Investment in machinery and industrial equipment fell 11.3% during the first trimester of 2015 compared with the same period in 2014 according to a report by Uruguay’s Chamber of Industry.
Among imported capital goods the report highlighted decreases in packing machines, roasting ovens for metallurgy and boilers.
“This behavior is in large part aligned with the poor performance of industrial exports [from Uruguay] which has been dragging for some trimesters and worsened at the start of this year” reported Uruguay’s Chamber of Industry.
The Uruguayan sector which showed the greatest increase in investment was food, tobacco, and alcohol where investment increased 87.9% compared the previous year. Excluding this sector Uruguay’s investment fell 24.8%.
The sector’s increased investment came mostly from companies in the milk and beverage sub-sector. Lower than usual levels of investment in this sub-sector during 2014 explains the dramatic increase.
This Uruguayan Business Brief is a summarized translation of a news article that appeared in the Uruguayan newspaper El Observador. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry. For more resources on Uruguayan Business visit the Uruguay Business Reports Store.
Uruguay’s current timber production could not support a third wood pulp plant
According to a report by Uruguay’s Office of Livestock and Agriculture Policy (Opypa), Uruguay’s timber industry will produce an average of 10 million cubic meters of wood to be processed into pulp. Timber for solid wood production is estimated to average 4.2 million cubic meters of which 71% is expected to come from pine and 29% from eucalyptus.
According to Opypa’s analysis, Uruguay’s projected timber production is insufficient to supply a third wood pulp plant. The agency recommends expanding timber plantings into several areas of the country that are well suited for it.
Opypa claims Uruguay has 2.6 million hectares suitable for timber production which are currently deforested. The majority are located in Uruguay’s center east region. Uruguay’s other regions also have room to expand timber production. Opya estimates in each of Uruguay’s regions only half the land suitable for forestry is currently planted on.
The report states that in 2012, the timber industry employed 12,000 workers. Of which a significant portion are classified as skilled workers.
In 2009, 45% of workers in Uruguay’s silviculture industry were classified as skilled compared with 24% in the other sectors Opypa monitors (ranching, agriculture, dairy, and grain).
Between the last two Opya censuses the number of firms in Uruguay whose primary income is from forestry has decreased by 230. This decline is at least partially due to consolidation within the industry. The number of firms under 500 hectares decreased by 419 hectares while the number over 500 increased by 189.
Challenges for Uruguay’s Lumber Industry
One of the principal concerns raised by Opya’s report is whether Uruguay’s forestry firms can meet the growing demand from Uruguay’s wood pulp industry for raw materials.
Uruguay’s new Montes del Plata wood pulp plant is expected to double the country’s production capacity and its wood pulp exports. The projected timber supply through 2030 is sufficient for the two plants. A third plant would require an increase in timber production.
Adding value to wood exports is another challenge. Uruguay’s wood board production is small but has increased recently, between 2012 and 2013 the value of these exports rose by 16%.
This Uruguay Business Reports news article is a translation from the Uruguayan newspaper El Pais. The original article is available here. Uruguay Business Reports translation by Donovan Carberry. Image is from Uruguay’s El Pais.
The Bolivian airline Amaszonas will offer flights connecting Montevideo with Santa Cruz de la Sierra, via Asunción del Paraguay starting sometime in the next few months. Three or four flights a week by Bombardier CRJ200 jet with a capacity for 50 people will connect the two cities.
Liliam Kechichian, Uruguay’s minister of Tourism and Sport, said the new connection is “a signal that we are still seeing a Uruguay with a lot of confidence in its tourism development” after the collapse of Uruguay’s flag carrying Airline Pluna in the middle of 2012. The minister added that despite the fact that Amaszonas is a small airline, they have taken “confident first steps and not an other work methodology. I think what they are doing is correct.”
The subsecretary of Tourism, Antonio Carámbula, said the Bolivian company has had meetings with various public agencies and private companies in Uruguay and has started the standardization process with Uruguay’s National Civil Aviation Department (DINACIA). He said the presence of Amaszonas “will stimulate business and tourist travel in region”.
Uruguay’s presidential website states that Amaszonas is a private firm “in the process of expansion” with domestic routes inside Bolivia as well as flights to Peru, Paraguay and Brazil. The new connection between Montevideo and Santa Cruz will reopen a route that was abandoned for nearly a decade after the collapse of Lloyds Aereo Boliva.
Since Pluna’s collapse, Uruguay’s government has been actively courting airlines in an attempt to regain air connections. Two years after Pluna’s close, in April 2013, Carrasco International Airport received some good news: Air France KLM agreed to operate out of Montevideo. A little time later, in July of 2013, Air Europa launched its first flight from Montevideo to Spain. Iberia has announced it will resume flights to Montevideo starting in September and Qatar Airlines is expected to begin flights to Montevideo soon as well.
This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El Observador. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.
Store Enso and Araucho’s new wood pulp plant may receive permission from Uruguay’s environmental regulator to begin operations this week.
The plant, which is ready to begin production, expects to receive permission from DINAMA, Uruguay’s environmental regulatory agency, to start operations this week.
An executive at the Finish company Stora Enso, which built the plant in Conchillas with the Chilean company Arauco, said Tuesday that the company expects to receive DINAMA’s approval by the end of the week.
“We could start literally at any moment. We expect very probably to have permission by the end of the week from the environmental authority” said Juan Bueno, the head of the wood pulp division at Stora at a speech to an industry conference.
In April it was announced that work on the plant in Montes del Plata had been finished and that the plant undergone tests and would be operational soon.
The only thing remaining is permission from DINAMA.
This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El Observador. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.
Uruguay’s latest export data, released yesterday, showed a clear increase in Uruguay’s total exports. Soy remained Uruguay’s top export. However, the data also showed a clear decrease in exports to Argentina, which has maintained strong restrictions on imports despite the changes it has implemented to its macroeconomic policies.
Uruguay’s exports increased 7.8% in May over May 2013, according to data from the Instituto Uruguay XXI. Uruguay’s exports have increased 5% between January and May of 2014. The total value of Uruguay’s exports in May reached $1,128 million USD, $81 million USD more than in May 2013.
Brazil remained the number one destination for Uruguayan exports despite a .2% drop between January and May. China remained the second biggest destination for Uruguayan exports. Exports to China fell 14.4% since January. The Nueva Palmira free trade zone received the third most Uruguayan exports. Venezuela, following a 33.5% increase between January and May, was the fourth most significant destination.
Uruguayan exports to Uruguay fell 16.3% during the first five months of 2014 when compared to the same period in 2013. The value of Uruguayan exports to Argentina decreased $33 million USD over the same period. Argentina remains the fifth largest destination for Uruguayan exports.
With Argentina “something chronic” is happening, Álvaro Queijo, the president of Uruguay’s Exporter’s Union (UEU), told the newspaper El Observador. “On one side trade is not good and on the other, Argentina’s changes to the exchange rate at the end of January caused [Uruguayan exporters] to lose competitiveness”. “That the official exchange rate has gone from $ 6 (Argentinean Pesos) to $8 which has changed the numbers a little. Whats more, the restrictions have not changed, they have remained the same; Argentina’s industry is very reluctant to buy imports”, explained Quejio.
Quejio does not believe that there will be any significant changes in the short-term to produce an opening for trade or an improvement in Argentina’s macroeconomic conditions. “This is a process that has been going on for some time, for some two or three years, with a continuing deterioration of exports to this country. If we compare it to 2012 the drop is bigger and if we use 2011 the decrease is even more pronounced”.
Quejio reported that the sectors most affected have been clothing, graphics, chemicals and plastics. He added that Brazilian demand does not make up for the fall in sales to Argentina. The decrease in exports to China, nearly 15%, can be attributed to the significant increase in exports to the Nueva Palmira free trade zone as most products are usually shipped from there to China.
Soy Stays In Front
Soy remained Uruguay’s principal export in May. Sales to abroad increased 14.7% over May of 2013 and represented 39% of Uruguay’s total exports in May. “Despite decreasing 2.8% over sales in May 2013, frozen beef was Uruguay’s second biggest export, making 9.3% of the total” reported the Uruguay XXI institute. Concentrated milk came in third with 4.9% of the total. Exports of live cattle saw the biggest increase in May. Sales of live cattle in May of 2013 did not even reach $300,ooo USD, in May of 2014 they topped $15 million USD.
This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El Observador. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.
The average value of Uruguay’s beef exports during the first five months of 2014 increased 3.6% compared to the same period in 2013, reaching a an average value of $3,951 USD per ton of meat from the front of the carcass and an average value of $3,812 USD per ton of meat from the back half.
Beef exports fell 5% as a proportion of Uruguay’s foreign currency inflows compared to the first five months of 2013, according to Uruguay’s National Meat Institute (INAC).
The volume of meat exports fell 9% amounting to 142,624 tons.
China held its position as the leading destination for Uruguayan beef. Uruguay exported 37,479 tons of beef to China, a 10.6% increase in volume. The value of Uruguay’s 2014 beef exports to China has reached $109.7 million USD so far, an increase of 7.8% over the same period in 2013.
Beef exports to the European Union continued to bring in more foreign currency than any other destination. So far in 2014 they have earned Uruguay $160.3 million USD, that is a 9.7% increase of the amount generated between January and May of 2013.
This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El Observador by Hugo Ocampo. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.
Montevideo’s Carrasco Airport is expected to tie the record it set in 2011 for most passengers passing through
The 2012 bankruptcy of Uruguay’s flag carrier airline Pluna created significant concern within the Uruguayan government about the loss of air connections to Montevideo. After extensive negotiations, Uruguay’s executive branch chose to support a new company employing Pluna’s former employees to prevent losing the country’s air connections.
The head of Alas Uruguay (the name of the new project which was formally announced this month), Daniel Olmedo, told the International Air Transportation Forum organized by Uruguay’s Transportation Ministry that the country’s connectivity problem has not been solved. He added that when Pluna was operating Montevideo had 350 regularly scheduled flights a week. “Now there are 159; we have to recover the regular flights that were assigned”, he said.
However, data from Montevideo’s Carrasco Airport tells another story. Although, the number of weekly connections is down, Carrasco is about to tie its record for passengers passing through the airport.
When the company Puertas del Sur took over operations at the airport in 2000, the terminal area saw 860,000 passengers between arrivals and departures. By 2011 that number had almost doubled to reach a record 1,700,000 passengers.
The director of Corporación América (which owns Puertas del Sur), Eduardo Acosta, told the Uruguayan newspaper El País that Carrasco will reach that 2011 record this year, even without the national airline.
“In 2011 we had a vibrant Pluna with 13 airplanes flying every day. Today, without those airplanes we have achieved the same thing. How? With airplanes that are more full and with companies that are more profitable” said Acosta. He said that the airport is stable and emphasized the work done with the Transportation Ministry to bring about the arrival of Air Europa in Uruguay and the return of Air France.
Qatar Airlines and Turkish Airlines are currently in negotiations with the Uruguayan government on doing business in the country.
Nevertheless, Acosta said that the airport still has not recovered many of the passengers transported by Pluna who connected through Montevideo. He also said that the newly formed company, Alas Uruguay, has a excellent opportunity to capture those customers. “Between 300,000 and 400,000 passengers who today do not have Carrasco and that [Alas Uruguay] could recover, because they are passengers are in the region and need to connect through Montevideo”, Acosta said.
At the International Air Transportation Forum, Acosta spoke on Alas Uruguay saying “there are many things that businesses cannot do alone; they need the state”. He added that Alas Uruguay will require government help. Nevertheless Olmedo, the head of Alas Uruguay, during his presentation expressed that those behind the new startup air company are not in favor of “protection” and that the company wants to compete with other companies in the sector.
Uruguay’s Transportation Minister Enrique Pintado, said that Alas Uruguay will receive government support. He said that the project has potential, but they need to identify weaknesses and establish a good strategic plan.
This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El País by Maximiliano Montautti. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.
Petrobras, Brasil’s state oil company, announced in a press release that it was selling its offshore oil exploration interests in two blocks off Punta del Este to the Anglo-Dutch company Shell. The sale is still subject to approval by Uruguay’s regulatory authorities and to approval by Uruguay’s state energy company Ancap.
Petrobras owned 40% of the rights to the offshore exploration blocks Ancap designated three and four. The Argentinean company YPF owns 40% of both and the Portuguese oil company Galp Energía owns 20%. Petrobras had agreed with YPF to handle operations in block four and let YPF take charge of operations in block three.
This transaction is not the first significant sale between the Petrobras and Shell. At the end of 2005 Shell sold all of its service stations in Uruguay, Colombia and Paraguay for $140 million USD to Petrobras. Petrobras currently operates 89 service stations in Uruguay.
“This operation represents another important step in the Petrobras’ Divestment Program (Prodesin), outlined in the 2013-2017 Business and Spending Plan”, Petrobras stated.
Petrobras announced a divestment plan to combat its current liquidity problems. The company plans to divest more than $9 billion USD, and has already sold various assets in countries such as Argentina, Colombia and Mexico.
Ancap awarded the exploration rights to blocks three and four in 2009. They were only ones awarded in the Ancap’s Uruguay round I which was designed to increase interest in offshore exploration in Uruguay. The exploration period for blocks three and four ends in May 2014. After that deadline the companies holding the rights to these blocks have two years to build wells.
Ancap conducted Uruguay round II in which it awarded eight blocks: three to British Petroleum, three to British Gas, one to the French company Total and one to the Irish company Tullow Oil which sold 30% of their rights to the Japanese company Inpex.
In March of 2013, Ancap began promoting Uruguay round III which will feature six blocks.
This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El País. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.
Uruguay’s inflation accelerated in September to its highest point in twelve months. All of the components of the consumer price index rose in September, increases in gas, fuel, and taxi prices announced in September were the main cause of the rate’s increase,
Experts consulted by the Uruguayan newspaper El Observador predicted that inflationary pressures will persist in the last trimester of the year, since the economic authorities have little room to adopt counter measures.
According to data released by Uruguay’s National Institute of Statistics (INE), the price of consumption rose 1.36% during September, which brought the inflation rate over the last 12 months to 9.02%.
Uruguay’s inflation is not only outside Uruguay’s monetary policy objective of between 4% and 6% but above the 7.9% accounted for in the country’s budget.
Expert predictions
Experts consulted by El Observador predicted that Uruguay’s inflation will not accelerate further and will remain at around 9% for 2013. At the same time they noted that Uruguay’s supermarkets are under intense pressure from unions to raise wages to meet criteria suggested by the executive branch. An increase in wages could lead to an increase in consumer prices.
This Uruguayan Business Reports news article is a summarized translation of a news article that appeared in the Uruguayan newspaper El Observador. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.
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