IMPORTANCE OF THE AGRICULTURAL SECTOR IN URUGUAY
The abundance of natural resources and production factors gives Uruguay comparative advantages in food production. With a vast majority of its territory, more than 90%, being suitable for agriculture and livestock, Uruguay stands out as a reliable global supplier of food and agricultural products .
The agriculture and livestock sector contributes 6% to 7% to Uruguay’s GDP during the 2015-2019 period. When considering the sub-sectors and related industries, often referred to collectively as the agro-industrial sector, their contribution to GDP ranges between 14% and 16% for the same period.
Agribusiness not only has a direct impact, but also positively drives other sectors through productive linkages both backwards, increasing demand for services such as transportation, storage, input production and telecommunications, and forwards, supplying key inputs for other industries.
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During the 2021-2022 season, total cropland area increased by 14% year-on-year, with farmland reaching 94% of its historical peak. This increase is mainly due to the expansion of crops such as soybeans, canola, which has doubled its planted area in the last two years, and barley, in addition to more modest contributions from rice and corn.
The agribusiness sector employed around 210,000 people in 2021, representing 13% of the country’s workforce. Of these, 80,100 jobs were directly related to agriculture and associated industries.
Investment Law (No. 16,906)
In October 2020, a new regulation came into force, which had a positive impact on the number of investment projects submitted, reversing the negative trend of previous years. In fact, projects related to the agribusiness sector increased from an average of 60 between 2015 and 2019 to more than 500 projects in 2021.
Agro-industrial exports made up 80% of total goods exports in 2021, reaching US$9.07 billion and registering a 39% increase year-on-year. Of these, agricultural products totaled US$ 2,415 million, an increase of 21%. Products such as soybeans, wheat and unprocessed barley were key to export growth in 2021.
The increase in international prices of agricultural products has been crucial for the expansion of the cultivated area in the 2022-2023 season.
SHARE OF THE AGRICULTURAL SECTOR IN GDP
Agriculture is a key component of the agricultural sector in Uruguay, contributing 6% to 7% to the country’s Gross Domestic Product (GDP) between 2015 and 2019. When sub-sectors and related industries are added together, this group is called the agro-industrial sector, whose contribution to GDP varies between 14% and 16% during the same period.
Beyond its direct contribution, agribusiness drives economic activity in other sectors through the creation of both upstream value chains – increasing demand for services such as transportation, storage, input production and telecommunications – and downstream value chains, where a significant portion of agribusiness products are used as raw materials in various industries.
The Central Bank of Uruguay (BCU) is currently updating its statistical methods to align them with the latest international standards. This transition has resulted in a lack of data broken down by sector in the last two years, complicating the analysis of the recent evolution of the different sectors that make up the primary sector, especially agriculture.
The information presented combines global GDP data for 2021 with a breakdown by subsector based on specific contributions to GDP for 2019, the last year recorded using the previous methodology.
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In 2021, Uruguay’s GDP amounted to US$ 59 billion, of which 8% came from primary activities, including livestock, agriculture, forestry, mining and fishing. Livestock was the most important primary activity, accounting for 4.7% of GDP, followed by agriculture with 2.2% and forestry with 0.6%.
INVESTMENT IN THE AGRICULTURAL SECTOR
As mentioned above, in October 2020, a new regulation was implemented under the Investment Law (No. 16,906) that had a favorable effect on the number and value of investment projects submitted, especially notable in the agro-industrial field. Projects in this sector experienced a significant jump, from an average of 60 between 2015 and 2019, to more than 500 projects in 2021. This regulatory reform catalyzed interest in the sector, which represented 17% of total projects in 2020, increasing to 32% between January and September 2021. This increase represented the largest year-on-year variation (213%) compared to other sectors.
From 2010 to 2020, the agricultural sector attracted investments in excess of US$ 4.7 billion, of which 35% came from agricultural companies. Within the agricultural sector, investments were evenly distributed between agricultural production (10%), industrialization of agricultural products (10%) and associated services (13%), while 2% went to the production of inputs. It is worth mentioning that 21% of investments in the agricultural sector were not allocated to specific activities, but investments in freight transportation (3%) and other related services (8%) suggest an even greater impact of agriculture on sectoral investment.
The agricultural sector has been the recipient of a significant flow of investments, mainly aimed at the adoption of advanced technology for grain production. Foreign companies, especially Argentine ones, played a crucial role in this aspect. In addition, some of the world’s largest grain traders, such as ADM, Bunge, Cargill, Louis Dreyfus, and COFCO, have established operations in the country, highlighting Uruguay’s strategic importance in the global agricultural sector.
EMPLOYMENT IN THE AGRICULTURAL SECTOR
In 2021, the labor market in Uruguay had 1.61 million workers. During that year, there was a recovery of approximately 48,600 jobs compared to the previous year.
According to the most recent data from the National Statistics Institute (INE), the number of employees returned to levels similar to those seen before the pandemic, reaching 1.65 million. At the same time, some 144,000 individuals were unemployed, which constitutes 8% of the economically active population.
Within agribusiness, approximately 210,000 people were employed in 2021, of which 127,000 belonged to the agricultural sector, representing 8% of the total number of workers in the country. The remaining 83,000 employees were employed in associated industries, constituting 5% of the total workforce.
The activity with the highest number of employees in the agricultural sector was livestock farming, with 75,000 people, followed by agriculture, with 41,100 workers. Overall, the agribusiness sector experienced an increase of 11,000 jobs in the last year. The industry linked to the agricultural sector showed a remarkable recovery, with an 8% increase in year-on-year employment, driven by a 21% increase in the livestock industry and a 47% increase in forestry.
Some 80,100 people were employed in agriculture and related industries in 2021, where 51% were employed in primary activities and the remaining 49% in industry.
The total number of jobs in the sector remained stable compared to 2020, although divergent trends were observed. In 2021, primary activity experienced an increase of 11%, stimulated by the vigorous performance of agricultural production, which managed to recover almost all of the jobs that had been lost during the pandemic.
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In contrast, industrial activity saw a 9% decrease in the same year, due to a reduction in employment in the areas of bakery and pasta and noodle production, although employment in milling and other industrial activities related to agriculture showed an increase.
AGRICULTURAL EXPORTS
The agroindustrial sector plays a crucial role in Uruguay’s export profile. With a population of 3.5 million, the country manages to meet the food needs of nearly 30 million people worldwide. Thanks to its recognized reliability as a supplier of food and agricultural products, Uruguay has access to 160 international markets, consolidating its position as one of the leading exporters of products such as rice, barley, rapeseed, malt and soybeans.
Agribusiness exports accounted for 80% of total foreign sales in 2021, amounting to US$9.07 billion and registering a 39% year-on-year growth. Within this sector:
- livestock products accounted for 32% of total exports of goods and services.
- agricultural products with 21%.
- forestry products with 19%.
Beef topped the list of exported products, accounting for 21% of the total, followed by cellulose with 14%, soybeans with 8% and dairy products with 6%.
The increase in agroindustrial exports in 2021 coincided with an increase in international commodity prices, resulting in a significant increase in the value of most products exported by Uruguay.
Beef had the greatest positive impact on the country’s exports that year, with a notable increase in value due to both better prices and an increase in exported volumes. Other agricultural products that saw significant increases in their export prices include cellulose and soybeans.
Main buyer countries of agricultural goods
1 – Brazil was the main buyer, with purchases increasing by 7% to US$ 572 million, accounting for 23% of total exports of agricultural goods. This growth was mainly due to an increase in malt sales, which accounted for 34% of exports to Brazil. In addition, there were significant increases in sales of barley, wheat and other foodstuffs to that country. In contrast, rice and soybean exports, which accounted for 9% and 3% of the total, respectively, fell compared to 2020.
2 – China was the second largest destination for Uruguayan exports, reaching US$ 477 million, a figure that remained stable with respect to 2020. Soybeans, which account for 77% of exports to this Asian country, experienced a decrease of 8% in annual comparison, totaling US$ 440 million in 2021. Notably, Uruguay exported barley to China for the first time, achieving US$ 23 million and becoming the second most important agricultural product in this market. Margarine and oil products followed in importance, with sales of US$ 6 million.
3 – Egypt ranked third as an export destination in 2021, accounting for 13% of the total. Shipments to this African country amounted to US$322 million, an increase of 150% compared to 2020. Soybeans accounted for 97% of these exports, making Egypt the second most important destination for this Uruguayan crop. In addition, 2021 marked the first year in which Uruguay exported wheat to Egypt, totaling US$9 million.
4 – Europe became the fourth largest export destination, with total sales of US$ 266 million. Rice led these exports, accounting for 36% of the total and registering a 25% growth compared to 2020. There was also an increase in sales of rapeseed, margarine and oils, as well as non-citrus fruits. Turkey (23%), the United Kingdom (20%) and the Netherlands (13%) were the main markets within the European bloc.
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Other important markets for Uruguayan agricultural exports include Argentina, with sales of assorted foods, margarine and oils and soybeans; Mexico, focused mainly on assorted foods; Peru, with exports of rice, malt and soybeans; and Iraq, where rice was sold almost exclusively.
