When looking for a global model, the Financial Times (FT) came up with Uruguay this week while the South American country's so-called “green bond” tied to environmental goals became the “Latin American Bond of the Year in 2022” according to the International Financial Review (IFR).
After the fall of previously successful models in Europe, FT analyst Janen Ganesh suggested looking elsewhere for ideas on which paths to pursue and came up with Uruguay.
Sweden used to be a land of superb public services and big-hearted welfare, a culture without the Anglo-American neurosis about sex and a significant female labor force participation. But Sweden lost its halo. Foreign progressives learned that their public services were open to such heresies as private providers and consumer choice. The Tories studied Göran Persson's time as finance minister and head of government as a model for spending cuts in the UK. Bad Sweden. Apostate Sweden, Ganesh wrote regarding the Nordic country's new wayward policies.
People loved Germany, the columnist also noted. An economy that worked for those technically and not just academically inclined, with a good distribution of wealth among regions, where industrialists talked to the minister who talked to the union boss. The country also welcomed many non-white immigrants.
Then Germany lost its halo. It dithered over Ukraine. Its strategic judgments - Russian gas as an input, China as a market - soured. Angela Merkel's secular beatification in the Western world turned out to be hasty. In 2020, a book came out called Why Germans Do Better: Notes from a Grown-Up Country. Too much to swallow.
The article revolved around where the moral crown would shift to with such a vacancy for the role of a model nation to compare the UK with. Where else, then, Denmark? the author wondered about a country not so open to immigration. Switzerland? Neutrality now carries a more geopolitical stigma. Singapore? Freedom House still has it as partially free. Norway? The resource advantage is too great.
My final offer. Uruguay, the author concluded when writing about a country with a large middle class, a long-standing welfare state, and the moral benefit of the doubt that seems to accrue to small nations in the vicinity of large ones. A paragon of the Global South, a true 21st-century place.
Meanwhile, the IFR distinguished Uruguay's dollar bond as the Latin American Bond of the Year in 2022, which was launched as recently as October 2022.
The British financial magazine founded in 1974 explained that the bond indexed to climate change indicators issued by Uruguay for US$1.5 billion was one of the highlights of the year in the primary bond market in Latin America and a milestone in sustainable finance, as it was a pioneer in introducing bidirectional rate adjustment in the global market for Sustainability Linked Bonds.
If CO2 emissions are not reduced by at least 50% and at least 100% of native forests are preserved by 2025, a coupon increase penalty will be triggered, while Uruguay will only agree to pay lower interest if it reduces emissions by 52% and increases its forest area by more than 3% (concerning the reference year) by 2025,” the magazine underlined.
Uruguay is the first country in the world to issue a bond in which the interest rate is tied to whether or not environmental targets are met.
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