Uruguay’s economy continues to suffer following the successive crises of Brazil and Argentina, its largest trading partners. Devaluation in Brazil in 1999 made Uruguayan goods less competitive, while the 2001 economic crisis in Argentina undermined Uruguay’s economy through reduced exports and plunging tourist revenues. An outbreak of foot and mouth didn’t help, putting the squeeze on beef exports to North America.

In mid-2002, Argentine withdrawals from Uruguayan banks forced the government to declare a bank holiday, starting a bank run only overcome by massive borrowing. In August last year Uruguay secured US$1.5bn in financing from the IMF and other multilateral organisations. Meanwhile in April this year the World Bank approved two loans totalling US$250m to support reforms to restore economic growth, improve social conditions and competitiveness.

Floating peso
The government eliminated its decade-long exchange rate band in June last year, allowing the peso to float freely. The dollar rose 60%, making exports more competitive, but lowering consumer purchasing power and creating a credit crunch that has hampered the economy’s ability to recover. Inflation, meanwhile, has soared from about 4% in 2001 to 26% in 2002.

Austrade’s Argentina office is responsible for Uruguay.
Telephone: +54 11 4777 6590
Fax: +54 11 4777 6591
Email: info@austrade.gov.au
Website: www.austrade.gov.au