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Distinct seasons, polite people

"Uruguay might not be the world's most polished place to retire, nor the very cheapest but it is the best-value," says Harrison. "It has a true first-world environment and visitors from the US, Canada or Europe invariably have less of a culture shock to contend with than they would in many other Latin American countries."

Harrison, originally from Pennsylvania, has made his home in the country's main resort city, Punta del Este, after a 30-year career in the US electric power industry and a spell living in Ecuador. "There I had no chance of blending in; here I can," he says. "Low levels of corruption compared with much of the rest of the continent, plus the general feeling that contracts are honoured, are key reasons I'm here to stay."

He estimates that a retired couple can live comfortably on $1,500 a month in Uruguay if they are homeowners.

Paola Fornari, an Italian who spent her childhood in Tanzania and Kenya, and some of her adult life in Belgium, praises the country's good, well-priced services.

"I recently hired a dressmaker to help me sew some curtains. The lady gave me a wealth of useful tips and it cost me 350 pesos ($17) for a morning's work," she says. "I love the fact that there are four distinct seasons, that people are enormously polite and that there is so little traffic. It's almost too good to be true!"

In spite of it's 97 per cent literacy rate, and (in Montevideo, at least) its handsome, sycamore-lined streets, Uruguay still has sizeable pockets of poverty. The capital's middle-class beach district of Pocitos, where I took a stroll one evening with the locals - many of whom were devouring Italian ice cream - appears a world away from disadvantaged districts such as La Cruz de Carrasco, where the pony-and-trap remains a common means of transportation among dwellings.

Fornari volunteers as an English teacher in a community centre in La Cruz de Carrasco. Her "extremely motivated" students are mainly young adults who dropped out of secondary school. She concedes that few of Uruguay's expats venture into the poorer districts but feels that getting involved in the wider community has changed her: "I feel loved in La Cruz de Carrasco. It has become a part of my life."

An hour's drive east of Montevideo, near the pretty seaside town of Piriápolis, developer David James is building 114 houses, together with a clubhouse and restaurant facilities, on a ribbon of land between the area's distinctive Sugar Loaf Mountain and the South Atlantic.

James's development is the first to be specifically marketed to North American and European buyers. Homes on plots of 1,000 sq metre cost from $200,000 (property is usually bought and sold in US dollars here). "It is clear from the moment you arrive in Uruguay that this is a place whose time has come. Montevideo and Punta del Este are buzzing with trendy restaurants, some local wines are now seriously good and shopping is excellent," says James. "On the other hand, the country has managed to conserve its traditions: I frequently see cowhands ride past the development, or dismount to enjoy the ubiquitous mate tea in the shade."

James insists that his development is a gated community not through security concerns - Uruguay has a longstanding reputation as Latin America's safest country - but because incomers require more privacy than the locals. "Americans also want walk-in closets, which are uncommon here. It's all about bringing in the best from outside and introducing these features in a setting that respects local building traditions," he says.

Expat residents at James's Sugar Loaf Ocean Club and Spa will also be cheered to know that Uruguay allows retirees a one-off import of personal effects, tax-free.

Precisely how many retirees from North America and Europe are settling in Uruguay, meanwhile, is an elusive figure. "Take Punta del Este," says Marcelo Larroque, a home-finder specialising in the retiree and buy-to-let markets. "Seventy per cent of properties in the town are owned by foreigners but most of these are Argentinians, as has traditionally been the case. In Montevideo, on the other hand, in the past 18 months it has been common to see block-buying by Spanish investors in new residential towers. But they buy speculatively, not to purchase a home for themselves."

Larroque takes the view that numbers of "traditional" expat retirees who, in the manner of the British pensioners in the 1970s and 1980s sold up in the UK and moved permanently to the Spanish Costas, are dwarfed by what he terms the "half-and-halves": fifty- and sixtysomethings who spend summer in the northern hemisphere, then head for their Uruguayan pied-à-terre in the autumn. "These people enter the country on three-month tourist cards and don't register as residents. When the three months are up, they pop over the River Plate to Argentina, automatically renewing their tourist card as they return. From my research, I would say that the number of half-and-halves more than doubled between 2006 and 2007. With improving air links [Montevideo airport's new passenger terminal is due for completion early next year] numbers will surely rise further."

Larroque's forecast might be a cause for concern for Patricia Westlake, a retired teacher from London who moved to Montevideo two years ago and rents a furnished one-bedroom flat in the university district for $375 a month.

"I discovered the place almost by chance on a weekend trip during a holiday in Buenos Aires," she says during a stroll in the city's Ciudad Vieja [Old Town]. Touted as a district ripe for investment in tourism-related services, the city council has set up a standing committee to extend its small pedestrianised zone and to recommendimprovements to an area that is, in parts, rather dilapidated.

"What impressed me immediately was that the society seemed so unmaterialistic and so keen to recycle - particularly books, which you can buy second-hand throughout the city," says Westlake.

She was also impressed by the care given to her during a short stay at Montevideo's British Hospital, a facility routinely used by Falkland Islanders. "Of course, I've heard that the oldies are coming," she tells me, smiling. "More expats means more company, which cannot be a bad thing. I only hope they don't change things too much because I'm happy with Uruguay just as it is."

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DeveloperSugar Loaf Ocean Club and Spa, tel: + 598 989 04067, www.sugarloafuruguay.com

Estate agentMarcelo Larroque and Associates, mlarroq@adinet.com.uy