Business Opportunities for Pharma Companies

BUSINESS OPPORTUNITIES FOR PHARMA

COMPANIES

Table of contents

Business Platforms & Opportunities for Global Companies ……………………………………………………………. 4 Pharma success stories ……………………………………………………………………………………………………………...... 6 Testimonials ……………………………………………………………………………………………………………………………………9 Uruguay´s Value Proposition ……………………………………………………………………………………………………….. 11 Reliablity ………………………………………………………………………………………………………………………….. 11 Market Access ……………………………………………………………………………………………………………….…. 15 Talent ………………………………………………………………………………………………………………………………..17 Lifestyle ……………………………………………………………………………………………………………………………. 21 Incentives ...... 28 Logistics Business Models………………………………………………………………………………………………………..…... 28 Comparison between tax systems (Logistics) ...... 32 R&D Opportunities ...... 32 Annex I: Key Players - Hub Operations in Uruguay………………………………………………………………………….35

BUSINESS PLATFORMS & OPPORTUNITIES FOR GLOBAL COMPANIES

Uruguay is the most reliable country to do business in one of the most economically attractive regions in the world. It offers a favorable business climate, social and political stability, investment grade rating and sustained GDP growth during the past 15 years. Investors distinguish Uruguay´s world-class infrastructure and excellent quality of life for executives and their families. Uruguay´s attractive tax system for export operations, such as the free trade zones, the investment law, free port and airport; qualified and multilingual talent (Spanish, English, and Portuguese) and competitive costs are also highlighted by investors. In addition, foreign investments receive equal treatment to domestic ones, there are no restrictions on capital or profit repatriation, and companies can operate in domestic or foreign currency. Uruguay offers advantages for different business platforms which make it an ideal business hub for the Americas. The HUB concept not only encompasses platforms for Support Services and Commercial activities but also for more sophisticated, innovative operations. There are successful FDI cases that found synergies between these different platforms:

Uruguay as LATAM´s business HUB – Success examples

LOGISTICS (Regional Distribution Centers) - Some of the main advantages offered by Uruguay include reducing inventories, lead times and deferring import taxes. It is particularly helpful for multimodal solutions as the timing is convenient, using this model is cost saving and predictable, especially as Uruguay reaches world class cold – chain standards.

COMMERCE (Trading & Procurement) - By centralizing these commercial activities in Uruguay is possible to optimize tax costs in the purchase & sale of products. This applies both for intra- Company Trading operations and for Procurement (supply of plants or other types of operations in the region).

SERVICES - Uruguay´s framework is ideal for companies aiming to centralize: a) Regional sales (Services companies) b) Support activities for its regional businesses (Shared Services Centers and Global Business Centers). This business model could be a specialized back-office center or even incorporate the centralization of commercial activities (Trading/Procurement/Sales) providing substance and efficiency. Main activities developed by Shared Services Center in Uruguay include Supply Chain services or Remote Coordination of the supply chain to customers, Finance and Accounting, Human Resources, Marketing Support, Customer Service, Legal Support, Treasury, etc. These activities can be carried out by the companies themselves (Captive Center) or by a third-party supplier. Moreover, Uruguay is a great location for companies looking to establish a Regional Headquarter. Some conditions such as tax benefits, quality of life for expats and a beneficial framework to develop Holding activities prove Uruguay’s favorable conditions to centralize regional positions.

INNOVATION (IT & BIO) - If you´re interested in expanding your R&D activities, or you are a tech Co. looking for a new location to develop your solutions, do not hesitate to evaluate Uruguay. In addition to the above-mentioned advantages, you will find a powerful innovation ecosystem, strong research groups and a mature Tech industry oriented to the development of high value-added solutions for global markets (the US is the main destination market).

For the development of these platforms, in addition to the pillars of Uruguay´s value proposition (Reliability, Strategic location, Talent and Quality of life) there are tax incentives (compliant with international OECD guidelines) such as the Free Trade Zones. These incentives provide an excellent opportunity for fiscal cost optimization.

Pharma Success Stories:

Roche has a Regional Supply Center in Uruguay which coordinates all logistic activities in Latin America. Also, the Center manages goods supply from the production centers to all its affiliates in the region. The main activities of the Regional Supply Center include: orders management, billing, and customer service. Thus, the Center has three different departments: Intercompany Operations, Supply Chain, and Transport. Each department ensures an alignment with regional interests and requirements.

Shimadzu Corporation manufactures analytical tools for precision and measurement, medical imaging systems, aircraft equipment and other industrial equipment. Shimadzu Latinoamérica S.A, works as a Regional Distribution Logistics center throughout Latin America for medical equipment, and analytical equipment (precision balances, and laboratory equipment). The company has business offices, a warehouse and their Regional Headquarters in Uruguay, which they moved from Brazil in 2013.

Merck settled in Uruguay in 1996. The company develops logistic, trade and shared services centers lead by regional and global positions. The operation has grown steadily, following Merck’s growth in Latin America, and currently 140 employees work in all the platforms. Regarding logistics, Merck packages and distributes biotechnology products manufactured in Europe, which are sent throughout various countries in the region. Concerning business services, the firm established a finance Shared Service Center that includes trading, procurement, F&A, supply chain and regulatory support activities for the region.

Adium Pharma settled its Regional Distribution Center in Zonamerica Business Park, Uruguay, to provide distribution and secondary packaging of finished generic drugs and raw material to most Latin American countries. Currently, it employs around 400 people.

AstraZeneca, has implemented in 2016 a strategic Logistics operation in Uruguay for the distribution of imported finished goods to Brazil. The products transit via Uruguay after sea and air long hauls, are consolidated and shipped via truck to Cotía plant, in the state of SP-Brazil. This Project delivered very important results to AstraZeneca’s operations. The travel times are very stable, damages and temperature excursions were reduced dramatically. For these reasons the company won an award as the best Distribution Network Strategy at Logipharma Awards. (https://logipharmaawards.wbresearch.com/2017-Winners).

Mega Pharma is a pharmaceutical company with a product portfolio commercialized in 18 Latin American countries and a total annual turnover exceeding US$ 1 billion. With a current investment of over US$ 100 million, in 2011 the company began the process of establishing its new headquarters together with a state-of-the-art R&D Center and Manufacturing Site in the Free Zone Parque de las Ciencias, which provides unique and redundant infrastructure capable of hosting industrial projects of such complexity. The new facilities will allow Mega Pharma to continue its consolidation and expansion with almost unlimited growth capacity and under a stable and trustworthy legal regime.

Abbott is a global health company dedicated to the discovery of new medicines, new technologies and new forms of health management. Its products range from nutritional products and laboratory diagnostics to medical devices and pharmaceutical therapies. Since 2015, it has installed its regional supply chain office in Uruguay, providing support to the LATAM region in Finance, Procurement, Supply and Distribution.

Integer Montevideo (formerly CCC Medical Devices) is dedicated to the design, development and manufacture of complete medical systems, with more than 35 years of experience in implantable medical devices that primarily service the United States market. Integer Montevideo has 250 employees, which includes 60 engineers (electrical, software, mechanical and chemical) in research and development. Locally, the company’s origin began in the 1970’s with the production of pacemakers and up until 2014, CCC focused 100% on the development of special projects in electronic engineering and software, including the prototype design and development of implantable and non-implantable devices, as well as manufacturing for its customers. In August 2014, CCC was acquired by

Greatbatch™, a medical device outsource company that provided components for implantable devices. In 2016, Greatbatch acquired Lake Region Medical™ and rebranded as Integer™. With the combination of CCC and Lake Region Medical, Integer has expanded its breadth of capabilities across the continuum from components to fully integrated systems to better meet the needs of the original device manufacturer (OEM).

URUGUAY’S VALUE PROPOSITION

Uruguay’s attractiveness relies on four key pillars: reliability, market and nearshore location, qualified human capital, and a unique lifestyle.

In service operations maximizing investment security is paramount. Uruguay offers investment security within an economically attractive region. The country has maintained strong political and social stability for years, supported by a consolidated democracy and the rule of law. Uruguay consistently leads Latin America and the Caribbean rankings relevant to potential investors:

1. Macroeconomic stability Uruguay has enjoyed 16 years of uninterrupted GDP growth. Between 2008 and 2019 the economy grew at an annual average rate of 4.1%.

Uruguay is recognized for its orderly management of public debt and for its fiscal stability. The three major credit ratings agencies Fitch (February, 2020), Moody´s (April, 2020), and Standard & Poor´s (May, 2019) have all ratified the country´s investment grade. Moreover, the US Department of State has recognized Uruguay as a fiscally transparent country.

1. Regulatory Framework | Easy for business

By virtue of its investment law, Uruguay guarantees equal treatment for local and foreign investors. No prior approval or registration is required to operate in Uruguay, and there are no restrictions on the transfer of capital or profits from investments. Companies can operate in both domestic and foreign currency. Furthermore, there is a single national tax system. Other tools which enhance the business environment are the Foreign Trade One-Stop-Shop (VUCE, in Spanish), a single platform which manages all the operations and documents related to imports, exports and transit. Furthermore, the New Customs Code (CAROU, in Spanish) introduces several innovations regarding customs, facilitating Uruguay´s internationalization. For further information about these and other utilities, check our Investor´s Guide available at http://www.uruguayxxi.gub.uy/guia/Index.html

2. Convenient distances for Business Centers. Business Parks under Uruguay's Free Trade Zone regime, such as Zonamerica or The Sciences Park (Parque de las Ciencias), are located five minutes from Carrasco International Airport (free airport) and 30 minutes from the Port of Montevideo (free port). Furthermore, Aguada Park and WTC Free Zone are strategically located in downtown Montevideo, close to universities, with excellent access, enabling young employees to continue studying while working.

Given the country's location, language, business history, shared culture and trade agreements, Uruguay is an excellent platform to access markets such as Brazil and Spanish-speaking countries. As a MERCOSUR member and its Free Trade Agreement with Mexico, Uruguay has access to a market of 398 million people, which represents the 76% of Latin America´s GDP. Uruguay is well-positioned as a regional business and logistics hub due to its proximity to the wealthiest areas in South America. The country´s free zones, free ports and airport, and bonded warehouses are ideal places to set up distribution centers. Moreover, Uruguay´s cultural affinity with Europe and North America, similar time zone, and excellent telecommunications infrastructure make the country an ideal nearshore location with those markets. Punta del Este Port

A country that empowers the digitalization: Fiber optic submarine cable Monet: A new underwater cable jointly developed in 2017 with Google. More than 12,500 Km from the US to Uruguay, allowing Uruguay to be an Internet provider to the region and the world. A Tier III Data Center, recognized as the Best Data Center Enterprise in Latin America, and able to be a provider of a wide range of solutions focused on the user. Huge infrastructure investments in fiber optic networks, with more than 23,000 Km and 77% of households with broadband connections. A well-developed IT industry placed at the forefront of technology in the world. Uruguay was invited to join the “Digital Nations Group”, a network of the world’s most advanced countries in digital development (Canada, Estonia, Israel, Mexico, New Zealand, South Korea, Portugal and the United Kingdom).

Moreover, digitalization has been growing for households too, as their Internet access increased from 13% to 81% in 2006-2019 and the digital gap was reduced from 35% to 8%.

Talent in Uruguay is highly competitive due to a combination of several factors: high quality of basic, technical and university training and the flexibility and ease of Uruguayan workers that allows them to adapt to new production processes or technologies. The Uruguayan workforce has been showing a steady increase in its ability to master other languages, in particular, English and Portuguese. Uruguay has the highest literacy rate in Latin America: 98%.

Free public education is provided from kindergarten to university.

4% of the country's GDP is invested in education

100% of high school students at the age of 15 have already completed at least three years of English and two years of computer science.

60% of University students work and study at the same time.

Long term policies: One Laptop Per Child Program. Uruguay´s Ceibal Plan is an initiative promoted by the Uruguayan government since 2007, based on the One Laptop Per Child (OLPC) program of the Massachusetts Institute of Technology (MIT). Uruguay was the first country in the world to provide laptop computers freely to all students and teachers in public schools and high schools. This program has allowed the country to substantially reduce the digital gap and empower future generations to face new employment challenges.

Education Technician General Bachelor Degree (University) equivalent Number of Educational Institutions in the 7 49 Metropolitan Area. Total number of enrolled students. 20.484 205.948 Total annual number of admissions. Not available 35.419 Total annual number of graduates. Not available 7.969 Life Sciences related studies % Global Services Enrolled students. 10% 28% Business Services related studies % Global Services Enrolled students. 41% 51% ICT related studies % Global Services Enrolled students. 22% 7% Architecture, Engineering & Creative Services % Global Services Enrolled students. 28% 13%

Source: MEC, Education statistical yearbook 2018 (Published in 2019)

Multilingual Talent: 66% of Uruguay´s population has a second language and 32% are multilingual. English is taught at nearly all public elementary schools and is supported by ‘Plan Ceibal’ (One Laptop per Child Project). With regard to private elementary schools, they have also incorporated it into their syllabus. In both public and private middle and high schools, English teaching is mandatory.Many elementary schools have incorporated Portuguese into their syllabus as well. Language skills among tertiary level students/graduates and general population:

Source: National Institut of Statistics (INE)

TOEFL English Examination

Supporting talent development: The Finishing Schools Program subsidies up to 70% of job training costs in specific skills required by companies to establish or expand export operations.

Since the program started operating (2012): 273 projects have been approved. 9,079 people have been trained. U$S 4,255,720 has been invested to train employees (from which U$S 1,870,221 was granted by the program). 301 companies have participated.

Moreover, Smart Talent, a website to post job opportunities focused on global services offers tests to measure the registered candidates’ knowledge. Through Smart Talent, companies can post their job vacancies and have access to tested profiles without any charge. It also works as a tool to promote the global services industry among young people in Uruguay through a series of awareness activities. The website was launched in March 2015 and today it has more than 350 global services companies and 35,000 registered candidates. In addition, 2,500 employment opportunities have been published since then.

Apart from the website, Smart Talent organizes different activities to foster companies’ employer brand such as visits to companies, tech workshops and the annual Smart Talent Day. We’ve been organizing 100 of these activities and we are looking forward to working with your company!

Fast-track for Visas and Residences. Talent from abroad is easier as there’s a fast track for Visas and Residences for, who find working and living in Uruguay very attractive.

Uruguay´s capital city of Montevideo (1.3 million inhabitants), Punta del Este and other cities offer excellent living conditions for executives and their families, including well-equipped free health services and education. More and more foreigners are choosing Uruguay as their place of residence for all or part of the year.

Uruguay ranks as one of the safest countries in Latin America on the Latin Security Index, developed by FTI Consulting for Latin Business Chronicle. The index measures security for multinational executives. What is more, according to Mercer´s 2019 Global Quality of Living Ranking, Montevideo is the best place to live in Latin America. The ranking is based on a variety of factors including wealth, economic growth, and quality of life.

Buceo’s coastline. Montevideo, Uruguay.

Quality of Living. Mercer (2019)

Incentives

3. INVESTMENT LAW

1. FREE TRADE 2. FREE PORT & FREE 4. TRADING INCENTIVE ZONES AIRPORT 5. HOLDINGS BENEFITS

6. TEMPORARY ADMISSION

Free Trade Zone Law.

Free Zones can be operated by the State or duly authorized private entities. Trade, industrial or service activities are allowed in Free Trade Zones. Moreover, companies in Free Zones can provide services to other countries and, in some cases, to Uruguay. Benefits granted to companies set up in Free Zones are: 100% Exemption from Corporate Income Tax (IRAE), Wealth Tax (IP) and any other current or future domestic tax. The State is the guarantor of this exemption.

Dividends distributed among shareholders with residence abroad are also tax-exempt in our country.

Foreign personnel may choose to contribute to social security in Uruguay or in their country of origin.

Sales and purchases of goods and services to and from abroad are VAT exempt. Sales and provision of services within Free Zones are also VAT exempt.

Companies may commercialize and provide services to Uruguay as well. In this case there are no tax exemptions for these goods and services provided to Uruguay.

Non-resident entities are also Corporate Income Tax exempt regarding activities developed with foreign goods declared in transit or kept within Free Zone, when they are not bound for the national customs territory. They are also Corporate Income Tax exempt when sales bound for the national territory do not exceed 5% of the total disposals of goods in transit or kept within Free Zone.

Goods traded by Free Zones with the rest of the world are exempt from customs duties.

Service companies may have up to 50% foreign personnel.

Free Ports and Airports.

The Free Port regime represents one of the mainstays for Uruguay to be positioned as a logistic platform in Mercosur and as a distribution center for goods in transit. Montevideo is the first terminal of the Atlantic coast in South America to operate under a "Free Port" system. This scheme also applies to the commercial ports of Colonia, Fray Bentos, La Paloma, Nueva Palmira, Paysandú, and Puerto Sauce, as well as Carrasco International Airport. When operating in a free port, goods circulate freely without the need for permits or formal procedures. During their stay at the port customs area, goods are exempt from all import taxes or import-related taxes. Since the adoption of the Uruguayan New Customs Code (C.A.R.O.U.), warehouses are not limited to those numbered by the article 2 of the Law 16.246 and its Regulatory Decrees. The same have been expanded, covering a larger range of possibilities, all in accordance with the provisions of the C.A.R.O.U. a) Storage warehouse: The goods may only undergo operations aimed to: ensure the recognition, preservation, lot splitting or volume fractioning, and any other operation that does not alter their value or change their nature or features.

b) Commercial warehouse: goods may undergo changes to facilitate their trading and increase their value. However, in order to enjoy the benefits of the originating goods, neither the tariff classification nor their originating nature shall be altered.

c) Overhaul and maintenance warehouse: Used for goods that may be subject to repair and maintenance services, not modifying their nature.

d) Temporary storage warehouse for exhibitions and similar activities: storage of foreign goods entered for the purpose of trade shows, demos, fairs or similar activities, following the authorization of the National Customs Directorate.

e) Logistics warehouse: the goods may undergo operations that alter their status or nature, provided their origin is not altered; those activities may consist of: assemblage or mounting; mixes; insertion or replacement of parts, pieces or accessories; setup of hardware; installation of software; packing, packaging, labeling or addition of other products always used for the marketing of goods that are to exit the warehouse; and other similar operations established by the Executive Power. The regulation incorporated through the C.A.R.O.U. establishes that goods that enters into the ports may remain for a maximum of five years, which term is renewable. Apart from the abovementioned customs benefits, the movement of goods and the rendering of services carried out within the port customs area are all VAT exempt. Moreover, goods placed under free port scheme are not included in the taxable base for Wealth Tax or Income Tax purposes. Suchlike Free Zone system, merchandise under the Free Port system does not lose its origin, both if it is reexported in identical conditions as imported and if it was subject to operations

which did not alter the nature of the product or its origin. In this sense, several agreements signed by Uruguay, including Mercosur and Israel, include a system of certificates of origin which facilitate the type of operation provided for in the Free Port system. Investment Law. This regime enables the investor to pay less corporate income and wealth tax (between 20% and 100% of the amount invested). That is to say, for all investment projects under this regime and promoted by the Executive Branch, it is possible to compute as part of the tax payment (IRAE - Corporate Income Tax) between 20% and 100% of the invested amount, depending on the type of project and the score obtained relying on different indicators. Tax benefits for Global Services companies located outside Montevideo.

Activities carried out by service companies are granted relevant tax benefits: 90% exemption of Corporate Income Tax. 100% exemption of Wealth Tax applicable to assets involved in the promoted activities. Service-exporting companies can have access to the aforementioned benefits if: the following ratio surpasses 60% each financial year: total remuneration costs for services rendered under an employment contract total remuneration costs rendered under an employment contract and out of it they are located within an 80 kilometers radius from Montevideo’s city center; they generate at least 15 new direct qualified jobs at the end of the first two years; at least 50% of the personnel is Uruguayan (provisional reductions may be authorized); they provide services to at least 5 entities. The tax exemption period will depend on the amount of new qualified jobs generated by the company: (i) 5 years when at least 15 new jobs are generated at the end of the first two years; (ii) 8 years when at least 30 new jobs are generated at the end of the first three years; and (iii) 10 years when at least 60 new jobs are generated at the end of the first four years. Youth Employment Law N°19,133. In order to promote youth employment, companies receive a subsidy from the State which is paid as credit to pay obligations to BPS (Bank of Social Security in English). Private-sector companies or institutions may apply to the Youth Employment Program through Via Trabajo website. It is important to take into consideration that the maximum hiring cap corresponds to 20% of the company’s permanent staff. Those firms with less than 10 workers may hire a maximum of 2 young people. Depending on the following categories, the company or institution that hires young employees will be subsidized accordingly.

New recruitments: First work experience: it allows hiring young people that are between 15-24 years old and have not had any previous work experience. The hiring period goes from 6 months up to 1 year and the firm will be subsidized 25% of the employee’s salary, being the maximum amount of the subsidy a 25% of $21.094 (preset value for 2020 – Uruguayan Peso).

Youth protected work: it allows hiring young people from 15-29 years old that are in socioeconomic vulnerability. The hiring period must be from 6 months to a maximum of 18 months. The percentage of subsidy corresponds to 80% of the employee’s remuneration (for women) or 60% of the employee’s salary (for men).

Working practices for graduates: It allows hiring young people from 15-29 years old for a maximum period of 12 months. The employee must have previously studied a career and the working practice must be related to it. The subsidy that the company receives represents a 15% of the employee’s salary. Internships/Training: Internships: Aimed to young people aged between 15-29 years old who are currently studying. The program requires an internship related to their studies. The practice can be paid or unpaid. If the student receives a salary, up to 50% of the employee’s remuneration will be subsidized. An unpaid internship may not exceed the total 120 hours of the course, though, if it is a paid internship, the days and hours of the training practice must be agreed between the educational institution and the training company. Benefits for students already working at a company: In order to prevent labor market access from causing drop outs in the education system, the Youth Employment Law provides an extension of study leaves granted by Law N°18.458 (*) and working hours reduction. Study leave: aimed to young people aged between 15-29 years old. Companies are granted an 80% subsidy of the employee´s salary per extra day of leave, being 8 the maximum amount of extra days that can be granted.

Working hours reduction: aimed to young people aged between 15-29 years old. Companies are granted an 80% subsidy of each reduced hour's value, being 4 the maximum amount of working hours that can be reduced. The minimum length of the aforementioned benefit is one week and the maximum two months per year. For more information please click here: https://www.bps.gub.uy/10371/empleo-juvenil.html. (*) The Law N°18.458 already grants the worker a 9 –day study leave.

Temporary Employment Subsidy. In order to stimulate employment among people that have not had any previous work experience, private-sector companies or institutions may apply to the Temporary Employment Subsidy through Vía Trabajo website. It is important to take into account that the maximum hiring cap corresponds to 20% of the company’s permanent staff. Those firms with less than 10 employees may hire a maximum of 2 people. Subsidies are as follow:

- 25% of the employee’s monthly salary when hiring workers between 15-44 years old. - 40% of the employee’s monthly salary when hiring workers at the age of 45 or older. The abovementioned subsidies only apply to new hirings with a maximum salary of 2.5 NMW (National Minimum Wage) Moreover, the subsidy may not exceed 25% of 1.5 NMW. It shall be granted for a maximum period of 18 months. For further details please click here: viatrabajo.mtss.gub.uy/ (*) National Minimun Wage: $16.300 uruguayan pesos as of 01/01/2020.

Trading Activities.

In terms of trading activities, there is a law that rules a specific framework for the trading of goods or services, as long as they do not enter or aren´t provided from Uruguay. The trading services themselves have to be delivered from Uruguay. In that case, 3% of the net profit is considered from Uruguayan source. Over that 3%, the Uruguayan corporate income tax (IRAE 25%) is applicable (Resolution51/997).

See other incentives: Contact centers incentives. Protection of personal data and habeas data remedy. Reimbursement of VAT. Software industry incentives. Free ports and airports. Temporary admission - Trade agreements.

Holding activities. Refers to centralizing the ownership of the subsidiaries or investments of the firm in the region. Uruguay has advantages for the establishment of holdings since it applies the principle of territoriality for tax purposes and consequently the income generated by the holding of

investments abroad (Dividends, Capital Gains, Interests, etc.). These are not subject to taxation In Uruguay. Likewise, the establishment of holdings presents synergies with activities of Headquarters, Trading Centers or Shared Services since it is convenient for international tax purposes to have economic substance for the holding's activity. The financial market is totally free; no prior consents for foreign exchange inflow or outflow are required. There are no restrictions to the inflow or outflow of capital, transfer of profits, dividends, interest, etc. Temporary Admission.

This authorizes tax-exempt introduction of foreign goods into the market to be subsequently exported within a set timeframe of five years. These goods can be reshipped both in the condition they were introduced ("as-is") or after having undergone specific transformation, manufacturing, repair or value-adding processes. Machinery and equipment of any origin, which enter into the country on a temporary basis for its repair, maintenance, update or use, are also protected by this system. Interested industrial companies may apply for the import of goods under the Temporary Admission scheme with LATU (Laboratorio Tecnológico del Uruguay –Uruguay’s Technological Laboratory), the authorizing entity. This law further offers Stock-taking and Draw-back mechanisms. The Stock-taking mechanism consists of replacing goods imported under the general scheme with the import of similar goods, free from taxes and levies, when they have been used as input for the transformation of exported products in the country. The Draw-back mechanism gives the possibility to claim the refund of taxes and levies paid for the import under the general scheme of goods which, by definition, can be imported under temporary admission and which were used in the country for the manufacture of products bound for export.

LOGISTICS BUSINESS MODELS

A - Uruguay as a Gateway to the region:

The operation consists of unloading goods and cross docking to another transport mode with minimum time (one day). The simplest situation would be the one where an exporter might consider using our platform simply as a port of entry, using intermodal transport to get to final destination. The main reason for using this procedure would be timeliness and predictability, of course supposing that there is a cost efficient situation also.

B - Uruguay as a Regional Distribution Center:

A more complex operation would include a REGIONAL DISTRIBUTION CENTER in Uruguay. This type of operation could be used by an exporter from any country who would like to manage an inventory in Uruguay and send to market on just in time basis, but not keeping unnecessary high stocks in each country. Logistics operators in Uruguay would provide full inbound services from port or airport to warehouse, giving shelf space on a volume based price. Today´s clients are working with different types of products and with storage times of 45 days on average. Upon receiving orders, these would be prepared and dispatched in one or two days. C - Uruguay as a Distribution and Customization Center:

The last model would include customization in the REGIONAL DISTRIBUTION CENTER, adapting goods to the requirements of different clients and/or countries.

So if an exporter wants to manage a centralized inventory for more than one country it will be necessary to apply some type of process to the products. Logistic operators have a high expertise for these value added activities, they usually analyze the processes required by their clients and provide tailor made procedures and costs.

What are the specific advantages of Uruguay’s logistics platforms? As a Gateway: Safe and agile entry: 94% of shipments dispatched in fewer than 8 hours. Containers removed from port premises in fewer than 48 hours. Quick border crossings. Reduced costs: Financial (deferred costs). Economic (stock reduction). Operative (efficiency gains resulting from consolidation). Tax breaks for companies and merchandise. As a Regional Distribution Center and/or Customization Center: Inventory optimization Centralization of regional inventories at heart of Mercosur. Reduced costs Financial (deferred costs). Economic (stock reduction). Operative (efficiency gains resulting from consolidation). Tax breaks for companies and merchandise. Improved service Faster speed to market. VAL services and benefits, including customization. Flexibility (reallocation of destinations). Client maintains ownership of goods. Lower risk: Option of having goods in US dollars.

Protection from global economic uncertainty or political turbulence. Uruguay is a smart choice, with an efficient, agile, non-bureaucratic and competitive port, with frequent vessel routes to all Brazilian ports. Ocean freight from Uruguay to Brazil is more economical than Brazilian inland freight. By reducing the CIF value of goods, the Uruguayan – Brazilian freight route reduces the Merchant Navy Tax, as well as all duties related to the Brazilian taxation. For example, a 40-feet container shipped by ocean from Montevideo to Recife costs 20% less than a container shipped inland between Sao Paulo and Recife. Similar savings apply to other Brazilian destinations.

COMPARISON BETWEEN TAX SYSTEMS (LOGISTICS)

Free Trade Zones (FTZ) Free Port/Airport Tax Warehouse

Storage, Commerce, Storage, Commerce, Reparations and Authorized Commerce, Manufacture, reparations and maintenance, exhibitions activities Services maintenance, exhibitions or or similar activities, similar activities, Logistics Logistics

Inside FTZ companies are exempted from created and future taxes Flexible Social Security: Goods are exempted from foreign employees may import & corporate taxes, Goods are exempted from Taxation choose social security VAT and non residents import taxes. system (national or income tax. foreign). Government guarantor of the exemption

Time in the No restrictions No restrictions 5 years (non-extendable) warehouse

Origin not affected by this Origin not affected by this system system Goods originating in MERCOSUR or a third The validity of the The validity of the country with an agreement certificate is taken from the certificate is taken from the with MERCOSUR, shall not departure of the departure of the Origin System lose their origin as long as merchandise from the merchandise from the the tariff classification or warehouse (180 days) warehouse (180 days) the originating nature is not altered (Decision CMC No. 33/15) Goods may be fragmented, Goods may be fragmented, issuing derivative origin issuing derivative origin certificates certificates

R&D OPPORTUNITIES

Uruguay is a great place to develop innovations and try new technologies. Its nature as a small and transparent country, with easy access to decision makers and regulators, great incentives for R&D initiatives, and modern tech infrastructure, makes of Uruguay an ideal test-bed country. Global companies with R&D activities can invest directly by installing or acquiring R&D or manufacturing centers, as well as contracting services (projects) from qualified local suppliers.

Uruguay´s attractiveness as an innovation hub additionally relies on some key successful factors:  Availability of talented and cost-competitive R&D workforce.  Science and technology parks with cutting-edge infrastructure under the free trade zone scheme (exempted from all taxes).  R&D institutes such as the Institute Pasteur together with a vast network of academic research groups and startups providing services, forming a functional innovation ecosystem for the development of R&D projects and centers.

MEDICAL CANNABIS As the first country in the world to integrally legalize cannabis (recreative, medical & industrial), Uruguay offers a wide range of business opportunities throughout the entire value chain (research, processing and industrialization for medicinal, nutritional or cosmetic purposes). There are international and local companies that manufacture cannabis by-products which have built up a strong base for an innovative ecosystem in Uruguay.

55 companies. 75 licences granted (March 2020). 48 for crops. 8 for industrialization. 19 for scientific research. 43 licences under evaluation. More than 1500 direct jobs already created. More than 133 million dollars invested.

ANNEX I: KEY PLAYERS · HUB OPERATIONS IN URUGUAY

International Country of Operation Location Captive/ Commerce & FTEs* Logistics IT Centers origin in UY in FTZ Third Party Services

TCS India 2002 ZA 1600 TP

Sabre USA 2004 ZA 926 C

Alorica USA 2011 AP 850 TP

Mercado Libre Argentina 2011 AP-WTC 914 C

Despegar Argentina 2010 ZA 450 C

Globant Argentina 2010 AP 450 TP

BASF Germany 2014 478 C

Atento Spain 2006 165 TP

Pedidosya Germany 2010 390 C

Mega Labs Argentina 2013 PDLC 350 C

RCI USA 2005 ZA 380 C

Trafigura Switzerland 2013 ZA 400 C

Adium Pharma Argentina 2010 ZA 325 C

Integer USA 2014 300 TP

Tenaris Italy 2003 180 C

Syngenta Switzerland 2016 210 C

Avanza Spain 2006 210 TP

Merck Germany 1989 ZA 140 C

Altisource USA 2009 ZA 140 C

PEPSICO USA 1955 ZFC 150 C

Finning-Cat Canada 2003 ZA 100 C

Netsuite USA 2012 140 C

International Country of Operation Location Captive/ Commerce FTEs* Logistics IT Centers origin in UY in FTZ Third Party & Services

Dufry Switzerland 2010 ZA 130 C

Aiva- Old Mutual China 1994 ZA 90 TP

Sportradar Switzerland 2010 ZA 120 C

RICOH Japan 2010 ZA 120 C

Willis Towers USA 2005 WTC 110 C Watson

Verifone USA 2006 ZA 110 C

Julius Bär Switzerland 1994 ZA 100 C

Cofco Hong Kong 2002 WTC 85 C

Stefanini Brazil 2012 100 C

Bunge Netherlands 2012 WTC 95 C

Louis Dreyfus France 2002 WTC 70 C Company

Tradehelm USA 2016 AP 130 TP

Assist-Card Switzerland 1998 ZA 30 C

Bestseller Denmark 2014 WTC 100 C

Totvs Brazil 2000 60 TP

Itaú Brazil 2013 AP 35 C

Pluspetrol Netherlands 2015 WTC 50 C

Travel Leaders USA 2011 AP 70 C

Infragistics USA 2008 40 C

Etermax Argentina 2013 WTC 35 C

Lexmark USA 2004 ZA 40 C

Humphreys & USA 2011 WTC 30 C Partners

Biotoscana Luxembourg 2016 WTC 35 C

Abbott USA 2016 ZA 30 C

International Country of Operation Location Captive/ Commerce FTEs* Logistics IT Centers origin in UY in FTZ Third Party & Services

Roche Switzerland 1947 120 C

GIS Europa Belgium 2012 WTC 25 TP

Interfood Netherlands 2011 ZA 30 C

Arcos Dorados USA 2011 WTC 25 C

*AP= Aguada Park

ZA= Zonamerica

WTC = World Trade Center Free Zone

PDLC= Parque de las Ciencias

ZFC= Zona Franca Colonia