MercoPress. South Atlantic News Agency

Signals the worst of the global crisis in Uruguay is moderating

Deputy Economy minister Andres Masoller says there are “positive and negative signals”

Private analysts and government officials believe there are signs the worst impacts of the global crisis on the Uruguayan economy are moderating. The Leader Index from the local domestic economics analysis think-tank Ceres, last May stabilized after having fallen for seven months running.

“This is the first signal that economic activity could begin to stabilize beginning the third quarter of this year. However to confirm that stability we must wait for the June and July indexes”, said the Ceres report.

But in spite of the positive signals Ceres also warns that the negative performance so far registered during the first four months of the year are indicating that “the level of activity will effectively contract in the second quarter”, as happened in the first quarter which was -2.9% over the last quarter of 2008.

Other data that points in the same encouraging direction are exports and manufacturing activity. Imports of intermediate goods, used as inputs for industry “seem to have stabilized”, which could indicate that “manufacturing is contracting at a far lesser rate or has ceased to contract”, according to another economic analysis think-tank, CPA/Ferrere

Even when industrial activity contracted 6.8% in May (compared to a year ago), in line with what has been happening since last January, if two of the most prominent sectors, crude refining and the huge pulp mill of Botnia are excluded, overall, there are signs of “stability” in May similarly to what happened in April, according to Deloitte.

Exports to Mercosur, --Uruguay’s main trade partner (27%) -- in the first half of the year suffered a small decline of 4%, which was smaller than the decline of 13.3% for overall exports. However exports to Brazil actually increased 13% while those to Argentina dropped 33%, because of the barriers imposed by Buenos Aires.

Deputy Economy minister Andres Masoller talking with the press in Montevideo said that there are positive and negative signals “but the economy is showing signs of stabilization”.

“There is no growth, but we are not seeing a further fall”, added Masoller who underlined “a stabilization trend in most indicators”.

The Uruguayan economy has been expanding sustainedly since the second half of 2003 and in 2008 was poised to establish a record growth rate of two digits, however the global crisis had a negative impact on the second half, particularly the last quarter and the first quarter of this year, according to available data.