quotas established in seven categories, namely: Code 1 US$330,000 Code 2 US$550,000 Code 3 US$1,100,000 Code 4 US$2,750,000 Code 5 US$5,500,000 Code 6 Quantity limitation Code 7 No limitation on quantity or value. Uruguay adds duty-free products on the basis of an individual-item negotiation procedure, product by product. Brazil has granted concessions on more than 1,500 Droducts and Uruguay on about 1,200. Our country's trade relations with Brazil are summarized in Table 2 of Appendix I, which provides the data for an analysis of the impact of the PEC and the proportion of Uruguay's total and regional external trade represented by trade with that country. The Regional Tariff Preference (PAR) Agreement operates as follows: subject to a list of exceptions, countries grant the following preference margins on all their tariffs:

28 Page 25 RECIPIENT COUNTRIES Less-developed Intermediate Other countries countries countries DONOR COUNTRIES Less-developed countries 20% 12% 8% Countries in the intermediate stage of development 28% 20% 12% Other member countries 40% 28% 20% In Uruguay's case, the list of exceptions is composed of tariff items embracing various production sectors. 960 LAIA It should be noted that the land-locked less-developed countries receive preferences greater than those indicated above: from the less-developed countries: 24%; from the countries in the intermediate stage of development: 34%; and from the other member countries: 48% As far as bilateral and multilateral agreements are concerned, the preference margins negotiated by Uruguay, whether granted or received, are for the most part in the region of 100 per cent and embrace specific products in every sector. Table 4 of Appendix I shows each LAIA member's share of Uruguayan imports, taking into account trade regulated by agreements. From Tables 5 and 6 of Appendix I it is possible to judge the trend of Uruguay's export and import trade with these countries in relation to their share of Uruguayan trade with the world and the region during the period 1988 to (c) Treaty of Asunción (MERCOSUR) This Treaty was signed on 26 March 1991 in the city of Asunción in the Republic of Paraguay by the representatives of the four participating States (Argentina, Brazil, Paraguay and Uruguay). It is aimed at establishing a Common Market by 31 December 1994.

29 Page 26 The Treaty consists of twenty-four articles and five annexes which must be taken jointly into account, namely: Annex I: Trade Liberalization Programme Annex II: General Régime of Origin Annex III: Settlement of Disputes Annex IV: Safeguard Clauses Annex V: Working Sub-Groups of the Group of the Common Market. The Treaty was ratified by Uruguay under Law No. 16,196 of 22 July 1991 and came into effect at the level of the four member countries on 29 November During the transition period, the following bodies will be responsible for the administration and implementation of the Treaty: - The Council of the Common Market, the policy-making body; - The Group of the Common Market, the executive body. The Group of the Common Market has met on five occasions since the Treaty was signed. It has also convened two meetings of the Ministers of the Economy and Central Bank Presidents of the participating States. These meetings confirmed the commitment to incorporate a MERCOSUR dimension in the internal economic decision-making process of each country and established the basic criteria for the adoption of a common external tariff. Among other things, the Ministers agreed that the economic policies of the four participating States should endeavour to achieve, as common objectives: - economic stability by adopting tight fiscal and monetary policies; - further economic opening, to achieve a more competitive position within the global economy; - modernization of the economy, inter alia, through deregulation and privatization. Within LAIA, the Treaty of Asunción was signed as Economic Complementarity Agreement No. 18. D. TRADE POLICY MEASURES APPLIED AND THEIR EVOLUTION IN THE VARIOUS SECTORS 1. Tariff policy Starting in 1974, the country began a continuous process of import tariff reduction. Over a five-year period, the maximum surcharge,was reduced from 300 per cent to 90 per cent.

30 Page 27 Imports were also subject to customs duties. Law No. 14,629 of 5 January 1977 created the Single Customs Duty, which replaced these duties, additional taxes and other charges, whether of a customs nature or not, collected by the customs and was levied at a basic rate of 25 per cent. This represented a significant rationalization of the tariff regime. It is also worth noting that prior to import quotas were in effect, together with requirements relating payment periods and to prior deposits, which in many cases implied an infinite degree of protection of national added value. Decree No. 736/78 of 26 December 1973 announced a programme of gradual import tariff reduction to be applied starting from 1 January 1980 with the aim of arriving at a basic tariff of 35 per cent in five years' time. In this so-called Global Tariff Rate (TGA) surcharges, the Single Customs Duty and other import charges (consular fees and the Port Handling charges, etc.) are all combined. In fact, oily three phases of the programme were actually put into effect: (a) From 1 January 1980 (Decree No. 787/79 of 31 December 1979) the maximum TGA of 116 per cent then in force was reduced to 103 per cent while maintaining a twenty-seven-tier rate structure. In this Decree the Ministry of the Economy and Finance was authorized to fix reference prices, at its discretion, the TGA being assessed on these prices or the declared c.i.f. value, whichever was the higher. (b) The TGA levels applicable from 1 January 1981 were established by Decree No. 687/80 of 24 December The maximum rate became 90 per cent and the rates were grouped, leaving only ten consolidated tariff levels. (c) Decree No. 654/81 established the tariff rates for 1982 with a maximum TGA of 75 per cent and an eight-tier rate structure (65 per cent, 55 per cent, 45 per cent, 35 per cent, 25 per cent, 15 per cent, 10 per cent). During this period the Tariff Reduction Programme made advances on two fronts. On the one hand, with the passing of Decree No. 602/80 of 26 November 1980 an accelerated TCA reduction mechanism was introduced. Where there was no national production, the basic rate of 35 per cent applied and where national production was insufficient to meet the demand, the rate was 53 per cent. Or the other hand, tariff reduction was also used as an antiinflationary mechanism by applying the basic rate to goods included in the family shopping basket. With the same objective in view, the Executive was authorized to bring forward the tariff reductions envisaged in the

31 Page 28 published programme for goods whose prices had registered increases out of proportion to the increases in costs. With Decree No. 477/982 of 27 December 1982 the Tariff Reduction Programme that had been implemented since 1 January 1980 was abandoned and new tariff protection guidelines were laid down. In the first place, the criterion of the existence or non-existence of national production as a justification for higher or lower rates respectively was discarded, added value becoming the ruling principle for the allocation of goods within the tariff structure. The basic aim was to provide uniform effective protection in the various production steps and processes. Furthermore, the reduced rate dispersion introduced by this Decree (five tiers) implied a decline in overall effective protection. Thus, the fundamental objectives of tariff policy are clear: - the efficient internal allocation of productive resources; - greater participation in the world economy by opening up the country to international trade. At the same time as Decree No. 477/982, Decrees Nos. 478/982 and 479/982 were also passed. Decree No. 478/982 reduced the Global Tariff Rate (TGA) to 10 per cent for a broad range of raw materials not produced domestically. Decree 479/982 established a tariff régime for imports of capital goods: - capital goods not produced in the country whose TGA was more than 10 per cent had the rate reduced to 10 per cent, subject to the issue of a certificate of compliance issued by the Ministry of Industry and Energy; - a TGA of 10 per cent was also applied to capital goods produced nationally which form part of a complete plant to be imported, subject to the issue of a certificate by the MIE, and to capital goods for use in the agricultural sector. Similarly, under Decree No. 487/983 of 9 December 1983 imports of components, spare parts and accessories for capital goods or agricultural machinery not produced domestically were subjected to a TGA of 10 per cent. Recently (on 8 March 1991), a decree was passed exempting from TGA machinery and industrial equipment imported by manufacturers, provided that they are not in competition with the products of national industry. The exemption was to remain in effect up te 30 June 1992, but its continuation up to 30 June 1993 has already been announced. Since the adoption of Decree No. 477/982, the country has opted for a policy of gradualism with respect to changes in both tariff structure and

32 Page 29 tariff rates. The principal measures to have been implemented comprise: (a) Elimination of the minimum surcharge on the importation of agricultural inputs, a measure aimed at improving the competitiveness of the primary sector of the economy. (b) The tariff adjustment of 20 August 1986 (Decree No. 558/86), which abolished the additional surcharge of 5 per cent at all levels of the tariff structure, introduced for fiscal reasons on 13 June In addition, the maximum TGA was reduced to 50 per cent. (c) The tariff adjustment of 1987 (Decree No. 465/87), which established a new structure extending the decline in the highest TGAs and partially reallocating certain goods within the structure. The maximum rate was reduced to 45 per cent, but as a result of the reallocation of basic goods (primary or with a low degree of prccessing, the corresponding rates fell by ten percentage points. The 10 per cent and 20 per cent rates were left unchanged, which, generally speaking, implied a greater adjustment of the effective than the nominal protection. (d) Decree No. 255/89 of 31 May 1989, which reduced the maximum rate to 40 per cent, carried the policy one step further. On this occasion, the rate for basic products was again cut by 10 per cent, leaving a TGA of 30 per cent. The Decree of 18 April 1990 announced changes in the tariff structure to come into effect on 1 September 1991, the process being continued in the Decree of 27 November 1991 which established the rates that would be applied as from 1 April 1992 and 1 January These measures resulted in a sharp acceleration in the pace of tariff structure adjustment. Only three rates were established, the percentage reduction being greatest at maximum levels, while the minimum stayed at 10 per cent. A direct correlation between tariff levels has been established, and reallocation of products according to their description has been abandoned. The present tariff structure has three rates: 24 per cent, 17 per cent and 10 per cent. The tariff structure that will come into affect on 1 January 1993 (10 per cent, 15 per cent and 20 per cent) implies a significant advance in the opening up of the economy, which will require increasing competitiveness in the allocation of productive resources in accordance with the medium-term plan for integration into the regional and global economies. The rules applicable to the motor vehicle industry and wheat imports constitute exceptions to the general trade policy régime described.

33 Page 30 In the first case, the industry is regulated by a combined system of compulsory local-content and compensatory-export requirements, although it has been announced that these requirements will be abolished as from 1 July 1992, a measure which will also apply to the importation of vehicles whether already assembled or in kits, of whatever category. The rules applicable to the marketing of wheat provide that before it can be imported a certificate of need must be issued by the Ministry of Agriculture, Livestock and Fisheries. Whether or not a certificate can be granted is determined objectively, according to whether or not the milling industry can purchase national wheat at the import price fixed by the Government. A procedure has been established which gives the interested parties comprehensive guarantees with respect to the actual satisfaction of the above-mentioned conditions. The Ministry of Agriculture has announced the elimination of this requirement for the 1992/93 crop. 2. Instruments directed against unfair trading practices 2.1 Decree Law No. 15,025 of 17 June 1980 and Regulatory Decree No. 86 of 25 February 1981 In the Uruguayan legislation, the conditions which determine whether imports are being dumped or subsidized and the assessment of the injury or threat of injury comply with the provisions of: - Article VI of the General Agreement. - The Agreement on implementation of Article VI of the General Agreement (Anti-Dumping Code). - The Agreement on interpretation and application of Articles VI, XVI and XXIII of the General Agreement (Subsidies Code). The amount and effect of the duties to be applied and the procedure for applying them generally comply with the GATT provisions. An Interministerial Advisory Committee operating under the Ministry of the Economy and Finance is responsible for the application of the measures. This Ministry is the only body competent to propose preventive measures, such as the imposition of anti-dumping or countervailing duties, to the Executive. 2.2 Decree No. 523 of 14 November 1990 and Decree of 30 August 1991 These instruments regulate all aspects of the application of reference prices and minimum export prices. In the exceptional cases in which the implementing authority fixes reference prices or minimum export prices for the importation of specific

34 Page 31 products the tariff rate is applied to those prices or to the c.i.f. price, whichever is the higher. The minimum export price serves, in its turn, as a basis for the determination of a sliding surcharge on imports equivalent to the difference between the minimum export price fixed and the c.i.f. price at importation. The determination of a minimum export price depends upon the simultaneous satisfaction of three conditions: - The import prices do not conform to the international prices considered normal (in accordance with GATT criteria), a situation attributable to unfair trading practices. - The existence of injury or threat of injury. - A causal relationship. The prices are fixed at the level necessary to neutralize the injury, provided that the lowest international representative price considered normal is not exceeded. These instruments try to reconcile two basic aims: rapidity in order that the determination may be timely, without preventing the interested parties from presenting all the evidence they consider appropriate. Thus, the prices are initially fixed provisionally (subject to reassessment) and after publication and the expiration of the deadlines available to the parties are fixed definitively for a period that may not exceed one year. Reference prices and minimum export prices are applied in conformity with the system of basic prices referred to in Article 8 of the Agreement on Implementation of Article VI (Anti-Dumping Code) of the General Agreement. 3. Export taxes In the past, taxes on traditional exports constituted an important source of revenue, at a time when they were being used as an auxiliary tool in the context of the import substitution policy, given the disincentive to the export of raw materials which their application implies and the consequent incentive to process them domestically. Starting in 1974, taxes on traditional exports were abolished as part of a programme of substantial reform embracing the liberalization of the foreign exchange market and external trade and the initiation of a market-opening process. Non-traditional exports were encouraged by granting government subsidies and eliminating export duties, given their depressive effect on overall exports and their distorting influence on

35 Page 32 relative prices in the economy, the latter being incompatible with the desire to improve the allocation of productive resources. The foreign debt crisis towards the end of 1982 and the excessive budget deficit with which the year closed led to an agreement with the International Monetary Fund on a stabilization programme, in the context of which taxes on traditional exports were re-introduced at rates which amounted to 15 per cent on the f.o.b. export values. In 1984, a maximum tax of 5 per cent was established by law and currently applies to greasy wool, washed and semi-washed, live animals (bovine, ovine and equine), beef without bones, raw bovine and ovine hides and skins (dried, salted, pickled or limed/wet-blue), fleshed hides and bovine fat. 4. Tax incentives for exporters Under Law No of 9 July 1964 the Executive was authorized to grant refunds to companies manufacturing for export, provided this was necessary to make their products internationally competitive, the refund on the f.o.b. export price being fixed initially at 20 per cent. In 1967 this was raised to 30 per cent. In 1982, under Decree No. 438/80 of 13 August 1980, a timetable was laid down for the progressive reduction of these refunds up till 1985, when they were to be abolished. This time-table was subsequently amended so as to make 30 November 1982 the exclusive cut-off date for all refunds. Starting in 1983, introduced. an indirect tax drawback system along GATT lines was Because of fiscal restrictions, the Decree dated 18 April 1990 made this system, which in 1989 had involved the refunding of approximately US$32 million, temporarily inoperative. On 1 July 1991, the indirect tax drawback system was re-established for the same products as before but with reduced percentages applied to f.o.b. export values. At present, the system costs US$15 million a year. II. THE TRADE POLICY ENVIRONMENT A. MAIN IMPORT AND EXPORT TRENDS In recent years the policies aimed at opening up and liberalizing the economy have been reflected in the structure and composition of Uruguay's external trade. At the beginning of the 1970s, more than 70 per cent of Uruguayan exports consisted of so-called traditional" products (in particular, meat, wool and hides). For example, in 1972 bovine meat exports represented almost 50 per cent of total foreign sales.

36 Page 33 In 1972, the European Economic Community was the principal purchaser of Uruguayan products, while the present LAIA countries took 12 per cent of exports and the United States 4 per cent. The elimination of various import barriers and restrictions and a programme of import tax reduction and rationalization, parallelled, up to the beginning of the 1980s, by an export promotion régime, led to a considerable increase in Uruguayan external trade, both exports and imports. Between 1974 and 1981, the Uruguayan external trade figures tripled in current dollar terms. During these years Uruguay's trade balance was in deficit, especially in 1979, 1980 and During the period mentioned, exports of "non-traditional" products exceeded "traditional" exports for the first time. As far as imports are concerned, the high oil prices on the international market meant that in 1981 and 1982 almost a third of Uruguayan foreign purchases fell under the heading 'Petroleum and petroleum products". Between 1982 and 1985 the increasing trend of exports and imports, measured in current dollars, was reversed. In 1985, exports and imports reached a minimum, in terms of value, for the last decade, while the trade balance recorded surpluses between 1983 and The year 1985 marked the beginning of a period of almost continuous growth in external trade. Uruguayan exports increased from US$853 million in 1985 to US$1,693 million in 1990, while imports grew from US$707 million to US$1,343 million during the same period. In 1991, imports, particularly imports of consumer goods and capital goods, continued to grow, while exports fell back relative to 1990, again in current dollars, basically because of declining sales of "traditional" items (wool and meat). Uruguay's foreign trade now has a structure considerably different from that which existed at the beginning of the 1970s. During the three-year period from 1989 to 1991, between 60 per cent and 70 per cent of exports fell under the "non-traditional" heading. In the last few years, the export share of bovine meat has amounted to less than 15 per cent of total exports in value terms. As far as textiles are concerned, the relative weight of "greasy wool' has fallen, while that of products with higher added value (tops, woven fabrics, clothing) has increased. At the same time, exports have become more diversified (rice, dairy products, barley, leather clothing and various industrial products). As regards import, in the last few years the share of consumer goods has tended to increase, whereas capital goods imports have fluctuated

37 Page 34 between 9 per cent and 16 per cent of foreign purchases and purchases of petroleum represent between 10 and 15 per cent of total imports. The change in the composition and structure of foreign trade is also reflected in the markets for Uruguayan exports. In 1991, the LAIA countries were the biggest customers for Uruguayan products, with Brazil and Argentina as the principal markets, taking 24 per cent and 11 per cent of total exports respectively. Between 1989 and 1991 the European Economic Community, the second most important destination for Uruguayan exports, took between 22 per cent and 25 per cent of the goods sold abroad, while approximately 10 per cent of total exports went to the United States. B. SIGNIFICANT TRENDS IN THE BALANCE OF PAYMENTS, RESERVES, DEBT, EXCHANGE RATES, INTEREST RATES AND OTHER SIMILAR PROBLEMS The country is completing negotiations for a new standby arrangement with the international Monetary Fund. In this connection, an overall budget deficit of 1.2 per cent of GDP and an inflation rate of 50 per cent are anticipated. Exchange rate policy is expected to remain unchanged. The exchange rate will continue to be fixed by the market, with the BCU establishing a floatation band. Its determination provides for a slippage of the exchange rate of the order of 38 per cent. This will not necessarily affect external competitiveness, since production costs in dollars are not expected to increase. No changes are foreseen in interest rate policy. It is assumed that international interest rates will remain stable. Domestic rates are fixed by the market. Rates in national currency will be determined in the light of the anticipated annual inflation rate of 50 per cent. No changes are expected in the demand for money, but it is possible that the fall in the inflation rate and the low opportunity cost due to the level of foreign-currency rates may encourage brokers to hold bigger balances in national currency. The Central Bank engages in open-market operations by holding a weekly treasury bill auction. The balance-of-payments trends are as follows: It is expected that the current account will be positive and that there will be a capital inflow which will translate into a significant increase in international reserves. The capital inflow will be medium and long-term and will include the placing of Euro-notes on the international

38 market which will be used to reduce short-term debt (six-month bills). This year, in connection with the debt capitalization programme, the refinancing of the previous year's debt will continue. Page 35 The policy with respect to Uruguay's foreign debt is to maintain it in real terms, so that the debt/gdp ratio is gradually reduced. C. INTERNATIONAL MACRO-ECONOMIC SITUATION AND MARKET ACCESS Despite the liberalizing intentions expressed in the Declaration of Punta del Este of 1986, which launched the Uruguay Round of Multilateral Trade Negotiations, protectionist measures - non-tariff barriers and subsidies - have not disappeared from the international scene and are having an adverse affect on trade. The non-tariff barriers erected by certain countries make it difficult to gain access to their markets and, moreover, have a direct impact on exports, reducing revenue from that source and placing obstacles in the way of export development and diversification. The subsidies and non-tariff barriers introduced by many industrialized countries have so distorted trade that, in addition to impeding access to markets, they have led to a sharp fall in international prices. In the last twenty years, Uruguay has begun to advance along the path of economic liberalization, multiplying its links with the rest of the world, so that it is now clear which direction future growth should take. Uruguay's participation in international trade is directly related to the structure of its economy. Approximately 80 per cent of its exports derive from the agricultural sector. At the same time, a relatively short list of products (bovine and ovine meat, rice, wool, hides and skins) accounts for 60 per cent of exports of agricultural origin. Imports continue to be mainly fuel, industrial raw materials and semi-manufactures. The importance of the agricultural sector for Uruguayan exports is therefore considerable, considering that the prospects for the development of its economy in general, and its exports in particular, will necessarily depend on an increase in agricultural production and the supply of exportable products. The subsidy policies currently being pursued will therefore have a direct negative impact on the agricultural sector. The picture painted above is at odds with international trends, since the forces that are driving world trade, investment and know-how, are completely different and directed towards computerization, advanced technologies, research-and-development-intensive production and the sharp reduction of the share of raw materials and labour in production costs. As for the country's trading companies, they have increased in number during the course of the last twenty years, given that Uruguay is now trading with more than 100 countries or zones. Nevertheless, 90 per cent

39 Page 36 of trade is concentrated in some thirty countries, including Brazil, Argentina, the United States, Germany, Mexico, Eastern European countries and the People's Republic of China. Specifically, more than 30 per cent of this trade is with countries of the region. As far as the country's general economic situation is concerned, the level of investment is very low, which will restrict future development. Considering its open-door strategy and its position of dependence as far as foreign trade is concerned, Uruguay's participation in the process of sub-regional integration - MERCOSUR - came in response to a combination of circumstances. Moreover, the Uruguayan economy is strongly influenced by the economic policies followed by Argentina and Brazil. In particular, the fluctuations and instability of exchange rate policies oblige the national economic operators to adapt to a constantly changing situation.

40 APPENDIX I

41 ('000 US dollars) EXPORTS IMPORTS BALANCE Year Total % E.C.A. Year Total %.C.A. Total E.C.A. Exports X/Glob. X/Zon. CAUCE X/Arg. Imports M/Glob. M/Zon. CAUCE M/Arg. Balance CAUCE , , , , , , , , , ,8 i-; , , , , , , , , , , , ,333 48, , , , ,836 83, , , , , ,497 68, , , , , ,441 79, , , , , ,872 52, , , , , , , , , , ,171 20, , , , , ,100 50, , , , , ,699 49, , , , , ,384 25, , , , , ,929-4, , , , , ,167 5,367 Fu tcd (» - 'o G- bm a' TABLE 1 Uruguayan Trade with Argentina Source: Bank of the Republic and CAUCE Joint Office

42 ('000 US dollars) EXPORTS IMPORTS BALANCE Year Total % % E.C.A. Year TOTAL % % E.C.A. Total E.C.A. Exports X/Glob. X/Zon. P.E.C. X/BR. Imports M/Glob. M/Zon. P.E.C. M/BR. Balance P.E.C , , , , , , , , , , , , , , , ,345 21, , , , , ,565 21, , , , , ,606 8, , , , , ,376 13, , , , , ,076 13, , , ,163 11, , , , ,271 6, , , , ,634 22, , , , , ,364 46, , , , , ,932 19, , , , X, ,770 49, , , , , , , , , , , , ,177 w C) 9, -- o_ CD ON1 TABLE 2 Uruquayan Trade with Brazil Source: Bank of the Republic

43 ('000 US dollars) Export Importe Balance Exports Imports Balance Exports Imports Balance Argentina 100, ,909-77,697 77, , ,658 82, , ,167 Bolivia 1, , , ,442 Brazil 228, ,197-73, , , , , , ,941 Colombia 4, ,850 7, ,105 12,025 46,994-34,969 Chile 11,759 22,791-11,032 16,723 20,980-4,257 16,613 20,343-3,730 Ecuador Mexico 18,194 61,675-43,481 28,322 50,499-22,177 32,972 49,972-17,000 Paraguay 6,487 13,970-7,483 6,621 12,788-6,167 7,335 10,568-3,233 Peru 3,756 4, ,053 4,197 1,856 8,380 3,665 4,715 Venezuela 1,397 2,870-1,473 1,623 4,669-3,046 1,668 7,545-5,877 LAIA 377, , , , ,654-25, , ,249-22,402 Rest World 1,017, , ,435 1,007, , ,083 1,037, , ,839 Total 1,394,616 1,135, ,031 1,596,082 1,238, ,759 1,702,392 1,410, ,437 Fu 0 ça-- ;S ON TABLE 3 Trade Balance Source: Based on data supplied by the Bank of the Republic

44 ('000 US dollars) Argentina 56,528 92,686 67, ,335 72, ,198 88, ,646 88, ,078 Bolivia Brazil 64, , , , , , , , , ,751 Colombia ,995 Chile 8,157 11,221 9,674 16,935 11,354 22,832 11,634 20,990 9,554 20,398 Ecuador 30 4, Mexico 5,508 60,380 11,713 86,096 10,433 61,691 12,447 50,509 11,525 50,015 Paraguay 8,66' 9,027 7,294 11,032 5,911 13,989 7,5e2 12,795 6,933 10,762 Peru ,550 3,905 1,517 4,181 2,343 4,201 2,489 3,678 Venezuela 0 5, ,873 1,627 4,670 3,734 7,552 Total LAIA 143, , , , , , , , , ,100 Rest World 461, , , , ,429 Total 811, ,573 1,135,585 1,239,704 1,414,529 0t 0 M.O soq N - Ṅ_h TABLE 4 Uruguayan Imports Negotiated 1986 Total Negotiated Total Negotiated Total Negotiated Total Negotiated 1990 Total Source: Information and Statistics Department of the LAIA Secretariat. The differences with respect to the tables that follow are due to adjustments. Data supplied by the Bank of the Republic. 'Negotiated" - covered by preferential agreement

45 ('000 US dollars) Country Country/ Country/ Country/ Country/ Countryl Imports Total LAIA Imports Total LAIA Imports Total LAIA Argentina 177, , , Bolivia Brazil 302, , , Colombia , Chile 22, , , Ecuador Mexico 61, , , Paraguay 13, , , Peru 4, , , Venezuela 2, , , p3 -_ (D y. _ a' TABLE 5 Uruguayan Imports from LAIA Members LAIA 588, , , Rest World 546, , , Total 1,135,',85 1,238,323 1,410,955 Source: Uruguayan delegation to LAIA

46 ('000 US dollars) Country/ Country/ Country/ Country/ Country/ Country/ Exports Total LAIA Exports Total LAIA Exports Total LAIA Argentina 100, , , Bolivia 1, ,489 nf , Brazil 228, , , Colombia 4, , , Chile 11, , , Ecuador Mexico 18, , , Paraguay 6, , , Peru 3, , , Venezuela 1, , , w -^ TABLE 6 -> C) _ Ah Uruguayan Exports to LAIA Members LAIA 377, , , Rest World 1,017, ,007, ,037, Total 1,394,616 1,596,082 1,702,392 Sources Uruguayan delegation to LAIA

47 APPENDIX II

48 III IV I Il III Oct. Nov. Dec. Jan. Feb. Net international reserves Assets1 1, , , ,297 1,297 1, , , , , , Liabilities Other assets and liabilities -1, , , ,772-1, ,343-1, , , , , ,131.3 A. With non-residents -1, ,487-1, , Pj Assets Liabilities 1, , , , , , , , , , , , ,039.4 B. With residents Assets 1, , , , , , ,752 1, , , , , , Liabilities 1, , , , , , , , , , , , ,860.7 II. Remaining net assets and liabs IV. Net total position CENTRAL BANK - GENRAL FOREIGN CURRENCY POSITION (In millions of US dollars at the end of each period) ¹The value of a troy ounce of gold was US$313 from December/86 to November/87, US$ from December/87 to November/88, US$ November/89, US$ from December/89 to November/90, US$ from December/90 to November/91 and US$ from December/91 Source: Central Bank of Uruguay from December/88 to

49 Buy Sell Buy Sell Buy Sell Buy Sell 1989 Average December June 1, , , July 1, , , August 1, , , , September 1, , , October 1, , November 1, December 1, , , , Average 1, , January 1, , , , February 1, , , , March 1, ,758 1, ,7 CI April 1, , , , May 1, , , June 1, , , July 2, , , August 2, ,111 2, , September 2, , , October 2, , , , November 2, , , , Docember 2, ,449 2, Average 2, , , , January 2, , , , , , February 2, , , ,632 2, ew0 x- CD En INTERBANK FOREIGN EXCHANGE RATES¹ (In new pesos) BCU N O T E S US dollar 1 US dollar 1 Argentine peso 1 cruceiro³ ¹Average of dally rates ²Austral (up to 31 December 1991) ³Cruzado (up to 15 January 1989) New cruzado (from 16 January 1989 Source: Central Bank of Uruguay to 15 March 1990). Called cruceiro from that date.

50 National currency Foreign currency National currency Foreign currency Fixed-term More tnan Not More than up to six months Commercial 1 month less Savings 1 month Sight to 6 months than 1 year Bank to 6 months currency Normal Preferential Normal Preferential fixed-term fixed-term fixed term account Average il Average Average Average I II , III , IV Average January February March April May June July August September October November December Average January February ko ' INTEREST RATES¹ Lending² Borrowing 'Average of most frequent interest rates of the five most representative private banking institutions for each financial instrument according to information for the month of July The resulting rates relate to the end of each period. When they correnspond to the average over the period, this is expressly stated. 2Most frequent rates at end of month 3Most frequent rates contracted in the last three days of each month Source: Central Bank of Uruguay

51 Parts and Basic Trans- Basic Food Machin- Trans- Petroleum access. food port & proc. Other and Dura- Other ary and port and dist- of mach. and parts & indust. inter- Total beverages bles consumer Total equip. eqaip. Total illates appliances bevs. access. supplies mediates Total imports ,082 41,993 30, ,391 92,314 61, , ,542 43,730 22,027 48, ,640 12, ,353 1,109, ,256 13,452 15,737 46,445 94,440 8, , ,160 47,741 30,438 19, ,389 11, , , ) 21,793 11,652 17,326 50,771 61,971 7,843 69, ,458 22,286 33,186 24, ,552 10, , , ,112 18,113 21,066 61,291 61,858 3,529 65, ,512 9,087 22,817 27, ,142 12, , , ,338 26,709 32,344 82,391 96,832 5, , ,136 13,688 52,255 59, ,105 9, , , ,451 56,221 43, , ,113 13, , ,785 18,322 53, , ,777 10, ,448 1,141, ,015 76,804 46, , ,802 33, , ,036 19,162 45,739 95, ,761 10, ,108 1,176, ,809 78,453 45, , ,741 17,689 1z6, ,286 21,835 42,412 84, ,316 9, ,850 1,202, ,289 94,393 59, , ,838 20,239 1ï9, ,202 24,144 42, , ,257 11, ,955 1,342, , ,339 86, , ,395 24, , ,922 25,705 58, , ,832 15,706 1,099,216 1,636, II 7,772 22,839 12,541 43,152 36,495 3,897 40,392 48,320 5,007 7,510 22, ,954 2, , ,767 I1 12,806 23,204 13,298 49,308 32,511 3,639 36,150 54,268 7,708 11,027 25, ,152 3, , ,472 IV 18,432 28,104 21,428 67,964 50,378 5,016 55,394 56,108 5,696 16,664 30, ,126 2, , , I 12,455 21,535 14,951 48,941 33,206 3,967 37,173 75,244 4,858 14,212 21, ,130 3, , ,586 Il 10,365 29,606 20,672 60,643 97,541 2, ,034 43,857 6,872 9,678 32, ,688 2, , ,094 III 11,402 31,198 22,340 64,940 59,665 6,068 65,733 62,975 6,707 14,245 33, ,815 5, , ,203 IV 18,881 48,000 29,014 95,895 51,983 11,933 63,916 56,846 7,268 20,253 37, ,199 3, , , Dec. 6,805 8,788 7,759 23,352 15,594 1,234 16,828 14,307 1,773 6,530 9,635 46, , , Jan. 4,660 8,950 6,099 19,709 15, ,914 38,181 1,834 6,678 9,416 53,499 2, , ,821 Feb. 4,667 6,295 4,145 15,107 10,998 1,856 12,854 29,968 1,436 2,833 5,208 40, , ,90.5 Mar. 3,126 6,291 4,707 14,124 7,022 1,384 8,406 7,095 1,588 4,700 6,436 35, ,330 78,860 Apr. 3,743 9,955 7,198 20,896 33, ,893 9,248 2,735 2,071 10,277 70,209 1,054 95, ,383 May 3,217 10,614 7,031 20,862 22, ,703 13,331 2,166 5,486 11,520 50, , ,457 Jun. 3,404 9,036 6,444 18,884 41,436 1,002 42,438 21,278 1,971 2,120 11,060 45, , ,254 Jul. 4,162 10,993 7,837 22,992 17,000 1,871 18,871 21,733 2,328 4,558 11,558 59,752 1, , ,851 Aug. 3,290 8,593 6,300 18,183 24,427 1,695 26,122 20,493 2,238 3,952 11,361 56,149 1,246 95, ,744 Sep. 3,949 11,612 8,203 23,764 18,239 2,502 20,741 20,749 2,141 5,733 11,068 59,915 3, , ,608 Oct. 6,095 14,331 10,460 30,886 18,214 2,555 20,769 17,331 3,049 5,117 12,254 62,657 1, , ,663 Nov. 6,728 15,691 9,788 32,207 15,347 2,001 17,348 23,945 1,839 7,992 14,278 52, , ,471 Dec. 6,058 17,978 8,767 32,803 18,423 7,376 25,799 15,570 2,380 7,144 11,226 46, , , Jan. 5,338 16,401 8,188 29,927 13,156 4,155 17,311-1,949 6,593 11,840 50,147 3,227 73, ,994 Feb. 4,403 11,292 8,135 23,830 27,528 2,339 29,867 15,956 2,376 14,533 9,349 54,515 3,175 99, ,601 bu CDx ~ -~ o- LnaZ M IMPORTS CLASSIFIED ACCORDING TO END USE (In thousands of US dollars) Consumer Capital Intermediates gales Figures for 1992 are preliminary Source: Central Bank of Uruguay