Oil and Gas investment in Uruguay: Great perspectives for Ronda 3 – 2018
After two successful offshore oil & gas rounds executed in the last years, in late 2017 Uruguay launched Ronda 3 (Round 3 or Third Round) offshore, which includes 17 areas or blocks in three different basins. This ongoing process is being promoted by the Uruguayan government around the world, in order to attract more offers and get the best possible result for the country.
From an external perspective, Uruguay is in position to have another success with the Ronda 3 process and cement its status as oil & gas country in a region where that term has been ownership of other nations. There are several elements that need to be aligned to generate comfort to investors and, at the same time, be able to extract the most positive economic outcome for the treasury and citizens, and Uruguay gathers most of them:
1. Rule of law, institutions and ease to do business
Beyond technical matters, about which I will not write since that is not my area of expertise, oil & gas investors look for two main indicators: an attractive economic reward for the risk taken and a sound legal framework. Let’s start from the second, legal system.
According to the Rule of Law Index 2017-2018, prepared by the World Justice Project, Uruguay is located in position 22 out of 113 countries analyzed. This outstanding position is highlighted by the fact that Uruguay is the country with best ranking in the region (first out of 30 countries). The country has good rates in separation of power, protection of fundamental rights, enforcement, absence of corruption or civil conflict, among others.
This ranking is especially important in Latin America, a region that has been prone to have a flexible approach towards the law and its application. Uruguay ranking is similar to the one received by the United States and better than several OECD countries. Its economic freedom is also remarkably good compared to the region.
In the oil & gas sector, even though legislation is not completely updated, the rules are clear and stable enough for the investors to trust, and that has been proven in the past two rounds. Also, the taxation regime is quite clear, with a corporate income tax rate of 25%, standard in the region. In the last years, Uruguay has signed double taxation agreements with more than 20 countries, which eases the transactions with companies incorporated in such jurisdictions.
2. Organization and transparency of the process
Following excellent examples in the region (Colombia, México) Uruguay has designed and already applied a clear process for contractors’ s