The Uruguayan economy showed a positive performance in the first quarter, despite the drought. Among other data, investment (fixed capital formation) rose 2.3% year-on-year and remains above 18% of GDP.
For an economy to grow in the medium and long term, it has to invest, first of all to replace the capital that is depreciating (this should be at least 10% of GDP); on that you have to add new investment, to generate a increased production that allows to improve the income of the economy.
In the case of Uruguay we are in high investment levels in historical terms. Although the construction of the second gigantic pulp mill in UPM, investment in new infrastructure and housing works is increasing, which has made it possible to maintain global investment in relation to GDP (graph).
A good part of the investment in housing is carried out by business promoters who drive the construction industry; another part are investments by companies in projects of various kinds, many of which take advantage of the benefits of investment promotion mechanisms (Comap, Free Zones). The public investment It is being deployed mainly on roads.
Priorities
A separate chapter deserves investments of state companies, where contradictions frequently emerge between the priorities of the company itself (and its drivers) and the general social interest. To the point that conflicts and -sometimes- millions in losses are usually generated, as was the case of ANCAP in past administrations. The decision to invest in the ANTEL Arena, although not so much the expansion of fiber optics by this same company: questioned at the time for being excessive, today it is key to taking advantage of the current information technology revolution.
The one who missed the appointment was SBI. This company did not make the necessary investments in the drinking water system and this was exposed by the historical drought that affects the country, especially in the river basin. St. Lucia. In such a way that Uruguay -a country recognized for its social and institutional stability, with investment grade- is running out of drinking water in its capital.
Why were investments in drinking water not prioritized? Several reasons can be pointed out. On the one hand, certain discrepancies within OSE itself to define which was the strategy to be executed. On the other hand, there is a certain mistrust between the company itself and its interlocutors in the government about the true urgency of the problem.
Also, despite the fact that years ago political leaders of different profiles and parties (Fernandez Huidobro, Astori, Batlle) They had been insisting on the need to shore up the water supply, the concern did not translate into an investment decision. Thus, the historic drought – which began to take shape last year – found Uruguay vulnerable and without an answer in the drinking water system. It is a lesson that it is important not only to invest but also to prioritize and anticipate problems, particularly in the area of state-owned companies, which –sometimes- prioritize their own agenda over the common interest.
Source: Ambito
