MercoPress. South Atlantic News Agency

Argentine depositors look for security and discretion in Uruguay’s banks

Montevideo’s Old City concentrates Uruguay’s financial system

Argentines disenchanted with their current government are taking their savings to refuge in neighbouring Uruguay where deposits of non residents have soared 20% during 2009, according to primary estimates from the Central Bank.

But these are not necessarily all the funds leaving Argentina since many use Uruguay as a jumping board to invest overseas, according to Montevideo money market operators.

Argentine investors looking for safer havens are using banks in Colonia, Punta del Este and Montevideo to channel their funds, a tendency which begun to grow in early 2008 and remained constant during 2009.

“Those landing in Uruguay prefer safety and liquidity, (and discretion) with not much concern about rates. However those heading overseas look for different portfolios with different alternatives and attractive profit options” said a Montevideo offshore operator.

At the end of 2009, December 31, deposits of non residents in Uruguay (mostly Argentines) had reached 2.957 billion US dollars, with a 494 million increase in the last twelve months. To this must be added another 927 million USD held by offshore financial institutions operating from Montevideo.

And there’s a third option: the infrastructure of international banks operating in Uruguay’s free trade zone which cater to Argentines wishing to invest in the US and Europe although lately they have shown a greater interest for “Brazilian stocks and bonds with promising profit margins”.

During 2009 deposits in the Uruguayan banking system increased both for residents, 12.2% and for non residents, 20%.

Uruguayan market operators admit that only a percentage of capital flowing out of Argentina remains in Uruguay given the fact that the country does not have the sophisticated financial investment opportunities demanded. “The Argentines value very much Uruguay’s proximity and agile financial operations”, but that’s it.

Argentines have historically looked to Uruguay as a safe haven for their deposits and financial investments. However before the 2002 crisis (and melting of the Argentine economy), of the total deposits in Uruguay’s banking system, 46% belonged to Argentines. But following the massive withdrawals at the time, the ratio has been 80% Uruguayans and the rest Argentine. However last year Uruguayans share fell to 75% while foreigners’ (mainly Argentines) climbed to 25%.

Another interesting conclusion from the primary data of the Central Bank is that during 2009, an electoral year, deposits in the Uruguayan banking system increased totalling 15.89 billion US dollars, with a 1.2 billion jump over 2008, of which 494 million belonging to foreigners.