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, shopping at the local market will find a 180-gram tube of toothpaste priced at 243 Uruguayan pesos (US$6.20). However, if this 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 only R$6.99 (US$1.28).

According to research 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 goods in Uruguay can be nearly three times higher than the import price. The difference is even more striking for items like soap and deodorant, which can cost up to six times the entry price.

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 revealed that, on average, prices in the South American country are 27% higher than in other nations.

Furthermore, 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 much of the tariff-free imports originate.

In specific categories, Uruguay is 58% more expensive than the average for hygiene and cleaning products, 55% for food and non-alcoholic beverages, and 43% for IT and electronics items. This phenomenon is more pronounced in areas with limited domestic production, requiring the importation of many products, as explained by Ignacio Umpierrez, an economist and researcher at CED.

Ignacio Umpierrez asserts that Uruguay’s high prices are not merely a short-term issue tied to the value of the Uruguayan peso but rather a long-term situation. He highlights the concept of the “country effect,” which refers to certain conditions that make Uruguay more expensive.

According to Umpierrez and his team, Uruguay’s small market size, with a population of 3.5 million, is dominated by a few large companies responsible for most imports. The lack of competition results in high profit margins: the research found that profit per product often accounts for more than half of the price paid by the end consumer. In other words, an item imported for 10 may be sold for over 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 end consumer.

Sebastián Fleitas, a Uruguayan economist and professor of economics 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 identifies “two central problems” contributing to Uruguay’s high costs: the lack of competition and state-regulated sectors, where regulation often faces serious issues. He explains that the small size of the country and the intense interaction between regulated entities and regulators complicate competition defense and lobbying control, making cost reductions a challenging task requiring significant political capital.

A crucial factor is the control exerted by large companies that dominate Uruguay’s market. According to Umpierrez, these companies often maintain exclusivity or commercial agreements that hinder competition. For example, if a Uruguayan company wants to import toothpaste purchased for US$1.28 at a Brazilian supermarket or wholesaler, it cannot do so without the product’s technical specifications, even if it is the same item sold by a multinational subsidiary in Uruguay.

Economist Alfonso Capurro, from the CPA/Ferrere consulting firm, questions whether protecting an industry is actually protecting monopolistic profits for an importer. He points out that regulations intended to protect consumers often overlap, creating inefficiencies in the market.

Capurro emphasizes that these regulations, designed to safeguard consumers, frequently limit competition and inflate prices. A CPA/Ferrere study on fruit and vegetable prices, commissioned by the Central Bank of Uruguay, further highlighted the need to streamline 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 found, for instance, that tomatoes cost three times more in Uruguay than in Brazil. Capurro warns that removing these protections could lead to the disappearance of the local production sector, effectively acting as a “hidden subsidy” that increases consumer prices.

Another contributing factor to high prices is Uruguay’s 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 somewhat outdated, relying more on direct consumption taxes than income taxes. We pay less in taxes like income tax, but these taxes are applied directly to consumed goods,” concludes the expert.

Uruguay faces high prices across 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 ranks 15th globally, with nearly half the price composed of taxes. Diesel is also costly, partly due to subsidies for public transportation, which raise product transport and distribution costs. Additionally, profit margins in distribution are high because “truck drivers and gas stations are unwilling to compete,” explains economist Alfonso Capurro.

Electricity in Uruguay is among the most expensive globally, partly due to investments made in the last decade to boost renewable energy production.

Uruguay is the Latin American country with the highest per capita Gross Domestic Product (GDP), around US$22,000, classifying it as a high-income nation according to the World Bank. The average Uruguayan household earns about US$2,500 per month, according to the National Statistics Institute. Despite this high income, Uruguayans often feel that the cost of living is excessively high.

Compared to Spain, where the average monthly income is around US$3,200 and shopping expenses are 25% lower than in Uruguay, Uruguayans face a heavier 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 high salaries, and are happy with it,” says Sebastián Fleitas.

On the other hand, housing is more affordable in Uruguay compared to many developed countries. The average rent in Uruguay is around US$500, while in Spain, it is double, according to official data.

The three economists interviewed agree that Uruguay’s welfare state has its costs, reflected in prices. However, some of these initiatives benefit the population, while others primarily benefit business owners and workers in specific sectors without generating general welfare. Fleitas notes, “We are expensive for reasons that do not generate public welfare but rather provide income to certain businesses and workers in those sectors.”