Historically much of Uruguay was ranch country and today many people still make a living by ranching. Due to this, gaucho, or ranch clothes are still popular and some aspects of this dress have made their way to mainstream fashion. Traditionally, the ranchers or cowboys would wear long pants in white, black, green, or blue that are durable enough for horse riding. On top they would wear ponchos, which were simple, but durable as it is worn in a style similar to a cape and generally only used during the colder and windier months.
Although you will see few people in the cities wearing ponchos today, the pants, called bombachas de campo are common throughout the country. The footwear throughout the country also reflects the gaucho culture as boots are common as are the more common alpargatas.
As a visitor to Uruguay you are welcome to wear nearly anything, but try to avoid anything that is too revealing, either by being too tight or by showing too much skin (although shorts and t-shirts are acceptable). Generally, covering up and wearing looser clothing is the way to go for a day of sightseeing, but clubs can take on a style of their own (many people will wear clothes that are tighter and/or more revealing), and business dress in Uruguay is no different from that of Europe or North America.