The recovery in tax matters that has been experiencing Uruguay in a generalized way after several quarters of negative balance, especially with regard to the VAT, finds reasons in two parallel phenomena that, in turn, are strongly related: the reduction of gap of prices with Argentina and an improvement in terms of tourist balance with the neighboring country.
This is what the economist said Javier from Haedo in the last Economic Situation Monitor of the Catholic University of Uruguay (UCU)for which he focused on the latest data published by the Ministry of Tourism referring to the tourism sector during the first half of the year, as well as in the Border Price Report (BPR) latest.
“A greater influx of Argentine tourists and, especially, the reduction of visits by Uruguayans to do tourism and shopping in Argentina, lead to an increase in consumer spending in our country. Spending that had been directed towards Argentina due to the extraordinary difference in prices,” the economist noted in the analysis.
According to him, this led to the fact that, since the last quarter of last year, the collection of the VAT —which between the fourth quarter of 2022 and the third of 2023 had a constant decline— improved up to 6% between the second and third quarters of the year. Not coincidentally, this recovery coincides with the reduction of the price gap with Argentina which, from a record high of 180% in September, fell to a low of 50% in March.
Although the latest record indicated that this gap has grown again for the second consecutive measurement – in May it was already at 59% while in July it reached 80% after a sharp increase – the positive effects of the significant reduction by 72% and, currently, by 55.5% compared to the highest figure still have a positive impact on tax collection, but also on tourism.
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The improvement in tax collection is not the only consequence of the narrowing the price gap between Uruguay and Argentina, Nor is it driven only by this significant economic figure for the country: the evolution of the tourism balance and, therefore, of spending, is also part of the equation, as De Haedo pointed out.
According to the latest data from the Ministry of Tourism and the analysis in perspective by the director of the Economic Situation Observatory from the UCU —which compared the information in terms of constant weights and not in dollars, whose value varies over time in a non-linear way—, “when comparing the first six months of 2023 and 2024, it is observed that the Argentine spending in Uruguay rose 5% while that of Uruguayans in Argentina fell by 34%.”
In this way, the tourism balance went from being negative by 66 million dollars to having a positive balance of 162 million dollars between both semesters. A circumstance that, clearly, also impacted on a better collection of VAT and which, in turn, was influenced by a Argentina less attractive for Uruguayan spending.
However, De Haedo warned that “it is not only the price difference between the two countries that matters but also the income situation in Argentina”: “With an impoverished middle class, it will take a long time before we reach the inbound tourism figures we have seen in the past.”
Source: Ambito
