18-K/A 1 rou-18ka1_0729.htm Unassociated Document
 

 

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 18-K/A
For Foreign Governments and Political Subdivisions Thereof
 
AMENDMENT No. 1
to
ANNUAL REPORT
OF
REPÚBLICA ORIENTAL DEL URUGUAY
 
(Name of Registrant)
 
__________________
 
Date of end of last fiscal year: December 31, 2012
 
SECURITIES REGISTERED*
(As of the close of the fiscal year)
 
Title of Issue
  
Amounts as to
which
registration
is effective
  
Names of
exchanges on which registered
N/A
  
N/A
  
N/A

Name and address of person authorized to receive notices
and communications from the Securities and Exchange Commission:

Andrés de la Cruz, Esq.
Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, NY 10006
                                          
*           The Registrant is filing this annual report on a voluntary
 
 
 

 
 
 


TABLE OF CONTENTS
 
 
EXPLANATORY NOTE
  3
   
SIGNATURE
  4
   
EXHIBIT INDEX
  5
   
EX-99.E  RECENT DEVELOPMENTS
  E-1
 
 
 
 
 
 
 
 
 
2
 
 
 
EXPLANATORY NOTE
 
This amendment to República Oriental del Uruguay’s (the “Republic”) Annual Report on Form 18-K for the fiscal year ended December 31, 2012 (the “Annual Report”) comprises:
 
(a) Pages numbered 1 to 5 consecutively.
 
(b) The following exhibit:
 
Exhibit 99.E:     Recent Developments
 
This amendment No. 1 to the Annual Report is filed subject to the Instructions for Form 18-K for Foreign Governments and Political Subdivisions thereof.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3
 

 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant, República Oriental del Uruguay, has duly caused this amendment to the Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized, in Montevideo, Uruguay on the 29th day of July, 2013.
 
 
REPÚBLICA ORIENTAL DEL URUGUAY
 
By:  /s/ Fernando Lorenzo                                 
Fernando Lorenzo
Minister of Economy and Finance of
República Oriental del Uruguay
 
 
 
 
 
 
 
 
 

 
4
 

EXHIBIT INDEX
 
Exhibit 99.E:       Recent Developments
 
 
 
 
 
 
 

 
5
 
 
 
 
 
 
 
 
E-1
 

RECENT DEVELOPMENTS
 
The information contained in this section supplements the information about Uruguay corresponding to the headings below that are contained in Exhibit 99.D to Uruguay’s annual report on Form 18-K, for the fiscal year ended December 31, 2012.  To the extent the information in this section differs from the information contained in such annual report, the information in this section replaces such information.  Capitalized terms not defined in this section have the meanings ascribed to them in the annual report.
 
 
INTRODUCTION
 
In March 2013, Banco Central adjusted its criteria with respect to the publication of the public sector debt statistics to adopt fully those followed by the IMF and the World Bank.  Prior to 2013, deposits of the non-financial public sector held with Uruguay’s banking system had been deducted from Uruguay’s gross domestic public sector debt.  According to the new methodology adopted by Banco Central, deposits of the non-financial public sector held with Uruguay’s banking system are solely recorded as assets and are no longer deducted from gross domestic public sector debt to make Uruguayan statistics comparable with statistics published by other countries that follow the IMF and World Bank’s methodology.  Data relating to gross domestic public debt for prior years has been restated following this new methodology.  The change in reporting methodology has no impact on Uruguay’s data regarding total gross public external debt.
 
 
THE ECONOMY
 
The Mercosur Agreements
 
As a result of the impeachment of former President Mr. Lugo in June 2012 and his destitution by the Paraguayan Congress, Paraguay was temporarily suspended as a Mercosur member in July 2012.  In addition, in July 2012, Mercosur members (other than Paraguay) admitted the Republic of Venezuela as a full member of Mercosur.  Venezuela is required to adopt the Mercosur common external tariff by 2016.  In April 2013, Paraguay held presidential elections and in July 2013 Mercosur members lifted Paraguay's suspension.  Paraguay has to decide whether to rejoin Mercosur.
 
GROSS DOMESTIC PRODUCT AND STRUCTURE OF THE ECONOMY
 
The following table sets forth information regarding GDP for the periods indicated.  The figures included in the table are based on 2005 prices (in accordance with the Integral Revision of the National Accounts published by Banco Central in March 2009) to eliminate distortions introduced by changes in relative prices.
 

 
E-2
 

Change in Gross Domestic Product by Expenditure
(% change from previous year, except as otherwise indicated, 2005 prices)
 
 
   
2008(1)
    
2009(1)
    
2010(1)
    
2011(1)
    
2012(1)
    
January/March
2013(1)(2)
  
Government consumption
     9.3 %     4.1 %     1.0 %     3.6 %     5.4 %     5.2 %
Private consumption
     9.1       (1.6 )     13.7       8.9       6.5       4.8  
Gross fixed investment
     19.3       (5.7 )     13.3       5.5       19.4       14.4  
Public sector (% of gross fixed investment)
     21.4       9.5       (6.1 )     (12.1 )     5.2       21.7  
Private sector (% of gross fixed investment)
     18.7       (10.1 )     20.1       10.3       22.5       11.3  
Exports of goods and services
     8.5       4.2       7.8       6.3       1.6       (9.9 )
Imports of goods and services
     24.4       (9.3 )     14.8       13.4       13.6       0.1  
 
___________________
(1)          Preliminary data.
(2)          January 1- March 31, 2013 compared to January 1- March 31, 2012.
 
Source:  Banco Central.
 
 
Principal Sectors of the Economy
 
The following table sets forth the components of Uruguay's GDP and their respective growth rates for the periods indicated. The percentages in the table are based on 2005 prices to eliminate distortions introduced by changes in relative prices.
 
 
Change in Gross Domestic Product by Sector
(% change from previous year, except as otherwise indicated, 2005 prices)
 
   
2008(1)
    
2009(1)
    
2010(1)
    
2011(1)
    
2012(3)
    
January/March 2013(1)(2)
  
Agriculture, livestock, fishing and forestry(3) 
     2.1 %     1.6 %     0.5 %     4.4 %     (1.6 )%     5.7 %
Mining
     1.7       0.3       2.1       7.3       15.5       n/a  
Manufacturing
     8.1       (3.7 )     3.6       1.2       1.6       2.0  
Electricity, gas and water
     (51.1 )     15.6       88.0       (25.6 )     (21.9 )     163.6  
Construction
     2.6       0.7       3.7       6.5       18.7       1.3  
Commerce, restaurants and hotels
     11.9       1.4       13.6       9.9       3.4       0.4  
Transportation, storage and communications
     30.7       12.5       17.6       12.6       7.4       4.4  
Real estate, business, financial and insurance services
     4.5       1.5       4.5       7.7       5.4       n/a  
Other services(4)(5) 
     4.6       3.8       1.8       2.7       3.3       1.3  
Total GDP
     7.2 %     2.4 %     8.9 %     5.7 %     3.9 %     3.7 %
___________________
n/a: not available
(1)                Preliminary data.
(2)                January 1- March 31, 2013 compared to January 1- March 31, 2012.
(3)                Data for the period January/March 2013, includes mining.
(4)                Includes public sector services and other services.
(5)                Data for the period January/March 2013, includes real estate, business, financial and insurance services.

Source:  Banco Central.
 
Uruguay’s GDP grew by 3.7% in the first quarter of 2013 compared with the same period of 2012.  The increase in the first quarter of 2013 was mainly due to improved levels of activity, primarily in the electricity, gas and water sector, the agriculture, livestock and fishing sector and the transportation storage and communication sector.
 
In the first quarter of 2013, Uruguay’s GDP increased 1.2% (measured on a seasonally adjusted basis) compared to the last quarter of 2012.
 
Agriculture, Livestock and Fishing
 
 
 
E-3
 
 
 
In the first quarter of 2013, the agriculture, livestock and fishing sector grew by 5.7% compared with the same period of 2012 driven by the improvement in the agricultural sector, in particular, the strong expansion of soybean and wheat production fueled by high international commodity prices and favorable weather conditions. In addition, cattle production increased during this period as a result of the normalization of rainfall levels. This increase was partially offset by a decrease in milk production.
 
Manufacturing
 
In the first quarter of 2013, the manufacturing sector grew by 2.0% compared with the same period of 2012.  This increase was mainly driven by oil and refined products, pulp and paper products and leather goods, offsetting decreases in foodstuffs, textiles and machinery.
 
Electricity, Gas and Water
 
In the first quarter of 2013, the electricity, gas and water sector grew by 163.6% compared with the same period of 2012.  This increase was the result of normalization of rainfall levels, which in turn allowed an increased use of hydroelectric source for electricity generation.
 
Construction
 
In the first quarter of 2013, the construction sector grew by 1.3% compared with the same period of 2012.  This increase was mainly due to public and private sector investment.  Public sector investment was fueled by infrastructure projects by UTE (electric power utility company), ANTEL (telecommunications company) and ANP (which operates most of Uruguay’s ports).
 
Commerce, Restaurants and Hotels
 
In the first quarter of 2013, the commerce, restaurants and hotels sector grew by 0.4% compared with the same period of 2012.  This increase was mainly due to an increase in commerce, as a result of an increase in consumption of imported products.  This increase was partially offset by a decrease in restaurants and hotels due to a decrease in tourism activities.
 
Transportation, Storage and Communications
 
In the first quarter of 2013, the transportation, storage and communications sector grew by 4.4% compared with the same period of 2012.  This increase is attributable mainly to the communications segment, reflecting an increase in the use of mobile communication and internet services. This increase was partially offset by a decrease in transportation, mainly as a result of the discontinuation of Pluna’s activities.

 
E-4
 

Employment, Labor and Wages
 
Employment
 
The employment rate decreased from 59.8% at May 31, 2012 to 59.7% at May 31, 2013.  Unemployment declined from 6.7% at May 31, 2012 to 6.3% at May 31, 2013.
 
The following table sets forth certain information regarding employment and labor in Uruguay as of the dates indicated.
 
Employment and Labor
(% by population)

   
As of December 31,
    
As of May 31,
  
   
2008
    
2009
    
2010
    
2011
    
2012
    
2013
  
Nationwide:
                                    
Participation rate(1) (2)
     62.5 %     63.1 %     62.7 %     64.5 %     63.8 %     63.7  
Employment rate(3)
     57.7       58.5       58.4       60.7       59.9       59.7  
Unemployment rate(4)
     7.7       7.3       6.8       6.0       6.1       6.3  
By Gender
                                                
Male
     5.4       5.2       5.0       4.5       4.6       5.0  
Female
     10.1       9.8       9.0       7.5       7.9       7.8  
By Age
                                                
Under 25 years
     21.3       20.2       19.7       17.4       17.7       19.6  
Over 25 years
     5.0       4.8       4.3       3.8       3.9       3.7  
Montevideo:
                                                
Participation rate(1) (2)
     63.8       64.8       64.9       66.8       65.9       65.0  
Employment rate(3)
     59.2       59.9       60.4       62.6       61.6       60.7  
Unemployment rate(4)
     7.3       7.6       6.9       6.2       6.5       6.6  
___________________
(1)
To be considered employed, a person above the minimum age requirement (14 years old) must have worked at least one hour with remuneration or fifteen hours without remuneration during the preceding week.
(2)
Labor force as a percentage of the total population above the minimum age requirement.
(3)
Employment as a percentage of the total population above the minimum age requirement.
(4)
Unemployed population as percentage of the labor force.
 
Sources: Instituto Nacional de Estadística (INE) and Banco Central.
 
Wages
 
For the 12-month period ended May 31, 2013, average nominal wages increased 11.7%, while average real wages increased 3.4%.  During this period, average public sector wages increased 10.5% and 2.3% in nominal and real terms, respectively, while average private sector wages increased 12.4% and 4.0% in nominal and real terms, respectively.
 
FOREIGN MERCHANDISE TRADE
 
Merchandise exports for the 12-month period ended May 31, 2013 totaled US$8.7 billion, compared to US$8.2 billion for the 12-month period ended May 31, 2012.  Merchandise imports totaled US$11.4 billion for the 12-month period ended May 31, 2013, compared to US$11.2 billion for the 12-month period in ended May 31, 2012.
 
Merchandise trade for the 12-month period ended May 31, 2013 recorded a deficit of US$2.7 billion, compared to a deficit of US$2.9 billion for the 12-month period ended May 31, 2012.

 
E-5
 

The following table sets forth information on exports and imports for the periods indicated.
 
 
Geographical Distribution of Merchandise Trade
(in millions of US$ and % of total exports/imports)
 
   
For the 12-month period ended May 31,
  
   
2012(1)
    
2013(1)
  
EXPORTS (FOB)
                        
Americas:
                        
Argentina
  
US$ 565
       6.9 %  
US$ 498
       5.7 %
Brazil
     1,672       20.3       1,672       19.1  
United States
     280       3.4       356       4.1  
Other
     1,287       15.6       1,207       14.7  
Total Americas
     3,804       46.2       3,733       42.7  
Europe:
                                
European Union:
                                
France
     37       0.4       34       0.4  
Germany
     289       3.5       250       2.9  
Italy
     135       1.6       127       1.4  
United Kingdom
     118       1.4       110       1.3  
Other EU
     515       6.3       461       5.6  
Total EU
     1,093       13.3       982       11.2  
EFTA(2) and other 
     607       7.4       596       7.2  
Total Europe
     1,700       20.6       1,579       18.0  
Africa
     339       4.1       293       3.4  
Asia
     860       10.4       1,401       16.0  
Middle East
     353       4.3       347       4.0  
Free Trade Zone
     n/a       n/a       n/a       n/a  
Other
     1,178       14.3       1,396       16.0  
Total
  
US$8,235
       100.0 %  
US$8,749
       100.0 %
IMPORTS (CIF)
                                
Americas:
                                
Argentina
  
US$ 1,911
       17.1 %  
US$ 1,720
       15.1 %
Brazil
     2,022       18.1       1,954       17.1  
United States
     1,251       11.2       889       7.8  
Other
     1,189       10.6       1,373       12.0  
Total Americas
     6,373       57.1       5,936       52.0  
Europe:
                                
European Union:
                                
France
     196       1.8       204       1.8  
Germany
     259       2.3       259       2.3  
Italy
     152       1.4       180       1.6  
United Kingdom
     100       0.9       104       0.9  
Other EU
     792       7.1       612       5.4  
Total EU
     1,499       13.4       1,359       11.9  
EFTA(2) and other 
     592       5.3       400       3.5  
Total Europe
     2,091       18.7       1,758       15.4  
Africa
     187       1.7       736       6.5  
Asia
     2,365       21.2       2,633       23.0  
Middle East
     85       0.8       236       2.1  
Other
     68       0.6       123       1.1  
Total
  
US$11,169
       100.0 %  
US$11,424
       100.0 %
 
___________________
n/a: not available
(1)     Preliminary data.
(2)     European Free Trade Association.
 
Source:  Banco Central.
 
FOREIGN TRADE ON SERVICES
 
Gross tourism receipts totaled US$2.0 billion for the 12-month period ended March 31, 2013, compared to US$2.1 billion for the 12-month period ended March 31, 2012.

 
E-6
 
 
Revenues from Tourism
 
 
Number of
Tourist Arrivals
(in thousands)
Gross Tourism
Receipts
(in millions of US$)
2008
1,998
1,051
2009
2,099
1,312
2010
2,408
1,496
2011
2,960
2,187
2012
2,846
2,076
For the 12 months ended March 31, 2013
2,821
1,959

__________________
Source: Banco Central.
 

The following table sets forth the percentage of tourist arrivals from Argentina, Brazil and other countries for the periods indicated.
 
Tourist Arrivals
 
(number of tourist by country, in thousands)
 
   
 
    
3-months ended March 31,
  
   
2008
    
2009
    
2010
    
2011
    
2012
    
2012
    
2013
  
Argentina
     1,047       1,150       1,262       1,723       1,765       739       708  
Brazil
     298       264       378       426       396       122       103  
Other
     653       684       771       811       686       183       209  
Total
     1,998       2,099       2,408       2,960       2,846       1,043       1,019  
             ___________________
            Sources: Banco Central and the Ministry of Tourism.

 
Tourist Arrivals
 
(% by country)
 
   
 
    
3-months ended March 31,
  
   
2008
    
2009
    
2010
    
2011
    
2012
    
2012
    
2013
  
Argentina
     52.4 %     54.8 %     52.4 %     58.2 %     62.0 %     70.8 %     69.4 %
Brazil
     14.9       12.6       15.7       14.4       13.9       11.7       10.1  
Other
     32.7       32.6       32.0       27.4       24.1       17.5       20.5  
Total
     100.0 %     100.0 %     100.0 %     100.0 %     100.0 %     100.0 %     100.0 %
___________________
Sources: Banco Central and the Ministry of Tourism.
 
Tourism from Argentina and Brazil (primarily during the months of January and February) has historically been the main driver of Uruguay’s services trade results.  On average for the period 2008-2012, the participation of Argentine and Brazilian visitors accounted for 56.0% and 14.0% of total visitors, respectively.   Nevertheless, developments affecting the economies of Argentina and Brazil have affected from time to time the number of tourists that visit Uruguay from those countries as well as gross receipts generated by those visitors. Visitors from Argentina increased by less than 10.0% in 2010 as a result of a downturn in the Argentine economy in 2009 that has been attributed primarily to the global financial crisis.  In 2011, however, tourism from both countries grew. Exchange control measures imposed by  the Argentine government in the second half of 2012 had an adverse impact in the first quarter of 2013, as the number of Argentine tourists  decreased by 4.2% compared to the first quarter of 2012. Future economic results or political conditions in Brazil or Argentina may adversely affect the number of tourists as well as gross tourism receipts originating from Uruguay's neighboring countries.
 
BALANCE OF PAYMENTS
 
In the 12-month period ended March 31, 2013, Uruguay’s balance of payments registered an overall surplus of US$2.2 billion, compared to a surplus of US$ 3.5 billion for the 12-month period ended March 31, 2012.

 
 
E-7
 

Balance of Payments(1)
(in millions of US$)
 
 
As of March 31,
 
2012(2)
  
2013(2)
       
Current Account
      
 Merchandise trade balance
US$        (1,633.6)
  
(2,279.6)
 Exports                                     
9,453.7
  
9,724.5
 Imports                                     
(11,087.2)
  
(12,004.1)
 Services, net                                     
1,339.2
  
756.2
 Interests and dividends
(1,529.9)
  
(1,587.9)
 Current transfers(3)                                     
151.9
  
112.4
Total current account
US$ (1,671.4)
  
US$ (2,999.0)
       
Capital and Financial Account
      
 Capital transfers                                     
US$ -
  
US$ 241.2
 Direct Investment                                     
2,567.0
  
2,655.7
 Portfolio Investment(4)
2,561.0
  
2,092.6
 Other Investment                                     
(1,017.8)
  
1,574.3
Total capital and financial account, net
US$ 4,110.1
  
US$ 6,563.8
       
Errors and Omissions(5)
US$ 1,020.2
  
US$ (1,317.7)
Total balance of payments
US$ 3,458.9
  
US$ 2,247.1
       
Change in Banco Central reserve assets(6)
US$ (3,458.9)
  
US$ (2,247.1)
       

                      ___________________
 
(1)
Calculated in accordance with the methodology set forth in the IMF Balance of Payments Manual (Fifth Edition).
 
(2)
Preliminary data.
 
(3)
Current transfers consist of transactions without a quid pro quo, including gifts.
 
(4)
Includes public bonds, commercial paper, notes and commercial banks’ foreign portfolio investment.
 
(5)
Constitutes a residual item, which is periodically revised as additional information regarding the current and capital and financial accounts becomes available.
 
(6)
Change in Banco Central international reserve assets does not reflect adjustments in the value of gold.

Current Account
 
Uruguay’s current account for the 12-month period ended March 31, 2013 recorded a deficit of US$3.0 billion, compared to a deficit of US$1.7 billion for the 12-month period ended March 31, 2012.  The increase in the current account deficit was attributable to a US$ 1.3 billion increase in total imports, mainly related to imports of products for infrastructure development and energy projects during the 12-month period ended March 31, 2013.  In addition, the services, net account contributed to the increase in the current account deficit, as a result of a decrease in tourism activities and an increase in Uruguayan residents traveling abroad.
 
Capital and Financial Account
 
Uruguay’s capital and financial account recorded a surplus of US$6.6 billion for the 12-month period ended March 31, 2013, compared to a US$4.1 billion surplus for the 12-month period ended March 31, 2012.  This increase is  mainly attributable to capital inflows, represented mainly by investments by non-residents in Banco Central bonds.
 
Portfolio investment totaled US$2.1 billion for the 12-month period ended March 31, 2013, compared to US$2.6 billion for the 12-month period ended March 31, 2012.
 
Other investment recorded an inflow of US$1.6 billion for the 12-month period ended March 31, 2013, compared to an outflow of US$1.0 billion for the 12-month period ended March 31, 2012.

 
E-8
 
 
International Reserves
 
As of July 24, 2013, the international reserve assets of Banco Central totaled US$15.1 billion, including US$7.9 billion in reserves and voluntary deposits of the Uruguayan banking system. As of December 31, 2012, the international reserve assets of Banco Central stood at US$13.6 billion, including US$ 9.0 billion in reserves and voluntary deposits of the Uruguayan banking system.
 
Foreign Investment
 
Foreign direct investment totaled US$2.7 billion for the 12-month period ended March 31, 2013, compared to US$2.6 billion for the 12-month period ended March 31, 2012.  This increase was driven by investment in private sector companies, which was partially offset by a reduction in investment in real estate.
 
The following table shows, by country of origin, direct foreign investment in Uruguay, for the periods indicated.
 
Foreign Direct Investment
(in millions of US$, except percentages)

 
 
2008(1)
  
 
2009(1)
  
 
2010(1)
  
 
2011(1)
Mercosur
                      
Argentina
US$533.9          
25.4%      
  
US$432.3          
28.3%      
  
US$587.8          
25.7%      
  
US$813.7          
32.5%      
Brazil
183.2          
8.7          
  
109.6          
7.2          
  
108.2          
4.7          
  
170.2          
6.8          
Paraguay
31.0          
1.5          
  
26.3          
1.7          
  
25.6          
1.1          
  
47.6          
1.9          
Venezuela
18.8          
0.9          
  
20.1          
1.3          
  
54.4          
2.4          
  
(11.3)          
(0.5)         
Europe
                                                                  
Austria
-          
n/a          
  
-          
n/a          
  
0.5          
-          
  
2.6          
0.1          
Belgium
(2.3)         
(0.1)          
  
53.1          
3.5          
  
54.9          
2.4          
  
51.2          
2.0          
Denmark
 (0.6)         
-          
  
0.4          
-          
  
2.2          
0.1          
  
0.6          
-          
France
17.2          
0.8          
  
23.4          
1.5          
  
35.4          
1.5          
  
(133.5)         
(5.3)         
Germany
4.3          
0.2          
  
0.5          
-          
  
15.3          
0.7          
  
11.8          
0.5          
Italy
3.9          
0.2          
  
(0.2)         
-          
  
1.7          
0.1          
  
0.2          
-          
Luxembourg
4.2          
0.2          
  
12.2          
0.8          
  
9.6          
0.4          
  
(12.4)         
(0.5)         
Netherlands
14.4          
0.7          
  
110.4          
7.2          
  
(2.0)          
(0.1)          
  
172.1          
6.9          
Portugal
-          
n/a          
  
-          
n/a          
  
0.6          
-          
  
1.6          
-          
Spain
232.2          
11.0          
  
54.7          
3.6          
  
75.2          
3.3          
  
196.4          
7.8          
Sweden
0.3          
-          
  
2.6          
0.2          
  
2.1          
0.1          
  
3.6          
0.1          
Switzerland
20.7          
1.0          
  
5.9          
0.4          
  
(0.5)          
0.0          
  
13.4          
0.5          
United Kingdom
82.1          
3.9          
  
14.1          
0.9          
  
134.6          
5.9          
  
0.9          
0.1          
Nafta
                                                                                      
Canada
2.8          
0.1          
  
-          
-          
  
14.4          
0.6          
  
19.9          
0.8          
Mexico
24.2          
1.2          
  
-          
-          
  
-          
-          
  
-          
-          
United States
143.5          
6.8          
  
167.2          
10.9          
  
(36.3)          
(1.6)          
  
77.5          
3.1          
Other
                                                                                                 
Australia
n/a          
n/a          
  
n/a          
n/a          
  
n/a          
n/a          
  
0.3          
-          
Bahamas
34.1          
1.6          
  
44.1          
2.9          
  
35.9          
1.6          
  
50.7          
2.0          
Bermuda
7.2          
0.3          
  
223.5          
14.6          
  
(59.4)          
(2.6)          
  
-          
-          
Cayman Islands
2.2          
0.1          
  
2.3          
0.2          
  
3.2          
0.1          
  
0.7          
-          
Chile
3.4          
0.2          
  
(42.9)         
(2.8)         
  
12.4          
0.5          
  
13.8          
0.6          
Colombia
n/a          
n/a          
  
n/a          
n/a          
  
n/a          
n/a          
  
16.0          
0.6          
Ecuador
7.4          
0.4          
  
-          
-          
  
-          
-          
  
-          
-          
Israel
0.1          
-          
  
-          
-          
  
-          
-          
  
-          
-          
Japan
3.4          
0.2          
  
39.0          
2.6          
  
-          
-          
  
-          
-          
New Zealand
13.8          
0.7          
  
-          
-          
  
-          
-          
  
42.2          
1.7          
Panama
10.5          
0.5          
  
5.8          
0.4          
  
8.1          
0.4          
  
(24.6)         
(1.0)         
Peru
1.2          
0.1          
  
-          
-          
  
-          
-          
  
-          
-          
Virgin Islands
3.6          
0.2          
  
7.8          
0.5          
  
14.1          
0.6          
  
(13.7)         
(0.5)         
Other
704.7          
33.5          
  
216.5          
14.2          
  
1,191.1          
52.0          
  
993.3          
39.7          
Total
2,105.7          
100.0          
  
1,528.6          
100.0          
  
2,289.1          
100.0          
  
2,504.8          
100.0          
___________________
n/a: not available
(1)           Preliminary data.
Source:  Banco Central.
 

 
E-9
 
MONETARY POLICY AND INFLATION
 
Monetary Policy
 
Banco Central’s decision in June 2013 to discontinue the use of a monetary policy rate determined by reference to a short term interest rate as its principal monetary policy tool and to revert to using the monetary base by managing monetary aggregates, for instance the amount of money in circulation and bank deposits levels, seeks to mitigate inflationary pressures while avoiding continued appreciation of the Uruguayan peso.  Banco Central’s use of the short term interest rate as its main monetary policy tool in an international environment characterized by depressed interest rates was considered ineffective to control inflation.  Capital inflows resulted in an appreciation of the Uruguayan peso. See “—Foreign Exchange.”  Banco Central is currently committed to managing monetary aggregates (M1) with the aim of controlling inflation.
 
Banco Central also broadened the inflation target range from 4.0-6.0% to 3.0-7.0% starting in July 2014 and announced that it expects to maintain this range for 24 months.
 
Liquidity and Credit Aggregates
 
The following table sets forth selected monetary indicators for the periods indicated.

Selected Monetary Indicators
(percentage change based on peso-denominated data)
 
   
2008
    
2009
    
2010
    
2011
    
2012
    
12 months ended
May 31, 2013(1)
  
M1 (% change)(2)                                         
     17.9 %     15.2 %     30.0 %     20.8 %     11.2 %     8.8 %
M2 (% change)(3)                                         
     17.3       14.9       31.0       22.1       10.3       8.6  
Credit from the financial system (% change)
     58.7       (13.1 )     24.1       14.1       18.3       17.8  
Average annual peso deposit rate (end period)
     5.4       4.9       4.8       5.5       5.2       4.6  
Monetary policy rate (TPM)
     7.75       6.25       6.50       8.75       9.00       9.25  
Average money market rate (TMM) (period end)
     4.99       6.20       6.50       8.75       9.00       9.23  
___________________
(1)           Preliminary data.
(2)           Currency in circulation plus peso-denominated demand deposits.
(3)           M1 plus peso-denominated savings deposits.

Source: Banco Central.
 
Inflation
 
Consumer prices increased 8.2% in the 12-month period ended June 30, 2013, compared to 8.0% in the 12-month period ended June 30, 2012.  Wholesale prices increased 1.7% for the 12-month period ended June 30, 2013, compared to 7.4% in the 12-month period ended June 30, 2012.

 
E-10
 
 
Foreign Exchange
 
The following table sets forth the high, low, average and period-end peso/U.S. dollar exchange rates for the dates and periods indicated.
 
Exchange Rates(1)
(pesos per US$)
 
 
High
  
Low
  
Average
  
Period-End
2008
24.520
  
19.079
  
20.947
  
24.350
2009
24.350
  
19.534
  
22.543
  
19.627
2010
21.329
  
19.042
  
20.072
  
20.094
2011
20.426
  
18.300
  
19.300
  
19.898
2012     22.099    19.111    20.321   19.399 
For the 12 months ended June 30, 2013
22.063
  
18.858
  
20.003
  
20.547
___________________
(1)           Daily interbank end-of-day bid rates.

Source: Banco Central.

As of July 26, 2013 the exchange rate stood at Ps. 21.320 per US$1.00.
 

THE BANKING SECTOR
 
Uruguay’s Banking System Following the 2002 Crisis
 
During the first five months of 2013, deposits of the non-financial sector with the financial system grew by 6.0%, or US$1.4 billion, to US$24.6 billion.  Likewise, credit extended to the non-financial sector by the banking system increased from US$13.2 billion as of December 31, 2012 to US$13.7 billion as of May 31, 2013.
 
PUBLIC SECTOR FINANCES
 
In the 12-month period ended May 31, 2013, Uruguay’s public sector overall balance generated a deficit of US$1.0 billion (2.0% of GDP), compared to a deficit of US$673 million (1.6% of GDP) for the same period ended May 31, 2012.
 
For the 12-month period ended May 31, 2013, Uruguay’s public sector primary balance recorded a surplus of US$386 million (0.7% of GDP), compared to a surplus of US$547 million (1.1% of GDP) for the 12-months ended May 31, 2012.
 
PUBLIC SECTOR DEBT
 
On July 8, 2009, Congress passed Law No. 18,519, which amended National Debt Law No. 17,947.  Under the National Debt Law, as amended, the government may incur debt, provided that the net debt of the government on the last day of the prior fiscal year shall not exceed by an amount set forth in the National Debt Law for each fiscal year the outstanding net public debt as of the last day of the preceding fiscal year.  The amounts set forth in the National Debt Law for any given year can be doubled if extraordinary and unforeseen circumstances occur.  For 2009, and subsequent years until a new law is passed, the amount of debt over and above the net debt outstanding as of the last day of the prior fiscal year contemplated in the National Debt Law is US$350.0 million.  In the Rendición de Cuentas for fiscal year 2010 relating to the Budget 2010-2014 approved by Congress, the government increased this amount for the years 2011 to 2014 to 5.5 billion UIs (equivalent to approximately US$693 million as of December 31, 2011).
 
 
E-11
 
The National Debt Law is an instrument of fiscal responsibility that imposes a ceiling on the annual increase in the net liabilities of the consolidated public sector.  For the purpose of the National Debt Law, consolidated public sector liabilities comprise, in addition to gross total public debt (defined as the overall financial liabilities of the consolidated public sector (i.e., central government, public sector enterprises and Banco Central) with third parties), the monetary base.  In addition, the National Debt Law requires that in determining whether the limits have been exceeded, monetary assets and liabilities generally be valued (in Pesos) at the time they were acquired or incurred.  The valuation methodology for the debt in the National Debt Law values the initial stock of assets and liabilities denominated in a different currency than the UI at market value as of the end of the prior year while all assets or liabilities contracted during the year are recorded at the market value at the time of the contract/acquisition.
 
In March 2013, Banco Central adjusted its criteria with respect to the publication of the public sector debt statistics to adopt fully those followed by the IMF and the World Bank.  Prior to 2013, deposits of the non-financial public sector held with Uruguay’s banking system had been deducted from Uruguay’s gross domestic public sector debt.  According to the new methodology adopted by Banco Central, deposits of the non-financial public sector held with Uruguay’s banking system are solely recorded as assets and are no longer deducted from gross domestic public sector debt to make Uruguayan statistics comparable with statistics published by other countries that follow the IMF and World Bank’s methodology.  Data relating to gross domestic public debt for prior years has been restated following this new methodology.  The change in reporting methodology has no impact on Uruguay’s data regarding total gross public external debt.
 
Domestic Debt
 
As of July 26, 2013, the government had issued an aggregate principal amount equivalent to approximately US$490 million in debt under the peso-denominated debt issuance program established for the February-July 2013 period, providing for the issuance of debt securities in the domestic market on a monthly basis for up to an aggregate principal amount of approximately US$530 million.
 
Total Public Debt
 
The total gross public sector debt stood at US$31.2 billion (60.8% of GDP) on March 31, 2013, compared to US$31.1 billion (62.4% of GDP) on December 31, 2012.
 
As of March 31, 2013, 38.1% of the total gross public debt was denominated in foreign currencies and 61.9% in Uruguayan pesos, compared to 42.7% and 57.3%, respectively, as of December 31, 2012. For more information see “Tables and Supplemental Information” on the 18-K Report of the Republic of Uruguay for the year ended December 31, 2012.
 

 
E-12