MercoPress. South Atlantic News Agency

Uruguay has a “financial shield” of 2 billion USD

Garcia is confident that Uruguay can stand the storm

Uruguay has a financial protection in the range of two billion US dollars if for some reason the current situation in global markets in the next two years makes it highly difficult to issue sovereign bonds, according to Central Bank sources in Montevideo.

The "armour" consists of 1.86 billion plus an additional 500 million from a special 6 billion US dollars stand-by credit from the Inter American Development Bank for emergency situations with a cap of 500 million per country. Although Uruguay in the last three years took advantage of world liquidity and lower rates to restructure its foreign debt and has no major disbursements until 2010, "the strategy is to disclose the existence of this financial availability so as to leave no doubts". The 1.86 billion is made up of a World Bank quick disbursement credit of 300 million US dollars; another contingency credit from the Andean Corporation for 400 million US dollars; several loans from the Inter-American Development Bank totalling 575 million and the possibility of an additional 585 million from the Latinamerican Reserve Fund, to which Uruguay is subscribed with a contribution of 234 million US dollars. The Uruguayan government strategy so far has been to delay making effective multilateral organizations loans (such as the IDB) because of the global liquidity. However given the current situation and credit crunch and minimal possibilities of issuing bonds, governments have re-focused their attention to multilateral organizations. Uruguay's Economy minister Alvaro García on his return from the IMF and World Bank annual meetings in Washington said that Uruguay was agreeing on credit lines from the Andean Corporation, 400 million US dollars, and 300 million from the World Bank, plus access to the six billion US dollars credit from IDB. Nevertheless Garcia pointed out that "Uruguay has decided to request access to those credits although we have no idea when and if we will need to use them. This means some paperwork which in multilateral organizations takes its time so we want to be ready in the event of a situation". "This is all prevention, vaccination while we are healthy. Having resources on hand and the liquidity mechanism, just in case we might need them". To this "we must add 575 million US dollars from IDB, of which 200 million will be released at the end of the year for specific projects, plus another 375 million earmarked for several sectors of the economy in 2009 and 2010", said Garcia.