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Montevideo, November 15th 2018 - 18:58 UTC

Uruguay inflation hard to break: in July it remained stubbornly above 9%

Thursday, August 7th 2014 - 08:02 UTC
Full article 6 comments
Food and beverage are one of the items which has increased most in the last seven months    Food and beverage are one of the items which has increased most in the last seven months

Inflation in Uruguay remains hard to break having reached 6.17% in the first seven months of the year, the highest since 2007 (6.38%) and over 9% in the last twelve months well ahead of the government's target of 3% to 7%, according to the latest figures from the stats office, INE.

 The inflation index in July was up 0.75% over June, the highest since February (1.66%) with Food and beverage having the most impact, 1.43%. So far in the first seven months of the year, this item has climbed 11.8%.

The second item in importance was healthcare which increased 3.5% and totals, 6.93% in seven months. Housing on the other hand dropped 1.07%, mainly because the sub item electricity was down 4.77%. This is attributable to the government owned power company, UTE, which alleging abundant rainfall decided on a considerable rate cut, both for homes and industry.

Uruguay must keep its annual inflation below two digits otherwise all labor contracts fall and are liable to a new round of negotiations. So with some manipulation of the index items and good relations with the powerful organized labor unions, the ruling coalition has so far managed to avoid the situation.

For this the Uruguayan government has a virtual monopoly over public utility rates and administered prices (power, fuel, communications, drinking water, health care, public transport and some rents), plus a manageable level of reserves to keep the US dollar in the local money market somewhere between 23 and 23.50 Pesos.

A happy combination in time and percentages, and some price agreements with the main supermarkets, help to reach the desired target below two digits.

Besides since this is an election year (October) it is hard to see the government involved in any effort to contain the admitted budget deficit, in the range of 3.4% of GDP, despite a strong growing economy, and in orthodox terms fuelling inflation.

Nevertheless the government's 'surgeons in numbers' can be expected to make the necessary combinations to ensure that the inflation index, and not necessarily inflation remain at a level below 10%. Cross your fingers and let the next government that takes office in March deal with the consequences of such contention inventive.

Categories: Economy, Politics, Uruguay.

Top Comments

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  • ChrisR

    “No Money Pepe” is singularly responsible for this.

    He unilaterally put the cost of all fuels up by 10%, even the chairman of ANCAP knew nothing about it until it was announced by the illiterate, innumerate, Hamas loving murdering commie bastard.

    Then, two months later he asked in the press “why has inflation gone up?”

    Of course, he didn’t realise being innumerate, that 10% on fuel was self perpetuating down the entire supply chain for all goods and the majority of citizens who have to travel on road transport, private or public.

    Anyway, the numbers quoted are fictitious from my own personal experience. I own my own house (so no rent), I am retired so only pay ‘income tax’ on my investments, etc, etc, and my observed price hike are over 12% according to my budget which is updated each time any costs are incurred and payment is made.

    Mujica has, in less than four years, wasted the good economy he inherited from Vasquez and left his successor a massive problem to solve. Giving money to the lazy bastards who never worked at school and have never had a job just like their parents aka “The Poor” has created a major social rift in the area where I live. The people here who work for a living detest this cretin for this alone.

    So the end result is don’t hold your breath for inflation to recede except after twelve months when the arithmetic has to use today’s numbers to calculate “the change” which of course is no change at all.

    Aug 07th, 2014 - 11:55 am 0
  • Lucdeluc

    Why do you live in a place where the president is an illiterate, innumerate, Hamas loving murdering commie bastard?

    Aug 07th, 2014 - 02:35 pm 0
  • Think

    (2) Lucdeluc

    It's a recurrent ailment on many Anglo old age pensioners that choose the Expat alternative...

    They grossly miscalculate their abilities & possibilities and, when confronted with reality, they get pissed with the locals and, eventually, return home...

    Not long for that to happen to Mr. ChrisR, I reckon...

    Aug 07th, 2014 - 04:34 pm 0
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