Economy of Uruguay

The economy of Uruguay is characterized by an export-oriented agricultural sector and a well-educated work force, along with high levels of social spending. After averaging growth of 5% annually during 1996–98, Uruguay's economy suffered a major downturn in 1999–2002, stemming largely from the spillover effects of the economic problems of its large neighbors, Argentina and Brazil. In 2001–02, Argentine citizens made massive withdrawals of dollars deposited in Uruguayan banks after bank deposits in Argentina were frozen, which led to a plunge in the Uruguayan peso, causing the 2002 Uruguay banking crisis.

Economy of Uruguay
World Trade Center Montevideo
CurrencyUruguayan peso (UYU, $U)
Calendar year
Trade organizations
WTO, ALADI, Mercosur, Unasur, Andean Community (associate)
Country group
Statistics
Population 3,449,299 (2018)[3]
GDP
  • $59.918 billion (nominal, 2019 est.)[4]
  • $82.969 billion (PPP, 2019 est.)[4]
GDP rank
GDP growth
  • 1.6% (2018) 0.2% (2019e)
  • −3.7% (2020f) 4.6% (2021f)[5]
GDP per capita
  • $17,029 (nominal, 2019 est.)[4]
  • $23,581 (PPP, 2019 est.)[4]
GDP per capita rank
GDP by sector
7.2% (2020 est.)[4]
Population below poverty line
 8.1% (2018)[7]
39.7 medium (2018, World Bank)[8]
Labor force
  • 1,774,336 (2019)[11]
  • 56.2% employment rate (September 2019)[12]
Labor force by occupation
Unemployment 9.5% (September 2019)[12]
Main industries
food processing, electrical machinery, transportation equipment, petroleum products, textiles, chemicals, beverages
101st (medium, 2020)[13]
External
Exports $11.41 billion (2017 est.)[6]
Export goods
beef, soybeans, cellulose, rice, wheat, wood, dairy products, wool
Main export partners
Imports $8.607 billion (2017 est.)[6]
Import goods
refined oil, crude oil, passenger and other transportation vehicles, vehicle parts, cellular phones
Main import partners
FDI stock
  • $44.84 billion (31 December 2017 est.)[6]
  • Abroad: $19.97 billion (31 December 2017 est.)[6]
$879 million (2017 est.)[6]
$28.37 billion (31 December 2017 est.)[6]
Public finances
65.7% of GDP (2017 est.)[6][note 1]
−3.5% (of GDP) (2017 est.)[6]
Revenues17.66 billion (2017 est.)[6]
Expenses19.72 billion (2017 est.)[6]
  • Standard & Poor's:[14][15]
  • BB (Domestic)
  • BB (Foreign)
  • BBB- (T&C Assessment)
  • Outlook: Stable
  • Moody's:[15]
  • Ba1
  • Outlook: Stable
  • Fitch:[15]
  • BB
  • Outlook: Positive
Foreign reserves
 $15.96 billion (31 December 2017 est.)[6]
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars.

History

In the 19th century, the country had similar characteristics to other Latin American countries: caudillism, civil wars and permanent instability (40 revolts between 1830 and 1903), foreign capitalism's control of important sectors of the economy, high percentage of illiterate people (more than half the population in 1900).

José Batlle y Ordóñez, President from 1903 to 1907 and again from 1911 to 1915, set the pattern for Uruguay's modern political development and dominated the political scene until his death in 1929. Batlle introduced widespread political, social, and economic reforms such as a welfare program, government participation in many facets of the economy and a new constitution. Batlle nationalized foreign owned companies and created a modern social welfare system. Income tax for lower incomes was abolished in 1905, secondary schools established in every city (1906), telephone network nationalized, unemployment benefits were introduced (1914), eight-hour working day introduced (1915), etc.[16]

Claudio Williman who served between Batlle’s two terms was his supporter and continued all his reforms, as did the next President Baltasar Brum (1919–1923). Around 1900 infant mortality rates (IMR) in Uruguay were among the world's lowest, indicating a very healthy population.

The number of trade unionists has quadrupled since 2003, from 110,000 to more than 400,000 in 2015 for a working population of 1.5 million people. According to the International Trade Union Confederation, Uruguay has become the most advanced country in the Americas in terms of respect for "fundamental labour rights, in particular freedom of association, the right to collective bargaining and the right to strike.

Currency

Uruguay has a partially dollarized economy. As of August 2008 almost 60% of bank loans use United States dollars,[17] but most transactions use the Uruguayan peso.[18]

Sectors

Agriculture, Textiles and Leather
Main article: Agriculture in Uruguay

Throughout Uruguay's history, their strongest exporting industries have been beef and wool. In the case of beef exports, they have been boosted since Uruguay joined the Mercosur agreement in 1991 and the country has been able to reach more distant markets, such as Japan. In the case of wool exports, they have not been doing so well in recent years suffering from other competitors in the market like New Zealand and the fluctuations of its demand during the 2008/09 recession in the developed world. At the same time with timber refining being kept within the country, forestry has become a growth industry in the recent years.

Energy

Uruguay imports crude and refined oil from other countries. It produces different types of petroleum products.

Uruguay is endowed with renewable energy resources and the country produces 95% of its electricity from alternative energy sources.[19] The country is likely to benefit greatly from the global transition to renewable energy and is ranked no. 6 among 156 nations in the index of geopolitical gains and losses after energy transition (GeGaLo Index).[20]

Mining

Although this is a sector that does not make substantial contributions to the country's economy, in recent years there have been some activity in gold and cement production, and also in the extraction of granite.

Plastics

Due to two major investments made in 1991 and 1997, the most significant manufactured exports in Uruguay are plastics. These investments laid the way for most of the substantial exports of plastic-based products which has taken a very important role in Uruguay's economy.

Telecommunications

In spite of having poor levels of investment in the fixed-line sector, the small size of Uruguay's population has enabled them to attain one of the highest teledensity levels in South America and reach a 100% digitalization of main lines. Although the telecommunications sector has been under a state monopoly for some years, provisions have been made to introduce liberalization and to allow for entry of more firms into the cellular sector.

Travel & Tourism
Main article: Tourism in Uruguay

In 2013, travel and tourism accounted for 9.4% of the country's GDP.[21] Their tourist industry is mainly characterized for attracting visitors from neighboring countries. Currently Uruguay's major attraction is the interior, particularly located in the region around Punta del Este. [22]

Specialties of Uruguay
  • Cattle were introduced to Uruguay before its independence by Hernando Arias de Saavedra, the Spanish Governor of Buenos Aires in 1603. Beef exports in 2006 amounted to around 37% of Uruguayan exports.[23]
  • Wool is a traditional product exported mainly to America, followed by the UK and India.[24]
  • Milk and dairy products. Conaprole, National Cooperative of Milk Producers[25] is the main exporter of dairy products in Latin America (in 2006). The area of the country dedicated to the dairy food is located mainly in the south west.
  • Rice. Fine varieties are produced in the lowlands in the east of the country close to Merin lake on the Uruguay-Brazil border. The national company Saman claims to be the main exporter in Latin America.[26] Countries it exports to include Brazil, Iran, Peru, South Africa, Chile, Senegal, Argentina, Paraguay, Bolivia, Ecuador, USA, Canada and China.
  • Tourism: Several seaside resorts, like Punta del Este or Punta del Diablo in the south-eastern departments of Maldonado and Rocha, regarded as a jet set resort in South America, are main attractions of Uruguay. International cruises call at Montevideo from October to March every year. Also, Uruguay hosts many year-round international conferences. (The original GATT Uruguay Round concerning trade was, as its name suggests, hosted in Uruguay). Montevideo is home to the headquarters (secretariat) of [Mercosur], the Common Market of the South, whose full members are Uruguay, Argentina, Brazil, Paraguay and Venezuela, associate members Bolivia, Chile, Colombia, Ecuador and Peru.
  • Software and consulting. Uruguay's well-educated workforce and lower-than-international wages have put Uruguay on the IT map. A product named GeneXus,[27] originally created in Uruguay by a company called ArTech, is noteworthy. Other important developers and consultants include De Larrobla & Asociados,[28] Greycon and Quanam.[29] Tata Consultancy Services has its headquarters for the Spanish speaking world in Uruguay. Many of these companies have established in Zonamerica Business & Technology Park.

"With a population of only three million, Uruguay has rapidly become Latin America's outsourcing hub. In partnership with one of India's largest technology consulting firms, engineers in Montevideo work while their counterparts in Mumbai sleep." - The New York Times, Sep 22, 2006.

  • Banking Services. Banking has traditionally been one of the strongest service export sectors in the country. Uruguay was once dubbed "the Switzerland of America", mainly for its banking sector and stability. The largest bank in Uruguay is Banco República, or BROU, which is state-owned; another important state bank is the BHU. Almost 20 private banks, most of them branches of international banks, operate in the country (Banco Santander, ABN AMRO, Citibank, among others). There are also a myriad of brokers and financial-services bureaus, among them Ficus Capital, Galfin Sociedad de Bolsa, Europa Sociedad de Bolsa, Darío Cukier, GBU, Hordeñana & Asociados Sociedad de Bolsa, etc. Uruguay has fully recovered from the financial crisis that caused a run on its banks.
  • Public Sector: The state in Uruguay has an important role in the economy, Uruguay resisted the trend of privatization in Utilities and state owned enterprises in the region. Several Referendums supported the state being in control of the most important utilities and energy companies. Some of the companies have a full monopoly warranted by law (like landline telephony, water), others compete freely with private operators (Insurance, mobile telephony, Banks). Most of them are dominant in the local market. There is strong debate in the Uruguayan society about their role, and future. Some of them made a contribution to the Uruguay state treasury.
    • The most important state owned companies are: Republica AFAP (Pension Fund), AFE (Railways), ANCAP (Energy), ANCO (Mail), Administracion Nacional de Puertos (Ports), ANTEL (Telecommunications: Telephony, Mobiles (ANCEL and Data ANTELDATA)), BHU (Mortgage Bank), BROU (Bank), BSE (Insurance), OSE (Water & Sewage), UTE (Electricity). These companies operate under public law, using a legal entity defined in the Uruguayan Constitution called 'Ente Autonomo' (Meaning Autonomic Entity). The government also owns parts of other companies operating under private law like the National Airline Carrier PLUNA and others owned totally or partially by the CND National Development Corporation.

Trade Agreements
Currently in force (Free Trade Agreements / Economic Complementation Agreements)
MERCOSUR (signed and effective November 1991)
ECA N.º 36 MERCOSUR with  Bolivia (signed December 1996 and effective February 1997)
FTA with  Mexico (signed November 2003 and effective July 2004)
ECAa N.º 59 with  Ecuador (signed October 2004 and effective April 2005)
ECA N.º 58 MERCOSUR with  Peru (signed August 2005 and effective December 2005)
ECA N.º 62 MERCOSUR with  Cuba (signed July 2006 and effective September 2008)
Comercial Preference Agreement MERCOSUR with  India (signed January 2004 and effective June 2009)
FTA MERCOSUR with  Israel (signed December de 2007 and effective December 2009)
Partial Agreement N.º 63 with  Venezuela (signed December 2012 and effective March 2013)
Comercial Preference Agreement MERCOSUR with SACU (signed September 2011 and effective April 2016)
FTA MERCOSUR with  Egypt (signed December 2015 and effective September 2017)
ECA N.º 72 MERCOSUR with  Colombia (signed July 2017 and effective December 2017)
FTA with  Chile signed October 2016 and effective December 2018)
Concluded (not in force)
FTA MERCOSUR with  State of Palestine (signed December 2011)

Raw Data

The following table shows the main economic indicators in 1980–2017.[30]

Year GDP in $
(PPP)		 GDP per capita in $
(PPP)		 GDP growth
(real)		 Inflation
(in Percent)		 Unemployment rate
(in Percent)		 Poverty[31]

(in Percent)

 Government debt
(Percentage of GDP)
1980 12.46 Bln. 4,240 6.0 % 63.5 % ... ... ...
1985 14.41 Bln. 4,749 1.5 % 72.2 %. 13.1 % ... ...
1990 20.33 Bln. 6,511 0.3 % 112.5 % 8.5 % ... ...
1995 27.81 Bln. 8,616 −1.4 % 42.2 % 10.3 % ... ...
2000 33.33 Bln. 9,952 −1.8 % 4.8 % 13.4 % 17.8 % ...
2005 38.42 Bln. 11,461 6.8 % 4.7 % 12.1 % 29.2 % 84 %
2006 41.23 Bln. 12,277 4.1 % 6.4 % 10.8 % 32.5 % 76 %
2007 45.09 Bln. 13,425 6.5 % 8.1 % 9.4 % 29.6 % 68 %
2008 49.28 Bln. 14,652 7.2 % 7.9 % 7.9 % 24.2 % 60 %
2009 51.76 Bln. 15,321 4.2 % 7.1 % 7.8 % 21.0 % 63 %
2010 56.48 Bln. 16,627 7.8 % 7.0 % 7.0 % 18.5 % 59 %
2011 60.62 Bln. 17,763 5.2 % 8.1 % 6.4 % 13.7 % 58 %
2012 63.92 Bln. 18,655 3.5 % 8.1 % 6.3 % 12.4 % 58 %
2013 67.96 Bln. 19,756 4.6 % 8.6 % 6.5 % 11.5 % 60 %
2014 71.42 Bln. 20,681 3.2 % 8.9 % 6.6 % 9.7 % 61 %
2015 72.47 Bln. 20,902 0.4 % 8.7 % 7.5 % 9.7 % 65 %
2016 74.45 Bln. 21,395 1.5 % 9.6 % 7.9 % 9.4 % 62 %
2017 78.15 Bln. 22,371 3.1 % 6.2 % 7.4 % 7.9 % 66 %
  • Industrial production growth rate: 12.6% (2006 est.)
  • Electricity - production: 9,474 GWh (1998)
    • fossil fuel: 3.91%
    • hydro: 95.62%
    • nuclear: 0%
    • other: 0.47% (1998)
  • Electricity - consumption: 6,526 GWh (1998)
  • Electricity - exports: 2,363 GWh (1998)
  • Electricity - imports: 78 GWh (1998)
  • Agriculture - products: wheat, rice, barley, maize, sorghum; livestock; fish
  • Exchange rates: Uruguayan pesos per US dollar - 24.048 (2006), 24.479 (2005), 28.704 (2004), 28.209 (2003), 21.257 (2002)

Uruguay in the world

The following table shows the position of Uruguay in the world.

Index Source Rank Published
Quality of Living index Mercer[32] 77° (Montevideo) 2018
Human Development Index UNDP[33] 57° 2019
Democracy Index Economist Intelligence Unit[34] 15° 2019
Global Peace Index Vision of Humanity[35] 37° 2018
Prosperity Index Legatum[36] 30° 2018
Corruption Perceptions Index Transparency[37] 23° 2019
Economic Freedom Index Heritage[38] 40° 2019
Global Competitiveness Report World Economic Forum[39] 53° 2018
Cost of Living Index Expatistan[40] 45° 2019
Debt Rating[41] Moodys BAA2 2017
S&P BBB 2017
Fitch BBB- 2018
Developed Country Recognition World Bank High Income 2018
United Nations Very High HDI 2018
Index of Geopolitical Gains and Losses

after Energy Transition (GeGaLo Index)

 Overland et al.[20] 6 out of 156 2019

See also

Notes
  1. Data cover general government debt, and include debt instruments issued (or owned) by government entities other than the treasury; the data include treasury debt held by foreign entities; the data include debt issued by subnational entities, as well as intra-governmental debt; intra-governmental debt consists of treasury borrowings from surpluses in the social funds, such as for retirement, medical care, and unemployment; debt instruments for the social funds are not sold at public auctions.

References
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  17. Piñón, Marco; Gelos, Gaston (2008-08-28). "Uruguay's Monetary Policy Effective Despite Dollarization". IMF Survey Magazine. Retrieved March 4, 2012.
  18. Piñón, Marco; Gelos, Gaston; López-Mejía, Alejandro (editors) (2008). Macroeconomic Implications of Financial Dollarization: The Case of Uruguay. International Monetary Fund. p. 2. ISBN 978-1-58906-727-1.CS1 maint: multiple names: authors list (link) CS1 maint: extra text: authors list (link)
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  20. Overland, Indra; Bazilian, Morgan; Ilimbek Uulu, Talgat; Vakulchuk, Roman; Westphal, Kirsten (2019). "The GeGaLo index: Geopolitical gains and losses after energy transition". Energy Strategy Reviews. 26: 100406. https://doi.org/10.1016/j.esr.2019.100406
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  24. Secretariado Uruguayo de la Lana
  25. "Conaprole". Archived from the original on 13 June 2015. Retrieved 11 June 2015.
  26. "SAMAN. Principal exportador de arroz de América Latina. The leading rice exporter in Latin America". Archived from the original on 10 May 2015. Retrieved 11 June 2015.
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  34. "Democracy Index", Wikipedia, 2019-02-06, retrieved 2019-02-06
  35. Humanity, Vision of. "Global Peace Index". Vision of Humanity. Retrieved 2019-02-06.
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