“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.
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.
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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.
I wonder if he is ill, a brain tumour perhaps?
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.
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.
Uruguay is doomed with this idiot running the country.
www.facebook.com/HonourRestored
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.
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
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
And it isn't as if he hadn't been warned!
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