MercoPress. South Atlantic News Agency

Uruguay's budget fiscal deficit climbs in March to its highest since October 2003

Minister Bergara believes there is no risk for public accounts sustainability

Uruguay's fiscal deficit climbed to 3.2% of GDP during March, the highest since October 2003, --equivalent to 1.69 billion dollars--, but Economy minister Mario Bergara said that there is no risk for “the sustainability of public accounts or sustainability of current macroeconomic policies”.

 Bergara added that the fiscal deficit “is one of the points to follow closely because having balanced public accounts, and keeping them balanced is part of the stability support of the current economic process”, but nevertheless “they are at manageable levels which do not question at all sustainability of public accounts or sustainability of macroeconomic policies”.

The Economy minister admitted the fiscal situation demands monitoring “but we are convinced that budget discussion next year will allow us to act with the responsibility which we acted to guarantee that the fiscal situation does not question in any moment the sustainability of Treasury accounts”.

Uruguay is holding presidential elections next October, so a loosening of the budget strings should not come as a surprise.

Regarding inflation which remains the third highest of the Americas, behind Venezuela and Argentina, Bergara argued that a strong growing economy, for years, has increased demand and caused a push on prices.

Uruguay's inflation despite a strong economy has in the last ten years ranged close to the double digit, and the government has managed to keep it down, below the crucial 10% (otherwise all mid and long term salary agreements have to be renegotiated) by manipulating prices.

Basically this means keeping public utilities rates (power, drinking water, communications) and administered prices such as transport and health care frozen for a couple of months at the end of each cycle. Likewise with the main chain stores and supermarkets agree to a basic list of prices.

However many economists and opposition politics argue that the government is attacking the 'inflation index' and not inflation, which is partly true since the Treasury ends up absorbing the public utilities' losses.

Bergara, a California University economics graduate also argued that much of the inflation problem is also because Uruguay is at its 'maximum production capacity', with international markets avid for the country's beef, rice, diary produce, pulp, cereals. This means higher prices in the domestic market.

“Investment remains steady and growth, despite a deceleration, remains strong”, concluded Bergara.