Why is Uruguay so expensive?

Uruguay is not cheap. And that is probably what caught us off-guard the most.

We kicked off our minimalist adventure in South America with Uruguay, and honestly, staying on budget was tougher than we expected.

We wanted to understand the reason for this, read on to discover what we found out.

Uruguayan supermarkets are expensive due to factors such as high import tax, high sales tax, small market size and price gouging. The country lifestyle, safety and strong currency also contribute to higher costs.

20 Uruguayan pesos

HIGH IMPORT TAX

Products in Uruguay cost on average double than in Bolivia, 80% more than in Mexico and 20% more than its neighbours Brazil and Argentina.

This happens more in areas where there's almost no local production—or none at all—so they have to bring in imported goods.

And the list of items that are not produced in Uruguay is very long.

Uruguay has, with most countries, higher tariffs and fees agreements than in other regions of the world.

Plus there is the obligation to hire a customs agent for each import.

SMALL MARKET SIZE

The Uruguayan market, with its population of 3.5 million, is dominated by a few companies that handle a significant portion of these imports.

BARRIERS TO COMPETITION

Significant interaction exists between the regulated entities and regulators, which, while legitimate, presents additional challenges for competition defense.

To introduce a product into Uruguay, it must be registered with the Ministry of Public Health, and the importer is required to have the product's technical data sheet.

HIGH SALES TAX

Due to this absence of competition, the profit per product consistently exceeds 50% of the price paid by the final consumer.

Uruguay's tax system is outdated, heavily relying on direct taxes on consumption rather than individual taxes. While less is paid in income taxes, they are directly applied to consumed goods.

PRICE GOUGING

The import of certain fruits and vegetables is prohibited by phytosanitary regulations, ensuring that only local production is available in the market.

It would be reasonable to think that this regulation serves as a health safeguard, however, there is the belief that it acts as a protectionist measure instead, considering that the government has allowed imports during periods of domestic shortages.

Consequently, fruits and vegetables are generally more expensive than if imports were allowed, leading to higher costs for consumers.

Removing these protections would potentially jeopardise the sector's existence, as they effectively act as a hidden subsidy.

At the same time, let's not forget that Uruguayan fruit and vegetable producers operate within a system burdened by high costs.

And it all adds up.

Our tip: It might seem like a no-brainer, but the best money-saving tip we found is to go for local, in-season products. The price difference is way bigger than you’d expect!