MercoPress. South Atlantic News Agency

Better prospects for Uruguay

An improved international environment should help the Uruguayan economy grow an estimated 2% during 2001, following two negative years. According to the guidelines of an agreement reached with the International Monetary Fund officials in Washington, IMF, Uruguay is gradually recovering, and in spite of a estimated budget deficit equivalent to 2,5% of Gross Domestic Product, GDP, exports should manage to grow an encouraging 7%. Uruguay experienced two recessive years, 1999 and 2000, --after almost a decade and a half of sustained growth--, as a direct result of the Brazilian currency devaluation in January '99 (over 50%), which also had an impact in Argentina, --Uruguay's two main trade partners--, plus the oil crisis, a strong dollar and increased interest rates. The combination of these factors led to a negative growth of 3,2% in '99 and 1,5% in 2000; a 14% and 11% export contraction; and GDP budget deficit of 3,5% and 4%, while unemployment jumped from 10% in '98 to over 14,3% in 2000. After two consecutive recessive periods, the change to optimism is based in the fact that Brazil is expected to keep growing at a steady 4,5%; Argentina has received an important international financial support; the oil market has cooled; rates are expected to drop as the United States economy slows down and the dollar is forecasted to loose ground to the Euro. All this should stimulate exports, particularly since the Uruguayan currency is tied to the US dollar and a weaker greenback will turn local exports more competitive.