Uruguay is a unitary republic made up of two sub-national levels of government: the departmental and the municipal. Traditionally it was a country made up of a single level of government, departmental, which served as local government. However, in the decentralization process, important advances were made to create municipalities as local governments in 2009, with the country undergoing a municipalization process.
Currently, municipalities are bodies subject to the hierarchy of departmental governments, which implies limited financial and fiscal autonomy and sources of resources. Its main income comes from central government budget allocations defined by the Departmental Governments, and donations.
Departments have high autonomy for the administration and setting of taxable values, as well as for proposing taxes, fees and contributions.
In Uruguay, urban and rural planning was consolidated in the System of Territorial Organization and Sustainable Development, founded by law in 2008. In 2009, important measures were taken towards decentralization with the approval of Law No. 18 567 on Political Decentralization and Citizen Participation, which established the municipalities as local governments under the hierarchy of their respective departments. This was a key moment in the decentralization of land use planning in Uruguay. In 2010, the first local governments were elected and there are currently 112 municipalities.