Policies play a pivotal role in determining land change. Uruguay has been subject to first a rise and then decline in plantations of exotic trees as a result of internal Uruguayan government policies, and a recent substantial increase in soybean cultivation that may be attributed to Argentinean policies. To properly assess the relationship between land change and changes in land-use policies, vegetation change for Uruguay from 2001 to 2009 was mapped using MODIS imagery. Between 2001 and 2009, the area covered by exotic tree plantations declined by 1435 km2, and 34 681 km2 of herbaceous cover was converted to agricultural cover, mainly soybean cultivation. Uruguay and Argentina implemented land-use policy changes following the 2002 economic collapse. Rapid increase in exotic tree plantations, mainly in the 1990s, may have been stimulated by Uruguayan government incentives, while their recent decline coincides with the subsequent elimination of these incentives. The rapid increase in soybean production may be largely attributed to recent tax regimes in Argentina and lack of export tax in Uruguay combining to provide a favourable financial climate for Uruguayan soybean cultivation. Soybean cultivation is predicted to continue to expand in Uruguay, while exotic tree plantations should also increase in importance owing to the recent establishment of the world's largest pulp mill.