World demand for dairy products is rising as populations grow and incomes increase globally. While production is increasing in many countries, it is not keeping pace with rising demand. Uruguay has competitive advantages in dairy production, including low costs, high productivity, and preferential access to export markets. It currently exports over 60% of its milk production. There are opportunities to increase exports by exploring new product niches and customized products to serve diverse international markets. The Uruguayan dairy industry has experienced steady growth and foreign investment, positioning it well to capitalize on growing global demand for dairy.

1. April
2010
Dairy Industry
Investment Opportunities

2. WHY INVEST IN THE URUGUAYAN DAIRY INDUSTRY?
Rising world demand
Changes in world demographics (i.e., migration to cities), the rise in average income, lifestyle
changes and population increases are some causes of the rise in food consumption and
animal proteins in particular. World milk production has been increasing at a slower rate
than world demand for dairy products over the past 10 years.
Uruguay is one of the few countries that can supply this rising demand
Milk production in the European Union (EU), India, the US and China is
oriented to cover domestic market demands and the possibilities of
expansion are limited or would be absorbed by domestic consumption.
The Uruguayan dairy industry has significant competitive advantages and
offers investment opportunities both in primary and industrial production
phases. Uruguayan milk production accounts for 0.3% of total world
production, but Uruguay represents 2% of world exports. Like Australia and
New Zealand, Uruguay exports more than 60% of its milk production.
Low costs and great potential for productivity improvements
Uruguayan milk production has risen 3% annually over the past 10 years and 4% over the
past five. Dairy cows are fed mainly pastures and a moderate supply of concentrates. Prices
received by Uruguayan producers are lower than those received by New Zealand or
Australian producers (and lower than Argentine producers as well). Production costs are
among the lowest in the world.
The expansion of Uruguayan agriculture increases the domestic availability of grains and
sub-products for strategic supplementation.
Manufacturing opportunities also exist in the dairy industry and include company
consolidation, process and product innovation, and product and marketing mix.
Practically unexploited world market offers great opportunities
The export mix consists mainly of powdered milk (53%) and cheeses (32%). Exporters focus
primarily on the Latin American market. Due to problems of scale and deficiencies in
marketing and product presentation, there is limited experience in supplying extra-regional
markets. Customized products and/or market niches have not yet been explored (e.g.,
kosher, halal, flavored cheeses and organic products). This also occurs in the production of
ingredients and nutraceuticals.
2

3. Uruguay, a reliable country with preferential access to regional markets
In Uruguay, foreign investors receive the same
treatment as local investors. Funds may be freely
transferred and profits may be freely repatriated.
Uruguay belongs to Mercosur, a market of over
260 million inhabitants, and almost 400 million if
we include other South American countries with
which Mercosur has economic complementation
agreements, such as Bolivia, Chile, Colombia,
Ecuador, Peru and Venezuela. Uruguay has signed
free trade agreements with Mexico and Israel.
Uruguay has a highly attractive investment and export promotion system
In 2007, Uruguay adopted an investment promotion system that allows companies to use
between 51% and 100% of investments as income tax payments under certain conditions.
Benefits for all exports include:
refund of VAT paid on supply purchases
a tax exemption system (customs and other duties) for imports of supplies
used in exported goods
a pre-export financing system
Uruguay has broad experience in the dairy industry
Uruguay has a long history in both milk production as well as the elaboration of dairy
products. Over the past 20 years, milk production has doubled while income from exports
has increased ten-fold. The recent arrival of major foreign investments, such as New Zealand
Farming Systems, Schreiber Foods and Bom Gosto, denotes a promising future for the
industry.
Why invest in Uruguay?
Significant comparative advantages based on:
Well-irrigated land and temperate climate with rain averaging
1,200 mm distributed throughout the year.
More than 80% of the surface area is arable and totals
approximately 4 hectares per person (world average is 0.21
hectares per person).
No natural catastrophes.
3

4. Export-oriented primary production:
Agriculture-based exports account for 65% of total exports.
7th largest beef exporter in the world (exports to 85 countries).
3rd in world ovine meat exports.
6th in world rice exports.
The grain elaboration process offers a large availability of sub-products with potential for
use in supplementation:
Soy production has risen 48% annually over the past 8 years.
Corn and wheat production has risen 18% annually over the past 8
years.
Dairy agroindustry data1:
Dairy accounts for 9.3% of agriculture/ livestock gross production
value and ranks third behind beef and rice production.
Milk production: 1,582 million liters.
Shipments to plants: 89% of production.
70% of plant shipments exported (to 90 countries).
Dairy farms: 4,592.
Surface area: 849,000 hectares (6% of total).
Improved surface area: 58% of total.
Number of dairy cows: 408,000.
Exports: USD 442 million (7.3% of all exports; third in importance
following beef and rice).
1
Data from 2007-2008
4

5. 1. World dairy market
Over the last 10 years, world production has
risen 2.1% annually (see Figure 1). China has
had the highest production growth and
focuses on supplying its domestic market.
Chinese milk production rose at a rate of
17% annually between 2002 and 2008. In
turn, Uruguay ranks second in the same
period with a growth rate of 4.1% (see
Figure 1). Milk production in Australia and
the European Union, two major players in world trade, has declined.
Figure 1: Milk production growth rates, 2002-2008 (selected countries)2
Average world growth rate = 2.1%
4,12% 4,02%
4% 3,29% 3,16%
2,04% 2,02%
Annual acumulative growth
2%
0,97%
0,66%
0%
-2%
-0,57% -0,93%
-2,79%
-4%
-6%
-8% -7,69%
Global exports of dairy products have risen over the last 10 years at around 4% annually.
Nevertheless, just 7% of world milk production is exported as manufactured products. New
Zealand and the EU account for 65% of world dairy trade, while Uruguay accounts for 2%
(see Figure 2).
2
Source: USDA – FAPRI (does not include China)
5

6. Figure 2: World dairy share, 2008 (in milk equivalents)3
N. Zealand European
33% Union 32%
Uruguay
Australia
Others 2%
11%
14% USA
8%
Given the low volume of milk sold internationally, any changes to global demand or supply
lead to magnified price changes. This market is estimated to be very volatile in the medium
and long term. Global demand for dairy products will continue to rise given the increasing
recognition of the nutritional value of milk and the improvement of living standards in
developing countries. The reasons behind these long-term auspicious forecasts for the dairy
industry have not changed with the current global economic crisis. The Agricultural Outlook
2008-2017 report by the OECD-FAO states that global dairy imports could increase between
23% and 57% by 2017 as compared to the 2005-2007 average, and that developing countries
will capitalize on the demand by nearly doubling exports (see Figure 3).
3
Source: based on data from Dutch Dairy Commodity Board, FAO and USDA
6

7. Figure 3: Estimates of increases in exports and imports of dairy products in 2017 vis à vis
2005-2007 average
130%
Powder milk (whole) Powder milk (skim)
110% Butter Cheese
90%
70%
50%
30%
10%
-10% IMPORTS OECD Countries Developing Countries
-30% EXPORTS
The continual growth in milk production in Uruguay is sustained by its solid international
positioning. With consumption equivalent to 219 liters per person per year (one of the
highest in the world), the entire increase in production is exported. Uruguay ranks second in
exposure to international competition, as milk exports represent 65% of production (see
Figure 4).
7

8. Figure 4: Dairy product exports (% of production in milk equivalent), 2006-2008 average4
80%
70%
60%
50%
40%
30%
20%
10%
0%
USA
EEUU Canada
Canada Argentina
Argentina EU
Unión Australia Uruguay N. Zealand
Australia Uruguay N. Zelanda
Europea
In short, the medium and long-term perspectives are encouraging for countries with a
competitive dairy industry that will be able to increase their share in an expanding
international dairy market. Milk production in Uruguay and its international position enable
increased business opportunities throughout the value chain. For example, a few years ago,
a New Zealand company sponsored the creation of the Uruguay-based and Auckland-listed
New Zealand Farming Systems Uruguay (NZFSU). The objective of NZFSU is to capitalize on
the opportunities to acquire lands and develop and adapt the New Zealand milk production
system to the local environment (see Table 2).
2. Why invest in the Uruguayan dairy industry?
The following is a description of the value chain, to be used for the identification of business
opportunities.
2.1. Industry description
The average annual per person consumption of dairy products is 219 liters (in milk
equivalents), which is similar to levels in more developed countries. The total value of the
domestic market is estimated at USD 400 million in terms of consumer prices (2008). The
main consumer product is liquid milk (240 million liters totaling approximately USD 120
million), followed by cheeses and yogurt. The recent deregulation of the liquid milk market
4
Source: FAO - USDA
8

9. opens opportunities to small plants (see Appendix 1 for more information on the domestic
liquid milk market).
Exports of dairy products in dollar terms rose 9% annually between 1991 and 2009 and 19%
during the 2002-2009 period (see Figure 5). In 2009, sales were USD 369 million, down from
the record USD 433 million achieved in 2008.
Figure 5: Dairy product exports (USD millions, FOB)5
2008
2007
2006
2005 Annual growth rate:
1991 - 2009 = 8.9%
2002 - 2009 = 19%
2004
2003
2002
50 100 150 200 250 300 350 400 450
Currently, the dairy sector exports to more than 60 countries. Brazil and Venezuela account
for 46% of export income, followed by Mexico at 20% and Cuba at 6% (see Figure 6).
5
Source: Agriculture Statistics Bureau (DIEA), Office of Agriculture Programming and Policy (OPYPA) of the
Ministry of Livestock, Agriculture and Fishing (MGAP).
9

10. Figure 6: Major dairy export destinations, 2009 (in terms of value)6
GERMANY SENEGAL ALGERIA MOROCCO CHILE
4% 4% 3% 3% 3% OTHERS
6%
SOUTH KOREA
5%
CUBA
6%
BRAZIL
25%
MEXICO
20%
VENEZUELA
21%
Powdered milk (whole and skim) is the sector’s number one export product and accounts for
44% of exports, followed by cheeses at 36%.
Figure 7: Exports per product type, 2009 (value)
MILK AND CREAM,NOT
CONTAINING ADDED SUGAR
WHEY
SERUM
BUTTER
CHEESE AND CURD
MILK AND CREAM WITH
ADDITION OF SUGAR
0% 10% 20% 30% 40% 50%
6
Source: Developed by Uruguay XXI based on Customs Bureau data.
10

11. An analysis of export market destinations also shows a budding specialization with regard to
the type of products exported (see Figure 8).
Figure 8: Powdered milk and cheese exports, 2008 (volume)7
35%
30%
Milk powder Cheese
25%
20%
15%
10%
5%
32%19% 9% 29% 12%19% 11% 0% 0% 19% 8% 0%
0%
BRAZIL VENEZUELA MEXICO CUBA SOUTH KOREA SENEGAL
Venezuela, Mexico, Cuba, Brazil, South Korea and Senegal account for 73% of powdered milk
exports and 89% of cheese exports (see Table 1).
The country’s largest dairy company, Conaprole, reports more than 50% of its income from
exports (see Table 1) and is followed by Inlacsa (Mexican shareholders), Ecolat (Venezuelan
shareholders) and Bonprole (joint venture between Bongrain of France and Conaprole).
Figure 9: Share of the top 10 dairy exporters, 20098
ECOLAT CLALDY 4% DULEI
URUGUAY
3%
8%
PETRA CALCAR PILI
6% SEYLINCO 2%
6% 6%
INLACSA NIDERA
10% URUGUAYA
1%
CONAPROLE
54%
7
Source: Central Bank of Uruguay. Latest available data for 2008.
8
Source: Data developed by Uruguay XXI based on Customs Bureau data.
11

12. Table 1
Cheese exports
In 2009, 37,000 tons of cheese were exported valued at USD 130 million. 60% of income
from cheese exports corresponds to semi-firm cheeses (between 36% and 46% humidity).
Examples include Swiss style cheeses: Gruyerito, Danbo, Edam, Fontina and Gouda (Dutch
origin but Swiss style) (see Figure 10).
Figure 10: Exports of cheese per type, share in dollar terms (2009)
Other
7% Firm
Soft 13%
20%
Semi
firm 60%
13% of income from cheese exports corresponds to firm cheeses (Sbrinz, Parmesan, Goya,
Emmental) and 20% to soft cheeses (Colonia, Cuartirolo). The remaining 7% includes fresh,
grated and melted cheeses. Of these, mozzarella has the highest share (64%).
Opportunities
Cheese consumption is increasing worldwide. The number of consumers is rising while
traditional consumers are increasing their per capita consumption. For example, in the
United States, some opportunities exist. Cheese consumption in the US has increased over
the past 30 years. The desire to consume new varieties of cheeses with different flavors
and textures in convenient packages has driven consumption growth. The “specialty
cheeses” segment has been the main driver of per capita consumption.
This is a market niche that needs to be exploited. The highest growing market niche is
linked to ethnic groups, e.g., Latin-style cheeses. Another high growth area is the artisan
cheese segment. Although small, the potential for growth of this segment is high.
The type of food given to the Uruguayan dairy rodeo, in addition to the low volume of
production and the character of some locally produced cheeses (Gruyerito and Colonia
types) could mean new business opportunities. The intense yellow color of the cheese
produced by cows fed with natural pastures is a positive attribute, given the consumer
perceives it as a value added product.
12

13. 3. Industrial sector in growth phase
The industrial sector consists of 36 companies, which are mainly highly concentrated
cooperatives that receive milk from producers (see Figure 11).
Figure 11: Reception of milk in plants for the top 10 companies (2009)9
CALCAR
6% PILI S.A CLALDY
INLACSA S.A ECOLAT 4%
8% URUGUAY 4%
7% DULEI S.A
2%
BONPROLE S.A
2%
GRANJA POCHA
S.A
CONAPROLE 1%
65%
COLEME
1%
Milk shipments to plants have risen 4% annually over the last 20 years, while industrial
capacity has grown at a slightly greater pace. The volume of milk for consumption has fallen
in absolute terms, and the entire increase in shipments to plants has gone towards the
elaboration of manufactured products.
9
Source: Data developed by Uruguay XXI based on data from the Dairy Activity Financing and Sustainable
Development Fund (FFDSAL).
13

14. Figure 12: Reception of milk in industrial plants per destination (millions of liters) 10
Millions of liters
Elaboration of products
Liquid consumption
Processing capacity is 8.4 million liters per day. Capacity increases have accompanied an
increase in shipments to plants and, above all, are able to supply springtime production
peaks. The effective use of installed capacity is estimated at between 63% and 76% for the
last few years.11
On average, production facilities could absorb an annual increase of 300 million liters (20%
of 2008 milk shipments to plants) without having to increase installed capacity. This figure is
slightly less than the annual production target set by New Zealand Farming Systems Uruguay
for 2014 (see Table 2). It should be noted that this is not the only new undertaking in the
primary level.
The dairy industry accounts for approximately 6% of the gross
production value of Uruguayan industry (OPYPA, 2008). The
industry employed 4,600 people in 2008 and employment has
been rising over the past few years. The added value of the
sector is estimated at 20% of the production value, which is
below the industry average. Investments have generally been
made to increase reception and primary processing capacity.
Yet, there are no industrial sites devoted to competitively adding value to raw materials for
production aimed at regional sales. As a result, value added products make up a small share
of the overall product mix.
The most recent investments have been made by Claldy (whey plant), Inlacsa and Conaprole
(a new powdered milk plant and improvements to other plants), Pili (whey nanofiltering and
drying plant) and General Mills (a casein and whey plant that was
later acquired by US-based Schreiber Foods in addition to the Dulei
cheese plant and the Belficor whey plant). This company, which has
10
Source: Agriculture Statistics Bureau (DIEA) of the Ministry of Livestock, Agriculture and Fishing (MGAP).
11
Note: Assuming constant daily plant shipments for the highest production month (generally October or
November).
14

15. invested USD 30 million in the purchase of these plants, plans to employ 100 people and to
eventually produce 450,000 liters of milk per day. Several other local plants have been
acquired by foreign companies over the last six years, including Ecolat, Inlacsa, Quesería
Helvética and Frigorífico Modelo.
Brazilian company Bom Gosto announced that it would begin to
build its first plant in Uruguay in May with a USD 30 million
investment. The plant will receive 600,000 liters of milk per day to
produce powdered milk and butter.
The production mix has not changed substantially as compared to
1998, except for the loss in the share of liquid products (UHT and
acidified milk) and the increase of caseins and caseinates (see Figure 13).
Figure 13: Production mix, 2008 (% in milk equivalent)12
Casein/ates Others
4% 1%
Acidified
2% (UHT)
8%
Butter / fat
3% Cheese
39%
Milk powder
43%
12
Source: Agriculture Statistics Bureau (DIEA) of the Ministry of Livestock, Agriculture and Fishing (MGAP).
15

16. 4. Primary sector with major growth potential
The notable growth of the Uruguayan dairy industry's
supply chain over the last 20 years has positioned it among
the top exporting countries. This performance has been
sustained by the competitiveness of the chain’s primary
link where milk is produced at low international prices.
Total milk production was 1,750 million liters in 2009,
including dairy farm production and consumption (Figure
14). In the same period, the number of producers fell 18%,
from 5,522 to 4,507. This reflects a global trend in
agriculture to the extent that market pressures and
changes in business practices promote consolidation
towards larger establishments with better operational efficiencies.
It should be noted that, on average, producers ship approximately 80% of their production
to industrial plants. The rest is used by the dairy farms themselves mainly for sub-products
and fresh milk. This group of around 1,000 artisan producers industrializes its own
production.
Figure 14: Milk production and number of producers (millions of liters, number)13
Number of producers
Millions of liters
Production Producers
The surface area used for milk production was around 1 million hectares in the 1991-2002
period (see Figure 15). As of 2002, surface area was lost, mainly to rising agriculture uses.
13
Source: Cattle Monitoring Bureau (DICOSE) of the Ministry of Livestock, Agriculture and Fishing (MGAP).
16

17. Between 2002 and 2009, surface area for dairy production fell by 200,000 hectares to
800,000. The number of cows has risen slightly since 2005 to 420,000 by 2009.
As a result of these changes, average dairy farm surface areas have fallen 12% over the past
10 years from a peak of 211 hectares in 1999 to 184 in 2008. The number of dairy cows
increased 15% in the same period, from 78 to 89 on average per farm.
Figure 15: Total surface area for dairy and number of cows14
1100 500
Area lechera
Dairy production region
Nº vacas of cows
Number
1000
450
900
400
Thousands of hectares
Thousands of cattle heads
800
350
700
300
600
500 250
2002 2003 2004 2005 2006 2007 2008 2009p
The growth in the average size of dairy farms has caused milk production to be very
concentrated. Currently, farms larger than 500 hectares represent 5% of all dairy
establishments and account for 28% of milk production.
The growth in production is based on a significant technological change. Per hectare
productivity rose 59% between 1998 and 2007. In this period, per cow productivity rose 21%
and the number of dairy cows per hectare increased 26%. The number of milking cows with
regard to total cows (a measure of the efficiency of dairy herd management) increased 7%.
Nevertheless, the ratio between total cows and the dairy herd has remained constant
(Appendix 1, Table 2).
In Uruguay, dairy cows are pasture-fed. Productivity increases stem from the progressive
substitution of improved, high-yield pastures for natural pastures. About 60% of the surface
area for dairy cows consisted of improved pasture in 2009. The use of concentrates has
fallen, while the use of silos and silage for supplementation has increased.
14
Cattle Monitoring Bureau (DICOSE) of the Ministry of Livestock, Agriculture and Fishing (MGAP).
17

18. Although productivity is rising, it is worth noting that at
current levels, there is a significant technological gap in certain
sized farms. This gap offers attractive investment
opportunities. As seen in Appendix 1, Table 3, there is a
significant per hectare productivity gap amongst the various
sizes of farms. Although the information available does not
show the causes for this gap, the most important factors are
likely due to a lack of scale, land ownership (mainly leases),
scant investment and apprehensiveness toward new
technologies.
Although productivity is rising, it is worth noting that at
current levels, there is a significant technological gap in certain
sized establishments. This gap offers attractive investment
opportunities. As seen in Appendix 1, Table 3, there is a
significant per hectare productivity gap amongst the various sizes of farms. Although the
information available does not show the causes for this gap, the most important factors are
likely due to a lack of scale, land ownership (mainly leases), scant investment and
apprehensiveness toward new technologies.
Likewise, relative to dairy farms in other countries, productivity levels of Uruguayan dairy
farms are not high. For example, among other reasons, NZFSU decided to set up in Uruguay
due to the per hectare productivity gap between New Zealand and Uruguay. The company
identified an opportunity for growth without needing an expansion of land.
The genetic quality of Uruguayan herds is well recognized and heifers are exported to Peru,
Brazil, Venezuela and recently China. For more than 30 years, semen from American and
Canadian bulls has been used. Recently, semen from Australia and New Zealand has been
added.
Land prices are low in comparison to the region and the world (USD 2,300 per hectare on
average), enabling more investments in dairy activities. In fact, one of the factors that NZFSU
valued positively with respect to its decision to invest in Uruguay was that the cost of
acquiring and developing was less than 30% of the cost in New Zealand. The abundance of
water and the possibility of irrigating pastures to increase the production of dry material
offer a new opportunity of technological change.
Irrigation and the agricultural used of lands also
offer the possibility of producing milk under
confined conditions. To date, two undertakings
may implement this method. No further
information is available at this time, however.
Milk production is concentrated mainly in the
south of the country. The departments of Colonia,
San José and Florida account for 84% of national
production and 55% of dairy farms and have most of the county’s production facilities.
18

19. Table 2
New Zealand Farming Systems Uruguay (NZFSU), a
company consisting of New Zealand capital, currently
operates 31 dairy farms and plans to have a total of 49
by 2012. The total investment to date has been more
than USD 200 million. NZFSU has been sponsored by PGG Wrightson Limited (PGGW), New
Zealand’s largest agriculture supply company.
“NZFSU was established to capitalize on the opportunities to acquire dairy farms in Uruguay,
where the New Zealand production system, once adapted to the local conditions, can
produce results comparable to those achieved in New Zealand.”
NZFSU considered that the acquisition
of establishments in Uruguay and
their later development/conversion
to the New Zealand system could be
done at a third of cost of acquiring a
dairy establishment in New Zealand.
Milk production in New Zealand is
performed mainly with the intensive
use of pastures (i.e., the production of
large quantities of high quality forage
per hectare and the widespread use
of genetically superior cows). This
system could be applied on lands with great potential and low cost that, in accordance with
New Zealand standards, is being underutilized in dairy production.
The “conversion” of dairy farms and lands acquired in Uruguay for the New Zealand system
will be done by a series of measures including: seeding new species of improved pastures,
applying phosphate fertilizers, optimizing subdivisions to monitor pasture growth and
improve yield, improving access to water for animals, increasing animal numbers to take
advantage of the increase available forage, using animals with high genetic value and
applying phosphates and nitrogen to maintain grazing areas.
As of June 2009, NZFSU operated 36,000 hectares with 53,000 heads of cattle, of which
11,300 were milking cows. The project was in advanced stages with nearly 70% of the
investment program in place.
At the end of 2008 work began on the issuance of local market bonds and in July 2009,
NZFSU successfully placed USD 30 million, which was acquired mainly by institutional
investors. With this financing, infrastructure, irrigation and electrification tasks will be
completed.
19

20. APPENDIX 1.
Table 1: The dairy industry in figures (2007/08)
Surface area (hectares) 847,000 (4.5% of productive surface area)
Dairy herd 744,000 cattle (408,000 cows)
Average number of cows 63
Average surface area (hectares) 184
Average productivity per cow per year 3,877 liters
Milk production 1,582 million liters
Shipments to industrial plants 98%
Dairy sector gross production value USD 466 million
Dairy sector gross added value USD 855 million
Cheese 40%
Milk utilization Whole powdered milk 24%
Liquid consumer milk 19%
Skim powdered milk/ Butter 10%
Powdered milk ………. 63,523
Cheese………………..... 53,737
Major industrialized projects (tons)
Butter………….….…….. 21,312
Caseins…………….……... 1,409
USD 442 million (7.3% of national total)
Exports
Powdered milk………….48,378 tons
Cheese………………………28,580 tons
Butter………………….........9,799 tons
UHT milk……..……7,174 million liters
Percentage of exported milk 63%
Venezuela 34%
Mexico 24%
Major markets (value)
Cuba 11%
Brazil 8%
Per capita consumption 219 liters (equivalent)
Total: 23,984
Labor force (direct employees) Primary production: 19,320
Processing: 4,664
20

21. Table 2: Main technological indicators15
1998 2007
Per hectare productivity (liters/hectare) 1,175 2,370
Per cow productivity (liters/cow) 3,192 3,875
Cows per hectare 0.38 0.48
Milking cows/total cows ratio 65% 69%
Cows/total dairy herd ratio 56% 55%
Improved pastures (% of total area) 40% 60%
Silo and hay supplement (kg/hectare) 471 1,239
Concentrate supplement (grams/liter) 150 138
Table 3: Productivity per farm size (2007)16
Farm size Productivity
Liters per cow Liters per hectare
< 50 hectares 14.7 1,943
between 50 and 199 hectares 16.7 2,436
between 200 and 499 hectares 18.2 2,312
between 500 and 999 hectares 19.1 2,594
between 1,000 and 2,499 hectares 19.2 2,334
< 2,500 hectares 18.2 1,932
National average 18.0 2,370
15
Based on data from the Agriculture Statistics Bureau (DIEA) of the Ministry of Livestock, Agriculture and
Fishing (MGAP).
16
Based on data from the Agriculture Statistics Bureau (DIEA) of the Ministry of Livestock, Agriculture and
Fishing (MGAP).
21

22. APPENDIX 2
Institutions
National Milk Institute (INALE), created by law 15,640, is the Ministry of Livestock,
Agriculture and Fishing (MGAP)’s arm to establish public policy.
National Agriculture and Livestock Research Institute (INIA) and School of Agronomy
(University of the Republic) research technologies for the primary production phase.
Animal Health Bureau of MGAP is in charge of sanitary policies.
Technology Laboratory of Uruguay (LATU), a private organization with government
participation, promotes technological development of industry and issues sanitary
certificates for export.
Dairy Industry Chamber of Uruguay (CILU) has practically all dairy product
manufacturers as members. This institution is a member of the Pan-American Dairy
Federation (FEPALE).
Business associations:
National Association of Milk Producers (CONAPROLE suppliers).
Milk Producers Business Association.
Milk Producers Chamber.
APPENDIX 3
Public policies
The dairy industry is regulated by laws that seek to attend to the special characteristics of
this agriculture sub-sector. The first, which dates back to 1935, is the law that created the
Conaprole cooperative. The latest is law 18,242 dated 27 December 2007 that implements
standards regarding production, development and regulation of the dairy industry. The law
created the National Milk Institute (INALE), a non-state entity subject to private law that
focuses on the dairy sector. The objective of INALE is to link public and private organizations
to create a new set of public policies for the sector to empower it and place it on a solid
footing for the future.
As of today, any company can participate in the supply of milk. Producers receive a single
price that is freely set for milk shipped to plants. The consumer price for liquid milk is set by
the Executive Branch. As a base price for the calculation, the national average price that
producers receive is used. This is estimated by the Agriculture Ministry based on information
supplied by dairy companies regarding prices paid for raw materials (milk) to producers.
22

23. APPENDIX 4
Strategic Diagnostic
Primary Phase
Strengths:
Natural and human resources with very good aptitude for milk production.
Extremely competitive based on low production costs and good milk quality.
High integration.
Continual productivity growth.
Favorable attitude towards technological changes.
High level of mechanization and use of bulk goods.
Good public image.
Government support for smaller producers.
Opportunities:
Consolidate foreign trade possibilities for dairy farms to ensure access at the best
possible prices.
Close the technological gap that exists for a large majority of dairy farmers to enable
continued growth.
Take advantage of spillover caused by agriculture expansion: new areas, sub-product
uses.
Implement irrigation systems to increase forage production and reduce risks of
fluctuation.
Industrial Phase
Strengths:
Abundant raw materials of superior quality relative to the region at internationally
low prices.
Geographic concentration of milk supply that offers reduced collection costs and
facilitates the use of bulks.
Low seasonal variability that decreases capacity downtime.
Strong supply chain integration.
Export tradition.
Opportunities:
Development of differentiated products.
Access to regional raw materials when health barriers expire.
Creation and/or strengthening of non-traditional supply sources.
Consolidation of numerous geographically concentrated small companies.
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24. Uruguay in a nutshell (2009)17
Location South America, bordering Argentina and Brazil
Capital Montevideo
2
176,215 km . 95% of the territory has soil suitable for agriculture and
Surface area
livestock activities.
Population 3.3 million
Population growth 0.3% (annual)
GDP per capita USD 9,458
GDP per capita (PPP) USD 13,019
Currency Uruguayan peso ($)
Literacy rate 98%
Life expectancy at birth 76 years
Form of government Democratic republic with presidential system
Political divisions 19 departments
Time zone GMT - 03:00
Official language: Spanish
Location South America, bordering Argentina and Brazil
Main Economic Indicators 2004-2009
2005 2006 2007 2008 2009
Annual GDP growth rate 7.5% 4.3% 7.5% 8.5% 2.9%
GDP (PPP), USD millions 32,048 34,602 38,235 42,543 43,551
GDP, USD millions (current) 17,367 20,035 24,262 32,207 31,606
Exports (USD millions), goods and services 5,085 5,787 6,933 9,292 8,551
Imports (USD millions), goods and services 4,693 5,877 6,775 10,218 7,755
Trade Balance (USD millions) 393 -90 158 -926 796
Trade Balance (% of GDP) 2.3% -0.4% 0.7% -2.9% 2.5%
Current Account Surplus / Deficit (USD millions) 42 -392 -220 -1,503 259
Current Account Surplus / Deficit (% of GDP) 0.2% -2.0% -0.9% -4.7% -0,8%
Overall fiscal balance (% of GDP) -0.4% -0.5% 0.0% -1.4% -2.2%
Gross capital formation (% of GDP at current prices) 16.5% 18.6% 18.6% 20.2% 19.1%
Gross national savings (% of GDP) 17.6% 16.9% 19.0% 17.9% 17.1%
Foreign direct investment (USD millions) 847 1,493 1,329 1,840 1,139
Foreign direct investment (% of GDP) 4.8% 7.5% 5.4% 5.7% 3.6%
Exchange rate peso / USD 24.5 24.1 23.5 20.9 22.5
Reserve assets (USD millions) 3,071 3,097 4,121 6,329 8,373
Unemployment rate (% of EAP) 12.2% 11.4% 9.7% 7.9% 7.7%
Annual inflation rate 4.9% 6.4% 8.5% 9.2% 7.5%
Net foreign debt (USD millions) 8,938 9,157 9,662 8,254 11,123
17
Note: GDP data was taken from the IMF; data on foreign trade, FDI, exchange rate, international reserves
and foreign debt was provided by the Central Bank of Uruguay (BCU); population growth, literacy,
unemployment and inflation data comes from the National Statistics Institute (INE).
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25. Investor Services
About Us
Uruguay XXI is the country’s investment and export promotion agency. Among other
functions, Uruguay XXI provides no cost support to foreign investors, both those who are
evaluating where to make investments as well as those currently operating in Uruguay.
Our Investor Services
Uruguay XXI is the first point of contact for foreign investors. Services we provide include:
Macroeconomic and industry information. Uruguay XXI regularly prepares reports on
Uruguay and the various sectors of the economy.
Tailored information. We prepare customized information to answer specific
questions, such as macroeconomic data, labor market information, tax and legal
aspects, incentive programs for investments, location and costs.
Contact with key players. We provide contacts with government agencies, industry
players, financial institutions, R&D centers and potential partners, among others.
Promotion. We promote investment opportunities at strategic events, business
missions and round tables.
Facilitation of foreign investor visits, including organization of meetings with public
authorities, suppliers, potential partners and business chambers.
Publication of investment opportunities. On our website, we periodically publish
information on investment projects by public entities and private companies.
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