Early in the year I had a conversation with a Uruguayan friend about the local economy. He said that if Uruguay ended 2009 with positive economic growth on the back of the robust growth of 2007 and 2008 in the face of the global recession it would be amazing.
Well, if current predictions by Uruguay’s economic ministry are correct, 2009 will turn out to be amazing.
According to a recent story in Reuters News, Uruguay’s gross domestic product (GDP) has increased by an average of 5.7 percent a year since 2004 (following a regional recession in 2002 and 2003). By 2007, Uruguay’s domestic production and distribution machine was bursting at the seams. Foreign Direct Investment was at an all time high (thanks to a large pulp mill built by a Finnish company), and exports were more profitable than ever.
Some said 2007’s economic growth was a fluke or just riding the wave of a continent-wide economic boom. However, Uruguay’s 2008 GDP grew at a rate of 8.9 percent while many countries in the region began falling into recession. This increase in growth is partly attributed to an increase in world food prices that upped the value of Uruguay’s agricultural exports. The growth of 2008 is also due to the administration of President Tabare Vazquez, who aggressively sought to attract a diverse group of companies and investors to do business with Uruguay.
Uruguay’s economy began to contract in the first quarter of 2009. It appeared that Uruguay was finally being overcome by the gravity of the global recession. However, in the second quarter of 2009 the country’s GDP was back in the black with half a percentage point of positive growth. Uruguay’s economic ministry is predicting that 2009 will end with a growth rate in a range between .7 and 1.2 percent.
However, Uruguay’s narrow escape from recession was not without a scratch. There have been some hard blows to the local pulp industry, as well as other industries, due to reductions in foreign demand and a tightening of capital available for investment.
Also, Uruguay has accumulated a national debt of 2.5 percent of GDP in the last few years. One-and-a-half percent of the debt is said to be due to a severe drought in the early part of the year. Almost all of Uruguay’s energy is produced from hydroelectric plants on the country’s major rivers. During the drought Uruguay was forced to buy more expensive energy from its neighbors, Argentina and Brazil.
Tabare Vazquez’s five-year term as president will expire at the end of this year. His legacy will include giving a free laptop computer to every elementary school student in Uruguay, a new international airport, and refusing to participate in the global recession.
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Contact the author of this article - David Hammond
David Hammond is the author of Buying Real Estate in Uruguay, an ebook available to purchase and download
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Contact the author of this article - David Hammond
David Hammond is the author of Buying Real Estate in Uruguay, an ebook available to purchase and download
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