1. NS4540 Winter Term 2017 Uruguay Economy
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2. Uruguay WEF I

3. Uruguay WEF II

4. Uruguay WEF III

5. Overview I Uruguay has a number of features that set it apart
Average annual population growth of 0.1% was the lowest in Latin America
Proportion of people living in urban areas in 2013 – 92% was the highest in the region
In 2014 Uruguay had one of the highest GDP per capita incomes at US$20,597 ppp
However due principally to the economic crisis in Argentina poverty grew dramatically in affecting almost 40% of the population in 2003
declined to 9.7% by 2014
In region characterized by very high levels of inequality, Uruguay the most equal society in Latin America

6. Overview II
Country developed a modern economy with a strong social security system on an almost exclusively agricultural base
From the late 19th century Uruguay developed as an agricultural export economy – wool, beef hides mainly to European countries
With favorable natural conditions and a low population density, and export values high
Uruguay was transformed into a stable democratic welfare state under President Ordonez ( )
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7. Overview III
Government policy encouraged domestic manufacturing and protection was intensified in 1930s and after WWII
Strategy of import substitution was exhausted in mid 1950s
Rate of growth of exports was low and
Small size of domestic market limited economies of scale
A period of economic stagnation followed and continued into the early 1970s
Social unrest led to the army assuming power
Economic policies of the military regime after 1973 based on a reduction of public sector and
Incentives to non traditional exports, helped stimulate GDP growth but with high inflation

8. Overview IV
Economy always linked closely to economies of Argentina and Brazil
Formation in 1995 of the Southern Common Market MERCOSUR accentuated this influence
GDP growth resumed in the 1990s but economy entered a decline towards the end of the decade due to
Devaluation of the Brazilian currency
Recession in Argentina and
Persistently low prices for agricultural exports
In 2001 production drastically affected by an outbreak of foot-and-mouth disease
In 2002 country experienced major economic crisis caused by Argentina’s default

9. Overview V
In economy
contracted by 11.2%
Unemployment reached almost 20% and
Gross public sector debt to GDP increased to over 100%
External debt restructuring and international financial assistance led to a swift recovery with growth of 2.4% in 2003
In common with other countries in region Uruguay benefitted from high commodity prices and in Uruguay’s case compounded by
High levels of foreign direct investment FDI
Economic Diversification, and
Productivity gains

10. Overview VI
For next decade Uruguay economy growth at annual average of 5.4% compared to LAC average of 3.4%
Per capita income has risen by 75% since 2002 while poverty and inequality have declined to an historic low
While not immune to the impact of the global financial crisis, Uruguayan economy was remarkably resilient
2.9% in 2009
8.9% in 2010 and
5.7% in 2011
Growth slowed to 3.9% in 2012 – mainly reflecting sharp fall in economic growth in Brazil and Argentina
Jumped to 5.1% in 2013 before slowing down due to poor economies in Argentina and especially Brazil

11. Overview VII

12. Assessment I
Although 2005 international financial markets concerned with inauguration of a new left-wing government led by Tabare Vazquez regime initiated
fiscal orthodoxy and structural reforms
Prudent fiscal policies and proactive management of external debt led to significant reduction in the debt-to-GDP ratio
Improvements in bank regulation and high international reserves all contributed to economic confidence.
Government of Present Jose Mujica ( ) largely continued orthodox economic policies of previous administration
President Vazquez back in office in 2015 but growth slowing down due to decline in commodity prices

13. Assessment II
Economy remains vulnerable to conditions in Argentina and Brazil
Domestically a number of concerns
High inflation and elevated fiscal deficit indicated need for a fiscal adjustment and lower wage settlements
High levels of industrial conflict and rigid wage settlements have negatively affected business climate
Low unemployment levels were resulting in shortages of skilled labor
Country’s infrastructure remained in urgent need of investment

14. Assessment III
Although Presidents Vazquez and Mujica significantly increased investment in education
Indicators that this input has not improved quality
Uruguay’s traditionally high educational standards are starting to lag behind those of other Latin American countries
To ensure attainment of a more sustainable path, government must
restrict increases in public spending and wage settlements
improve infrastructure and address failings in the education and training of the workforce
If these issues are dealt with successfully, Uruguay should be able to sustain a turnaround in economic performance over the medium term.