Economy of Uruguay is characterized by an export-oriented agricultural sector, a well-educated work force, and high levels of social spending. After averaging growth of 5% annually during 1996-98, in 1999-2002 the economy suffered a major downturn, stemming largely from the spillover effects of the economic problems of its large neighbors, Argentina and Brazil. In 2001-02, Argentine citizens made massive withdrawals of dollars deposited in Uruguayan banks after bank deposits in Argentina were frozen, which led to a plunge in the Uruguayan peso, a banking crisis, and a sharp economic contraction. Real GDP fell in four years by nearly 20%, with 2002 the worst year. The unemployment rate rose, inflation surged, and the burden of external debt doubled. Financial assistance from the IMF helped stem the damage. Uruguay restructured its external debt in 2003 without asking creditors to accept a reduction on the principal. Economic growth for Uruguay resumed, and averaged 8% annually during the period 2004-08. The 2008-09 global financial crisis put a brake on Uruguay's vigorous growth, which decelerated to 2.9% in 2009. Nevertheless, the country managed to avoid a recession and keep positive growth rates, mainly through higher public expenditure and investment, and GDP growth exceeded 7% in 2010.

Uruguay ⁱ/ˈjʊərəɡwaɪ/, officially the Oriental Republic of Uruguay, sometimes the Eastern Republic of Uruguay; (Spanish: República Oriental del Uruguay pronounced: [re̞ˈpuβ̞lika o̞ɾje̞n̪ˈt̪al̪ d̪e̞l uɾuˈɰwai̯]) is a country in the southeastern part of South America. It is home to 3.3 million people, of whom 1.8 million live in the capital Montevideo and its metropolitan area. An estimated 88% of the population are of European ancestry.

Except for the recent union of Timoteo Domínguez Island and Argentina's Martín García Island, Uruguay's only land border is with Rio Grande do Sul, Brazil, to the north. To the west lies the Uruguay River and the estuary of the Río de la Plata to the southwest. To the southeast lies the southern part of the Atlantic Ocean. With an area of approximately 176,000 square kilometres (68,000 sq mi), Uruguay is the second-smallest nation in South America by area, after Suriname.

Colonia del Sacramento, one of the oldest European settlements in the country, was founded by the Portuguese in 1680. Montevideo was founded by the Spanish in the early 18th century as a military stronghold. Uruguay won its independence in 1811–28 following a three-way struggle between the claims of Spain, Argentina and Brazil. It is a constitutional democracy, with a president who is both the head of state and the head of government.