Infrastructure Report Uruguay 2014

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1 Page 1 Market Research Infrastructure Report Uruguay 2014 Prepared by Your guide to doing business in Latin America Miryam Lazarte, Founder & CEO

2 Page 2 EXECUTIVE SUMMARY Despite Uruguay's small size and lack of natural resources, the country punches well above its weight within Latin America. President Mujica's liberal financial and social policies led The Economist to name Uruguay their Country of the Year Uruguay's strategic location, combined with a well educated work force and open trade policies, make it an ideal hub for doing business in the region. Many infrastructure companies do not bother much with Uruguay, preferring instead to concentrate their efforts in the larger, neighboring markets of Brazil and Argentina. However, large infrastructure projects, especially in the maritime sector, are slated for construction in the near to medium term. Uruguay is also a logistics and financial hub for businesses operating in the region. The country's unique zona libre (free trade zone) allow importers to maintain large quantities of stock in Uruguay without ever passing through customs stock in transit ideal for just in time fulfillment to Brazil and Argentina. What's more, Uruguay is facing an energy crisis the cost of electricity is among the highest in Latin America. Within five years, current hydroelectric production will be operating at maximum capacity. President Mujica has stated publicly that renewable energy sources solar and wind are the government's preferred option to keep the cost of energy affordable. Conclusion: Uruguay is an excellent financial and logistics hub in the region. The country's coming energy crisis means it will likely be a world leader in the renewable energy sector.

3 Page 3 Table of Contents EXECUTIVE SUMMARY... 2 Table of Contents... 3 INFRASTRUCTURE PROJECTS SUMMARY... 4 A. Ports... 4 B. Renewable Energy Production... 7 C. Highways... 9 SOME BACKGROUND STATISTICS National Accounts GDP and others Final Economic Offer, GDP and Importations GDP & Balance of Trade GDP Per Capita Annual Exports Exports Main products and Destination Exportation of goods as per country Importations per year and country Canada Uruguay Relations About Go South! Consulting For More Information... 15

4 Page 4 INFRASTRUCTURE PROJECTS SUMMARY A. Ports Uruguay currently has eight ports. The two largest are the Puerto de Montevideo (in the nation's capital) and the Puerto de Nueva Palmira (agribusiness exports). Upcoming projects The Puerto of Montevideo, the country's largest and most important port, is projected to reach operational capacity within the next eight years. Projects under consideration include: o o o o o o o New multipurpose terminal New infrastructure for containers New infrastructure for loading and unloading of bulk Logistic point at Punta Sagayo Cruise ship terminal Naval installation at Punta Lobos Proposed Investment Extension of C pier, est. USD $10,000,000 Flooring and lighting, est. USD $6,000,000 Electrical installations, est. USD $500,000 Other improvements, est. USD $43,000,000 Puerto de Nueva Palmira, the country's second largest port, is also operating near capacity, and is planning a new terminal. Cereoil S.A. and Bultery S.A., both large agribusiness concerns, are planning a private port project for the refining and export of soybean oil. Vale S.A., a Brazilian mining company that runs Uruguay's only mine (iron), is also planning a private port. The Puerto de Colonia, just across the river from Buenos Aires in Argentina, receives a large number of cruise ships, and plans are underway to improve terminals to further develop the tourism sector.

activity in the country, and Nueva Palmira has the highest activity mobilizing bulk, representing 62% of operations in this area.

5 The following table illustrates the movements regarding quantity of containers (second column) and bulk (third column). Page 5 Source: Infraestructura Uruguay 2030 As this table indicates, the Puerto de Montevideo manages 100% of all container activity in the country, and Nueva Palmira has the highest activity mobilizing bulk, representing 62% of operations in this area. Source: Infraestructura Uruguay 2030 As these table on the left shows, the quantity of containers arriving in Montevideo is expected to double by 2030.

6 Page 6 The table on the right projects that containers in transit will also double by A five star hotel and casino complex is planned adjacent to the port of Punta del Este. In high season, the existing port or rather, yacht club runs at capacity, when yachters flock to this playground of the rich and famous. The casino plans to build its own yacht club / port to accommodate the overflow. The government is considering building a deep water port. The Uruguayan market in itself does not justify such a move, but because of its geographical location and zona libre, Uruguay is well positioned as a logistics hub for importers shipping to Argentina, Brazil, and, to a lesser extent, Paraguay. However, this a long term project, as it will require dredging. No immediate plans for construction are underway. In 2011, Uruguay licensed many of the world's largest oil companies to explore for oil and gas in the Punta del Este offshore basin. At a recent infrastructure conference we attended in Montevideo, two important officials indicated that natural gas had, in fact, been found, although the government was withholding the official announcement for now. According to these officials, offshore drilling is slated to begin in first semester This will require construction (and illumination and monitoring) of multiple offshore rigs, plus additional facilities onshore. Details: o Exploration off shore exploratory pit ( ) estimated investment USD $200 million per pit (estimating 2 pits) o 2 nd phase estimated investment USD $1,560 million o 3 rd phase estimated investment USD $1,500 million Exploration on shore there are already two companies working in the exploration phase. Estimated investment in the first phase USD $8 million and perforation USD $15 million (5 years project)

Page 7 B. Renewable Energy Production Current Energy Consumption Uruguay's energy consumption is around 3,700 ktoe (2011), estimated to increase to 7,265 ktoe in 2030.

7 Page 7 B. Renewable Energy Production Current Energy Consumption Uruguay's energy consumption is around 3,700 ktoe (2011), estimated to increase to 7,265 ktoe in Experts estimate an annual increase in demand of 3.55% a.a. Solar Source: Infraestructura Uruguay 2030 Investment in solar plants is estimated to be around USD $700 million. Wind Farms Uruguay is a windy place, especially along the coast. What's more, the country's low population density makes substantial investment in wind farming uncontroversial. Details: An additional 1500 MW per year are projected to be added between now and 2023, with 300 MW per year from then until Estimated investment in wind farms: USD $4,000 million Bio Fuel A new ethanol plant is slated to produce 70,000 m3/year between 2014 and 2017 (estimated investment: $USD 60 million). Refinery Installation of cogeneration plant

Page 8 Regasification plant and other pipelines (2013 to 2015) estimated investment 150 MUSD Port logistics for crude oil (2016 to 2018) estimated investment 230 MUSD

8 Page 8 Regasification plant and other pipelines (2013 to 2015) estimated investment 150 MUSD Port logistics for crude oil (2016 to 2018) estimated investment 230 MUSD Biomass plants necessity 200 MW Estimated investment 70 MUSD Strengthen and expand of transmission lines estimated investment 1,700 MUSD Source: Infraestructura Uruguay 2030

9 Page 9 C. Highways The national road network in Uruguay boasts 8,600 kms. In addition, the provinces managed an additional 60,000 kms of roads. All this for a country with a territory of a mere 175,000 km 2 and a population of 3,241,000 inhabitants. Density: 1km/2.5 km 2, mostly paved. Current condition: In 2012, more than 50% of the roads were in a state of disrepair. Uruguay also manages 700 bridges, 43% of which need to be replaced or reinforced.

10 1. National Accounts GDP and others Your guide to doing business in Latin America SOME BACKGROUND STATISTICS Page 10 Source: Instituto Nacional de Estadisticas de Uruguay This table above shows the behavior of the GDP between 2011 and GDP grew 6.5%. 2. Final Economic Offer, GDP and Importations Source: Banco Central del Uruguay Since 2010 the final economic offer, GDP and importations have grown steadily.

3. GDP & Balance of Trade Your guide to doing business in Latin America Page 11 Source: Banco Central del Uruguay The graphic shows how the GDP has grown in the last three years.

11 3. GDP & Balance of Trade Your guide to doing business in Latin America Page 11 Source: Banco Central del Uruguay The graphic shows how the GDP has grown in the last three years. During this time the balance of trade remained negative. Exports continue to grow. 4. GDP Per Capita Source: Banco Central del Uruguay The country has been growing every year since 2002.

12 5. Annual Exports Your guide to doing business in Latin America Page 12 Source: Uruguay Siglo XXI 6. Exports Main products and Destination Source: Uruguay Siglo XXI

13 7. Exportation of goods as per country Your guide to doing business in Latin America Page 13 Source: Uruguay Siglo XXI 8. Importations per year and country Source: Uruguay Siglo XXI The graphic shows how dramatically the imports have increased since China is Uruguay's main importer, but note also that Brazil's imports from Uruguay have grown every year. Argentina's trade with Uruguay, meanwhile, has steadily decreased.

14 9. Canada Uruguay Relations Your guide to doing business in Latin America Page 14 The commercial relationship between Canada and Uruguay has grown in the past ten years. Uruguayan exports to Canada are mainly agricultural. Canadian exports to Uruguay consist primarily of engineering services and electrical/electronic products. Canada is the eleventh country in the list of investors in Uruguay. January September 2012 Source: Uruguay Siglo XXI

15 About Go South! Consulting Page 15 Our goal is to guide you every step of the way, from market entry to post sale management. We can assist with: Market Research Is there a market for your product or service? How big a market? We design a strategy for each country you target. We specialize in working with local people on the ground to smooth your market entry. Trade Shows What trade shows and events should you attend? Are you already actively marketing your product, or do you just want to dip your toe in the water, see what the competition looks like? We can advise you which events best serve your needs, and we find the right people to support you during your time there. Meetings Time to talk to a potential client? Even if you speak Spanish and many of our clients don t there is a larger cultural and business gulf than most new entries to Latin America realize. We can act as matchmaker, smoothing the introductions and helping you establish a foothold in the markets you want to enter. Negotiation Ready to close? Steady! You need someone who understands the legal frameworks in each country. Although we aren t lawyers ourselves, we have many years of experience negotiating contracts, and can guide you during this difficult and often frustrating process. Plus, our network of lawyers spans the continent. There s no need to pay for expensive international law firms our on the ground contacts can review final terms of sale for a fraction of what the big boys charge. Contract Administration Got a contract? Fantastic! We can advise you on bonding requirements, manage invoicing and payments, and keep the lines of communication open between you and your client to avoid any complications. Post Sale Got a happy client? Keep em that way! We manage your client relationships to make sure they come back to you again and again Visit our website Contact us at GoSouth@GoSouthConsulting.com For More Information

Uruguay Additional Information. September 2009

1 Uruguay Additional Information September 2009 2 Case Studies Successful Investments September 2009 3 Weyerhaeuser US-based company present in Uruguay since 1996; harvesting operations began in 2005.