NS4540 Winter Term 2017 Uruguay: Trade Adjustments Panama Key issues 2016 Inclusive Growth in Panama

Overview President Vazquez seeking greater international trade via accords with countries of Pacific coast Facing some resistance from part of his congressional bloc After strong growth between 2004 and 2014 and sharp slowing in 2015, economy has remained stagnant in 2016 This has affected fiscal accounts forcing spending cuts and tax increases. Raising concerns over Impact on public sentiment and Relations with the country’s strong trade unions

Economic Issues Economic performance deteriorated in the early part of 2016 with expectations of a contraction for the year, rising unemployment and year end inflation of nearly 12% For 2017 average growth forecasts have fallen from 1.4% in February to 0.8% in August Industrial data indicates the recession that began in 2014 strengthened in 2016 Exports have been contracting: -2.7% (2014), -7.1% (2015), and -4.0% (2016). In light of small and stagnant domestic market, government aims to boost recovery through improving the performance of exports

Pacific Alliance In a bid to increase exports, Vazquez has attempted to come to a free trade accord with Chile, Peru and Colombia These countries, together with Mexico are part of the free-trade oriented Pacific Alliance Their trade policy is far removed from that of the Mercosur bloc which Uruguay is a member and which is divided over the position of Venezuela within the block Uruguay appears increasingly at odds with the other founding members of Mercosur The current crisis within the bloc further undermines prospects for regional integration and an eventual association with the EU.

Assessment Vazquez’s bloc has shown little enthusiasm for the Pacific Alliance strategy Vazquez’s initiative could stimulate a stagnant economy but will agitate an already tense political standoff potentially increasing uncertainty The president’s move may succeed and could help recover lost support from public opinion and the business community