Friday, February 8th 2013 - 06:51 UTC

“No big deal with inflation, I grew up in a country with 70%/80% inflation”

Two contrasting views have surfaced in the Uruguayan government regarding inflation which has been steadily climbing and seems so far immune to monetary tools, but is now the second highest in the region behind Argentina.

President Mujica exposed differences on economic policy in his government

While Vice-president Danilo Astori and his team at the Ministry of Economy and Central Bank describe inflation as the main challenge for the Uruguayan economy, President Jose Mujica and the Planning and Budget Office have stated that there’s no need to be scared about inflation, it can be reined in.

“There’s no big deal with inflation, it can be reined in and we are going to fix it. I grew up in a country with 70% and 80% inflation”, said President Mujica on Wednesday when he arrived to the funeral of a former minister that gathered most of the cabinet, lawmakers and top officials.

In effect the head of the Planning and Budget Office, Gabriel Frugoni, his deputy Jeronimo Roca and advisor Pedro Buonomo insist that the main challenge for the Uruguayan economy is “competitiveness” because of the depreciation of the US dollar and strength of the Uruguayan Peso and its impact on non commodity exports with added value.

At the Executive Tower where the Planning and Budget Office is seated they are working on support measures and incentives for the exports with added value.

But at the Ministry of Economy, Fernando Lorenzo is pointing his guns to bringing down inflation which reached 8.72% in the last twelve months, and one of the options is drastically cutting consumer credit.

The other big issue in the discussion is the budget fiscal deficit which now stands at 2.8% of GDP, and probably with inertial growth.

“Uruguay in current circumstances must be particularly careful with expenditure which is feeding a deficit far higher than what it should be” said Vice-president Astori at the last cabinet meeting.

The head of the Macroeconomic Department at the Economy ministry Andres Masoller also called for ‘caution with expenses’ and advanced that this year’s budget would be ‘tight’ with no new outlays programmed.

He went further describing the situation as ‘delicate’ and suggesting ‘drastic cuts in outlays or an increase in taxes’.

However 24 hours later he had to back step denying any fiscal ‘adjustment’ was planned and even when budget outlays have increased “this does not imply a serious situation”. The target of cutting in half the deficit to 1.4% of GDP in the next twelve months as had been anticipated was brushed aside.

Furthermore the government will go ahead with its promise of cutting two percentage points of VAT (currently at 23%) for electronic transactions.

Another area of friction is implementing higher taxes on companies’ profits and luxury goods which is sponsored by the Planning and Budget Office and rejected at the Ministry of Economy since it would ‘discourage investments’.

But President Mujica’s advisors argue it is necessary “to keep advancing in wealth distribution” and to consolidate the achievements of the government ahead of 2014 presidential election.

22 comments Feed

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1 Anglotino (#) Feb 08th, 2013 - 07:09 am Report abuse
Venezuela isn't in this region it would seem because it is almost double Uruguay's.

But it could be worse..... like next door.

As for having grown up in a country with 70-80% inflation, I would think he would realise how poor that country was then. Inflation is a wealth destroyer for poorer people..... so maybe he was a rich in a poor country - hardly a man of the people with a comment like this.
2 ChrisR (#) Feb 08th, 2013 - 10:02 am Report abuse
He's lost the confidence of the majority of Uruguayos as far as I can see and this nonsense will be the last straw for people on low wages, unless of course in true communist fashion he intends to take from the rich and give to the poor.

I wonder if he is ill, a brain tumour perhaps?
3 ElaineB (#) Feb 08th, 2013 - 10:37 am Report abuse
Senile? There is a tendency to regress to one's childhood as senility take a hold.

What is so ridiculous is that the young never really see the full picture of rampant inflation or carry the worry of trying to survive as parents shield them from it.

What a twit.
4 CaptainSilver (#) Feb 08th, 2013 - 10:52 am Report abuse
People who have never had any savings are unaffected by inflation if wages are also inflating. But, if you are retired having saved judiciously all your life inflation can destroy your retirement. The only way to avoid that is to invest your cash in assets like property that you can rent out, or, keep your cash in a stable foreign currency.
Having your country run by someone who has lived a humble life might seem very admrable but it could seriously erode or destroy your savings and ruin a prudent life.
5 Idlehands (#) Feb 08th, 2013 - 12:31 pm Report abuse
Who'd have guessed that a marxist guerilla would have a poor understanding of economics?
6 yankeeboy (#) Feb 08th, 2013 - 01:01 pm Report abuse
I can't remember who was arguing with me out Ol' Pepe, they got mad when I called him a weak drunk old commie.
Uruguay is doomed with this idiot running the country.
7 Idlehands (#) Feb 08th, 2013 - 01:13 pm Report abuse
He does have some Gandhi like qualities - but he doesn't have the education or experience to be president.
8 redpoll (#) Feb 08th, 2013 - 01:20 pm Report abuse
Of course 70-80% inflation didnt bother Pepe. At that time he was a Tupamaro guerillla and when they needed money they just robbed a few more banks
9 Karl101 (#) Feb 08th, 2013 - 04:37 pm Report abuse
Please support this page honouring all those who helped liberate the Falklands in 1982 and dedicated to keeping the islands liberated and free of Argentine colonialism.
10 Sergio Vega (#) Feb 08th, 2013 - 06:52 pm Report abuse
This is what this guy IGNORANT.....
Is commonly known that the inflation is not only the poors tax, it´s a bloody hurt where the incomes flows out from people and Gvt. pockets and the economy demean.....
All clever Gvt. fight the inflation with all the measures they have to keep it under control even it could means a lower growth rate.....may be the day Mr. Mujica learn to read he can understand it.....instead be doing demagogic presentations as the poorest president of the neighborhood....I prefeer a very wealthy president into a wealthy country before a poor president into a poor country.....
But, this is a problem that the Uruguayans must save.....with their votes.
11 redpoll (#) Feb 08th, 2013 - 08:59 pm Report abuse
Yes I tink the old man at last realises hes out of his depth and one detects a discreet cri de couer to Vasquez to help him out
One of the problems is that while the Communists have limited representation in Parliament thier influence in the Frente Amplio party is very great as posts are dished out according to the way each sector votes at the party conventions as they ALL come out to vote whereas the other more moderate sectors do not
12 Baxter (#) Feb 08th, 2013 - 09:43 pm Report abuse
One begins to worry about this man . First he says inflation is terrible since it affects the poor mainly . Now he tells us not to worry ! This is the same one who said that practicality is above laws and constituitions ! Poor Uruguay .
13 redpoll (#) Feb 08th, 2013 - 09:51 pm Report abuse
Apparently he does whatever his wife Lucia Topolansky tells him to do and say
14 St.John (#) Feb 08th, 2013 - 10:00 pm Report abuse
Jeeeez, with a president who has that attitude, I don't envy our Uruguayan friends. Inflation above 10 percent is a serious problem, which discourages people from saving and investing - at 20 percent you are heading towards a catastrophic national economy.
15 Ayayay (#) Feb 09th, 2013 - 06:00 am Report abuse
Is anyone gonna mention the deval in Venezuela? 'Big Macs' were going for $16 preDeval, while $4 in the U.S. Of A.
16 AMGVVV (#) Feb 10th, 2013 - 11:04 am Report abuse
Dear Mr. President, please stop drinking for a copule of days. Or, if you cannot stop it, just do not open your mouth, please.
17 ynsere (#) Feb 13th, 2013 - 02:04 am Report abuse
President Mujica was just having a bad day (pills?) He'll probably say the opposite in the very near future. We're used to it, he's been doing it for years.
18 redpoll (#) Feb 15th, 2013 - 12:59 pm Report abuse
He certainly had a bad Valentines day as the supreme court ruled one of his pet taxes as unconstitutional. This is ICIR (Impuesto sobre Concentracion de Immuebles Rurales) and is a annual supertax on larger farms. He has already spent the monies he has got in from this tax and will now have to return it to those who paid it
This on top of gross govt overspending last year when incoming tax revenues were at a record level. Instead of cutting spending the govt is going to finance this with higher taxation rates and this before ICIR was declared inconstitutional
Pepe aint a happy camper at present
19 ynsere (#) Feb 15th, 2013 - 01:06 pm Report abuse
Redpoll @ 18
And it isn't as if he hadn't been warned!
20 redpoll (#) Feb 15th, 2013 - 03:17 pm Report abuse
Problem is we seem to have two different ministires of economy at loggerheads with each other on what to do
21 ynsere (#) Feb 15th, 2013 - 06:29 pm Report abuse
Have you got any confidence in either of them?
22 redpoll (#) Feb 16th, 2013 - 12:13 am Report abuse
Not much

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