Uruguay - Industry

Although foreign trade depends mainly on agricultural production, the production of industrial goods for domestic consumption is increasing, primarily in the fields of textiles, tires, shoes, leather apparel, cement, petroleum refining, and wine. World War II spurred the industrial growth of Uruguay, and now local industry supplies most of the manufactured products used. Most industry is concentrated in and around Montevideo.

Manufacturing output declined by an average of 1.3% annually between 1977 and 1987, and declined by an average0.10% per year during 1988–98. In 1998 alone, manufacturing grew by 2.3%, and accounted for 18% of GDP. Growth was led by oil refining, car production, and food production. However, the manufacturing sector declined by 6.1% in the first half of 1999. Reduction of domestic demand and a decrease in exports to Brazil and Argentina had contributed to the overall decline. A recession that began in 1999 and continued into 2002 further hampered industrial growth. Sectors showing overall production decreases included textiles, vehicles, machinery, chemicals, paper, processed meat, and sugar. The construction sector registered a considerable decline in 2001. Industry as a whole accounted for 29% of GDP in 2001, and employed 16% of the work force.

The manufacturing sector still has severe structural problems as a legacy of the protectionist policies that stressed import substitution during the 1970s. With the MERCOSUR trade bloc, the domestic market for manufactured goods has opened to strong competition from Argentina and Brazil. Some industries, like textiles, may expand because they are already internationally competitive. Others, like petrochemical refining, chemicals, pharmaceuticals, and tires are reasonably competitive and should do well with new investment. The automotive, electronic, and machinery sectors will probably continue to decline because of competition among MERCOSUR partners. Uruguay produced 10,530 automobiles in 2001, down 27% from the 14,404 units produced in 2000. Uruguay's oil refinery had a capacity of 37,000 barrels per day in 2002.

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