Source: "The magic of Montevideo"
From the article: "On March 22nd the central bank reported that GDP grew by 2.7% in 2017, bringing the country’s growth streak to 15 years, the longest expansion in its history. Its success shows the value of openness, strong institutions and investment in know-how. Uruguay was too economically dependent upon large neighbors Brazil and Argentina. The Broad Front (FA), a leftist coalition that has governed since 2005, began an effort to “decouple” Uruguay from its neighbours. Under two FA presidents—Tabaré Vázquez, an oncologist who governed from 2005 to 2010 and again since 2015, and José Mujica, a former guerrilla who held office between Mr Vázquez’s two terms—the government created special tax regimes and set up economic zones to attract investment. Uruguay entered new industries, such as software and audiovisual services, which exported to new markets. Between 2001 and 2016 the share of exports going to Brazil and Argentina fell from 37% to 21%.
Recently the government has invested in raising productivity. Public spending on science and technology increased by 73% in real terms between 2007 and 2015. Even cattle farmers adopted new technology. While Argentina slapped export tariffs on beef to hold down domestic prices, Uruguay became the first Latin American country to make all its beef exports electronically traceable, a way of reassuring buyers that problems like foot-and-mouth disease will be caught early. Between 2005 and 2012 Argentina’s beef exports fell by three-quarters; Uruguay now sells more than its larger neighbour. At the same time, FA governments stuck with the orthodox economic policies they inherited and with practices that make the country attractive to investors, such as keeping taxes low and the judiciary independent of political influence.
The formula has worked. Uruguay kept growing after Brazil and Argentina entered recession in 2014. The middle class, as defined by the World Bank, grew from 39% of the population in 2003 to 71 % in 2015. Uruguay’s income per person is the highest in Latin America."