The government believes that Uruguay has a greater capacity to “decouple” from the current economic crisis it is going through Argentina —deepened by electoral uncertainty—, and that the impact on the local situation is “much more limited” than that experienced with the social outbreak that occurred between 2001 and 2002 in the neighboring country.
This was stated by the Minister of Work and Social Security (MTSS) Pablo Mieresduring the breakfast consultation of the Official Spanish Chamber of Industry, Navigation and Commerce (Camacoes). Although he recognized that Uruguay has to “be attentive” to the political direction it takes Argentina, He pointed out that the instability of that country has not affected the local economic direction as much as it has in the past.
“Let’s compare this crisis with that of 2001 and 2002, that infected us immediately and generated an extremely hard imported crisis in all sectors of our lives. Today we have a situation that in many ways is almost worse than that of 2001 for Argentina and in Uruguay It has had an impact but much more limited,” said the head of the MTSS.
“It is clear that Argentina always impacts Uruguaythat is, we have to be attentive, try to detect where the shots are coming from and what the future of the Argentine economy is going to be like,” he indicated, to which he later clarified that Uruguay has managed to “decouple” from “the comings and goings” of Argentine reality.
“I believe that we have to continue working on this decoupling, deepening it, because the imbalances of the Argentine economy are unfortunately very frequent,” concluded Mieres during his dissertation on the labor situation in the country.
The impact of the post-election devaluation
In parallel to Mieres’s sayings, Uruguay observe closely what is happening in Argentina; and specialists from both the government and the private sector are already contemplating the different scenarios that, starting December 10, may take place in the neighboring countries based on the economic proposals and exchange rate schemes promoted by each of the three main candidates. . The immediate conclusion is the same: whoever wins on the other side of the pond there will be more devaluation and this will impact the local economy.
“The future Argentine economic scenario is very uncertain at the moment. It is strongly linked to the outcome of the presidential elections. Although it is difficult to clearly predict what will happen in the long term, in the short term we can expect a greater increase in the dollar, at least Dolar blue”, he pointed Deborah Eilender, researcher of Center for Development Studies (CED).
In dialogue with Ambit, considered that “in addition to taking into account the increase in the dollar, we must analyze what happens with the inflation, which already reached triple digits several months ago and will surely continue the upward trend, possibly increasing its growth rate.” The current figures indicate a inflation of 170% for this year. “Depending on what increases faster, whether the dollar or prices, is what will happen to the purchasing power of Uruguayans in Argentina”, he added.
The current situation at the local level is already critical: the price gap with Argentina reached an all-time high and the consequences of the exchange difference are observed in the already habitual Uruguayan exodus, in the detour of the internal consumption, the drop in sales of coastal businesses and the damage to tax collection throughout the country. Therefore, a greater devaluation in Argentina It would have a direct impact—as it has now—on the local economy.
“We hope that a scenario of greater devaluation in Argentina deepen the effects that have already been observed on consumption and tourism,” he told Ambit Florencia Zufiría, economist in the Economic Analysis and Projections Service area of CPA Ferrere. For the analyst, “if the exchange rate continues to increase and the price gap widens even further, “It is expected that the consumption that Uruguayans carry out on the neighboring shore will continue to increase.”
A “consumption leak” which directly affects “the levels of activity, employment (mainly in the coastal departments), revenue and the level of real sales in the commerce and services sector, for example,” he explained.
Source: Ambito
