Country Profile
Country Profile
Uruguay is bordered by Brazil to the north, by Argentina to the West and South West, and the South Atlantic Ocean to the southeast.
Only a short boat ride separates coastal Uruguay with vibrant Buenos Aires.
It is the second smallest independent country in South America, larger only than Suriname and the French overseas department of French Guiana.
History
After Uruguay's last civil war ended in 1904 the country entered a period of sustained economic growth. Able to produce first class beef for a growing world meat trade, and good quality wool, Uruguay's exports grew in volume and commanded good prices.
The two world wars and the Korean war stimulated exports further. By 1950 Uruguay accounted for 3.5% of all Latin American economic activity. Uruguayans enjoyed the standards of living of a developed country, and their strong currency (the Uruguayan Gold peso) allowed them to take cheap holidays in Europe.
For many Uruguayans the first half of the twentieth century, culminating in a glorious victory over Brazil in the 1950 World Cup Final, is their golden age.
Throughout this period, except for a short period of military rule under Terra in the early 1930s, Uruguay remained a constitutional democracy.
Uruguay's prosperity had ebbed away by the 1960s as state-supported enterprises became riddled with bureaucratic inefficiency. The Tupamaros, an urban guerrilla movement that appeared publicly in 1967, threw the country into turmoil.
In 1973, Congress was dissolved, the military was invited to participate in government, and the Tupamaros were effectively neutralised. The military continued to hold sway in national politics until the return to civilian rule on 1 March 1985 with the inauguration of the democratically elected President Julio Maria Sanguinetti.
At the same time Uruguay's economy began to recover. GDP grew an average of 4.2% from 1992 to 1998 and international ratings agencies awarded Uruguay top investment grades.
Then two catastrophes struck, both because of problems with Uruguay's neighbours, which are now thankfully consigned to the past.
Crisis
In 1998 Brazil (which bought a quarter of Uruguay's exports) devalued its currency. The devaluation of the Real led to Uruguayan imports becoming too expensive. This loss of trade and therefore industry led Uruguay into recession.
Then in 2002, as Uruguay was finding its feet again, the Argentine economic problems that led to a run on their banks spilt into Uruguay. Argentines crossed the border and withdrew their deposits from Uruguayan banks and just as in Argentina, the country's private banking sector (a quarter of its economy at the time) collapsed. From its 1998 peak to its 2002 trough. Uruguay's economy halved in dollar terms.
Economy
GDP: US$19,319bn
GDP per head: US$5,812
Annual Growth: 7.0% (Jan-June 2007 5.8%)
Inflation: 6.4% (Jan-Oct 2007 8.4%)
Major exports: Meat, wool, processed rice,
hides and skins
Major trading partners: Brazil, United States,
China, Argentina, Venezuela
Under President Tabare Vazquez, elected in 2005, Uruguay is emerging from the shadows of Brazil and Argentina. The government is increasingly trade-friendly. In January 2007, Uruguay signed a Trade and Investment Framework Agreement with the United States, its major trading partner, but pursuit of a free trade agreement with the U.S. has been stymied by other MERCOSUR members. According to Transparency International, Uruguay is the second least corrupt country in Latin America (after Chile). Uruguay's economy is on the whole more stable than in its surrounding states and it maintains a solid reputation with investors. An export-oriented agricultural sector, a well educated work force, and high levels of social spending currently characterize Uruguay's well-to-do economy.
Recovery From 2002
The most important feature to understand about Uruguay's economy (and indeed that of Argentina) is in its recovery from the 1998- 2002 economic
crisis. Although there are still challenges ahead Uruguay's recovery is firmly on track. And it would seem that now is the time to take advantage. Cooperation with the International Monetary Fund (IMF), following a loan of US$1.5bn helped stem the damage of the crisis and In 2007 Uruguay
improved its debt profile by paying off $1.1 billion of IMF debt. Public debt has declined to 66 percent of GDP, from 110 percent of GDP in 2003. It continues to follow the orthodox economic plan set by the Fund in 2005 and under current policies; this ratio is projected to drop to 40 percent by 2012.
Uruguay has one of the highest urbanization and literacy rates in South America as well as the lowest poverty and population growth rates. Education is compulsory and free.
Uruguay's economy currently remains dependent on agriculture. However, economic diversification, including development of hydroelectric power, has spread optimism; and tourists are flocking to Atlantic beach resorts like Punta del Este and Piriapolis. Unemployment is still falling and the period between Jan- Sept 2007 recorded the lowest rate in 5 years at 10%.
Export Industry
Uruguay's main export partners are Brazil, USA, Argentina, Germany and China. Meat is still Uruguay's main export; others include agricultural products such as vegetables, citrus, rice and Soya. Minerals such as gold and semiprecious stones are rising and wood and its derivatives (cellulose, chips, and logs) are also increasing, with a potential larger than traditional exports.
Exports have increased to the EU where Uruguay has benefited from the US$ depreciation in comparison to the Euro. Meat production reached an all time record in 2005. Fruit exports are unable to cover international demand, rice and soya crops continue to expand across the countryside. With the global demand for food rising, particularly in the emerging economies of Brazil and China, Uruguay's agricultural industry will be well placed to take advantage.
Recent Foreign Investment
The construction of a pulp mill in Fray Bentos, which represents the largest foreign direct investment in Uruguay's history at $1.2 billion, came online in November 2007 and is expected to add 1.6% to GDP and boost already booming exports. More FDI is expected to follow as Uruguay's export sector continues to grow strongly, as a result of high global commodity prices in line with Uruguay's main exports, a competitive peso, growth in the region, and low international interest rates (comparatively for Latin America).
