Moody’s raises Uruguay’s credit rating to Ba1, one level below investment grade
Uruguay’s credit-rating outlook was raised on Thursday to positive by Moody’s Investors Service, which cited the government’s commitment to keeping its budget deficit in check.
Moody’s raised Uruguay’s outlook from stable 13 months after lifting the rating to Ba1, or one level below investment grade.
“A steady improvement in Uruguay’s sovereign credit profile as a result of a strong and continued commitment by the government to fiscal discipline, a condition that has led to moderate deficits and declining debt metrics,” wrote Mauro Leos, a Latin America sovereign credit analyst for Moody’s Investors Service, in a report.
“Along with a better capacity to administrate adverse financial and economic conditions, the profile of the Government’s credit has improved gradually but steadily, thus getting closer to the line that the sovereign countries with the highest ratings have,” Moody’s added.
Yields on government dollar bonds due in 2022 fell 4 basis points, or 0.04 percentage point, to 3.94% and the extra yield investors demand to hold Uruguayan bonds instead of US Treasuries rose 3 basis points to 210. That’s less than some investment-grade countries including Peru, Russia, and Poland.
The Uruguayan government reduced its debt by extending average maturities and decreasing the share of foreign currency- denominated debt, according to the report.
Fellow credit rating agencies Standard& Poor’s and Fitch maintain a similar rating with Uruguay -BB+- with stable panoramas.
Moody’s lowered Uruguay’s rating to Ba2, two levels below investment grade, in 2002 because of the spillover from neighboring Argentina struggling in the aftermath of its record default.
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The latter concept belongs to the economics of the madhouse.
Getting rid of public headcount WHILST at the same time retraining the people involved into PRODUCTIVE work is the only way Uruguay can break out of the mindset that the state can do everything. It may be able to do everything BUT IT WILL NOT BE AS EFFICIENT AS THE PRIVATE SECTOR.
I think you may not understand how a monetary system works.
Just imagine that ALL the people working in Uruguay actually worked for the government - probably in very important jobs such as the teachers and the policia. Please tell me where the money to pay them comes from: hint - it's NOT the taxes that they pay!
Then there is the question of “efficiency”. Do the people of the world want “efficiency” or a healthy economy where everyone who wants to is working, paying their bills, getting a yearly vacation, getting good health care, etc. Efficiency is but one measure of economic health, and not one that I have a lot of respect for.
And, yes, the public sector in the US has been slashed in the past couple of years.
From CNN: “Job cuts this year [2011] total 564,297, a 13 percent increase over the 2010 total of just under 530,000. The public sector was hit the hardest shedding roughly 180,000 jobs in 2011.” The cuts have hit every state, city, town, and school district.
The Uruguayan economy is a mix of private and public sector markets, and has done an exceptional job of supporting a healthy economy for its people. So much so, that Moody's just upgraded Uruguay to Ba1. The financial world, in general, sees Uruguay as stable. Why mess around with something that is working reasonably well.
Believe me, I LOVE Uruguay. But friends have to tell it how it is. If they had done something along the lines that I have shown is neccessary, it would have been INVESTMENT grade NOW, which is what the government wanted.
NOW, please answer my original question. No flannel, just the answer.
Admittedly, what I am advocating is something that a pure capitalist would choke on, so I expect that you will, too. But, surprise me.
Additionally, I don't see why Uruguay needs to impress the Ratings Agencies, since that entire system is collapsing in on itself due to the incestuous nature of global finance and banking, and will become irrelevant in the near future.
Two subjects here.
1) Nationalised businesses NEVER run efficiently. It does not matter whether they are in democratic countries like Uruguay or in Marxist communist countries like Cuba (especially Cuba who is breaking down the restrictions because after all these years they have realised they don't work).
Why should nationalised industries bother to be efficient when the Finance Minister allows them to put prices up (UTE by an average of 5%)? Did your wages go up this year? My pensions have not.
But here is the suprise: YES you are right about strict controls on what private businesses can do with the country's infrastructure. There is not room here to explain what is required but it can be done.
2) Ratings agencies. Uruguay have decided to go for an 'Investment Rate' from the Agencies. With this grade they would attract many of the 'fence sitters' who at the moment can't make up their mind whether to invest in business in Uruguay. I agree that is a simple way to attract these people BUT it will not happen if the fiscal drag on the economy caused by government structures keeps increasing. And it will keep increasing while this attitude to price hikes without corresponding efficiencies is allowed to continue.
BTW... Cuba is an aberration since the US has had an embargo going on for 50 years. There is no way that to use it as an example of a failed Marxist economy. I say that US capitalism has failed miserably, but then the current form of US capitalism is also an aberration and not true capitalism. Neither can be used as examples.
However, I will surprise you by saying that I agree that the manner in which the nationalized businesses are managed is very important, and, to be sure, they are not always managed well. Same goes for private enterprise.
There is no reason in a vibrant balanced economy why private / government jobs should result in serious unemployment.
Yes, the complete screw up we have now, caused by greedy investers (banks and private individuals) who bought the bad mortgages high interest returns without understanding or even being told what the risks were which led to the crash does not look good for capitalism.
However, if we go back to your original concept of an internal economy, then Cuba is exactly why it will not work. Yes, they had an embargo - but if the internal market really does work it would not matter (no imports, no exports).
I agree wholeheartedly with your final paragraph. However, if the private business is ineficient ONLY the owner has to pay (by losing profit margin) and his customers by higher prices - but they can choose not to buy. Try not buying from OSE, ETE, ANTEL and see where you get. AND, who pays for government inefficiency? We ALL do in increased taxes.
You also seem to overlook another advantage to the workers liberated from the government to work in the private sector: they will earn more money and should have a better standard of living for their family. They WILL have to work harder though from what I have seen of the overstaffed government departments in Uruguay. :o)
Regarding increased taxes that are needed when state owned businesses are less efficient, I actually don't mind that (if in fact yours is an accurate statement about ) because a larger portion of the population are having their needs met. I know that must sound very strange to you. I just don't believe that capitalism works all that well as dominate system. I prefer that most everyone is well taken care of, even if it costs me a little more.
I found the quote below today and thought is was insightful. It references today's financial climate.
“Faced with the risk and rigor of 'free markets' and the drive to zero economic profit through increasing competition, there is the impulse to create monopolies, manipulate prices, and control information to line one's pockets.”
“It is the natural tendency for clever people to stretch the rules and even break them to gain an advantage over other participants. This is what makes the idea of the natural efficiency of free market systems so laughable. They work fine as long as there are no people involved in them. Freedom and justice take hard work and dedication, and are not the natural state of the world.”
Additionally, all one has to do is look at how the neo-cons (both Repubs and Dems) privatized the US military and how the prices to deliver support to service members around the world has gone through the roof, by ANY standards one looks at it. Soldiers doing KP (Kitchen Patrol) vs. KFC/Pizza Hut. No contest! Soldiers driving fuel trucks vs. private contractors? No contest! Etc. Etc.
Agreed about overstaffing and mind numbing bureaucratic processes. Still, they all go home with food to eat and a roof over their heads, and their kids are going to school and drinking clean water. It's all very good.
If you would like to continue this discussion off site: rylang23@gmail.com
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