Fruits and vegetables are significantly more expensive in Uruguay than in Brazil, as revealed by a recent study.
For example, a resident of Rivera, a Uruguayan border city, who goes to the local market will find a 180-gram tube of toothpaste costing 243 Uruguayan pesos (US$6.20). However, if the same resident crosses the street to a market in Sant’Ana do Livramento, Brazil, they will find the same product, produced in São Paulo, for just R$6.99 (US$1.28).
According to a survey conducted by the Center for Development Studies (CED) at the request of the Central Bank of Uruguay and published in February, the average price of products in Uruguay can be nearly three times higher than the import price. The difference is even more noticeable for items like soaps and deodorants, which can cost up to six times more than the entry price into the country.
Based on data gathered by the World Bank, the Center for Development Studies (CED) compared the prices of around 600 products in Uruguay with those in 43 other countries over time. The research found that, on average, prices in the South American country are 27% higher than in other nations.
Moreover, developed European countries like France, Germany, and the United Kingdom have lower prices than those found in Rivera or Montevideo. Compared to other places in Latin America, products in Uruguay are more than twice as expensive as in Bolivia, 80% more expensive than in Mexico, and 20% more expensive than in Brazil and Argentina, Mercosur partner countries from which many tariff-free imports come.
In specific categories, Uruguay is 58% more expensive than the average of countries in hygiene and cleaning products, 55% in food and non-alcoholic beverages, and 43% in computing and electronics. This phenomenon is more pronounced in areas with little domestic production, which requires importing many products, explains Ignacio Umpierrez, an economist and researcher at CED.
Ignacio Umpierrez, an economist and researcher at the Center for Development Studies (CED), asserts that high prices in Uruguay are not merely a short-term issue related to the value of the Uruguayan peso but a situation expected to persist in the long term. He highlights the concept of the “country effect,” referring to certain conditions that make Uruguay more expensive.
According to Umpierrez and his team, the Uruguayan market, due to its small size with a population of 3.5 million people, is dominated by a few large companies responsible for much of the imports. The lack of competition results in high profit margins: the research found that profit per product often represents more than half the price paid by the end consumer. In other words, an imported item for 10 can be sold for more than 20 to the consumer.
Umpierrez describes these margins as “relatively high” but admits not knowing exactly how many intermediaries are involved in the chain between the importer and the final consumer.
Sebastián Fleitas, a Uruguayan economist and economics professor at the Pontifical Catholic University of Chile, specializing in competition and markets, adds that Uruguay faces additional challenges in international trade due to its geographical location. “Uruguay is far from the rest of the world, which implies higher transportation and logistics costs, especially when products do not come from neighboring countries,” explains Fleitas.
Fleitas notes that Uruguay is expensive due to “two central problems”: the lack of competition and state-regulated sectors, where regulation often faces serious problems. He explains that the small size of the country and the intense interaction between the regulated and the regulators complicate the defense of competition and the control of lobbying, making cost reduction a challenging task requiring significant political capital.
A crucial aspect is the control exerted by large companies that dominate the Uruguayan market. According to Umpierrez, these companies often maintain exclusivity or trade agreements that hinder competition. For example, if a Uruguayan company wants to import toothpaste bought for US$1.28 in a Brazilian supermarket or wholesaler, it cannot do so without the product’s technical data sheet, even if it is the exact same item sold by a subsidiary of a multinational in Uruguay.
Economist Alfonso Capurro from the CPA/Ferrere consultancy questions whether, in protecting an industry, we are actually protecting the monopolistic profits of an importer. He states that there are regulations aimed at protecting the consumer but points out that the “inertia and accumulation of different regulations” create an environment where rules overlap and prevent the market from functioning more efficiently.
Capurro emphasizes that regulations, which should ensure consumer protection, often end up limiting competition and inflating prices. CPA/Ferrere conducted another study at the request of the Central Bank of Uruguay, this time focused on fruit and vegetable prices, reinforcing the need to review and simplify the set of regulations to improve market efficiency.
“This makes fruits and vegetables more expensive than they would be if they could be imported,” says Capurro. The study conducted by CPA/Ferrere compared fruit and vegetable prices in wholesale markets in Uruguay and Brazil and found that, for example, tomatoes cost three times more in Uruguay. Capurro notes that by removing these protections, the local production sector could disappear, characterizing a “hidden subsidy” that raises prices for consumers.
Another factor contributing to high prices is the Uruguayan tax system. Capurro explains that, in addition to the Value Added Tax (VAT), some products face additional taxes that increase their cost. “Our tax system is a bit outdated, based more on direct consumption taxes than on income taxes. We pay less in taxes like income tax, but these taxes are directly applied to the goods consumed,” the expert concludes.
Uruguay faces high prices in various sectors due to a combination of economic and regulatory factors.
A notable example is fuel: Uruguay has the most expensive gasoline in Latin America and the 15th most expensive in the world, with nearly half of the price made up of taxes. Diesel is also expensive, partly due to the subsidy for public transport, which raises transportation and distribution costs for products. Furthermore, profit margins in distribution are high because “truck drivers and gas stations are not willing to compete,” explains economist Alfonso Capurro.
Electricity in Uruguay is also among the most expensive in the world, partly due to investments made in the last decade to increase renewable energy production.
Uruguay is the Latin American country with the highest per capita Gross Domestic Product (GDP), around US$22,000, which classifies it as a high-income country according to the World Bank. Each Uruguayan family earns on average about US$2,500 per month, according to the National Institute of Statistics. Despite this high income, Uruguayans often feel that the cost of living is very high.
Comparing with Spain, for example, where the average monthly income is around US$3,200 and shopping costs 25% less than in Uruguay, Uruguayans face a greater financial burden. Even compared to countries known for their high cost of living, like Copenhagen, Uruguay faces challenges. “Copenhagen is expensive but for good reasons. People live very well there, earn very good salaries, and are happy with it,” says Sebastián Fleitas, an economist at the Pontifical Catholic University of Chile.
On the other hand, housing is more affordable in Uruguay compared to many developed countries. The average rent in Uruguay is about US$500, while in Spain it is double, according to official data.
The three economists interviewed agree that the welfare state provided by Uruguay has its costs, reflected in prices. However, some of these initiatives are beneficial to the population, while others result in benefits for entrepreneurs and workers in specific sectors, without generating general welfare. Fleitas notes that “we are expensive for things that do not generate well-being for the population, but are incomes that go to some entrepreneurs and workers in these sectors.”
