Uruguay and Paraguay: Two safe havens for wary investors who need a plan B

Uruguay and Paraguay are two countries in South America which are often overlooked. Yet they offer a great option for wealthy migrants who look for a permanent residence that can be converted to citizenship after some time. While most of Latin America offers some sort of RCBI programs these two MERCOSUR member countries have special features that are unmatched by others.

Safety and tax-friendly climate in Uruguay and Paraguay

Both Uruguay and Paraguay are relatively small countries, at least by regional standards (Paraguay is bigger than Germany and Japan, Uruguay is bigger than Switzerland and the Benelux countries combined). They have enjoyed political stability for decades and have not suffered from economic chaos, hyperinflation, left-wing populism and rampant crime like their neighbors. The fiscal environment is pleasant as well: traditionally business-friendly Paraguay has a strictly territorial tax system which only taxes local income and even this at a standard rate of only 10%. In Uruguay, income tax rates are higher, but new tax residents can enjoy a temporary income tax exemption of 10 years (tax holiday) on foreign income. Alternatively, they can opt for a reduced 7% rate that will apply permanently on such foreign sourced income.

Both countries have attracted a significant number of high-net-worth individuals who relocated from the larger neighboring countries as well as from further afield, especially the USA and Germany. And, in both countries, foreigners can apply for citizenship after three years of residence (though in the case of Uruguay one needs to live there with a spouse – otherwise the period is five years). Of course, foreign freehold land ownership is permitted and discriminatory practices like dual pricing (for locals and foreigners) are unheard of. And both countries can rely 100% on renewable, green energy, are free from natural disasters like earthquakes, volcanoes, etc., and guarantee food security as they are major exporters of agricultural commodities.

Three years to citizenship

For immigration purposes, both countries require applicants for residency to provide civil documents such as birth, marriage and police clearance certificates with apostilles (respectively with attestations from the relevant embassy or consulate in case the country of issue of such documents is not a member of the Hague Apostille Convention). The citizens of both enjoy visa-free travel to the UK, the Schengen area, Russia, UAE, South Africa, Singapore, Hong Kong etc. Uruguayans can also travel to Japan and New Zealand without a visa. Among the major countries only China, USA and Canada require visas from them. It is noteworthy that permanent residents of either country can travel to the other MERCOSUR countries without a passport – their local ID card (Spanish: cedula) is sufficient as long as they have a nationality which does not require a visa. MERCOSUR consists of Argentina, Brazil, Paraguay and Uruguay. Citizens of any MERCOSUR member – regardless of whether they are born or naturalized citizens – can easily take up residence in another member country: Usually a proof of holding no criminal record is sufficient to remain in the host member state, and one can work under the same labor laws as local citizens.

Uruguay, the Monaco of Latin America

Uruguay, with its Mediterranean vibe, long coastline, beautiful beaches and ritzy beach resort towns like Punta del Este has been the Darling of Latin America’s rich and beautiful for a long time. For those who want to settle permanently, a key requirement – other than the civil documents - is the proof of income which allows the applicant to support himself. While there is no exact amount defined it is generally understood that a proven amount of US$2,000  per month is sufficient, (as this is usually deemed to be sufficient to support one’s lifestyle).

An application made for permanent residence usually takes several months to get approved. It has to be made in person at the immigration authority in Montevideo or other cities throughout the country. Within a few days after submission of the application for permanent residence, however, the identity card office of the government will issue a temporary residence card. This card shall be exchanged for the permanent residence card once approved, and an applicant has 12 months to go back in person to the identity card office for the conversion. In the meantime, the temporary residence card can already be used for the opening of bank accounts, mobile and internet subscription, conversion of a foreign driving license etc. After three years of residency, an investor can apply for citizenship if the applicant has spent more than 6 months per year in the country. Unlike in Portugal, which is often compared to Uruguay, there is no written language exam but basic Spanish must be spoken and understood by the applicant when attending his hearing in a court of law.

 Paraguay, a rural paradise for investment immigration 

Landlocked Paraguay sees less tourists than Uruguay, but is similarly popular among investment immigrants. There are currently two options to obtain a permanent residence. With the set up of a company and the investment of an equivalent of US$70,000 over a period of 10 years, the permanent residence is issued directly within a few months after an application is submitted. No temporary residence card is issued in the meantime. Alternatively, an applicant who can proof sufficient income (no amount is specified) can obtain a temporary residence which can be converted to a permanent residence after maximum two years (possibly earlier, but this option has only been in place since Q3 2022).

Regardless of the option one has chosen to obtain permanent residence foreigners can apply for citizenship after 3 years holding legal residence in the country. Like in Uruguay, there is no language exam to be passed. However, a basic history test must be performed successfully and a government official will briefly visit the applicant in his home. Dual citizenship is not recognized in Paraguay, except with Italy and Spain. But in practice renunciation of previous citizenship is not demanded.

Lack of alternatives in South America

There are so many other countries in Latin America which are open for immigration – what brings the choice down to those two? Yes, in most other Latin American countries it is possible to obtain citizenship through residence as well. And residence is often readily available in the form of an independent means visa or in exchange for an investment. The monetary requirements are usually not high and citizenship comes after 2-7 years. In Argentina, for example, an application for citizenship can be submitted after only 2 years of residence already. However, for high-net-worth individuals, the much higher tax rates and the lack of tax exemptions/holidays in most other countries in the region are a big deterrent.

Argentina is a good example of a country where the shorter period to citizenship is not worth the additional taxes levied on wealthy individuals. Panama – a  long time favorite among US pensioners and nomads - and Costa Rica are two tax friendly countries but in the former the residency requirement is five years and in the latter seven years – not a compelling offer given that the passports of these countries do not rank any higher in terms of travel freedom and mobility than those of Uruguay and Paraguay. Moreover, in Panama, while in theory the residence requirement is five years, in practice the administrative hurdles to get naturalized successfully after five years are very high, and the delays are significant which leaves the country as a sound option for residence only.

Another reason why Uruguay and Paraguay stand out is public safety and security. Unlike in the Caribbean or Pacific jurisdictions with direct citizenship programs, some physical presence on the ground is required in all the Americas, and most migrants prefer to be in a country which is not known for its high levels of crime. And last but not least, some passports from the region do not travel as well as those of aforementioned countries. Ecuadorians or Bolivians for example need a visa to travel to the Schengen area, UK and UAE. So a combination of negative factors in other countries (longer residence requirements, onerous tax obligations, red tape and quality of passports for travel purposes) make Uruguay and Paraguay the most desirable options in the Americas for wealthy migrants who aim to get a second passport through residence rather than investment only. 

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