you are the unfair competition
· originally published on LinkedIn →
this is a translation of the spanish original · read the original →
on july 2 a delegation from cuti went before the senate's science, innovation and technology committee. they were there to talk about the framework law on science and technology. they ended up talking about something else.
its president, amílcar perea, described to the senators a way of working that worries him: young uruguayans who provide services to companies abroad, get paid into accounts outside the country, do not invoice and do not contribute to social security. he defined it as a problem, as a negative situation for the country, and as "pure unfair competition" against the local industry.
it is worth pausing on that phrase, because it contains the entire discussion. and it is worth putting it to a test.
the test
suppose the complaint gets resolved tomorrow. every one of those young people opens a sole proprietorship or a sas, registers with dgi, pays bps, invoices by the book. the chamber's claim is satisfied in full.
what changes for cuti's companies?
nothing. the client in austin keeps hiring him directly. the developer keeps charging four times what he would earn at a local company. the difference between what the client pays and what the worker receives, which was the business, still exists for nobody but the two of them.
if the remedy does not touch the harm, the declared harm is not the real harm.
what is being defended in that committee is not social security. it is the margins of uruguayan development companies, and what they are trying to limit is the talent's direct access to the client. the word unfair does not describe an evasion. it describes a disintermediation.
why the contributions argument does not hold
there is an empirical reason, on top of the logical one.
in uruguay, formalizing as an independent worker is one of the cheapest and fastest things a young person can do. a sole proprietorship is registered entirely online, with no documentation to submit, and the procedure costs one professional stamp tax. two hundred and seventy pesos in 2026.
if he wants something more sophisticated, the state built him the vehicle. law 19,820, of september 2019, created the simplified stock company (sas): a single shareholder, incorporation by digital means, limited liability, no oversight from the nation's internal audit office unless revenue exceeds 37,500,000 indexed units. converting a sole proprietorship into a sas was exempted from irae, irpf, vat and the wealth transfer tax. article 45 went as far as requiring banks to provide mechanisms that make it easier for these companies to open an account.
and the cost of contributing does not scale with income. the owner of a sole proprietorship contributes to bps on notional salaries. the administrator of a sas contributes on notional contribution bases, fifteen or thirty depending on whether he draws compensation or not. someone invoicing eight thousand dollars a month contributes, in practice, almost the same as someone invoicing fifteen hundred. irae can be settled under a notional regime if annual revenue does not exceed four million indexed units.
in other words: seven years ago the country designed exactly the instrument this worker needs, made it digital, deregulated it and set the contribution at a flat floor.
and not contributing makes their life harder
the flip side is even more forceful.
in uruguay, access to housing and credit is entirely conditioned on formality. anda requires sole proprietors, independent workers and monotax payers to present an income certificate and the last three paid receipts from bps and dgi. sura asks for current bps and dgi certificates plus the last year's sworn income statement. the housing ministry's rental guarantee fund demands formal net income and a nominated bps employment history, and on top of that has a cap of one hundred adjustable units that leaves this profile straight out. the guarantee from the nation's general accounting office excludes independent workers outright. for a mortgage you have to present an income certificate from a certified public accountant.
a twenty-six-year-old invoicing thousands of dollars a month who is not registered cannot rent a decent apartment, cannot take out a loan, cannot buy a car on financing, has no fonasa, accumulates no employment history and will not be able to buy a house. he pays an enormous price for that privilege, in exchange for saving himself a contribution that is set on a notional base.
nobody who earns well has an incentive to stay out. the uruguayan system is built so that formalizing is the only rational way out as soon as income stops being marginal.
which leaves us with two possibilities. either the phenomenon is much smaller than the committee was led to believe, or most of those young people are already formalized and the problem was never the contribution.
we do not know which. cuti did not bring a number to the senate. it did not say how many they are, how they were measured, or where the estimate came from. an accusation without a denominator.
what actually broke
the word unfair presupposes a pact.
the pact existed and it was fairly clear. the uruguayan developer accepted a fraction of the value he produced for a client in boston or london. in exchange he received stability, contributions, a career, and the reasonable promise that the company capturing that difference would still be there when he was forty with two kids.
that difference had a technical name: arbitrage. two arbitrages, actually. one on labor, the gap between what the client paid and what it cost to produce here. one on taxes, two decades of software exemptions, free zones, explicit tax expenditure, sustained on the argument that the country needed a knowledge-exporting industry. the state trained the people, gave up the taxes and built the infrastructure. the company intermediated.
nobody disputes that the arrangement produced real things. more than twenty thousand qualified jobs, salaries that triple the national average and beat banking's by 67%, 63% of revenue coming from the international market. it is not smoke.
the problem is that both legs of the arbitrage broke almost at the same time, and neither of them was broken by a twenty-five-year-old kid.
the tax leg was broken by the oecd. the 15% global minimum tax does not eliminate the uruguayan exemption: it makes it useless. what uruguay does not collect, another tax administration collects. the competitive advantage still exists on paper and no longer exists in the result.
the labor leg was not broken by artificial intelligence. it was broken by payments infrastructure. when a client in austin can hire, comply and wire to montevideo without an intermediary, the function the uruguayan company performed, which was to hire, guarantee, pay and provide trust, stops being scarce. what lost value was not the programmer. it was the intermediation.
artificial intelligence did the third thing, and perea described it precisely even though he did not give it that name: it ate the layer of tasks that made the pyramid profitable. the chamber's own president acknowledged that the stage where someone with no prior training did an intensive three-to-six-month program and entered the market is over, and asked how there will be seniors tomorrow if nobody invests in juniors today.
on the diagnosis we agree. it is exactly what we wrote in march about the ceibal generation. the market did not close: it polarized. the distance between that text and the stenographic record of july 2 is not analytical, it is four months.
the proposal gives away the goal
faced with that picture, the chamber brought two ideas to the senate.
the first, that those working independently for clients abroad are engaging in unfair competition. the second, an incentive policy so that young people join state technology projects and areas, which today cannot compete with private-sector salaries.
neither of the two recovers a single peso for bps.
the first returns the person to the dependency scheme, where the intermediary gets paid again for intermediating. the second asks the state to finance the training of the junior the industry stopped absorbing, in order to hire him as a senior later. it is the socialization of the training cost and the privatization of the trained worker.
it is also an old, well-documented mechanism. when a country produces more credentials than its market can employ, the escape valve is usually the public payroll. it is not a solution, it is a deferral. and it is the same institutional response we have been seeing for two years: coordinating supply when the problem is in demand and in cost.
perea was honest on one point and it is worth giving it back to him. he said the sector pays triple the country's average not out of generosity, but because it is in an enormous competition for resources. exactly. the competition is for the worker, not for the client. what they are asking to regulate is not a market. it is a labor supply.
the asymmetry
there is something worth naming without euphemism.
the promoted legal entity has lawyers, accountants, a business chamber and a seat at the senate committee. the natural person has a bps contribution and an accountant's certificate. when the former demands contribution from the latter, after twenty years of tax expenditure, nothing extraordinary is happening. the usual thing is happening.
and perea himself conceded the fact that dismantles his own case. the sector has almost no brain drain, unlike what happened in the two thousands. the young people do not uproot, do not leave, and spend in uruguay the money they earn abroad. he considered that preferable to them leaving the country.
if they do not leave, if they consume here, if they pay vat, if they sustain rents and shops in montevideo and in the interior, then the country situation is not negative. what is negative is the margin.
the only one who named a real problem in that session was senator sabini, when he spoke about the lack of protection of those who work alone. that is public policy. uruguay's contributory architecture never imagined a one-person services exporter, and that void deserves a regime of its own. but that is not the claim the chamber brought.
they are the same kids
perea insisted on a detail he uses as an aggravating factor and that to me is the key to everything: they are the same kids trained by uruguayan universities.
yes. they are the same ones. and they learned exactly what the country taught them.
we gave them a computer at age six. they were introduced to programming in school. we explained to them for two decades that the future was exporting knowledge, earning in dollars and not depending on the domestic market. we built them a digital sole proprietorship so they could do it alone. and when the student executed the program without the intermediary, we discovered it was a negative country situation. lol.
perea also mentioned, almost in passing, that many of those young people go through loneliness, lack of support and absolutely unnatural schedules because of the time zone difference, and that this sometimes pushes them back to the sector's companies.
that sentence deserves to be read twice. the precariousness of the arrangement does not appear as a problem to solve. it appears as a return mechanism.
the question nobody asked
a framework law on science and technology was being discussed. the united states is the sector's main export destination. 63% of revenue comes from abroad. more than twenty thousand qualified jobs depend on that.
nobody asked who owns the compute. nobody asked who decides which models uruguay gets access to, at what price and under what license. nobody asked what happens to those twenty thousand jobs if the provider changes the terms, or if the buying country decides it prefers to buy at home.
the session spent its energy discussing how much the kid invoicing from austin contributes. it is a reasonable question. it is not the question.
the model ends the day its main institutional defense consists of lowering the ceiling on whoever jumped over it, and calling the disappearance of the commission unfair competition. that already happened, it is in the stenographic record, and it is published.
the question left open in the committee is not how much that kid should contribute. it is what the country offers him in return, now that he no longer needs anyone to introduce him.
sources
- los uruguayos que trabajan para el mundo sin aportes y con sueldos de miles de dólares: el "problema" que la cuti llevó al senado. el observador, july 2026, on the stenographic record of the senate's science, innovation and technology committee session of july 2, 2026. cuti delegation: amílcar perea (president), aníbal gonda (board), manuela garcía (innovation and transversality executive).
- law no. 19,820, of september 18, 2019, title ii, simplified stock company. articles 11, 15, 34, 45 and 46.
- bps. sole proprietorship registration. online procedure, no documentation, cost of one professional stamp tax. form r205, notional salary declaration.
- bps and tax advisors. contribution regime for sas administrators and directors on notional contribution bases (15 and 30 bfc). inclusion in the national health system.
- anda. rental guarantee requirements for sole proprietorships, independent workers and monotax payers: income certificate and registration with the last three paid bps and dgi receipts.
- ministry of housing and territorial planning, national housing agency and the nation's general accounting office. rental guarantee fund: formal net income between 15 and 100 ur, nominated bps employment history.
- nation's general accounting office. rental guarantee service: scope limited to public employees, employees of companies with an agreement, retirees and pensioners.
- ande and ine. empresas en uruguay 2008-2020: estructura y evolución. 190,592 active companies in 2020, 85.2% microenterprises, sas gaining relative weight against srl and sa.
- cuti. cuti eligió sus autoridades para el período 2026-2028, july 2026. more than 20,000 qualified jobs, 63% of revenue coming from the international market, the united states as main destination.
- previous articles in the series: the end of the model; the model we built with forgone taxes and what comes next; the ceibal generation arrives at the worst market of the decade.