MercoPress. South Atlantic News Agency

Growing frustration and recriminations in Uruguayan cabinet over economic policy

Minister Lorenzo again surprised by his spend-thrift peers and government companies

Relations inside the Uruguayan cabinet remain tense with some ministers in non-talking terms even when President Jose Mujica cancelled the Monday full ministerial turnout for three specific areas, security, social affairs and production meetings, which function every two weeks.

Last Tuesday the Social affairs cabinet meeting had to be suspended by President Jose Mujica after a serious exchange of recriminations and other serious accusations between the Finance minister and his Social Development peer Daniel Olesker.

Olesker complained bitterly that the funds were not coming for an approved program called Seven Zones geared to attack extreme poverty, while Lorenzo said he had previous appointments and could not remain at the meeting.

The Seven Zones project has the blessing of President Mujica and was elaborated by part of his team, the Executive deputy secretary Diego Canepa, Minister of Interior, Eduardo Bonomi and Olesker. 

Lorenzo on the other hand is faithful to Vice-president Danilo Astori and an orthodox, IMF approach to economic policy much questioned lately because of untamed inflation and a budget deficit that has soared in 18 months to almost 3% of GDP. Lorenzo has called on his fellow ministers and government companies to contain outlays and think in austerity because the international tail-winds have stopped to blow.

Lorenzo closest ally in Mario Bergara, President of the central bank, but the team of Mujica dominate the Planning and Budget office, and his economist advisors manage foreign aid and favour a more expansive economic policy, despite the budget deficit, with eyes set on a strong economy in 2014, when Uruguayans elect a new president.

Opinion polls anticipate (and the opposition reluctantly admits it), that former president Tabare Vazquez is favourite to win next year, but the complex ruling Broad Front coalition needs to decide who will fill the rest of the presidential ticket. President Mujica has names in pectore and so has Astori, and the battle is raging.

The last full Monday cabinet meeting took place February 20 and the split between the two teams as to how to apply economic policy was to evident and fierce that President Mujica called for a truce, publicly admitted the differences (called for a patching of souls) and created a new system of meetings in three areas. At the press conference the president did not take any questions.

The difference then as now is over spending, really excessive spending and increasing revenue to address higher outlays. Astori and Lorenzo reject point blank what they consider is ‘changing the rules’ for investors, while from the Executive tower they insist much more must be done to make to spread the windfall earnings of these last years, combating inequality and poverty.

It is now public that at the February 20 cabinet meeting Lorenzo and Bergara were prepared to resign but Astori held them back with promises of a truce. But now again Lorenzo feels weakened and frustrated by the latest events questioning his handling of inflation and the loss of competitiveness because the Uruguayan Peso is too strong vis-à-vis its main trading partners, what is identified as the ‘Uruguayan cost’.

But what really came as a blow after preaching for austerity was the announcement by Uruguay’s telephone company, ANTEL, which works as a quasi monopoly, to build a theatre and convention centre costing 40 million dollars. The complex will be jointly managed by ANTEL and the municipality of Montevideo, which runs a huge deficit and was unable by itself to build the project: lack of funds and credit.

“I read about it in the papers”, confessed Lorenzo.

Mujica’s advisors admit it will be some time before there can be a return to the Monday cabinet meetings and underlined the unexpected effectiveness of the specialized area discussions.

“Meetings have less members, far more agile and effective, decisions are reached far quicker compared to the large meetings where ‘soporific reports’ consumed most of the time and delay the decision making process”, said an advisor close to Mujica.