Tourism in Uruguay: its impact on the economy and job creation

The presentation was divided into two parts. The first consisted of an overview of the impact of tourism on the economy and job creation, with some very clear numbers on the importance of tourism as a productive sector.

Tourism Minister Pablo Menoni emphasized, "It is important to emphasize and make it clear to the political community and society as a whole that tourism is a productive sector, and one of the most important. In other words, we want everyone to be aware that tourism is a genuine job creator in and of itself."

The second part of the presentation addressed the articles that directly concern our section.

It is important to highlight the importance of tourism in the economy seen from three fundamental aspects:

1- Its participation in the economy, or the weight that tourism has in the GDP.

2- The generation and quality of employment generated by the sector.

3- The income from foreign currency generated by the export sector.

A 1% increase in tourism's share of GDP could generate approximately USD 70 million in taxes annually.

Employment

Regarding employment, we have nearly 104,000 companies, and the vast majority are SMEs: nearly 97%.

Tourism employs a proportionally higher number of young people than the economy average, a population that has the highest unemployment rates in Uruguay (an unemployment rate of almost 27% for this age group). Twenty-six percent of all employed people in the tourism sector are under 29 years old, while in the Uruguayan economy this figure is close to 21%.

The tourism sector, in turn, employs relatively more people with completed primary and secondary education than the rest of the economy. Once again, this population has higher unemployment rates (especially in the primary education sector) than the Uruguayan average.

Foreign exchange

Regarding foreign currency income, we have the potential to grow, especially given what we have been able to achieve in previous years.

It is also interesting when we make a comparison with other export sectors.

In 2023, non-traditional services such as IT services, professional and consulting services, financial services, and telecommunications, among others, accounted for 15% of exports.

- Trading services accounted for 14%.

- Meat and by-products another 14%.

- Tourism 12%.

- Wood, paper and cellulose 11%.

It is worth noting that this latter value has undoubtedly increased since the start of UPM 2 in 2023.

Local Economy

During the presentation, the impact of tourism on the local economy was highlighted. Tourism has been increasing its product offering, especially in what is known as Tourism in Rural and Natural Environments (TERN), heritage tourism, cultural tourism, and so on. These products have a strong local component. In other words, tourism can have a truly transformative effect on small towns and the interior of the country in general. It prevents migration to the south, as long as it is accompanied by policies that support this.

If we strengthen cultural preservation and enhance the heritage of our interior, especially our deep interior, tourism can be a catalyst for decentralization in its broadest sense.

The availability of technical and bachelor's degree programs in the country's interior reinforces the aforementioned, with UTEC and the highly specialized institutes.

This is just a sample of when we talk about tourism as an articulator of policies, in this case educational and productive.

Social tourism

Since tourism is conceived as a human right, the main objective of the National Social Tourism System is to enable those who cannot access tourism for socioeconomic or other reasons to do so. It is essential that everyone be able to participate in tourism, since we all have the right to travel for recreational, cultural, sporting, and other purposes.

The goal is to create a system where all tourism offerings meet all demand, thus opening up a broad space for exchange that makes the system more efficient.

Today, we have segmentations where, in some cases, there is clearly an excess of supply, in accommodations, for example, with demand that for various reasons cannot meet it. Or, conversely, an excess of demand with a saturated supply.

In both cases, with various actions to eliminate these segmentations and group all supply with all demand, or by stimulating some of them, a more efficient equilibrium point could be achieved.

This more efficient use of tourism products will not only result in more people enjoying tourism, but also in reducing seasonality, increasing domestic tourism, and improving the quality of work of those who provide tourism services.

The National Social Tourism System has some basic premises:

Equity.

Universality.

Sustainability.

Neutrality.

Scalability.

While some of the premises are very easy to understand, we emphasize the last two:

Neutrality: The selection of service offerings must be neutral, with the understanding that one service cannot be privileged over another. All products must have equal opportunity to be selected. We are specifically talking about private versus public offerings, such as accommodations, but not limited to them.

Scalability: Once operational, the SNTS must contain a very large range of services, from accommodations and transportation to experiences, so it cannot be managed manually. It must be a scalable IT system that integrates all supply and demand. It must allow for the management of subsidies, payments, reservations, and the generation of statistics, among other things.

We envision a large-scale IT system, like the ones many of us have used, but for social tourism. Each user, either alone or supported by a government agency or tour operator, can choose where to go, when to go, and what to do within a pre-established offering.

How is demand stimulated?

Once the terms of the offer are established, the SNTS will allow many beneficiaries, who have the ability to pay, to enjoy a broader range of services than they do today. That is, some users only access certain offers because their membership conditions so require, but they are unable to take advantage of other offers under similar financial conditions. In this case, it will be sufficient to establish mechanisms for exchanging offers, and these users will expand their options.

But there will undoubtedly be some people who need financial support to access certain services. This essentially means providing subsidies, or stimulating demand, to use a more economical term.

The goal is to reach more than 10,000 beneficiaries per year. Beneficiaries who need some type of subsidy, therefore the social tourism universe will be much larger.

The main features are:

1- Progressiveness: the subsidy will be progressive according to the income level.

2- All three parties must contribute: State, beneficiary and operators (public or private).

3- The implementation will establish the maximum amounts that will be accepted for consideration within the subsidies.

The other major lines.

We'll summarize support for SMEs, inbound tourism, and regionalization as the major generators of employment and foreign currency, and we'll share how we plan to address each of them, along with what we call cross-cutting axes, as they interact or intersect with each other.

Source: Ministry of Tourism of Uruguay.