Argentina’s poor cousin? Not Uruguay
The following piece by Jude Webber writing for the Financial Times explains the different approach by the two neighboring countries to the windfall earnings of the commodities boom.
While Argentina apparently is letting a wonderful opportunity pass by, Uruguay already has overtaken its neighbor in beef exports, attracting foreign investors and is on route to attaining investment grade rating.
The full article follows:
Uruguay is a little country jokingly considered – by Argentines – to be just another province, or even an annex, of their nation, albeit with better beaches.
Yet Uruguay has already overtaken Argentina in one area where it hurts – beef exports – and its ability to attract big investments, such as the two billion US dollars Montes del Plata pulp mill, is another factor that sets Uruguay apart from its larger neighbor. The prospect of attaining an investment grade credit rating as early as next year, as forecast by Nomura Securities in a new research note, is another.
“The combination of strong growth and robust fiscal framework should continue to lower the debt burden. In addition, the gradual de-dollarization process and the declining share of foreign-currency-denominated debt is expected to put Uruguay on a solid path towards an investment grade credit rating sometime in 2012. Inflation remains a threat, but the prudent monetary policies and the dissipation of commodity price shocks should minimize the risk”, points out the Nomura report.
Roberto Lavagna, Argentina’s economy minister between 2002 and 2005, highlighted Uruguay, alone with Chile in the region, as taking full advantage of the current booming conditions for producers of primary products.
“I have the feeling that the bonanza effect isn’t being taken full advantage of in Latin America to the fullest possible extent, with the exception perhaps of Chile and Uruguay,” he told foreign correspondents last week.
Uruguay, he said, was using favorable conditions to push through “deeper structuring changes than the rest”. The country, he said, had changed – by adding value to production of primary goods – and “I don’t see that being the case of other countries, and it clearly isn’t the case of Argentina,” Lavagna said.
Which isn’t to say that Uruguay has no problems at al: chief among them is inflation. As Nomura says:
“Headline CPI is currently running above the target band (4-6%) as a result of surging commodity prices and hot domestic demand. However, we believe it will moderate somewhat to slightly above 7% by year end.
“After stabilizing between 6% and 7% in annual terms during the 2H 2010, inflation has been increasing steadily since January to 8.34% in April. The main culprits are increases in gasoline (9.8% y-o-y) and electricity prices (5.5% y-o-y), elevated food prices (10.7% y-o-y) and strong demand-side pressures, which can be attributed to wage increases (10.3% y-o-y) and strong consumer credit expansion. While we don’t discard the possibility that inflation, in annual terms, exceeds 9% in the coming months, we believe it will decline to 7% by December, on the understanding that the central bank (BCU) will keep tightening monetary policies. In order to tackle above-target inflation and limit the contamination of inflation expectations, BCU has already put into place significant tightening measures, via sharp increases in the policy rate to 7.50% from 6.25% in March and elevating reserve requirements. We judge that the latter channel is more effective in a highly dollarized economy such as Uruguay. Moreover, supply-side shock from high commodity prices seems to be dissipating. For instance, in the past two weeks, oil prices have collapsed by 13% with WTI prices now below the US$100/bl psychological threshold”.
HSBC, in a recent report entitled “Growing Pains”, described inflation as at “burdensome levels” but it also expected it to peak – around 9% somewhere in the second quarter, it reckons – and forecast 7% inflation by year-end. Both it and Nomura are now forecasting 5.5% growth this year – still robust, after last year’s 8.5%, and Nomura highlighted the government’s strong commitment to fiscal discipline.
Furthermore, as Nomura notes:
“Uruguay is poised to attract sizable FDI inflows due to a particularly inviting business environment. According to Brazil Getulio Vargas Foundation, an independent think tank, Uruguay is ranked the top Latin American country in terms of the quality of its business environment”.
In one key sector – energy – Uruguay, an importer, is preparing a second tender of offshore hydrocarbons blocks and has this year announced an on-land discovery of hydrocarbons, which is now being studied.
So there is plenty for President José Mujica, to cheer about. Yes. But this week, he is looking glum. His Broad Front (Frente Amplio) coalition decided at the weekend to vote – against his wishes – in support of a bill to overthrow a law that granted amnesties to dictatorship-era figures.
One might be forgiven for thinking that Mujica – a former urban guerrilla who was himself imprisoned for 14 years in the 1970s and 1980s – would be in favor, but he says it is wrong to annul not one but two referenda on the issue (1989 and 2009) but has already said he will not veto the bill.
The vote is Thursday in Uruguay’s Lower House; the Upper house approved the bill earlier this year, meaning that it will become law if approved. Political analysts say the issue has weakened Mujica. At least he can take some cheer from the economy.
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16 comments Feed
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Obviously not. And thanks God it is not!!!.
Adding to that, what's for sure is that the Falklands are not Argentine. And also thanks God they are not!!! lol!!
Cheers.
While Britain apparently is letting a wonderful opportunity pass by, Northern Ireland already has overtaken its neighbor in beef exports, attracting foreign investors and is on route to attaining investment grade rating.
Bla, bla, bal Britain, more bla, bla Britain , bla Britain, bla Britain, Ah yes Northern Ireland more Britain...
Ha ha are the Journalists of FT becoming every day more stupid? I guess so.
@jerry
“And, of course many Argentina campo people have shifted to Uruguay and are not only exporting meat from there, but grains also.”
And ? do you know how wonderful will be to get rid of people of the campo for Argentineans?
They are the disgrace of Argentina like the south of US for yanks.
none are going to miss them.
his is a sad, sad posting
So are you journalist of campo boys?
The “Campo” for Argentina have been a disgrace, conservative people that always cry, don’t give a damn thing for the rest of the society, selfish and they only want to keep their privileges.
Their mentality is to have people in misery to explode them, its like the Mohamed’s financial system in UKI.
They don’t want to pay taxes, always press any govt. to get privileges, etc, etc, etc.
They are for the rest of the society what Moyano is for the transportation business.
Lets say the Moyanos of the seeds and cows, never is enough for them.
So if they are happy in Uruguay, Bolivia, etc. or whatever fine. If they have a good price may be we will buy some beef from them if we cannot fine better price from Africa. Who knows?
The free market and globalization is like this haha.
About the part of the journalist the sad thing that you didn’t mention it is that the article was supposed to be about Uruguay.
Published in: Economy, Politics, International, Mercosur, Uruguay
en.mercopress.com/uruguay
And half of the article was dedicated to Argentina what reveals the real intention of the editorial using Uruguay as a tool to fabricate a pointless comparison which shows the lack of neurons of the writer.
In hope I just covered your expectations mates or else move to Uruguay.
l think that you have a chip on both shoulders.
Nope
I’ve never said that and it has noting to do with ideology it is a matter of economic equation.
USA has faced the same dilemma during the 1800.
The south AKA “el campo” the rentist sector of the monopoly of the productive lands wanted to impose to the rest of the country their view of the economy model what of course was only successful to them based on slavery, open market and the leak of any European @ss power market (England ,etc) who where willing to buy cotton, grain, etc.
One American once said during troubling times in Argentina “Argentina is what would be US if the south would won the war”
If I want to dominate you economically I wouldn’t allow you to make things with add value so I will do any what I can to put restrictions to your factories and I will only open with certain restriction the imports of raw materials and commodities. So I would buy certain amount of cotton for example and in exchange you will have to buy from me Sweaters, blankets, etc. Do this model sounds familiar to you?
During 1933 the “CAMPO” lobby push to sign a draconian pact with Britain where Britain imposed conditions like. No taxes to Brits industrial products, a restrictive quota that only allows Argentina to export to Uki if the price was less of their colonies and only processed meat from foreigners meat factories where 80% were Brits and Yanks.
es.wikipedia.org/wiki/Pacto_Roca-Runciman
The brits developed the trade with their colonies like Australia, Canada, NZ, etc. and Argentina ended up naked. This is known in economic history as the Policy of import substitution imposed by Britain under the chapter of mercantilism.
Tell me one country in the world that had become developed 100% thanks to el campo????
: )
“l think that you have a chip on both shoulders.”
Better, a chip on each shoulder - unless you are making a yoke ;-)
“lszoldy, l have new yoke for you” l miss those days.
But don't you think NicoD raves on a lot? There seems to be no end to the fool.
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