MercoPress. South Atlantic News Agency

World Bank support for Uruguay's five year reform plan

The World Bank, (WB), extended Uruguay three credits totalling 175 million US dollars earmarked for infrastructure and social development during the official inauguration this week in Montevideo of the bank's regional headquarters.

Several leading Uruguayan cabinet ministers were present at the ceremony which was headed by the WB regional vice president for Latinamerica and the Caribbean, Pamela Cox who underlined the significance of the event.

"This is a clear message of confidence and trust", in the new administration authorities said Ms. Cox who committed the bank to collaborate in helping Uruguay achieve a "sustained growth with equity".

Uruguayan Finance minister Danilo Astori highlighted the long standing and historic relation with the WB, --Uruguay was one of the founding members--, "with which we share concerns over issues eminently social such as education and poverty" and not only effectively economic as "growth, job creation and bettering incomes".

Mr. Astori revealed that the three credits, 70 million US dollars for infrastructure, 75 million multi-sector plus 37 million for environmental conservation, which includes a non refundable grant of 7 million, "are an example of the integral development concept we share with the WB".

The current operation is part of an 800 million US dollars package for the 2005/2010 period agreed in Washington on June 9, following the three years stand by agreement reached with the International Monetary Fund, is "part of the bank's new support strategy for the coming five years", indicated Mr. Astori.

"The inauguration of these offices is testimony of trust in Uruguay, but also of permanence and commitment", he stressed.

However Ms. Cox and Mr. Astori also implied that the disbursement of credits is directly linked to the monitoring of the country's debt and the achievement of goals agreed with multilateral organizations.

Mr. Cox recalled that Uruguay still has ahead several "basic structural reforms and investment proposals" to consider and consolidate which means "upholding sustained growth and stability".

Uruguay in 2002/2003 suffered a financial crisis which spilt over from defaulting neighbouring Argentina and only a month ago was able to float 500 million US dollars in bonds. The financial exposure and vulnerability of the country is given by the fact that the debt/GDP ratio is above 90% and therefore access to credit has been limited to multilateral organizations.

Mr. Astori announced that next August Uruguay will be signing a similar five year credit package with the Inter American Development Bank, the other main multilateral credit organization.

Uruguay's debt with multilateral organizations stands at over 5,8 billion US dollars with a current GDP of 12,9 billion US dollars.

In the middle of the 2003 banking crisis that threatened with melting the whole economy, Uruguay was rescued by a massive 1,5 billion US dollars loan implemented by the US Treasury and later replaced by credits from the multilateral organizations.

Ms. Cox highlighted that World Bank loans have lower interest rates and are long term, "that is why they are more convenient than normal banking operations". But not everybody was happy.

Uruguayan Agriculture minister Jose Mujica regretted that Uruguay has become a "begging country" and was concerned about the country's increasing debt.

However he was grateful to the World Bank and argued that the reason behind the situation was Uruguay's lack of saving capacity.

"The 182 million dollar loan is evidence of our poor saving and investment capacities" said Mr. Mujica adding that "in these conditions we must be grateful to international organizations, because whether they have something wrong it's not their fault, but ours for having to beg for money".