MercoPress. South Atlantic News Agency

Uruguay downplays possible impact of Argentine situation

“Uruguay has a budget surplus” said Mnister Astori

Uruguayan financial authorities minimized the possible economic impacts on Uruguay of the current uncertainty scenario in Argentina because of the ongoing conflict with farmers and which has temporarily suspended the neighboring country's cereal and oil seeds exports.

"There's no clear indication of a significant alteration of economic activity in Argentina, so from the Uruguayan point of view we're not anticipating any extraordinary event", said Economy minister Danilo Astori. However he did admit that Uruguay is closely monitoring the situation because "Argentina is not any country, it's big, powerful, a neighbor and with great influence over the Uruguayan economy". Addressing a meeting of businessmen Astori recalled that Uruguay is far better prepared for any eventuality of the kind that struck Uruguay in 2001, when the rapid contagion of the melting of the Argentine economy and the massive default. "Today Uruguay has a budget surplus, we're fiscally sound, we have no financial problems to finance until the end of the current mandate (2010) and commercially Uruguay's foreign trade has greatly diversified since", added Astori. In similar terms Uruguay's Central Bank chairman, Walter Cancela said that "one always must be prepared, albeit it partially; we are closely following the evolution of affairs in Argentina and we see no significant negative impact risk for the Uruguayan economy, so far" As to the growing inflow of Argentina capitals to Uruguay, Mr. Astori attributed the phenomenon to two main causes: investments are moving from Argentina to Uruguay, "which is good for the country because it enhances Uruguay's growth and development opportunities". Secondly Uruguay has become investment attractive, "although we must closely monitor these movements and improve the information available". However Central Bank chairman Cancela did not openly support such a statement and said that "as far as we can see much of that (Argentine) money is only stopping over in Uruguay, which for the financial system diminishes the exposure and vulnerability to funds from the neighboring country". In the 2001/02 financial crisis the run on Argentine banks and collapse of several of them rapidly spread to Uruguay given the significant percentage of Argentine deposits in the local financial system. The current farmers' conflict in Argentina and political vulnerability of the Kirchner administration has forced the neighboring country's monetary authorities to sell US dollars to support the official exchange rate while unfounded rumors of a possible deposits freeze (as happened in 2001/02) have been spreading on internet.