Uruguay: The perfect place to pilot

Lee Kuan Yew, the architect of the modern Singaporean state, offers many lessons for smaller countries striving to play an outsized role in the global geopolitical landscape, especially those geographically nestled among great powers. He said, “A nation is great not by its size. It is the will, the cohesion, the stamina, the discipline of its people and the quality of their leaders which ensure it an honorable place in history.” I believe that Uruguay is in the early innings of designing a tax, innovation, and immigration policy that could lead it to become the model emergent economy for Latin America. In some years I expect Uruguay to be mentioned alongside Israel (startup nation), Costa Rica (climate champion), and Switzerland (banking and finance).

In the short run, I believe that Uruguay has the opportunity to be the most coveted and strategic launchpad for top entrepreneurs and startups in Latin America. While Uruguay has a population of less than 3.5 million people, has a land mass smaller than Washington state, and is often overlooked for its Brazilian and Argentinian neighbors as a business hub, there is much more to it. For starters, breakout companies including Globant, Dlocal, PedidosYa, Datanomik, Prometeo, and Bankingly all got their start in Uruguay.

I left my time in Montevideo with conviction that in the coming years Uruguay will become a test-bed for startups and that top talent might consider time in Uruguay as a necessary tour of duty for launching their business across the southern cone. Many people are working today to make this vision a reality. Spending time with leading voices from the community such as Rene Lebarthe from Oxychain, Hernan Haro from MrPink VC, Paula Mosera from UNDP, and Fernando de la Puente and Nicolas Slinger from NewLab convinced me deeply of the future of the innovation economy in Uruguay.

Let’s start with a few key observations behind this idea, followed by two specific ideas for investors and startups to consider for the future.

1. Uruguay has an unusually stable political and monetary system — Uruguay has a strong and beloved federalist system with a currency that relative to its neighbors, has maintained stability and strength for nearly two decades. Especially for international investors, headlines of record high inflation and government instability can trigger unconscious biases and lead to passing on investment opportunities — more professionally defined as “country risk.” Uruguay has a historically durable advantage in this regard.
2. Progressive and accessible leadership — A recent president of Uruguay was famous for not wearing shoes and rejecting the presidential palace to continue living on his mariposa farm north of Montevideo. From discussions with those close to the administration, the signal of accessibility is true to the core. Government ministry officials can be reached on a whatsapp basis, they are present at happy hours, and they engage with the issues directly.
3. Big neighbors, big opportunity — Brazil and Argentina are Uruguay’s immediate neighbors. A massive and medium sized market with great talent, venture capital, and research universities. Multiple direct flights daily from Montevideo to both countries’ capital cities. Taking a regional approach to talent, fundraising, technology development, and go to market could lead savvy founders to take the best each country’s ecosystem has to offer to accelerate their growth. For example, imagine an agtech startup hiring best in class researchers in Argentina while taking advantage of Uruguayan non-dilutive capital injection and executive advisor networks, and leading go to market in Brazil among the largest agriculture incumbents globally.
4. Incredible concentration of top corporate executives — Some people I met referred to Uruguay as the “La Suiza de Latino America.” Top executives from Mercado Libre, NuBank, Itau, and many of the top business leaders and family offices across Latin America have residency in Uruguay. This is partly due to the country’s friendly tax code surrounding high net worth individuals offering tax shelters in exchange for significant investment in the local economy (read: a fabulous summer home in Jose Ignacio). For a small country, having this high level of concentration means an outsized opportunity for the entrepreneurs in the area to access world class investors, advisors, and network. Proximity is power, and I could imagine the Uruguayan government playing a discreet role in facilitating these individuals to advise young entrepreneurs in the country, an invaluable asset for early stage companies.
5. Uruguay benefits from the post-Covid talent shuffle — The pandemic widened the share of top technical talent capable of working remote and brought cities and towns around the world previously considered vacation destinations into the long term living discussion, Punta del Este is one of those places, many of the people I met during my time in Uruguay were a reflection of this trend.
6. No Industrial Revolution hangover — Industrialization brought wealth and global relevance to some Latin American countries, but it also resulted in incumbent industry, intractable consolidation, inequality and in some cases deep political fissures. This is a leapfrog opportunity for Uruguay which never experienced a 20th century Industrial Revolution like its neighbors, in many ways its economy is still driven by farm agriculture and cottage industry. While this was a grave disadvantage in the last century, for the next it will be an advantage with no dominant industries or political arrangements to untangle or contend with as they seek to adopt and adapt to the tools of a 21st century economy (see point 6 and 7 for clear leapfrog examples).
7. Uruguay is the model for sustainable energy transition — The NYT Magazine recently highlighted the country’s pioneering moves to renewable energy in the last decade, the risks that the federal government took to set the transition in motion. The result is near total energy independence, a renewable energy mix of over 73% and advanced public consciousness on the topic.
8. Microsoft AI Research Labs in Uruguay — At first I was surprised to learn that Microsoft established one of its three cutting edge AI research labs in Uruguay in 2022, while the other two are based in Shanghai and Germany (arguably more predictable locations). In the age of AI, I could not imagine a more powerful signal from bigtech than locating their frontier research labs in the country. It signals a proclivity for innovation on behalf of the government, a high quality of life, and a strategic regional positioning.

These observations have convinced me of two things, 1) The Uruguayan government, in partnership with some of its leading local executives, a South American version of the Edmund Hillary Fellowship, and 2.) Startups should start to consider Uruguay as the “pais piloto.”

The Edmund Hillary Fellowship was initially a partnership between the government of New Zealand and Peter Thiel to attract top global talent to the country via a highly selective 2-year leadership program. The program offered specialized talent visas, non-dilutive capital, workspace, and proximity to top leaders around the world with aligned interests willing to help. Taking full advantage of all 8 observations above, I believe Uruguay has the opportunity to launch a new and improved model that soon becomes the most coveted fellowship in the Americas for only the most promising leaders that are likely to shape the next generation of companies and organizations across the continent, starting with the southern cone. If well designed, a few years from now the next David Velez could attribute their early success to time in Uruguay.

Whether or not such a program comes to live, I believe Uruguay remains an excellent place for founders to consider building their companies before entering larger markets. Let’s take a step back — when companies are just getting started they need some money, great coaches, customer feedback, and space to think and build with their teammates — this period usually lasts between 10–14 months. While VCs love to hear about big market opportunities, the reality is that the country you start in no longer dictates the size of the market you can address, and to state the obvious — nothing is big at the beginning. In fact, I believe that sometimes playing in a big/crowded market too early can be overwhelming, and a headwind masking an opportunity that often forces premature pivots. With this in mind, Uruguay can position itself as a launchpad to offer founders the resources to pilot early ideas with close advisors and a small but dynamic population of users.

Uruguay has the opportunity to be the small but mighty Latin American country of the 21st century economy, lean, sustainable, and capable of attracting and cultivating best in class talent to address the continent’s modern challenges. I can’t wait to visit again and witness the progress.

Thank you to the brilliant people I met along the way from NewLab, Oxychain, UNDP, and Mr. Pink.