MercoPress. South Atlantic News Agency

The positive impacts of the ”K(irchner) effect” on Uruguay

Quick course of basic economics needed for the Kirchners

The many “non intelligent” economic decisions from Argentina's current Kirchner couple administrations, or better known as the “K effect” have benefited neighbouring Uruguay's agriculture, finances and tourism.

Economist Javier de Haedo, a former Economy minister and head of the Budget office said that the "K effect" has been particularly encouraging since pushed by the Kirchners export taxes on grains and oilseeds, "some of the most efficient and best Argentina farmers, and they are really good" moved to Uruguay and helped transform Uruguayan agriculture. "The concepts of costs, money-value, yields, capital financing, diversifying operations, volume trading, using the most appropriate seeds and fertilizers based on farm profits expertise have in the last five years contributed to revolutionize Uruguayan farming, and for this we must be most grateful to the Kirchners and "their silly way of running economic issues", said De Haedo. Besides helping to contract Argentine global supply has enabled Uruguay to replace Argentina as the leading exporter of top quality beef in the region, and take advantage of markets left idle by "our neighbours". However De Haedo also warned that the golden period of soaring commodities is over and this farming campaign is going to be "particularly tough". "Prices for cereals and oilseeds are down, and falling, costs are declining but not so fast and the inputs for the current crops are mostly at peak prices while output will be sold at rock bottom prices compared to only a year ago". De Haedo described the situation as a "hinge year", since for the following winter and summer crops "cost-price" relation should be more stable and balanced. But he also warned that even when oil prices (closely linked to fertilizers) have plummeted from a record 147 USD a barrel to below 50 USD, "they still are far from the 28 USD when this escalating spiral of prices begun". That is why I insist on "a hinge year between a boom and a bust". De Haedo also mentioned other areas where Uruguay has benefited from the Kirchners lightweight economic knowledge. Looking back to the previous 2001/02 crisis which spilt over from Argentina to Uruguay forcing a run on the Montevideo banking system, --saved by a 1.5 billion US dollars bridge loan from the US Bush administration--, De Haedo recalled that at the time 46% of foreigners deposits in Uruguayan banks were Argentine as well as two thirds of tourists. "Those percentages are now down to 23% and 40%. In banking Argentines have been replaced by Brazilians and other Mercosur citizens and regarding tourims we've had a boom of Europeans, US, Mexicans, Chileans, Paraguayans, top bracket visitors, a significant percentage of which can be described as "crisis immune"", said De Haedo. He also mentioned the latest decision by the Kirchner couple administration to take over the pensions' funds and this week approved by the ruling majority in Congress. "This is an outright confiscation, what's the next step: bank deposits, accounts, coffers, who knows?" Nevertheless even when all these impacts from the "K effect" have been positive for Uruguay, which is a serious member of the world community, honours debts, respects private property, the accumulative effect will necessarily at some point generate a major turbulence in the Argentine economy, and "it will be difficult for Uruguay to elude some of the side effects