Economy of Uruguay

Economy of Uruguay

Southern America

Located between two Latin American giants, Uruguay is the geographical center of the most densely populated MERCOSUR zone, connecting the Pacific and Atlantic oceans. The network of roads and expressways is the densest in Latin America. The length of roads is 8983 km, incl. 90% hard coated (2000). 3/4 of cargo transportation is carried out by road. The length of the railways is 3003 km, they lead from the hinterland to the ports, mainly to Montevideo. Uruguay is the natural gateway to the Paraná-Paraguay water system, serving 40 million people. and leading to Paraguay, Bolivia, connecting Argentina and Brazil. The total length of navigable rivers is 1600 km. The largest foreign trade port is Montevideo. Communication with other countries of the world is carried out through the international airport in Montevideo, where approx. 10 international lines and one domestic. 559 thousand passengers are transported per year (2001). Check diseaseslearning for political system of Uruguay.

Uruguay is one of the few countries in the world with 100% coverage of the territory by a digital communications network, has the highest density of fixed telephone lines in Latin America (28 phones per 100 inhabitants), 921 thousand telephone subscribers, 350 thousand mobile users (2001). Among Latin American countries, it occupies a leading position in terms of the number of Internet users (400 thousand people in 2002) and personal computers. Radio is used by 1.97 million people.

Almost 2 million foreigners visit Uruguay every year, not only for business purposes, but also for recreation. The country has become an international tourist center due to natural conditions and a high level of service. In terms of the ratio of the number of tourists and population, Uruguay (0.69) is 6 times higher than Mexico (0.11).

During the years of President H. Batlle’s rule (since 2000), the promised structural reforms have not been carried out. The President pays special attention to saving the financial system, undermined by the crises in Brazil and Argentina, and cuts government spending. Due to the fear of an intensification of the social crisis, the privatization of the telephone communications sector and the demonopolization of the oil refining sector, which is in the hands of the state, are not carried out. Budgetary difficulties affect the reduction of social spending.

In 2002, the credit system was based on three state-owned banks (central bank, Bank of the Oriental Republic of Uruguay – BROU, Mortgage Bank – IB), 21 commercial banks, 8 financial institutions, 12 offshore banks. The main state institution that determines the norms and principles of the entire banking system of the country is the central bank. All banks are required to keep a security deposit in it. A high degree of dollarization is characteristic (88% of all bank deposits were denominated in dollars). Until 2002, the credit system was characterized by a high degree of stability and the country was called “Latin American Switzerland”. The crisis in Argentina led to a flight of capital and a reduction in bank reserves from $3 billion (end of 2001) to $769 million (end of 2002), and deposits by 50% (only in 2002).

In 1999, in the face of declining business activity and rising government spending, the public finance deficit exceeded 4% of GDP. In 2002, loans from the IMF and the US Treasury, as well as cuts in wages and pensions, reduced the budget deficit to 3.4% of GDP. Crisis phenomena were reflected in the growth of external debt. If in 1990 it was $4,415 million, then in 2001 it was $9,706 million (long-term debt was $3,114 million and $6,634 million, respectively). In 2003, the external debt of the public sector amounted to $11,426 million, which, according to official data, will require principal and interest payments of $1,884 million.

In 2002, the freezing of wages and the growth of inflation led to the fact that real wages decreased by 18% compared to 2001, and incomes – by 23% and amounted to $ 4,236 per person, i.e. fell below the level of 1990. Up to the crisis period in Uruguay, in contrast to other Latin American countries, there was a decrease in the level of poverty. Share of families living below the $120 per month poverty line in the 1990s decreased from 11.8 to 5.6%, and those living in poverty – from 2 to 0.9%. Income is distributed more evenly than in any other Latin American country.

Trade policy since the 1990s focuses on the member countries of MERCOSUR. With a general upward trend in foreign trade turnover in 1991-2000, the share of MERCOSUR countries in the volume of Uruguayan exports increased from 36 to 46%, and imports, respectively, from 41 to 44%. The volume of Uruguay’s trade with MERCOSUR members doubled during the period under review. Since 2000, there has been a downward trend in the volume of exports and imports of goods and services of Uruguay (in 2000, exports of goods and services – 3659 million US dollars, in 2002 – 2859 million, and imports – respectively 4193 million, 2672 million). Main trading partners: Brazil, Argentina, EU, USA. Export structure (2000,%): livestock products 30.5, crop products 11.2, textiles 11.7, leather products (excluding shoes) 11.5. The main import items are engineering and equipment, oil and oil products.

Economy of Uruguay