The economist of the Center for Development Studies, Ignacio Umpierrez, referred to the recent controversy surrounding the increase in the investor grade by Moody’s.
The improvement in the credit rating for Uruguay by Moody’s Rating Not only was it good news for the country’s economy, but it also lit the spark of controversy between the government and the opposition over the awarding of the important achievement and the results that led the agency to raise from Baa2 to Baa1 with stable outlook the investment grade note. For the economist Ignacio Umpierrez of the Center for Development Studies (CED)“there is a long-term construction issue,” but “the improvement in the grade has to do with some structural reforms that have taken place in the last three years.”
In times of electoral campaign, everything seems to be a source of controversy. Even more than in times without so much influence from the partisan component. Recently, the improvement of the investment grade rating by Moody’s It was the issue permeated by the dispute between the ruling party and the opposition. Although it was a milestone celebrated from all political sides, for the Wide Front It was not a specific achievement of the government, as the Minister of Economy and Finance (MEF), Azucena Arbeleche.
In that sense, the senator and Broad Front candidate Mario Bergara noted that “these are things that are a cumulative process of a behavior that Uruguay has had for a long time, which has been consolidated with different political parties in the government”; and he recalled that the country recovered investment grade during 2012, after losing it in the 2022 crisis, “with a lot of effort in the Broad Front government.”
Umpiérrez was consulted in this regard, in his regular column on Radio Carve, who acknowledged that “as in any process, there is always an issue of long term construction”. “It is true that this is an institutional and long-term process that exceeds governments, however, I think it is very clear, and this is what the statements from the credit agencies express, that the improvement of the grade has to do with some structural reforms that have taken place in the last three years,” he noted.
The three key improvements to improve the credit score
In that sense, the CED economist pointed out what were those specific structural improvements or reforms that contributed significantly to not only Moody’s improve the rating, but the five credit agencies did so in recent years.
Firstly, “the improvement in the fiscal framework and the new fiscal institutionality that implied a tax rule with three pillars, the fulfillment of which has occurred in the four years that it has been in force”; an achievement recently highlighted by both the government and the Fiscal Advisory Council. This, according to Umpierrez, “has improved the sustainability of public finances” and has “reduced the procyclicality characteristic of the fiscal policy of Uruguay”.
“From the point of view of the monetary politics There has also been very important progress, first in the consolidation of inflation targets, in trying to have lower inflation with a change in goals from 3% to 6%; and after the consolidation of inflation within the target range in the last nine months,” he explained. “There are also very important advances such as non-intervention in the exchange market”he added.
Finally, he referred to the social security reform, “which had been greatly postponed.” “We all knew and agreed that it was necessary and urgent to undertake a social security reform, and indeed in this period it took place,” said Umpierrez, adding that “later one may agree more or less on how it was done, but in Definitely, it is something that also contributes to the sustainability of public finances and that contributes to this improvement in the investment grade.”
“Therefore, it is true that although controversy has been generated, it is somewhat unfair to try to minimize this achievement because it effectively has to do with things that have occurred in the last three, four years,” he concluded.
Source: Ambito
