EX-99.D 2 d913283dex99d.htm DESCRIPTION OF REPUBLICA ORIENTAL DEL URUGUAY Description of Republica Oriental del Uruguay

Exhibit 99.D

Description of

República Oriental del Uruguay

May 11, 2020

 

D-1


TABLE OF CONTENTS

 

     PAGE  

Recent Developments

     D-3

Introduction

     D-9

República Oriental Del Uruguay

     D-12

The Economy

     D-17

Gross Domestic Product and Structure of the Economy

     D-24

Foreign Merchandise Trade

     D-38

Foreign Trade on Services

     D-42

Balance of Payments

     D-43

Monetary Policy and Inflation

     D-47

The Banking Sector

     D-52

Securities Markets

     D-61

Public Sector Finances

     D-62

Fiscal Policy

     D-66

Public Sector Debt

     D-69

Tables and Supplemental Information

     D-80

 

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RECENT DEVELOPMENTS

The information contained in this section supplements the information about Uruguay corresponding to the headings below that are contained in this Exhibit 99.D to Uruguay’s annual report on Form 18-K for the fiscal year ended December 31, 2019.

REPÚBLICA ORIENTAL DEL URUGUAY

In December 2019, a novel form of pneumonia first noticed in Wuhan, Hubei province (COVID-19, caused by a novel coronavirus) was reported to the World Health Organization, with cases soon confirmed in multiple provinces in China. On March 11, 2020, the World Health Organization characterized the COVID-19 as a pandemic. Governments have undertaken several measures across the world to control the coronavirus, including mandatory quarantines and travel restrictions.

On March 13, 2020, the Ministry of Public Health reported the first four cases of COVID-19 in Uruguay. In response to the COVID-19 outbreak, on March 13, 2020, the government declared a state of national sanitary emergency and deployed several measures aimed at strengthening health care systems and facilities, expanding testing and enhancing hygiene protocols to prevent mass contagion. The government decided against instating a countrywide “shelter in place” policy, citing the importance of not grinding the economy to a complete halt. Instead, it actively discouraged large gatherings, promoted social distancing measures, suggested citizens to limit outdoor activities and exhorted the public and private sector to put in place, when possible, measures to develop working remotely.

The measures deployed by the government in response to COVID-19 include:

(i) partial border closure, with a mandatory 14-day quarantine for persons arriving from affected zones or countries declared as risky or symptomatic. This requirement was later extended to all Uruguayan stranded abroad, repatriated by the government. On March 17, 2020, all border crossings with Argentina were closed, except for the repatriation of Uruguayan citizens and residents, the transport of goods to Argentina and the transit of humanitarian aid;

(ii) suspension of classes for all educational levels, public and private (except for guaranteed daily food assistance for students);

(iii) launch of a mobile application that allows persons who suspect having COVID-19 symptoms to consult their health condition remotely;

(iv) implementation of actions to ensure availability of alcohol hand sanitizer, including the reactivation of an ANCAP production plant near Paysandú;

(v) publication of personal care products price comparison chart by the consumer protection area of the Ministry of Economy and Finance;

(vi) suspension of all public performances and outdoor events; (vii) reduction of public transport services to minimum essential services;

(viii) prohibition of passengers and crews to disembark from cruise ships, barring exceptional circumstances;

(ix) implementation of hygiene protocols and mandatory use of masks for metropolitan and interdepartmental bus services, taxis and school transports; and

(x) exemption of customs duties for imports of sanitary products necessary to fight against the COVID-19.

Simultaneously, Uruguay is implementing several measures to limit the effects of the COVID-19 outbreak on the economy and helping citizens, particularly those in vulnerable sectors, and businesses deal with the immediate consequences. The measures spanned the following areas:

(i) Credit preservation, liquidity injection, and loan guarantees for micro-, small- and medium-sized enterprises. The government’s key priority is to preserve the health and credit quality of micro-, small- and medium- enterprises in the face of a temporary shock, to ensure a functioning payment system between producers, suppliers and customers. The measures include the following: (A) state-owned Banco de la República Oriental del Uruguay introduced more flexible loan repayment and financing terms for affected borrowers, including lower interest rates and longer maturities; (B) Banco Central reduced commercial banks’ reserve requirements on local currency deposits until June 30, 2021, in order to inject liquidity into the local currency loan market (See “—Monetary Policy and Inflation—Monetary Policy” and “—The Banking Sector”); (C) the National Development Agency launched a direct credit program for micro-entrepreneurs, providing working capital loans for up to 24 months at subsidized rates (in effect, Ps.12,000 monthly loans available for approximately 67,000 single-member companies, to be granted for the months of April and May 2020); and (D) prospective capitalization of the National Guarantee System (SIGA) to leverage banking system loans to small- and medium-sized enterprises, reducing the commission charged by the guarantee system (from 2.6% to 0.8% for U.S. dollar-denominated loans and from 2.0% to 0.6% for local currency-denominated loans).

(ii) Protecting household income and human capital, particularly the most vulnerable sectors through direct income transfers and expanded unemployment insurance: (A) a subsidy (unemployment benefit) to self-employed workers for two months in the amount of up to 25% of the monthly average compensation perceived in the six-month period immediately preceding the date work was suspended, through May 31, 2020; (B) expanded flexibility in unemployment insurance to safeguard employee-employer relationships in sectors affected by the slowdown of their activities, allowing firms to place employees in part-time schedules and use the unemployment insurance fund to ensure that employees receive wages as close as possible to their regular wages; (C) to ensure that elderly workers (over 65 years) stay at home, full wage compensation in the form of sick leave for approximately 7,775 public employees and a sickness subsidy for approximately 17,000 private employees; and (D) a subsidy of Ps.6,779 per month to approximately 10,115 single-tax payers (monotributistas) in vulnerable situation for the months of April and May 2020.

(iii) Tax relief, easing of bank regulations and postponement of other obligations: (A) deferral of the March and April 2020 payments of the minimum VAT applicable to micro- and small-enterprises (i.e., enterprises with a monthly income below Ps.113,612), which will be paid in six equal and consecutive installments, without penalty interest; (B) deferral of the annual balance of income tax and capital tax payments for all taxpayers (excluding large taxpayers) whose fiscal years ended between December 31, 2019 and February 29, 2020; (C) deferral of the annual income tax affidavit presentation for all taxpayers whose fiscal year ended on December 31, 2019; (D) a 60% deferral in the payment of workers’ social security tax collected by Banco de Previsión Social (BPS) for the months of April and May 2020 by individual employers and micro- and small- enterprises with up to 10 employees, with the amount deferred to be paid in six installments beginning June 2020 (with the remaining 40% balance to be exempted and paid by the government); (E) for retirees with outstanding loans from Banco de Previsión Social (BPS) whose pension payments are below Ps. 13,600, a deferral in their May, June and July 2020 installments; (F) Banco Central, through the Superintendency of Financial Services, authorized banks, financial services companies and credit management companies to extend families and companies loan maturities for up to 180 days, for debtors whose income may be affected as a result of the health emergency; and (G) Banco Hipotecario del Uruguay announced a 50% reduction in instalments to be paid during April and May 2020 for all its clients with outstanding mortgage debt.

 

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In addition to these measures, on April 8, 2020, the government enacted Law No. 19,874, which created the “COVID-19 Solidarity Fund” (“Coronavirus Fund”). The Coronavirus Fund will be managed by the Executive Power, through the Ministry of Economy and Finance, which is authorized to assign resources and budgetary expenditures to address the emergency, and is required to timely disclose information on such budgetary expenditures assignment, adopt procedures to allow ex-post evaluation and accountability review. The Coronavirus Fund will be funded with (i) up to 30% of the net earnings recorded by the state-owned Banco de la República Oriental del Uruguay during the fiscal year ended December 31, 2019, and 100% of the accumulated profits of the Corporación Nacional para el Desarrollo; (ii) contributions from the National Institute of Agricultural Research and the National Meat Institute, in addition to tax credit waivers from cattle farmers (1% municipal tax on the sales of cattle); (iii) tax collections from a new monthly tax (Impuesto Emergencia Sanitaria COVID-19) that will be applicable to remunerations and nominal benefits of public employees of the central government, departmental governments, autonomous entities and decentralized services, non-state public law persons and state-owned entities (healthcare employees who are directly or indirectly exposed to COVID-19 as a result of their employment will be exempt) in a progressive scale; (iv) donations (including in foreign currencies) expected to be contributed to the Coronavirus Fund; (v) proceeds of loans from international and multilateral credit organizations; (vi) contributions by non-state public persons; and (vii) other funds or contributions intended for the Coronavirus Fund.

The domestic supply shock from the COVID-19 outbreak and the ensuing income reduction on households and companies, together with restrictive measures put in place to control the spread of contagious diseases and lower external demand, will adversely affect Uruguay’s economic activity in 2020. While the economic cost of COVID-19 is difficult to predict, the government forecasts that GDP growth will be negative in 2020, and that the government’s fiscal deficit will increase. The government expects that public spending tied to the COVID-19 response will increase, largely, from the use of unemployment and health insurance mechanisms, a key feature of Uruguay’s broad and established social insurance coverage.

Constitution, Government and Political Parties

On April 8, 2020, the Executive Power enacted Law No. 19,875, which authorized the electoral court to reschedule departmental and municipal elections scheduled for May 10, 2020 due to the COVID-19 outbreak.

Foreign Policy and Membership in International and Regional Organizations

On December 17, 2019, Congress passed Law 19,842, approving the Republic’s incorporation as a member of the Asian Infrastructure Investment Bank (AIIB).

On April 28, 2020, the AIIB confirmed that Uruguay met all steps required to become the 80th member.

THE ECONOMY

The Economic Policies of the Lacalle Pou Administration

On March 11, 2020, the Lacalle Pou Administration announced a set of measures aimed at improving fiscal accounts requiring ministries to reduce annual operating and investment expenses (excluding wages) by 15% and other austerity initiatives. In addition, only one third of personnel vacancies generated in the central government during the course of each year will be covered, with the exception of teachers, health personnel and employees from the Ministerio del Interior (Ministry of Internal Affairs).

On April 23, 2020, the Lacalle Pou administration submitted to Congress an urgent consideration bill (“Ley de Urgente Consideración”, or LUC) to implement certain key measures and structural reforms in line with the administration’s objectives. These include, among others, (i) a new fiscal rule, fiscal framework and budget process to ensure sustainable finances over the medium term; (ii) new governance policies for public enterprises; and (iii) microeconomic reforms (such as the regulatory framework for the energy markets and promotion of competition in non-tradable sectors) to boost potential GDP and competitiveness.

Specifically, the proposed fiscal rule is anchored on a structural fiscal result, limiting growth in the Central Government’s real public spending, which shall be tied to the estimated long-term average (i.e., “potential”) growth of the economy. Fiscal surpluses would be earmarked to a countercyclical fund to finance fiscal policies in recessionary economic cycles.

 

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Under Uruguay’s Constitution, the Executive Power can submit urgent consideration bills to Congress and if not expressly rejected by the vote of at least 60% of the members of both chambers of Congress, the urgent consideration bills will be enacted into law on the 90th calendar day from the date on which the Executive Power submitted the bill to Congress. Uruguay cannot give assurances that the LUC will be adopted as submitted, as Congress can amend it before its enactment.

The Lacalle Pou administration has until June 30, 2020 to submit to Congress a draft bill containing the fiscal performance report for fiscal year 2019 (the “2019 Rendición de Cuentas”) and August 31, 2020 to submit the budget for the 2020-2024 period, respectively. (See “—Fiscal Policy—2020-2024 Budget”).

Environment

Among the measures to be included in the Ley de Urgente Consideración is the creation of a Ministry of Environment and Water, tasked with the formulation, execution, supervision and evaluation of national plans for the protection of the environment.

On April 13, 2020, the Japan Bank for International Cooperation and the Ministry of Economy and Finance signed a memorandum of understanding (MoU) to enhance cooperation on hydrogen resources and other environmentally friendly technologies in Uruguay. Over the past decade, Uruguay has transformed its energy matrix by increasing and diversifying its renewable sources of energy generation. The country is keen on further promoting sustainable production and harnessing sources of “green competitiveness.” This MoU lays the foundations for expanding future business and financial opportunities between both countries, including by deepening Uruguay’s financial presence in the Japanese financial market.

GROSS DOMESTIC PRODUCT AND STRUCTURE OF THE ECONOMY

Role of the State in the Economy

Large-scale Foreign Direct Investments and Public-Private Partnerships for Infrastructure Development

Following the confirmation by UPM of its investment in a second pulp mill on July 23, 2019, the construction of the pulp mill is ongoing, in accordance with the 2017 investment agreement between the government and UPM as of the date of this annual report.

Further, as of the date of this annual report, the construction of the railway pursuant to the agreement entered into between the Ministerio de Transporte y Obras Públicas (Ministry of Transport and Public Works) and Grupo Vĺa Central is also ongoing.

See “Gross Domestic Product and Structure of the Economy—Role of the State in the Economy—Large-scale Foreign Direct Investments and Public-Private Partnerships for Infrastructure Development”.

Minera Aratirí S.A. Arbitration

During January and February 2020, oral hearings in the case brought against the Republic before the United Nations Commission on International Trade Law in connection with the Aratirí project were held in Washington DC. The United Nations Commission on International Trade Law’s decision is expected for 2021. See “Gross Domestic Product and Structure of the Economy—Role of the State in the Economy—Minera Aratirí S.A. Arbitration.”

Employment, Labor and Wages

Employment

According to estimates by the National Statistics Institute, the employment rate stood at 56.4% in February 2020 compared to 57.1% in February 2019 and the unemployment rate stood at 10.5% in February 2020, compared to 8.4% in February 2019.

Wages

For the 12-month period ended March 31, 2020, average real wages decreased by 0.9% compared to a 1.0% growth for the 12-month period ended March 31, 2019.

Private sector wage negotiation rounds have been postponed until the economic impact of the COVID-19 outbreak in the economy can be assessed. See “Gross Domestic Product and Structure of the Economy—Employment, Labor and Wages—Wages.”

FOREIGN MERCHANDISE TRADE

Merchandise exports for the 12-month period ended March 31, 2020 totaled US$7.4 billion, reflecting no significant variation when compared to the same period in 2019. Merchandise imports totaled US$7.8 billion for the 12-month period ended March 31, 2020, compared to US$8.2 billion for the 12-month period ended March 31, 2019.

Merchandise trade for the 12-month period ended March 31, 2020, recorded a deficit of US$345 million, compared to a deficit of US$734 million for the 12-month period ended March 31, 2019.

BALANCE OF PAYMENTS

International Reserves

As of April 30, 2020, Banco Central’s international reserve assets totaled US$15.9 billion (of which gold represented US$6 million). This amount includes US$7.4 billion of reserves and voluntary deposits of the financial sector, including US$2.6 billion of public banks, with Banco Central.

 

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MONETARY POLICY AND INFLATION

Monetary Policy

Aggregate M1’ annual average growth during the first quarter of 2020 stood at 5.1%, below the target range set by the Monetary Policy Committee (COPOM) of Banco Central of 6%-8%, reflecting a lower demand for money during March 2020 due to the outbreak of COVID-19.

The COPOM has also decided to increase the frequency of decision-making, communication of the measures taken and monitoring of monetary policy. The number of meetings each year of the Monetary Policy Committee will be doubled, from four meetings each held at the end of each quarter, to eight meetings held every two months. This increase in the frequency of the meetings is intended to improve the ability of the COPOM to respond where measures to strengthen monetary policy become necessary.

In the first policy statement of the COPOM after the new Banco Central authorities assumed office in March 2020, the COPOM decided to set the indicative broad M1 (M1’) growth in a range between 3% and 5% for the quarter ending June 30, 2020.

Inflation

The following table shows changes in consumer prices (CPI) and wholesale prices (WPI) for the period indicated.

Changes in CPI and WPI

(% change from previous year at period end)

 

     CPI  

For the twelve months ended April 30, 2020

     10.86

 

Source: National Institute of Statistics.

 

     WPI  

For the twelve months ended April 30, 2020

     17.1

 

Source: National Institute of Statistics.

For the 12-month period ending April 30, 2020, the inflation rate rose to 10.86%, mainly due to an increase in food and beverage prices caused by adverse weather conditions and increases in tariffs charged by water, electricity and gas utilities.

The weighted average annual interest rate for 91 to 180-day term deposits in U.S. dollars in the banking system was 0.4% in February 2020, reflecting no significant variation when compared to February 2019. The weighted average annual interest rate for 91 to 180-day term deposits in pesos in the banking system was 5.6% and 6.0% in February 2020 and February 2019, respectively.

The following table shows the value in pesos of the UI as of April 30, 2020.

 

     UI

Value in pesos as of April 30, 2020

   Ps.4.5352

 

Source: National Institute of Statistics.

The following table shows the value in pesos of the UP as of April 30, 2020.

 

     UP

Value in pesos as of April 30, 2020

   Ps.1.18023

 

Source: National Institute of Statistics.

 

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Foreign Exchange

The following table shows the high, low, average and period-end peso/U.S. dollar exchange rates for the period indicated.

Exchange Rates (1)

(pesos per US$)

 

     High      Low      Average      Period-End  

For the 12 months ended April 30, 2020

     45.942        33.830        37.707        42.257  

 

(1)

Daily interbank end-of-day bid rates.

Source: Banco Central.

THE BANKING SECTOR

In response to the COVID-19 outbreak, starting April 1, 2020, Banco Central reduced the reserve requirements in domestic currency (both nominal pesos and CPI-indexed units) that banks are required to maintain with the monetary authority. This decrease in reserve requirements will be tied to the growth of the aggregate amount of current loan portfolios in local currency in the Uruguayan financial system, thus generating additional liquidity that allows the financial system to respond to the financial needs of companies and individuals. Banco Central is monitoring the current situation daily, evaluating measures, and in permanent dialogue with the different economic agents. During the second quarter of 2020, increases in lending in national currency and indexed units by financial institutions will be deducted from the minimum mandatory capital reserves in such currencies established in Banco Central current regulations. The deduction will be capped per deposit maturity, as follows:

 

   

less than 30-day term deposits: the reserve requirement was reduced by 7%, from 22% to 15%;

 

   

30 to 90-day term deposits: the reserve requirement was reduced by 5%, from 11% to 6%;

 

   

91 to 180-day term deposits: the reserve requirement was reduced by 5%, from 7% to 2%; and

 

   

181 to 366-day term deposits: the reserve requirement was reduced by 3%, from 5% to 2%.

Countering the Financing of Terrorism Law

In January 2020, GAFILAT (Grupo de Acción Financiera Latinoamérica), a regional intergovernmental organization that brings together 17 countries, published the “Mutual Evolution Report” analyzing the system implemented by Uruguay to prevent money laundering and the financing of terrorism. The report recognized the political commitment demonstrated and the significant progress made by Uruguay in the application of prevention measures. Hence, Uruguay was removed from the list of non-cooperating countries.

FISCAL POLICY

2020-2024 Budget

The Ministry of Economy and Finance has until June 30, 2020 to submit to Congress the 2019 Rendición de Cuentas and August 31, 2020 to submit the budget for the 2020-2024 period, respectively.

Social Security

As of January 31, 2020, 24,798 out of 53,893 workers, and 2,939 out of 8,965 retirees had decided to change their affiliation from the individual capitalization pension scheme to the public social security “pay-as-you-go” scheme. See “Fiscal Policy—Social Security.”

PUBLIC SECTOR FINANCES

In the 12-month period ended March 31, 2020, Uruguay’s overall public sector deficit represented approximately 3.9% of GDP, compared to an overall public sector deficit of 3.0% of GDP for the 12-month period ended March 31, 2019. Leaving aside the transfers to the public social security trust fund estimated at 1.2% of GDP (arsing from changes to Uruguay’s social security system known as “Cincuentones Law”, as defined below), Uruguay’s overall public sector deficit stood at 5.0% of GDP for the 12-month period ended March 31, 2020, compared to 4.5% of GDP for the 12-month period ended March 31, 2019. (See “Fiscal Policy—Social Security”)

 

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PUBLIC SECTOR DEBT

Central Government Debt

The following table sets forth information regarding the debt of the central government outstanding as of March 31, 2020.

Central Government Debt

(in millions of US$, except as otherwise indicated)

 

     As of March 31, 2020  

Gross Debt

   US$   29,512  

Of which

  

(% in foreign currency)

     58

(% in local currency)

     42

Of which

  

Nominal

     7

CPI-linked

     27

Wage-linked

     8

Average maturity (in years)

     14.4  

Net Debt

   US$ 26,869  

 

 

Source: Ministry of Economy and Finance.

As of April 30, 2020, the central government’s debt service obligations (capital payments and interest expenses) for the next 12 months stood at approximately US$2.4 billion.

The following table reflects the central government’s uses and sources of funds for 2019 and projected for 2020.

Central Government Financing Needs and Funding Sources

(in millions of US$)

 

                 2019                  Projected for 2020  

Financing Needs

   US$ 4,833      US$ 4,649  

Interest Payments

     1,451        1,529  

Amortizations of Bonds and Loans(1)

     2,523        1,618  

Primary Deficit (2)

     859        1,501  

Funding Sources

     4,833        4,649  

Multilateral Disbursements

     457        1,520  

Gross Bond Issuance (3)

     3,595        3,750  

Net Others

     282        128  

Use of Assets (4)

     498        (750
                   

Net Bond Issuance (5)

   US$ 1,467      US$ 2,132  

 

 

(1) 

For 2019, includes bonds redeemed through domestic and international liability management operations and loan prepayments, and other contractual obligations that were canceled. For 2020, includes bonds redeemed through domestic liability management operations through April 30, 2020.

(2) 

Excludes transfers to the Social Security Trust Fund.

(3) 

Includes domestic and external debt issuances.

(4) 

Positive value indicates a reduction in the Central Government’s liquid assets and a negative value indicates an accumulation of liquid assets.

(5) 

Corresponds to gross bond issuance for the period net of bond amortizations.

Source: Ministry of Economy and Finance.

Between March 1, 2020 and April 30, 2020, Uruguay’s central government received loans for US$1,050 million from the IADB, of which US$801 million correspond to disbursements under pre-approved credit lines granted for contingency financing before 2019. As of April 30, 2020, credit lines available to Uruguay’s central government from CAF and FLAR (Latin American Reserve Fund), grant Uruguay access to contingency financing of approximately US$1.4 billion. As of the date of this annual report, Uruguay is negotiating additional credit lines and loans with multilateral institutions (IADB, World Bank, FONPLATA and the European Investment Bank).

Between December 31, 2019 and April 30, 2020, the central government issued peso-denominated treasury notes linked to the average nominal wage index and CPI-linked treasury notes for an aggregate principal amount equivalent to US$1.3 billion, including the equivalent of US$949.2 million issued under a joint liability management transaction with Banco Central executed in January 2020. Under the liability management transaction, investors tendered short-term Banco Central and central government securities in exchange for peso-denominated treasury notes linked to the average nominal wage index and CPI-linked treasury notes with a longer maturity.

 

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INTRODUCTION

All references in this document to the “government” are to the government of the República Oriental del Uruguay (“Uruguay” or the “Republic”) and references to the “central government” are to the central government of Uruguay (which includes government agencies and subdivisions and excludes financial and nonfinancial public sector institutions). All references in this document to the “overall public sector” are to the central government and financial and nonfinancial public sector institutions, excluding Banco de la República Oriental del Uruguay and Banco Hipotecario.

The terms set forth below have the following meanings in this document:

 

   

Gross domestic product, or GDP, means the total value of final products and services produced in Uruguay during the relevant period, using nominal prices. Real GDP instead measures GDP based on 2005 prices (in accordance with the Integral Revision of the National Accounts published by Banco Central del Uruguay (“Banco Central”) in March 2009) to eliminate distortions introduced by changes in relative prices.

 

   

Imports are calculated based upon (1) for purposes of foreign trade, statistics reported to Uruguayan customs upon entry of goods into Uruguay on a cost, insurance and freight included basis (referred to as CIF basis) and (2) for purposes of balance of payments, statistics collected on a free on board basis at a given departure location (referred to as FOB basis).

 

   

Exports are calculated based upon (1) for purposes of foreign trade, statistics reported to Uruguayan customs upon departure of goods from Uruguay on a free on board, or FOB, basis and (2) for purposes of balance of payments, statistics collected on a FOB basis.

 

   

The rate of inflation is measured by the December to December percentage change in the consumer price index or CPI, unless otherwise specified. The CPI is calculated on a weighted basket of consumer goods and services using a monthly averaging method. December to December rates are calculated by comparing the indices for the latest December against the indices for the prior December.

References herein to “US$,” “$,” “U.S. dollars” or “dollars” are to United States dollars. References herein to “Uruguayan pesos,” “pesos,” or “Ps.” are to the lawful currency of Uruguay. Unless otherwise stated, Uruguay has converted historical amounts translated into U.S. dollars or pesos at historical annual average exchange rates. References to “Euro” or “€” are to the lawful currency of the Member States of the European Union that have adopted the single currency in accordance with the treaty establishing the European Community, as amended by the Treaty on European Union. References to “JPY” or “yen” or “¥” are to Japanese yen. Translations of pesos to dollars, Euros or yen (or dollars to Euros or yen) have been made for the convenience of the reader only and should not be construed as a representation that the amounts in question have been, could have been or could be converted into dollars, euros or yen at any particular rate or at all.

References herein to “UIs” are to Unidades Indexadas. UIs are inflation-indexed monetary units. The UI is calculated by the National Institute of Statistics (Instituto Nacional de Estadística or “INE”) as provided and published monthly in advance for each day from the 6th day of each month to the 5th day of the following month by INE and Banco Central del Uruguay. The UI changes on a daily basis to reflect changes in the consumer price index (Indice de Precios al Consumo or IPC), which is measured by the INE. The UI for each day is set in advance based on changes in previous months’ inflation.

References herein to “UPs” are to Unidades Previsionales. UPs are wage-indexed monetary units. The UP is calculated by the INE as provided and published monthly in advance for each day of the month. The UP changes on a daily basis to reflect changes in the nominal wages index (Indice Medio de Salarios Nominales or “IMSN”), which is measured by the INE. The UP for each day is set in advance based on changes in previous months’ nominal wage changes.

References herein to the Uruguayan “public sector” includes the central government, Banco Central, public enterprises, local governments and other public sector entities.

 

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The Federal Reserve Bank of New York does not report a noon buying rate for Uruguayan pesos.

The fiscal year of the government ends on December 31. Accordingly, all annual information presented herein is based upon January 1 to December 31 periods, unless otherwise indicated. Totals in some tables in this document may differ from the sum of the individual items in those tables due to rounding.

Uruguay’s official financial and economic statistics are subject to a review process by Banco Central and the Uruguay National Statistics Institute. Accordingly, the financial and economic information in this document may be subsequently adjusted or revised. Certain information and data contained herein for 2015, 2016 2017, 2018 and 2019 is preliminary, and subject to further adjustment or revision. The government believes that this practice is substantially similar to the practices of many industrialized nations. The government does not expect revisions to be material, but cannot assure you that material changes will not be made.

Historically, deposits of the nonfinancial public sector held with Uruguay’s banking system were deducted from Uruguay’s gross public sector debt. According to the methodology adopted by Banco Central in March 2013, deposits of the nonfinancial public sector held with Uruguay’s banking system are not deducted from Uruguay’s gross public sector debt and are recorded as nonfinancial public sector assets. Data for prior years has been restated following this methodology.

 

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SUMMARY

(in millions of US$, except as otherwise indicated)

 

    2015     2016(1)     2017(1)     2018(1)     2019  

THE ECONOMY

         

GDP (in millions of US$ at nominal prices)(2)

  US$ 53,273     US$ 52,825     US$ 59,577     US$ 59,571     US$ 56,001  

Real GDP (in millions of constant 2005 pesos)(2)

  Ps. 670,268     Ps. 681,594     Ps. 699,257     Ps. 710,585     Ps. 712,163  

% change from prior year

    0.4     1.7     2.6     1.6     0.2

Consumer price index or CPI (annual rate of change)

    9.4     8.1     6.6     8.0     8.8

Wholesale price index or WPI (annual rate of change)

    6.6     (1.9 %)%      5.4     10.0     20.1

Unemployment rate (annual average)(3)

    7.5     7.8     7.9     8.3     8.9

Balance of payments(4)

         

Trade balance (merchandise)

    1,307       1,911       2,391       2,425       2,920  

Current account

    (491     311       420       54       419  

Capital account

    176       17       5       44       52  

Financial account, net

    (739     (222     1,586       (143     854  

Errors and omissions(5)

    (423     (550     1,162       (241     383  

Change in Banco Central international reserve assets (period end)

    (1,677     (2,189     2,449       (408     (1,111

Banco Central international reserve assets (period end)(6)

    15,634 (7)      13,472 (8)      15,963 (9)      15,557 (10)      14,505 (11) 

PUBLIC FINANCE

         

Non-Financial Public Sector Revenues

    15,456       15,471       17,717       18,636       17,274  

Non-Financial Public Sector Primary Expenditures

    15,337       15,770       17,775       18,215       17,537  

Public Sector Primary Balance

    (9     (288     (125     311       (336

Public Sector Overall Balance (surplus/(deficit))

    (1,905     (2,032     (2,072     (1,729     (1,950

PUBLIC DEBT

         

Total public sector debt

         

Debt with non-residents(12)

    18,081       17,120       17,856       18,390       19,361  

Debt with residents

    13,479       16,392       20,995       20,013       17,799  

Total

    31,560       33,512       38,851       38,403       37,160  

As a % of GDP

    59.2     63.4     65.2     64.5     66.4

Total public sector external debt service

         

Amortizations

    2,965       693       1,497       1,271       2,369  

Interest payments

    809       885       856       992       957  

Total

    3,774       1,579       2,353       2,263       3,326  

As a % of exports of goods and services

    24.1     10.9     14.6     13.8     20.8

 

(1) 

Preliminary data.

(2) 

Figures are not adjusted by purchasing power.

(3) 

Unemployment population as a percentage of the labor force.

(4)

Calculated in accordance with the methodology set forth in the IMF Balance of Payments Manual (Sixth Edition).

(5) 

Constitutes a residual item, which is periodically revised as additional information regarding the current and capital and financial accounts becomes available.

(6) 

As presented in this chart, gold reserves have been valued at their corresponding market prices as of December 31, 2015, 2016, 2017, 2018 and 2019.

(7)

This amount includes US$6,584 million of reserves and voluntary deposits of the Uruguayan banking system with Banco Central, including US$2,457 million of public sector financial institutions.

(8)

This amount includes US$5,542 million of reserves and voluntary deposits of the Uruguayan banking system with Banco Central, including US$2,481 million of public sector financial institutions.

(9)

This amount includes US$5,558 million of reserves and voluntary deposits of the Uruguayan banking system with Banco Central, including US$2,461 million of public sector financial institutions.

(10)

This amount includes US$5,581 million of reserves and voluntary deposits of the Uruguayan banking system with Banco Central, including US$2,576 million of public sector financial institutions.

(11) 

This amount includes US$6,012 million of reserves and voluntary deposits of the Uruguayan banking system with Banco Central, including US$2,343 million of public sector financial institutions.

(12)

Excludes interest on non-resident banking deposits.

Source: Banco Central

 

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REPÚBLICA ORIENTAL DEL URUGUAY

Territory and Population

Uruguay is located in the southern, subtropical zone of South America, bordering Argentina to the west and Brazil to the northeast. Its territory covers an area of approximately 176,000 square kilometers with a 500-kilometer coastline along the Atlantic Ocean and the Río de la Plata. Uruguay’s major cities are Montevideo, the nation’s capital and main port, Paysandú, Salto and Las Piedras.

According to the 2011 national census, Uruguay’s population of approximately 3.3 million is primarily of European origin and has a literacy rate above 98%. Approximately 95% of the population lives in urban areas and about 40% of the population resides in the Montevideo metropolitan area. The population growth rate averaged 0.2% per year for the period from 1985 to 2011, and is the lowest in South America. Uruguay is generally considered a high-income country. The following table sets forth comparative gross national income (“GNI”) figures and selected other comparative statistics as of December 31, 2019, unless otherwise indicated.

 

     Uruguay     Brazil     Chile     Mexico     United States  

Per capita GNI(1)

   US$ 15,650     US$ 9,140     US$ 14,670     US$ 9,180     US$ 62,850  

PPP GNI per capita(2)

   US$ 21,900     US$ 15,820     US$ 24,250     US$ 19,440     US$ 63,390  

Life expectancy at birth(3)

     78       76       80       77       79  

Adult literacy rate(4)(5)

     98.6     92.0     96.9     94.5     N.A.  

Infant mortality per 1000 live births(6)

     6       13       6       11       6  

 

N.A. = Not Available.

 

(1) 

World Bank Atlas method, 2018 data

(2) 

Current US$, adjusted for purchasing power parity.

(3) 

In years. 2016 data.

(4) 

Percentage of people ages 15 and older.

(5) 

2016 data, except for Chile data, which corresponds to 2015. The Economic Commission for Latin America and the Caribbean (“ECLAC”) does not prepare statistics on the United States’ adult literacy rate.

(6) 

2016 data.

Source: The World Bank - World Development Indicators database and ECLAC.

Constitution, Government and Political Parties

Uruguay is organized politically as a republic and is geographically divided into 19 departments (districts). The 1967 Constitution, which was last amended in 2004, provides for a presidential system of government composed of three branches: executive, legislative and judiciary. The president heads the executive branch and is chief of staff and commander of the armed forces. The president is elected by direct popular vote for a period of five years and may not seek re-election for consecutive terms. Under Uruguay’s electoral system established under the 1996 constitutional reform, each political party selects a single candidate for presidential elections. If no candidate wins more than 50% of the vote in the first round of elections, a run-off between the two leading candidates is held. The legislative branch is composed of a 31-member Senate and a 99-member Chamber of Deputies, which together constitute the Congress. Members of Congress are elected every five years by direct popular vote under a system of proportional representation. The Supreme Court is composed of five judges appointed for 10-year terms by Congress. The Supreme Court has jurisdiction over selected constitutional matters and appellate jurisdiction over decisions rendered by lower courts. Uruguay’s judicial system consists of trial and appellate courts with jurisdiction in each case over civil, criminal, family and labor matters. In addition, Uruguay has an administrative court system with jurisdiction over several public sector matters.

Uruguay has been a democratic country throughout most of its history since it became an independent nation in 1825. The country’s democratic tradition was interrupted twice during the last century: once briefly in the 1930s and again during the period from 1973 to 1985. In June 1973, a military junta took over power, dissolved Congress and suspended all voting activity. Military rule continued until November 1984, when democratic elections were held and voters elected Julio María Sanguinetti as president.

 

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Politics in Uruguay are dominated by three political parties: the Frente Amplio (Broad Front), the Partido Colorado and the Partido Nacional.

Until the 2004 presidential and congressional elections, Uruguay’s two traditional political parties, the Partido Colorado and the Partido Nacional, had alternated holding the presidential office. Since appearing on Uruguay’s political landscape in 1971 as a coalition of, among others, the Christian Democratic, Socialist and Communist parties, the Frente Amplio gained increasing support and, in October 2004, won victories in the presidential and congressional elections, remaining in power until March 2020. In addition to these three main political parties, other smaller political parties occupy Uruguay’s politics, such as (i) the Partido Independiente, which split from the Frente Amplio before the 1989 elections, (ii) the Unidad Popular, party formed in 2013 by several smaller political groups, (iii) the Partido Ecologista Radical Intransigente, a political party founded in 2013 and based on the principles of green politics, such as environmentalism, (iv) the Partido de la Gente, party founded in 2016 and (v) the Cabildo Abierto, a party founded in 2019.

Presidential elections were held on October 27, 2019. Mr. Daniel Martínez Villamil, from Frente Amplio, received 39.02% of the votes cast; Mr. Luis Lacalle Pou, from Partido Nacional, received 28.62% of the votes cast; Mr. Ernesto Talvi, from Partido Colorado, received 12.34% of the votes cast; Mr. Guido Manini Ríos, from Cabildo Abierto, received 11.04% of the votes cast; Mr. César Vega from Partido Ecologista Radical Intransigente received 1.38% of the votes cast; Mr. Edgardo Novick, from Partido de la Gente, received 1.08% of the votes cast and Mr. Pablo Mieres, from Partido Independiente, received 0.97% of the votes cast. Based on these results, Mr. Martínez Villamil and Mr. Lacalle Pou participated in the runoff election on November 24, 2019, and Mr. Lacalle Pou from Partido Nacional won the national presidential election with 50.79% of the votes cast. Mr. Lacalle Pou took office on March 1, 2020, succeeding Mr. Tabaré Vázquez Rosas. Mr. Lacalle Pou leads an informal political coalition known as Coalición Multicolor, comprised of the Partido Nacional, Partido Colorado, Cabildo Abierto, Partido Independiente and Partido de la Gente.

Congressional elections were also held on October 27, 2019, in which the Coalición Multicolor obtained the majority of seats in both houses of Congress. The congressional representation of each of the seven parties elected for the 2020-2025 term is as follows:

 

     Senate     Chamber of Deputies  
     Seats      %     Seats      %  

Coalición Multicolor

     17        54.8       55        55.5  

Partido Nacional

     10        32.2       30        30.3  

Partido Colorado

     4        12.9       13        13.1  

Cabildo Abierto

     3        9.7       11        11.1  

Partido Independiente

     —          —         1        1.0  

Frente Amplio

     13        41.9     42        42.4

Partido Ecologista Radical Intransigente

     —          —         1        1.0  
  

 

 

    

 

 

   

 

 

    

 

 

 

Total(1)

     31        100     99        100
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(1) 

The Vice President, currently Mrs. Beatriz Argimón Cedeira of the Partido Nacional, occupies the thirty-first seat in the Senate.

The Lacalle Pou administration has the following goals of economic policy:

 

   

reaching a sustainable level of economic growth, supported by a steady development of Uruguay’s productive capacity, productivity and competitiveness;

 

   

reducing fiscal deficit to slow down debt incurrence through the establishment of stricter fiscal policies (a “fiscal rule”);

 

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identifying and taking advantage of public spending savings opportunities, without affecting social expenditures;

 

   

improving internal public security;

 

   

improving the governance of public companies; and

 

   

reform the tax system to support small and medium-sized companies.

Foreign Policy and Membership in International and Regional Organizations

Uruguay has had no significant regional or international conflicts in recent years. The Republic has focused its foreign policy on international economic, political and legal issues and on the development of international arrangements aimed at improving economic cooperation among nations, conflict resolution and international law. Uruguay maintains diplomatic relations with 172 countries and is a member of 105 international organizations, including:

 

   

the United Nations (founding member), including many of its specialized agencies;

 

   

the Organization of American States;

 

   

the World Trade Organization;

 

   

the International Monetary Fund or the IMF;

 

   

the International Bank for Reconstruction and Development or the World Bank;

 

   

the International Finance Corporation;

 

   

the Multilateral Investment Guaranty Agency;

 

   

the International Centre for Settlement of Investment Disputes;

 

   

the Inter-American Development Bank or the IADB;

 

   

the Inter-American Investment Corporation; and

 

   

the Corporación Andina de Fomento or the CAF.

Uruguay maintains close ties to its neighboring countries and participates in several regional arrangements designed to promote cooperation in trade and investment. It has been the host country for the Latin American Integration Association, a regional external trade association that includes ten South American countries in addition to Mexico, Cuba, Panamá and Nicaragua since its creation in 1960.

In March 1991, the governments of Argentina, Brazil, Paraguay and Uruguay signed the Mercosur Treaty. Under the Mercosur Treaty, these four countries originally pledged:

 

  (1)

to create a full common market in goods, services and factors of production by eliminating or significantly reducing, in some cases over a period of years, import duties, tariffs and other barriers to trade among members; and

 

  (2)

to establish common external tariffs for trade with non-members.

In December 1994, the four members of Mercosur signed an agreement establishing January 1, 1995 as the deadline for the implementation of a common external tariff intended to transform the region into a customs union. The common external tariff regime became effective on January 1, 2001. However, it was also agreed that each member country would be entitled to make exceptions to the common external tariff for a transitional period scheduled to end in 2008 for Argentina and Brazil, and in 2010 for Paraguay and Uruguay. These periods have been extended, allowing Argentina and Brazil to maintain their list of exceptions until December 31, 2021, Uruguay until December 31, 2022, and Paraguay until December 31, 2023. Accordingly, the full implementation of a customs union has been deferred. See “The Economy—The Mercosur Agreements.”

 

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In July 2012, Mercosur members (other than Paraguay) admitted the Republic of Venezuela as a full member of Mercosur. In December 2013, Paraguay acknowledged the admission of Venezuela as a full member of Mercosur. In July 2015, Bolivia signed a Protocol to become a full member of Mercosur. The Protocol provides that Bolivia will gradually adopt the regulations of Mercosur over a period of four years following the entry into force of the Protocol. Within the same period, Bolivia is expected to adopt the Mercosur Common Nomenclature (NCM), the Common External Tariff, and Mercosur’s Origin Regime. In December 2016, Venezuela’s status as a full member was temporarily suspended by the other Mercosur members, after it was considered to have failed to implement Mercosur regulations, in accordance with the undertakings assumed in 2012 in connection with its admission to Mercosur.

Since the establishment of Mercosur, the following trade agreements have become effective for Mercosur members:

 

Year Signed

  

Year Effective

 

Country/Economic

Region

 

Description of

Agreement

1996    1996   Chile   Free trade zone starting in 2014
1996    1997   Bolivia   Free trade zone starting in 2006
2003    2005   Colombia, Ecuador and Venezuela   Gradual free trade zone for certain goods until 2020
2005    2006   Peru   Gradual free trade zone for certain goods until 2021
2006    2008   Cuba   Tariff elimination for certain goods
2007    2009   Israel   Gradual free trade zone for certain goods until 2019
2004    2009   India   Tariff reduction for certain goods
2008    2016   Southern African Customs Union (“SACU”)   Tariff reduction for certain goods
2010    2017   Egypt   The gradual establishment of a free trade zone for certain goods by 2027

In December 1995, Mercosur and the European Union signed a framework agreement for the development of free trade. Negotiations were suspended from 2004 to 2010. In May 2016, Mercosur and the EU exchanged proposals with respect to open issues and continued negotiations. On June 28, 2019, Mercosur and the European Union concluded longstanding negotiations reaching a landmark understanding. It is expected that the agreement will, over time, eliminate duties on 92% of Mercosur goods exported to the European Union (including exports of meat, grains and leather) and 91% of goods that the European Union companies export to Mercosur (including certain exports of cars, car parts, machinery, chemicals, clothing, pharmaceuticals, leather shoes, textiles, and certain food and drinks). The trading blocs are currently finalizing the negotiation of the agreement.

Mercosur also initiated negotiations for the establishment of a free trade zone with the European Free Trade Association (“EFTA”). In January 2017, representatives of Mercosur and EFTA announced the commencement of negotiations in the World Economic Forum’s Annual Meeting in Davos. In February 2017, Mercosur and EFTA approved the agenda and structure of the negotiations and have held ten negotiation rounds since then. On August 23, 2019, negotiations on a comprehensive free trade agreement concluded.

In March 2018, Mercosur and Canada began negotiating a comprehensive free trade agreement. As of the date of this annual report, negotiations were ongoing.

 

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In September 2018, Mercosur and South Korea began negotiating a comprehensive free trade agreement. As of the date of this annual report, negotiations were ongoing.

In October 2018, Mercosur and Singapore launched negotiations for a comprehensive free trade agreement. As of the date of this annual report, negotiations were ongoing.

Mercosur and the United States, which had suspended negotiations in 2004, sought to resume negotiations relating to the hemisphere-wide- Free-Trade of the Americas Agreement (FTAA) pursuant to the 1991 “Four Plus One” Agreement. The negotiations revealed important differences between the parties, and there can be no assurance that an agreement will be reached within the near term, as originally contemplated.

Significant trade imbalances among Mercosur countries developed over time as a result of various factors. These imbalances have prompted discussions and negotiations among the member states that to date have not resulted in the convergence of the national economies, an objective stated on several occasions pursued. Argentina’s crisis in 2001 and its long-lasting effects adversely affected trade within Mercosur and with non-Mercosur countries and the timely implementation by Mercosur of the objectives set forth in the Mercosur Treaty of 1991, in particular the customs union. It also triggered the adoption of various safeguard measures and caused indefinite delays in Mercosur’s ability to achieve the macroeconomic coordination and stability sought by its member states. Uruguay continues to support the long-term objectives contemplated in the Mercosur Treaty, while pursuing measures intended to maximize access to export markets by Uruguayan products in the short and medium-term.

Uruguay has entered into bilateral treaties related to trade and investment, including the following:

 

Year

Signed

 

Year

Effective

 

Country/Economic Region

 

Descriptions of Agreement

2003   2004   United Mexican States   Free Trade Agreement
2004   2007   Iran   Bilateral Trade Framework Agreement
2005   2006   United States of America   Bilateral Investment Promotion Treaty
2007   2007   United States of America   Trade and Investment Framework Agreement
2008   2011   United States of America   Cooperation Agreement in Science and Technology
2008   —     India   Bilateral Investment Treaty
2008   2009   Venezuela   Economic Cooperation Agreement
2010   2012   Chile   Bilateral Investment Treaty
2009   2011   South Korea   Bilateral Investment Treaty
2009   2012   Chile   Public Procurement Agreement
2009   2012   Vietnam   Bilateral Investment Treaty
2015   2017   Japan   Bilateral Investment Treaty
2016   —     Chile   Free Trade Agreement
2018   —     United Arab Emirates   Bilateral Investment Treaty
2019   —     Australia   Bilateral Investment Treaty

In March 2009, Uruguay and Brazil signed an energy cooperation agreement for the development of an electrical transmission line, to facilitate interconnectivity of both countries’ energy networks. A line with a transmission capacity of 500MW was completed in 2016 and on May 2, 2017, Uruguay began exporting electricity to Brazil. See “Gross Domestic Product and Structure of the Economy—Principal Sectors of the Economy—Electricity, Gas and Water.”

Since 2017, Uruguay has entered into bilateral agreements with China under the Belt and Road Initiative (the “BRI”), a global development strategy adopted by the Chinese involving infrastructure development and investments in nearly 70 countries and international organizations in Asia, Europe, and Africa. During 2019, representatives from Uruguay and the Chinese National Development and Reform Commission held meetings to discuss projects under the BRI.

 

D-16


THE ECONOMY

History and Background

In the 1980s, Uruguay’s economy was affected by a crisis of its financial system, followed by a severe recession. A deterioration in its external debt to GDP and exports ratios led the Republic to negotiate a rescheduling of its maturing debt obligations within the framework of the Brady Plan in 1991. In the early 1990s, the government took steps to increase private sector involvement in the economy (including foreign investment in previously restricted areas), and reduced the size and influence of the public sector in the economy. Following a modest 0.9% increase in real GDP in 1990, a new recovery began in mid-1991, and real GDP increased steadily between 1991 and 1994 at an average cumulative annual rate of 5.2%.

The economic liberalization policies of the 1990s, while stimulating improvements in productivity and economic growth, also increased the exposure of Uruguay’s economy to regional and international economic developments. The absence of capital controls facilitated a gradual dollarization of the assets and liabilities of the banking system. A loss of investor confidence in certain countries in the region, capital flight and a resulting contraction of economic activity followed the Mexican peso devaluation in December 1994. Argentina, one of Uruguay’s principal trading partners and sources of direct foreign investment, was particularly affected. The contraction in aggregate demand in neighboring countries, particularly Argentina, was coupled with a decrease in Uruguay’s private demand and public sector investment. In 1995, real GDP contracted by 1.4% as compared to 1994. Uruguay’s economy recovered with real GDP growth of 5.0% on average from 1996 to 1998 fueled mainly by increased exports and growth in gross fixed investment, particularly private sector investment, which in turn stimulated private consumption. During this period, the financial and insurance services sector grew in real terms and as a percentage of GDP.

The Mercosur Agreements

The execution and implementation of Mercosur represented Uruguay’s single most important foreign trade endeavor, as it was expected to offer Uruguayan companies access to a common market of approximately 200 million people. On January 1, 2000, internal tariff rates among Mercosur countries were reduced to zero, with the exception of sugar and automobiles.

With the establishment of the common external tariff in January 1995, the members of Mercosur agreed to cause a gradual convergence of their respective external trade regulations over a five-year period. A common external tariff became effective on January 1, 2001. However, each member of the Mercosur retained some degree of flexibility intended to gradually allow certain industries to enhance their competitiveness, and had the ability to take specific exceptions to the common external tariff (initially 300 each) over a transitional period. Argentina and Brazil are currently entitled to 100 exceptions each and Uruguay and Paraguay are currently entitled to 225 and 649 exceptions, respectively. With respect to imports of capital goods, telecommunications and information technology products of non-Mercosur origin, the members of Mercosur agreed that all of them could take exception from the common external tariff, Argentina and Brazil until 2021 and Uruguay and Paraguay until 2022 and 2023, respectively, and Venezuela until 2022 (although Venezuela’s membership has been suspended since December 2016). The Mercosur member states agreed to coordinate policies in certain areas, including agriculture, industry, transport and trade in services, to reduce or eliminate imbalances, and several working groups are currently engaged in policy coordination negotiations.

The devaluation of the Argentine peso in January 2002, and other measures taken by the Argentine government during this period (including unilateral increases in import tariffs on consumer goods and the elimination of import tariffs on capital goods, for non-Mercosur products) adversely affected trade within Mercosur and with non-Mercosur countries and the timely implementation by Mercosur of the objectives set forth in the Mercosur Treaty of 1991, in particular the customs union. Uruguay maintains certain duties affecting imports of certain Argentine products whose producers are entitled to regional or sectorial subsidies. It also caused indefinite delays in Mercosur’s ability to achieve the macroeconomic coordination and stability sought by the December 2000 understanding on common macroeconomic targets. Uruguay continues to support the long-term objectives contemplated in the Mercosur Treaty and the December 2000 understanding, recognizing the short and medium-term need to maximize access to other export markets by Uruguayan products.

 

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Certain barriers to the comprehensive regional integration initiated by Mercosur continue to exist. Phytosanitary border inspections and other bureaucratic border procedures still lack uniformity among Mercosur member countries and are onerous in many instances, causing delays in trade. Rules on intellectual property, antitrust and the environment, among other things, are different in each of the Mercosur countries, and while certain mechanisms for dispute resolution and cooperation have been established, comprehensive mechanisms are still under development. In December 2002, Mercosur approved common antitrust procedures implementing a 1996 Antitrust protocol. This agreement constituted a step towards the elimination of antidumping claims among members. Trade in services, such as financial and banking services, has not been uniformly liberalized, with countries like Uruguay having a financial system which is open to non-Uruguayan participants while countries like Brazil allow only limited participation of non-Brazilian banks in their financial system. Roads, bridges and railways must also be developed to further facilitate trade. In December 1997, the Mercosur members agreed to a framework agreement for the liberalization of the provision of services, access to markets and freedom of establishment. The members of the Mercosur meet annually to negotiate the implementation of the 1997 framework agreement. A protocol regarding the provision of services entered into effect in December 2005 and was ratified by Argentina, Brazil, Paraguay and Uruguay. The liberalization is expected to be effected gradually on the basis of negotiation rounds intended to result in eliminating restrictions by segments with a view to reaching complete liberalization. In December 2017, Mercosur members signed a Cooperation and Facilitation Investment Protocol and a Government Procurement Protocol. As of the date of this annual report, both protocols were pending ratification.

As Mercosur has not yet fully developed into a customs union (due to the set of exceptions to the common external tariff), the free circulation of goods among the Mercosur countries reaches only the goods bearing Mercosur origin. To advance the free movement of goods and avoid charging tariffs on goods bearing non-Mercosur origin after their first access to a Mercosur member state, in 2004 and 2005 standards were approved that recognized Mercosur origin to those goods imported from third countries that met Mercosur’s common tariff requirements (Dec. No. 54/04 and Dec. No. 37/05 of the Common Market Council). However, the lack of agreement among the Mercosur member states with respect to the allocation of customs revenue has resulted in limiting free movement only to those products subject to a 0% tariff upon import into any of the Mercosur member countries in which the tariff applied by all countries is 0%, either because this is the level of the Common External Tariff (CET) or because it has a 100% preference in agreements signed by Mercosur. Likewise, to facilitate the logistics and circulation of goods originating from Mercosur itself or third countries, various regulations have been approved: relating to the use of customs warehouses (Dec. No. 17/03, Dec. No. 62/07 and Dec. No. 55/08 of the Common Market Council) and to the use of free trade zones (Dec. No. 33/15 of the Common Market Council), the latter will come into effect this year.

1999-2002: Recession and Crisis in the Banking System

Between 1999 and 2002, a series of external factors, including most significantly the economic crisis that affected Argentina severely in 2001 and 2002, had material adverse consequences for Uruguay’s economy, affecting local demand, exports and the overall balance of the public sector.

In 2002, Uruguay’s economy experienced its most significant setback since 1982, with real GDP contracting by 11.0%. The proximate causes of Uruguay’s 2002 economic crisis were associated with Argentina’s economic crisis during that time. Uruguay’s fiscal imbalances, its dependence on Argentina and Brazil as its principal trading partners and sources of foreign revenues, and rigidities that limited the ability of the economy to absorb and adapt to external factors, added to the severity of the crisis.

Uruguay’s banking system confronted its worst crisis since 1982-83. At December 31, 2002, total U.S. dollar deposits of the non-financial private sector with the banking system (excluding off-shore institutions) were US$7.3 billion (of which US$2.4 billion were of non-residents), compared to US$14.2 billion as of December 31, 2001 (of which US$6.6 billion were of non-residents). In the second quarter of 2002, a deposit outflow affected Uruguay’s financial system leading first to the suspension of Banco Galicia de Uruguay, or BGU, and Banco Comercial, Uruguay’s two largest private banks (both affiliated with Argentine banks) and soon thereafter to the closure of Banco Montevideo/La Caja Obrera, Uruguay’s third largest private bank in June 2002. Although the government received approximately US$500.0 million from the IMF on June 29, 2002, and provided liquidity assistance to the local banks, confidence in the Uruguayan financial system continued to erode.

The Uruguayan authorities sought the financial assistance of the IMF, the World Bank and the IADB to safeguard Uruguay’s payment and financial system. On August 4, 2002, Congress passed Law No. 17,523, known as

 

D-18


the Law for the Strengthening of the Financial System. The law (i) provided for the establishment of a fund for the stability of the Uruguayan banking system, the Fondo de Estabilidad del Sistema Bancario, or FESB, (ii) extended to three years the maturities of all U.S. dollar-denominated time deposits held with Banco de la República and Banco Hipotecario, (iii) transferred foreign currency-denominated liabilities of Banco Hipotecario to Banco de la República, and (iv) facilitated the liquidation of insolvent banks.

In furtherance of the economic program agreed with the IMF, in December 2002, Congress enacted amendments to the banking law aimed at strengthening the banking system. Following the enactment of these amendments, the government completed the reorganization of Banco Comercial, Banco Montevideo and La Caja Obrera into a new commercial bank, Nuevo Banco Comercial. The non-recoverable assets of the three liquidated banks are held by liquidation funds, and the proceeds have been earmarked to satisfy deposits of the liquidated banks that were not assumed by Nuevo Banco Comercial.

Between January 1, 2002 and February 28, 2003, depositors withdrew approximately US$6.8 billion from the Uruguayan banking system. Banks responded to depositors’ demands by withdrawing approximately US$1.1 billion in reserves and voluntary deposits held with Banco Central and shutting down credit. The financial system received assistance for approximately US$2.0 billion from the Uruguayan authorities.

In 2002, the government adopted a series of initiatives intended to reduce the deficit of the public sector. It relied on access to funding by the IMF and other multilateral agencies to shore up Banco Central’s international reserve assets with the expectation that confidence in the banking system would thereby be restored.

The 2002 economic crisis had profound effects on Uruguay’s monetary and exchange rate policy. The continued devaluation of the Argentine peso and growing uncertainties as to the future of the Brazilian economy increased the risk of a speculative run on the peso. On June 19, 2002, Banco Central allowed the peso to float, abandoning the “crawling peg” system. The devaluation of the peso accelerated in July 2002, dropping to its lowest value of Ps.32.33 per US$1.00 on September 10, 2002. The depreciation of the peso resulted in Uruguay’s foreign currency-denominated debt to GDP ratio rising to 89.1% as of December 31, 2002, while the foreign currency-denominated debt service to exports ratio for 2002 was 33.6%.

The decrease in tax collections attributable to the contraction of GDP, together with the increase in debt service requirements (measured as a percentage of GDP) caused primarily by the devaluation (nearly all of Uruguay’s debt was denominated in foreign currency), practically neutralized the savings achieved by the central government in 2002. As a result, the overall public sector deficit for 2002 was approximately 4.1% of GDP. Nevertheless, by reducing expenditures (excluding interest payments), Uruguay’s public sector generated a primary surplus equal to 0.5% of GDP.

2003-2019: Recovery and Economic Growth

Uruguay’s economy stabilized during the second quarter of 2003 and began to recover, recording an annual real GDP growth of 0.8% and 5.0% in 2003 and 2004, respectively. This improvement was mainly a result of an increase in external demand driven primarily by Argentina’s economic recovery, an increase in the prices of commodities exported by Uruguay, the opening of the U.S. market to Uruguayan beef exports and a recovery in domestic demand spurred by improved consumer and investor confidence. Between 2005 and 2010 GDP grew at an average rate of 6.2%, and continued to grow at rates of 5.2% in 2011, 3.5% in 2012, 4.6% in 2013 and 3.2% in 2014. Commencing in 2015, the rate of economic growth decelerated reflecting the impact of slower economic growth and recession affecting Uruguay’s main regional trade partners and a decrease in the prices of Uruguay’s export commodities. Real GDP grew by 0.4% in 2015, 1.7% in 2016, 2.6% in 2017, 1.6% in 2018 and 0.2% in 2019.

In 2015, domestic private consumption decreased 0.5% compared to 2014 and represented 66.8% of GDP. In 2016, domestic private consumption grew by 0.1% compared to 2015 and represented 66.1% of GDP. In 2017, domestic private consumption grew by 4.6% compared to 2016 and represented 67.2% of GDP. In 2018, domestic private consumption grew by 1.5% compared to 2017 and represented 66.8% of GDP. In 2019, domestic private consumption grew by 0.5% compared to 2018 and represented 66.4% of GDP

In 2015, gross fixed investment (both public and private) decreased by 9.2% compared to 2014, representing 19.8% of GDP. In 2016, gross fixed investments decreased by 1.6% compared to 2015, representing 19.0% of GDP.

 

D-19


In 2017, gross fixed investments decreased by 15.7% compared to 2016, representing 16.5% of GDP. In 2018, gross fixed investments decreased by 2.7% compared to 2017, representing 16.5% of GDP. In 2019, gross fixed investments increased by 1.4% compared to 2018, representing 17.2% of GDP. Gross domestic savings represented 16.8% of GDP in 2015. Gross domestic savings data for 2016, 2017, 2018 and 2019 will not be available until Banco Central conforms its balance of payments and international investment position data to the principles outlined in the sixth edition of the International Monetary Fund’s Balance of Payments Manual (BPM6), a process that is scheduled to be completed in 2019. See “Balance of Payments.”

Exports of goods and services decreased by 0.6% in 2015 and 0.2% in 2016. In 2017, exports grew by 6.9% but decreased by 4.8% in 2018. In 2019, exports of goods and services increased by 1.2%. Imports of goods and services decreased by 7.3% in 2015 and by 6.2% in 2016. In 2017, imports increased 0.5% and decreased by 2.0% in 2018 and 0.2% in 2019.

Deposits held by the non-financial private sector with the banking system (excluding deposits held with off-shore banks and financial houses), stood at US$27.9 billion at December 31, 2015, US$28.2 billion at December 31, 2016, US$28.4 billion at December 31, 2017, US$28.4 billion at December 31, 2018 and US$29.2 billion at December 31, 2019. Approximately 76.2% of those deposits were denominated in foreign currencies (primarily U.S. dollars) as of December 31, 2019, compared to 73.6% as of December 31, 2018. Foreign currency deposits held by non-residents decreased by 21.5% in 2017, following the implementation by Argentina of its tax amnesty in 2016. In 2018, foreign currency deposits held by non-residents increased by 0.3%. In 2019, foreign currency deposits held by non-residents increased by 8.7%. The annual rate of consumer price inflation reached, 9.4% in 2015, 8.1% in 2016, 6.6% in 2017, 8.0% in 2018 and 8.8% in 2019. For a discussion of Uruguay’s current monetary policy see “Monetary Policy and Inflation—Monetary Policy.”

The Economic Policies of the Lacalle Pou Administration

The Lacalle Pou administration intends to remain focused on macroeconomic stability, and intends to adjust existing policies to pursue its main policy objectives, which include:

 

   

boosting productivity and improving the competitiveness of the Uruguayan economy;

 

   

improving the efficiency of the public sector, including state-owned companies, through reforms that aim at enhancing governance;

 

   

strengthening commercial relationships with the Mercosur member countries, while developing markets and making alliances with other trading partners;

 

   

maintaining a prudent fiscal stance, recognizing this as a condition to long term fiscal sustainability; and

 

   

promoting a social security reform through the establishment of an expert commission that will be tasked with preparing a diagnosis report, which the Lacalle Pou administration will use to send a draft bill to Congress.

Privatizations

While privatizations have not been a major focus of Uruguay’s economic policy, the government has divested or privatized certain state-owned enterprises, such as the gas company servicing Montevideo in 1993, and has taken measures to transfer certain activities, such as sewage, garbage collection, maintenance and the administration of certain ports and airports, to the private sector through concessions and other similar arrangements. Legislation has also been enacted enabling the government to open various components of the telecommunications and energy and gas sectors to private investment. Proceeds from privatizations have not been material to date.

The government is committed to improving the competitiveness of the Uruguayan economy and encouraging private investment by continuing to open several areas of the economy previously reserved to public sector enterprises to private investment. Through the Administración Nacional de Telecomunicaciones, or ANTEL, the local telecommunications company, several revenue-sharing arrangements with private companies for the installation and

 

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operation of certain new telecommunication facilities have been implemented. In February 2001, Congress approved the licensing of cellular phone services and data transmission to private sector providers and opening of the telecommunications sector (other than local fixed-line services but including long-distance) to private sector providers. In December 2002 and May 2004, licenses were granted to foreign telecommunications companies, to provide mobile telephone services. Other activities that have been opened to private sector participation include the management and administration of the postal service (2001), the Montevideo airport (2005) and the Punta del Este airport (in 2019 a concession for its operation was extended for 14 years).

The government also charged the Corporación Nacional Para el Desarrollo, or CND, a state-owned investment corporation, with overall responsibility for the administration of a program of public works designed for the 2003 – 2018 period. CND currently owns the concessions as well as 100% of the shares of Corporación Vial del Uruguay S.A, or CVU, a special-purpose company responsible for the projects. CVU investments are financed through toll collections, loans from multilateral agencies, government subsidies and debt issuances in the domestic capital market. In April 2017 and 2018, CVU issued bonds totaling the equivalent of US$100 million and US$185 million, respectively, in the domestic capital market, corresponding to the first two issuances of a US$450 million debt program. In 2019, CVU issued bonds in an aggregate principal amount of US$185.1 million, while CVU investments executed during 2019 amounted to US$236.3 million, compared to US$369.3 million in 2018.

In July 2007, the government sold 75% of the equity of Pluna Airlines to Leadgate Investment Corporation (45%) and to Sociedad Aeronáutica Oriental S.A. (30%), and retained a 25% stake in the airline under Pluna Ente Autónomo (Pluna Autonomous Entity). The new company was called Pluna Líneas Aéreas S.A. In 2011, Pluna incurred severe losses, and its liquidity and financial condition deteriorated severely. On June 15, 2012, Leadgate—the controlling shareholder—transferred all of its shares in Pluna to a trust under the surveillance of the Uruguayan government. In July 2012, Pluna suspended all flights and initiated a judicial reorganization procedure. Thereafter, Congress passed Law No. 18,931 to reorganize the operations of the airline, including by disposing of Pluna’s assets. In October 2012, through a trust created pursuant to Law No. 18,931, the government conducted an auction for the sale of seven of Pluna’s aircrafts. The auction was initially awarded to Cosmo S.A., a company organized under the laws of Spain, however, the transaction was not completed. In December 2013, the Supreme Court of Uruguay declared several provisions of Law No. 18,931 unconstitutional. As a result, the transfer of the Pluna aircraft to the trust was reversed and they remained property subject to liquidation by Pluna’s receiver until their sale in 2014 to Strategic Air Finance (SAF) for US$77 million. On December 9, 2016, the Juzgado Letrado de Concurso de Primer Turno (Insolvency Procedure Court) approved a distribution agreement among Pluna Airlines’ creditors. On December 6, 2017, Congress enacted legislation suppressing Pluna Ente Autónomo as of December 31, 2017, and transferring its remaining assets, liabilities and personnel to the Uruguayan government.

At this time the government has no plans to privatize any public sector enterprises.

For a description of government participation in the Uruguayan economy see “Gross Domestic Product and Structure of the Economy—Role of the State in the Economy.”

Environment

The Uruguayan Constitution provides for the right to a clean environment and Congress has enacted enabling legislation for the protection of the environment, including legislation that created the Ministerio de Vivienda, Ordenamiento Territorial y Medio Ambiente (Ministry of Housing, Zoning and the Environment) in 1990. Under a 1994 environmental law, potentially hazardous projects must be approved by the Ministry of Housing, Zoning and the Environment before their implementation. In addition to the Ministry of Housing, Zoning and the Environment, environmental supervision and regulation is carried out by many of the departments of the central government and state and municipal governments. In July 1994, legislation was adopted ratifying the UNFCCC. In March 2000, Congress enacted a law creating a National System of Protected Natural Areas and granting the government the authority to incorporate, by decree, areas into this system and limit or prohibit certain activities within and around these protected areas.

Uruguay has received financing from the IADB for purposes of improving municipal infrastructure services for garbage collection and sewage treatment. The government currently requires environmental studies to be presented in connection with any proposals for construction and other projects. In addition, all projects financed by the IADB currently require environmental impact studies. Beginning in the late 1980s, Uruguay also received a series of loans from the IADB to undertake the cleaning up of Montevideo’s coast, including the shoreline along the Río de la Plata.

 

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In November 2000, Congress ratified the Kyoto Protocol adopted during the UNFCCC’s III Conference on Climate Change (the “Kyoto Protocol”), which entered into force in February 2005. The Kyoto Protocol aims at reducing emissions of six gases generated by human activity that cause global warming (carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride). In 2012, Congress ratified an amendment to the Kyoto Protocol (the “Doha Amendment”), which provides for a commitment period to reduce greenhouse gas emissions through December 2020.

In May 2006, Argentina brought a claim to the International Court of Justice (“ICJ”) against Uruguay under the Treaty of the Uruguay River, alleging that by authorizing the construction of certain pulp mills in the Fray Bentos region, along the shores of the Uruguay river, Uruguay failed to honor its obligations under the treaty. On April 20, 2010, the ICJ issued its final ruling on this dispute. Although the ICJ ruled that Uruguay breached certain procedural obligations under the Treaty of the Uruguay River, it did not find that any of the environmental damages claimed by Argentina had been proved and did not impose any remedial sanction on Uruguay. On August 30, 2010, Uruguay and Argentina signed an agreement providing for the creation of a technical committee within the Administrative Commission of the Uruguay River (“CARP”). This committee was created to monitor the Uruguay river and the industrial and agricultural businesses and cities on both margins of the Uruguay River that discharge effluents into the river.

In May 2009, the Tabaré Vázquez administration created the National System of Response to Climate Change and Variability (“SNRCC”), whose primary objective is to coordinate and plan public and private action necessary for the prevention and mitigation of climate change risks and adaptation to these changes. The SNRCC is comprised of a coordination group, chaired by the Ministerio de Vivienda, Ordenamiento Territorial y Medio Ambiente (Ministry of Housing, Zoning and the Environment) and includes representatives from several other ministries as well as from the Oficina de Planeamiento y Presupuesto (Office of Budget and Planning), from the Sistema Nacional de Emergencias (National Emergency System) and from the Conferencia Nacional de Gobernadores (National City Mayors Congress).

In October 2009, Congress enacted legislation creating the National Emergency System, tasked with the protection of people, assets and the environment from the potential or real occurrence of natural disasters, coordinating with the government the appropriate and sustainable usage of private and public resources.

In October 2009, Congress enacted legislation declaring of national interest the efficient use of energy to contribute to the competitiveness of the economy, the sustainable development of the country and the reduction of greenhouse gas emissions.

In August 2015, the Executive Power enacted a decree approving the Plan Nacional de Eficiencia Energética (National Plan of Energy Efficiency) which would be executed by the Ministerio de Industria, Energía y Minería (Ministry of Industry, Energy and Mining). The main goal of this plan is to achieve a total energy reduction of about 1,690 thousands of tons of oil equivalent in the period 2012-2024, which represents a saving equivalent to 45% of the total consumption of energy during the base year 2012.

In March 2016, the Ministry of Housing, Zoning and the Environment launched its Programa para la Reducción de Emisiones Causadas por la Deforestación y la Degradación Forestal (Program to Reduce Emission Caused by Deforestation and Forest Degradation), which aims at preventing climate change through incentives designed to prevent deforestation and protect the quality and integrity of forests. The program identifies native forest deterioration causes and creates action plans to mitigate them, prioritizing those areas with water basins, as well as livestock and agriculture production areas. Further, in 2017, a system for monitoring, reporting, verification of and the design of measures to prevent greenhouse gases was created under the Program to Reduce Emission Caused by Deforestation and Forest Degradation.

In June 2016, Congress enacted legislation creating the Sistema Nacional Ambiental (National Environmental System), which aims at shaping, coordinating and strengthening environmental, water and climate change policies, fostering sustainable environmental development that preserves ecosystems and promoting the protection of water sources and its rational use.

In October 2016, Congress enacted legislation ratifying the Paris Agreement adopted during the UNFCCC’s XXI Conference on Climate Change (the “Paris Agreement”), which entered into force in November 2016. The Paris Agreement establishes an international mechanism to deal with climate change and limiting global temperature increases.

 

D-22


In November 2017, the Executive Power enacted a decree approving the Política Nacional de Cambio Climático (National Climate Change Policy), which sets forth a long-term strategic framework to guide the reforms that Uruguay intends to adopt to mitigate climate change and meet the international obligations it assumed under the Paris Agreement. The National Climate Change Policy promotes measures that contribute to Uruguay’s sustainable development, emphasizing the protection of human rights, strengthening mechanisms to protect citizens from climate change and to generate awareness, promotes low-carbon emissions based on production processes that incorporate knowledge and innovation on sustainable development.

In August 2018, Congress enacted legislation to prevent and reduce the environmental impact derived from the use of plastic bags, with measures designed to discourage their use and promote their re-use or recycling and prohibiting the manufacture, import, distribution, sale and delivery of plastic bags that are not compostable or biodegradable.

In October 2018, Congress enacted legislation to implement a subsidies program to support the transition towards the use of more efficient and sustainable technologies in public bus services nationwide, to replace up to 4% of the current diesel engine bus fleets with electric-engine buses during a seven year period. This law is earmarked within the National Plan of Energy Efficiency, and complements a set of other fiscal incentives to foster the use of electric services in private cars as well as taxis.

In line with the commitments assumed under the United Nations Framework Convention on Climate Change (“UNFCCC”), Uruguay has promoted a series of national plans to adapt to and to mitigate the effects of climate change, such as the Plan Nacional de Adaptación a la Variabilidad y el Cambio Climático para el Sector Agropecuario (National Adaptation Plan to Variations and Climate Change in the Farming Sector), the Plan Nacional de Adaptación para la Zona Costera (National Adaptation Plan for the Coastal Zone) and the Plan Nacional de Adaptación en Ciudades e Infraestructuras (National Adaptation Plan for Cities and Infrastructure).

 

D-23


GROSS DOMESTIC PRODUCT AND STRUCTURE OF THE ECONOMY

The following tables set forth information regarding GDP and expenditures for the periods indicated. The figures included in the table entitled “Nominal GDP by Expenditure” are based on current (nominal) prices for each year, whereas the percentage figures included in the table entitled “Change in GDP by Expenditure” 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.

GDP and Expenditures

(millions of 2005 pesos, except as otherwise indicated)

 

     2015     2016     2017(1)     2018(1)     2019(1)  

GDP

   Ps. 670,268     Ps. 681,594     Ps. 699,257     Ps. 710,585     Ps. 712,163  

Imports of goods and services

     234,871       220,291       221,400       216,914       217,326  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total supply of goods and services

     905,139       901,885       920,657       927,499       929,490  

Exports of goods and services

     195,929       195,621       209,125       199,053       201,493  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total goods and services available for domestic expenditures

   Ps. 709,210     Ps. 706,264     Ps. 711,531     Ps. 728,446     Ps. 727,996  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Allocation of total goods and services:

          

Consumption (public and private)

     570,406       572,901       595,464       603,939       607,063  

Gross investment (public and private)

     138,805       133,363       116,068       124,507       120,933  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total domestic expenditures

   Ps. 709,210     Ps. 706,264     Ps. 711,531     Ps. 728,446     Ps. 727,996  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

GDP growth (%) (2)

     0.4     1.7     2.6     1.6     0.2

 

(1)

Preliminary data.

(2)

% change from previous year, 2005 prices.

Source: Banco Central.

Nominal GDP by Expenditure

(% of total nominal GDP, unless otherwise indicated)

 

     2015     2016     2017(1)     2018(1)     2019(1)  

Government consumption

     13.8     14.5     14.5     14.6     15.0

Private consumption

     66.8       66.1       67.2       66.8       66.4  

Gross fixed investment

     19.8       19.0       16.5       16.5       17.2  

Public sector (% of gross fixed investment)

     4.6       4.8       3.9       4.0       4.3  

Private sector (% of gross fixed investment)

     15.2       14.2       12.6       12.5       12.9  

Exports of goods and services

     22.5       21.4       21.4       21.0       21.7  

Imports of goods and services

     22.9       19.9       18.3       19.0       19.3  

Gross Domestic Savings(2)

     16.8     N.A.       N.A.       N.A.       N.A.  

 

N.A. = Not Available.

 

(1)

Preliminary data.

(2)

Gross domestic savings data for 2016, 2017, 2018 and 2019 will not be available until Banco Central conforms its balance of payments and international investment position data to the principles outlined in the sixth edition of the International Monetary Fund’s Balance of Payments Manual (BPM6), a process that is scheduled to be completed in 2020. See “Balance of Payments.”

Source: Banco Central.

Change in GDP by Expenditure

(% change from previous year except as otherwise indicated, 2005 prices)

 

     2015     2016     2017(1)     2018(1)     2019(1)  

Government consumption

     2.2     2.9     (0.7 )%      0.8     0.8

Private consumption

     (0.5     0.1       4.6       1.5       0.5  

Gross fixed investment

     (9.2     (1.6     (15.7     (2.7     1.4  

Public sector (% of gross fixed investment)

     (12.2     10.9       (28.9     3.8       (0.6

Private sector (% of gross fixed investment)

     (8.5     (4.8     (11.9     (4.2     1.9  

Exports of goods and services

     (0.6     (0.2     6.9       (4.8     1.2  

Imports of goods and services

     (7.3 )%      (6.2 )%      0.5     (2.0 )%      0.2

 

(1)

Preliminary data.

Source: Banco Central.

 

D-24


Principal Sectors of the Economy

The Uruguayan economy relies heavily on services, including the commerce, restaurants and hotels sector, which involves a wide range of tourism services, the financial and insurance sector, the real estate and business services sector and the government sector.

In 2019, GDP increased by 0.2% in real terms, after growing by 1.6% in 2018, 2.6% in 2017, 1.7% in 2016 and 0.4% in 2015, in each case with respect to the prior year. In 2019, services accounted for approximately 69.5% of GDP, while the manufacturing and agriculture, livestock and fishing sectors together accounted for 17.6% of GDP.

The following tables set forth the components of Uruguay’s GDP and their respective growth rates for the periods indicated. The discussion of the various sectors follows the order in which the sectors are presented in the tables. The percentages and figures included in the table entitled “Nominal GDP by Sector” are based on current (nominal) prices for each period, whereas the percentage figures included in the table entitled “Change in GDP by Sector” are based on 2005 prices to eliminate distortions introduced by changes in relative prices.

Nominal GDP by Sector

(in millions of US$ and % of GDP, nominal prices)

 

     2015     2016     2017(1)     2018(1)     2019(1)  

Agriculture, livestock and fishing

   US$ 3,266        6.1   US$ 3,112        5.9   US$ 3,044        5.1   US$ 3,362        5.6   US$ 3,304        5.9

Mining

     228        0.4       238        0.5       248        0.4       249        0.4       232        0.4  

Manufacturing

     7,055        13.2       6,771        12.8       6,973        11.7       6,941        11.7       6,573        11.7  

Electricity, gas and water

     1,181        2.2       1,401        2.7       1,628        2.7       1,496        2.5       1,280        2.3  

Construction

     5,089        9.6       5,080        9.6       5,897        9.9       5,904        9.9       5,454        9.7  

Commerce, restaurants and hotels

     6,945        13.0       6,871        13.0       8,261        13.9       8,166        13.7       7,603        13.6  

Transportation, storage and communications

     2,979        5.6       2,844        5.4       3,291        5.5       3,204        5.4       3,023        5.4  

Real estate and business services

     8,939        16.8       8,801        16.7       9,943        16.7       9,782        16.4       9,050        16.2  

Financial and insurance services

     2,447        4.6       2,513        4.8       2,859        4.8       3,010        5.1       2,874        5.1  

Services of the government

     5,024        9.4       5,157        9.8       5,782        9.7       5,867        9.8       5,946        10.6  

Other community, social and personal services

     5,271        9.9       5,346        10.1       6,194        10.4       6,177        10.4       5,613        10.0  

Net adjustments for payments made by financial institutions and import tariffs

     4,849        9.1       4,689        8.9       5,456        9.2       5,412        9.1       5,049        9.0  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

GDP (in millions of US$ at nominal prices)(2)

   US$ 53,273        100.0   US$ 52,825        100.0   US$ 59,577        100.0   US$ 59,571        100.0   US$ 56,001        100.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Nominal GDP per capita

   US$ 15,365        US$ 15,179        US$ 17,055        US$ 16,991        US$ 15,916     

 

(1)

Preliminary data.

(2)

Figures are not adjusted by purchasing power.

Source: Banco Central.

 

D-25


Change in GDP by Sector

(% change from previous year, 2005 prices)

 

     2015     2016     2017(1)     2018(1)     2019(1)  

Agriculture, livestock and fishing

     (1.2 )%      2.5     (5.7 )%      6.0     (3.8 )% 

Mining

     (15.5     18.2       (19.7     (5.7     (2.8

Manufacturing

     4.9       0.7       (3.5     1.9       (1.1

Electricity, gas and water

     (6.7     9.6       1.2       2.2       5.7  

Construction

     (6.1     (2.6     (2.1     (2.8     (2.0

Commerce, restaurants and hotels

     (4.0     (2.8     6.2       (1.3     (2.1

Transportation, storage and communications

     4.8       8.1       9.4       6.8       3.5  

Real estate, business, financial and insurance services

     2.7       0.8       (1.3     (0.4     0.4  

Other services(2)

     0.1       (0.3     (0.3     0.4       0.9  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total GDP

     0.4     1.7     2.6     1.6     0.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Preliminary data.

(2)

Includes public sector services and other services.

Source: Banco Central.

The most significant sectors that contributed to GDP growth in 2019 were electricity, gas and water and transportation, storage and communications. The electricity, gas and water sector grew by 5.7% in real terms with respect to 2018, mainly due to an increase in the generation of electricity for export, while the transportation, storage and communications sector grew by 3.5% as a result of an increase in the use of mobile data services.

Agriculture, Livestock and Fishing

Uruguay’s territory consists primarily of vast plains, which, combined with its temperate climate, make the country well suited for agriculture and livestock. In 2015, the sector contracted by 1.2%, mainly due to the decrease in agricultural production which offset increases in forestry and cattle production. In 2016, the sector grew by 2.5%, as a result of increases in cattle slaughter and exports of live cattle, which was partially offset by the decrease in cereals and oil and milk production. In 2017, the sector contracted by 5.7% mainly due to a decrease in soybean production, as described below. In 2018, the sector grew by 6.0%, particularly due to growth in the livestock sector. In 2019, the sector contracted by 3.8%, as a result of a decrease in livestock and forestry production, which was partially offset by an increase in the production of cereals and oil.

In 2015, cereal and oil production decreased by 9.4%, mainly as a result of decrease in rice and soybean production. In 2016, cereal and oil production increased by 3.6%, mainly as a result of increase in soybean production. In 2017, droughts caused cereal and oil production to decrease by 20.6%, mainly reflected in wheat and soybean production. In 2018, cereal and oil production grew by 7.8% mainly driven by increased production of wheat. In 2019, cereal and oil production increased by 0.9% due to higher production of soybean and wheat.

Milk production decreased by 2.2% in 2015 with respect to the prior year. In 2016, milk production decreased by an additional 7.2% compared to 2015 as a result of a drop in international prices. In 2017, milk production grew by 9.9% and in 2018 production increased by 4.1%. In 2019, milk production decreased by 4.2% compared to 2018.

In 2015 and 2016, livestock production recovered, growing 4.3% and 2.6%, respectively. In 2017, livestock production grew by 0.7%, mainly due to opportunities created in the export market, primarily in Asia. In 2018, livestock production decreased by 0.5%, mainly due to a decrease in the farming sector, which was partially offset by an increase in cattle slaughter. In 2019, livestock production decreased by 6.0%, mainly due to a decrease in cattle slaughter and a decrease in cattle exports.

 

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The following table sets forth the production of selected primary goods for the periods indicated.

Selected Primary Goods Production

(in millions of US$, except as otherwise indicated)

 

     2015      2016      2017(1)      2018(1)      2019(1)  

Cereals and oil products

   US$ 2,016      US$ 1,945      US$ 1,619      US$ 1,803      US$ 1,724  

Rice

     285        261        246        236        215  

Wheat

     258        139        94        178        181  

Soybean

     866        929        730        722        686  

Pastures

     374        361        415        375        395  

Vegetables and fruits

     555        627        575        569        513  

Milk

     583        514        684        674        600  

Livestock

     2,375        2,158        2,210        2,333        2,443  

Cattle

     1,884        1,759        1,807        1,960        2,092  

Wool

     65        65        68        57        46  

Forestry

     435        415        459        462        446  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total agricultural and livestock production

   US$ 5,963      US$ 5,659      US$ 5,547      US$ 5,842      US$ 5,727  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cattle (in thousands of heads slaughtered)

     2,212        2,264        2,346        2,355        2,243  

Milk (in millions of liters)

     1,974        1,775        1,924        2,063        1,970  

Wool (in tons)

     23,419        24,805        24,568        25,761        25,761  

 

(1)

Preliminary data.

Source: Banco Central.

The following tables set forth percentage changes from prior years for agricultural and livestock production for the periods indicated, based on 2005 prices to eliminate distortions attributable to changes in relative prices.

Agricultural and Livestock Production

(% change from previous year, 2005 prices)

 

     2015(1)     2016(1)     2017(1)     2018(1)     2019(1)  

Cereals and oil products

     (9.4 )%      3.6     (20.6 )%      7.8     0.9

Rice

     (1.6     3.6       (5.8     (5.5     (6.1

Wheat

     1.1       (32.4     (40.5     53.8       8.9  

Soybean

     (20.0     8.7       (24.8     (3.2     4.4  

Pastures

     4.1       4.7       6.0       (2.9     1.7  

Vegetables and fruits

     (5.0     2.6       (2.6     (5.2     4.7  

Milk

     (2.2     (7.2     9.9       4.1       (4.2

Livestock

     4.3       2.6       0.7       (0.5     (6.0

Cattle

     3.7       4.3       1.7       0.3       (7.8

Wool

     (15.9     6.2       (1.0     —         —    

Forestry

     17.3       1.8       4.3       1.3       (1.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total agricultural and livestock production

     (1.5 )%      2.0     (6.6 )%      2.5     (2.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

Preliminary data.

Source: Banco Central.

Mining

The mining sector mainly consists of stone and sand quarries. These products are used primarily in construction. Other contributors to the mining sector include smaller operations for the mining of gold and semi-precious stones, such as agate and amethyst. Mining has remained relatively constant as a percentage of GDP from 2015 through 2019 at approximately 0.4%. Uruguay has no known oil or natural gas reserves. Several projects have been developed in Uruguay over the past years for the mining of nickel, copper and diamonds, without any findings.

Manufacturing

Manufacturing accounted for 11.7% of GDP in 2019. In 2015, the manufacturing sector grew by 4.9% in real terms compared to 2014, mainly due to increased production of pulp, paper and oil and refined products. In 2016, the manufacturing sector grew by 0.7%, in real terms, compared to 2015, mainly due to increased processed meat and

 

D-27


paper pulp production. In 2017, the manufacturing sector decreased by 3.5% in real terms compared to 2016, mainly due to a scheduled maintenance shutdown of the ANCAP refinery between February and October 2017. In 2018, the manufacturing sector grew by 1.9% in real terms compared to 2017, mainly due to the reopening of the ANCAP refinery. In 2019, the manufacturing sector contracted by 1.1%, in real terms compared to 2018, due to a decrease in activity in most industries, except for paper pulp production, beverages and tobacco industries.

The following tables set forth information regarding goods production for the periods indicated.

Selected Manufacturing Goods Production

(in millions of US$)

 

     2015      2016      2017(1)      2018(1)      2019(1)  

Foodstuffs:

              

Processed meats

   US$ 3,224      US$ 3,101      US$ 3,277      US$ 3,229      US$ 3,295  

Dairy products

     1,332        1,156        1,510        1,461        1,365  

Wheat and rice mills

     640        699        743        694        640  

Baked goods

     1,092        1,072        1,161        1,055        985  

Other foodstuffs

     1,539        1,504        1,579        1,552        1,494  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total foodstuffs

     7,827        7,533        8,271        7,991        7,779  

Beverages

     777        753        845        764        719  

Tobacco

     143        131        126        113        107  

Textiles

     476        406        388        403        337  

Leather goods

     360        360        353        329        295  

Wood, pulp and paper

     2,157        2,082        2,153        2,510        2,301  

Chemicals

     2,399        2,315        2,546        2,448        2,266  

Oil and refined products

     1,661        1,689        822        2,068        1,736  

Machinery

     960        903        937        854        825  

Other industries

     1,817        1,451        1,574        1,468        1,344  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   US$ 18,577      US$ 17,623      US$ 18,016      US$ 18,948      US$ 17,709  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) 

Preliminary data.

Source: Estimates based on data of Banco Central and the National Statistics Institute.

Manufacturing Production

(% change from previous year, 2005 prices)

 

     2015     2016     2017(1)     2018(1)     2019(1)  

Foodstuffs:

          

Processed meats

     2.8     4.4     3.5     (0.3 )%      (2.9 )% 

Dairy products

     (6.6     (3.5     6.3       (0.5     (3.3

Wheat and rice mills

     (13.4     18.1       2.9       (10.1     (3.3

Baked goods

     (0.9     (1.3     (4.7     (4.3     (2.0

Total foodstuffs

     (0.2     2.6       2.0       (1.9     (1.9

Beverages

     (5.5     (1.4     4.0       (3.3     0.5  

Tobacco

     (13.1     (4.6     (1.4     (11.6     1.5  

Textiles

     (13.3     (13.1     (7.9     2.1       (13.2

Leather goods

     2.8       4.4       (10.0     (1.3     (12.2

Wood, pulp and paper

     25.4       3.0       1.0       (2.6     2.5  

Chemicals

     1.1       (0.1     2.4       (1.1     (3.9

Oil and refined products

     7.9       7.3       (60.1     172.7       (3.6

Machinery

     (6.5     (1.3     (3.2     (7.4     (1.8

Total

     1.8     0.2     (6.1 )%      6.2     (2.3 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

Preliminary data.

Source: Banco Central.

Electricity, Gas and Water

Energy consumption in Uruguay consists of oil and gas, electricity and wood. Electricity is produced primarily from hydroelectric sources and is provided by Usinas y Transmisiones Eléctricas or UTE, a state-owned entity. Electricity can be imported freely and Uruguay has imported electricity from Argentina and Brazil. In March 2009, Uruguay and Brazil agreed to build an electrical transmission line between San Carlos (Uruguay) and Candiota (Brazil), with an intermediate frequency converter in Cerro Largo (Uruguay), with financing provided by the Structural

 

D-28


Funds of the Mercosur, the CAF and the National Treasury of Brazil. The building of the line, with a transmission capacity of 500MW, was completed in 2016 and Uruguay made its first exports of electricity to Brazil in May 2017. Uruguay also exports electricity to Argentina. Uruguay imports all of its oil and gas supplies from various international sources and has a state-owned oil refining company, ANCAP. Uruguay’s economy is therefore vulnerable to increases in international oil prices. With a view to reducing oil imports, ANCAP invested in biodiesel plants that became operative in 2009. To increase its fuel transportation capacity, ANCAP has also invested in vessels. ANCAP also awarded private sector enterprises with hydrocarbon exploration and exploitation contracts in on-shore and off-shore Uruguayan areas. Natural gas can be imported freely, and its distribution and transportation have been opened to private investment. See “—Role of the State in the Economy.”

The electricity, gas and water sector’s performance has varied over the past five years, mainly as a result of the electricity sector’s performance, which in turn depends on the type of electricity generated. In 2015, the electricity, gas and water sector contracted by 6.7% in real terms, as electricity generation shifted back to hydrocarbon-based facilities due to water shortages caused by droughts. In 2016, the electricity, gas and water sector grew by 9.6% in real terms, driven primarily by an increase in the generation of electricity using renewable sources, primarily wind farms. In 2017, the electricity, gas and water sector grew by 1.2% in real terms, driven by the generation of electricity using renewable sources, primarily hydroelectric. In 2018 and 2019, the electricity, gas and water sector grew by 2.2% and 5.7% in real terms, respectively, driven primarily by the generation of electricity using renewable sources, primarily hydroelectric.

Construction

In 2015, the construction sector contracted by 6.1% mainly due to a decrease both in public and private sector investments. In 2016, the construction sector contracted by 2.6%, in real terms, mainly due to a decrease in the level of public and private investments. In 2017, the construction sector contracted by 2.1% in real terms, mainly due to a decrease in the level of public and private sector investments. In 2018, the construction sector contracted by 2.8% in real terms, mainly due to a decrease in private sector construction, the completion of infrastructure projects related to wind energy and a decrease in roadworks. In 2019, the construction sector contracted by 2.0%, mainly due to a decrease in private sector construction and the completion of infrastructure projects related to wind energy and ANTEL’s multipurpose indoor arena.

Commerce, Restaurants and Hotels

In 2015, the sector decreased by 4.0% in real terms mainly as a result of a deceleration in wholesale services (driven by lower imports of goods) and a decrease in retail sales, and accounted for 13.0% of GDP. In 2016, the commerce, restaurants and hotels sector decreased by 2.8%, in real terms, and accounted for 13.0% of GDP. In 2017, the commerce, restaurants and hotels sector grew by 6.2% in real terms, and accounted for 13.9% of GDP. In 2018, the commerce, restaurants and hotels sector decreased by 1.3% in real terms, mainly due to the decrease in sales of motor vehicles and the deceleration in domestic sales, and accounted for 13.7% of GDP. In 2019, the commerce, restaurants and hotels sector decreased by 2.1% in real terms, mainly as a result of a decrease in sales of imported and domestic goods, and accounted for 13.6% of GDP.

Transportation, Storage and Communications

In 2015, the transportation, storage and communications sector grew by 4.8% in real terms, primarily driven by an increase in telecommunications services. In 2016, 2017 and 2018, the transportation, storage and communications sector grew by 8.1%, 9.4% and 6.8% in real terms, respectively, mainly due to an increase in the use of data services. In 2019, the transportation, storage and communications sector grew by 3.5% in real terms, mainly due to an increase in the use of mobile data services.

Real Estate, Business, Financial and Insurance Services

The real estate, business, financial and insurance services sector grew by 2.7% in 2015 and 0.8% in 2016. Growth during these years was driven primarily by the financial and insurance services sector and by the business services segment, as a result of a trend in the manufacturing sector to sub-contract administrative, maintenance and cleaning services. Growth in the real estate services was driven by tourism rentals and purchases. The real estate,

 

D-29


business, financial and insurance services sectors contracted by 1.3% and 0.4% in 2017 and 2018, respectively, mainly due to a decrease in the lease of machinery and equipment and in certain professional and financial intermediation services. In 2019, the real estate, business, financial and insurance services sector grew by 0.4% in real terms, mainly driven by an increase in financial and insurance services.

Uruguay established a strong reputation as a regional financial center in the early 1980s, primarily due to its free foreign exchange and capital markets, which were liberalized in 1974, its banking and tax reporting secrecy legislation, and its low tax rates. During periods of economic turmoil in the region, such as 1995, 1998 and 2001, Uruguay’s financial sector saw deposits from foreign sources increase as depositors sought a safer haven for their savings.

Beginning in 2002, Uruguay’s financial sector was significantly affected by Argentina’s crisis. Large withdrawals of deposits during 2002 significantly exceeded the liquidity of four private banks (including the two largest private banks which were branches of Argentine based banks), which ceased to operate and entered a liquidation stage. Through multilateral financial support from the IMF, the World Bank and the IADB, the government was able to provide the necessary liquidity to government-owned banks and to the three largest private banks to honor sight deposits existing as of July 30, 2002, thereby mitigating to some extent the impact of the crisis of the banking sector on the economy as a whole. For information on measures adopted by the government to strengthen the banking systems following the 2002 crisis see “The Banking Sector—Uruguay’s Banking System Following the 2002 Crisis.”

The financial and insurance services sector’s contribution to GDP grew at a slower pace after 2002 compared to other sectors of the economy. However, since 2008, the financial and insurance services sector’s contribution to GDP has improved.

In 2019, the real estate and business sector accounted for approximately 16.2% of GDP, while the financial and insurance services sector accounted for approximately 5.1% of GDP.

Role of the State in the Economy

The government continues to participate in the economy through state ownership of certain companies. The government, however, has emphasized its willingness to continue preparing state-owned companies for competition, as it takes measures to reduce further barriers to trade and to deregulate markets. It has also stated its intention to draw clearer distinctions between the role of the state as a regulator and as a shareholder or owner of commercial enterprises. In that respect, several regulatory entities were created to monitor the telecommunications, water, electricity, railway freight, oil and sanitation sectors. Since 1999, legislation has been passed to allow the private sector to participate in the provision of telephone (other than fixed line) and railroad services, in the administration of maritime ports, in the importation and distribution of natural gas and in certain other areas of the economy previously restricted to the public sector. In addition, in 2011, the government enacted Law No. 18,786, creating and regulating public-private participation contracts for infrastructure and related services. This law establishes a new type of arrangement designed to allow private investors and the government to invest in different areas of the economy, primarily the energy and infrastructure sectors, requiring significant investments.

At present, the government owns:

 

  1.

the local telecommunications company, Administración Nacional de Telecomunicaciones (ANTEL);

 

  2.

the electric power utility, Administración Nacional de Usinas y Trasmisiones Eléctricas (UTE);

 

  3.

the oil refinery company, Administración Nacional de Combustibles Alcohol y Pórtland (ANCAP);

 

  4.

the water and sewage authority, Obras Sanitarias del Estado (OSE);

 

  5.

Administración Nacional de Puertos (ANP), which operates most of Uruguay’s ports;

 

D-30


  6.

Administración de Ferrocarriles del Estado (AFE), which operates railway freight services;

 

  7.

Banco de la República Oriental del Uruguay (BROU) and Banco Hipotecario del Uruguay (BHU) (state-owned financial institutions);

 

  8.

Banco de Seguros del Estado (BSE) (an insurance company); and

 

  9.

Administración Nacional de Correos (ANC), a postal services company that competes with several private sector companies.

ANTEL has been the traditional provider of domestic and international long-distance telephone services in Uruguay and is also the major provider of internet services in Uruguay. ANTEL also provides basic telephone service in localities outside major urban areas, and has developed rural telephone services.

UTE provides electric power and services to Uruguay. With the exception of Salto Grande, a bi-national hydroelectric facility jointly owned by the Uruguayan and Argentine governments, UTE owns and operates all of the hydroelectric generation plants in Uruguay. It also owns and operates several thermoelectric and gas facilities and all of Uruguay’s electricity transmission assets. UTE currently provides all of the domestic electricity services in Uruguay, although the private sector may engage in generation activities and industrial consumers are able to purchase energy directly from foreign sources taking advantage of interconnection arrangements with Brazil and Argentina.

To complement traditional energy sources (fossil such as gas oil, fuel oil and natural gas, biomass waste and hydraulic), UTE has developed wind farms and solar energy projects.

In 2015, 7% of total energy generation derived from gas oil, fuel oil and natural gas and the remaining 93% from renewable sources (17.4% biomass waste, 60.2% hydroelectric, 15% from wind and 0.4% solar energy). In 2015, the installed wind and solar power amounted to 857MW and 65MW, respectively. In 2016, 3.3% of total energy generation derived from fossil sources and the remaining 96.7% from renewable sources (17.5% biomass, 56.5% hydroelectric, 21.6% wind and 1.1% solar energy). In 2016, the installed wind and solar power amounted to 1,212MW and 89MW, respectively. In 2017, 2% of total energy generation derived from gas oil, fuel oil and natural gas and the remaining 98% from renewable sources (18% biomass waste, 52% hydroelectric, 26% wind, and 2% solar). In 2017, the installed wind and solar power amounted to 1,511MW and 243MW. In 2018, approximately 3% of total energy generation derived from fossil sources and the remaining 97% from renewable sources (17% biomass, 44% hydroelectric, 33% wind energy and 3% solar energy). In 2018, the installed wind and solar power amounted to 1,511MW and 248MW, respectively. In 2019, approximately 2% of total energy generation derived from fossil sources and the remaining 98% from renewable sources (15% biomass, 50% hydroelectric, 30% wind energy and 3% solar energy). In 2019, the installed wind and solar power amounted to 1,514MW and 254MW, respectively.

The increase in wind and solar energy generation since 2015 has decreased Uruguay’s dependence on energy imports. This energy matrix transformation has improved Uruguay’s ability to withstand external economic shocks that would impact on the fiscal condition of Uruguay’s public sector.

ANCAP is the national oil refinery, responsible for processing the crude oil imported by Uruguay and marketing refined products. Uruguay has no known oil reserves.

In May 2008, the government enacted Decree 577/08 creating the “Uruguay Round 2009” program to be implemented by the national oil refinery ANCAP aimed at awarding private sector enterprises with hydrocarbon exploration and exploitation contracts in off-shore Uruguayan areas, totaling approximately 74,000 square meters. The areas were divided into 11 blocks, each ranging between 4,000 and 8,000 square kilometers in water depths between 50 and 1,450 meters, situated in the Punta del Este basin, the southernmost region of the Pelotas basin and the Oriental del Plata basin. On December 9, 2009, under the “Uruguay Round 2009” program, ANCAP granted hydrocarbon exploration and exploitation contracts to a consortium comprising YPF S.A. (formerly, Repsol YPF) (40%), Petroleo Brasileiro (40%) and Galp Energía (20%) to explore blocks 3 and 4 located in the Punta del Este basin. ANCAP has reserved the right to perform exploratory work in other blocks.

In September 2011, the government enacted Decree 316/11 creating the “Uruguay Round II” program to be implemented by ANCAP, aimed at awarding hydrocarbon exploration and exploitation contracts to private sector

 

D-31


companies in off-shore areas. In March 2012, ANCAP received 19 offers for off-shore oil exploration and exploitation over eight of the 15 blocks offered. These eight blocks cover more than 50% of the total area offered and were awarded to British Petroleum and British Gas (UK), Total (France) and Tullow Oil (Ireland). On October 5, 2012, ANCAP entered into a contract with these companies, by which they committed to invest approximately US$1.6 billion in the aggregate in exploration and development activities without recourse to ANCAP or the government for any risks and costs incurred in connection with activities associated with the project.

In April 2013, ANCAP authorized three international companies to commence oil and gas on-shore exploration in the north of the country. Total, Geoquim S.A. and Petrina were awarded these exploration and exploitation concessions, involving an aggregate investment of US$4.2 million.

In addition, ANCAP, and privately owned companies run the gas transportation and distribution business within a regulatory framework based on the granting of concessions, contracts and decrees by the government. Uruguay imports all the natural gas it consumes.

On January 4, 2016, Congress approved the capitalization of UIs 5.7 billion of claims held by the government against ANCAP.

In February 2018, the government implemented a third round of auctions (“Uruguay Round III”) through ANCAP, aimed at awarding hydrocarbon exploration and exploitation contracts to private sector companies in off-shore areas. Although two companies, presented documentation to qualify for Uruguay Round III, none submitted an offer. In April 2018, ANCAP declared the round void after receiving no offers.

In April 2019, the government approved the new regime for the selection of oil operating companies for the exploration and exploitation of hydrocarbons in five onshore and six offshore areas, the “Open Uruguay Round.” In this continuously open process, companies can qualify and submit offers at any time. The system consists of two bidding rounds per year, with opening of offers twice a year. If awarded, the exploratory period contract will have a term of up to eleven years, while the term of the contract including the exploitation period is thirty years, subject to extension for ten additional years. In 2019, Kosmos Energy and Tullow Oil presented qualification requests to participate in the process.

On November 28, 2019, ANCAP and ION Geophysical Corporation entered into an multi-client agreement to reprocess approximately 22.500 km² of 3D deep water blocks off the coast of Uruguay to provide ANCAP with more precise information for the development of offshore exploration activities in Uruguay (the “Tannat Project”). The Tannat Project will be a non-exclusive, multi-client operation at the entire cost and risk of ION Geophysical Corporation, which in turn is authorized to grant licenses to third parties (for a period of up to 10 years) on the offshore collected information.

To diversify the energy matrix and obtain a constant supply of natural gas, the government has considered different actions for the production of LNG in Uruguay. In August 2012, Uruguay initiated an international bidding process for the construction and operation of Gas Sayago, a LNG regasification facility in Montevideo with a processing capacity of 10 million cubic meters of gas per day and a storage capacity of 267 million cubic meters. The regasification plant, once operational, was expected to inject natural gas to the local distribution network for homes, industries, transportation and electrical energy generation. In May 2013, the government awarded a 20-year concession to GSSA (owned by UTE and ANCAP) and Gas Natural Licuado del Sur S.A. (“GNLS”), a consortium comprised of GDF Suez S.A. and the Japanese company Marubeni, for the construction and operation of Gas Sayago. The terms of the award required the LNG regasification facility to be operative in 2016. The agreement between GSSA and GNLS was terminated in September 2015 following an impossibility to perform by GNLS’s subcontractor, OAS S.A. Under the terms of that same agreement, the Republic was paid US$100 million by GNLS on account of such termination.

On May 15, 2018, OAS S.A. (a Brazilian construction company) filed a lawsuit against Gas Sayago SA, the ANCAP and UTE claiming damages in the amount of approximately US$30,000,000, due to alleged breaches to a certain gas pipeline construction agreement entered into among the Uruguayan branch of OAS S.A. and Gas Sayago S.A. In addition, in October 2016, OAS S.A. filed an additional claim within an existing proceeding against Gas Sayago S.A. and Banco de Seguros del Estado petitioning the nullity of certain guarantees made for the benefit of Gas Sayago under the aforementioned contract and, alternatively, their non-enforceability. Gas Sayago S.A. disputed all facts alleged in OAS S.A. lawsuits. As of the date of this annual report, both dispute resolution proceedings were still in their early stages.

 

D-32


OSE is Uruguay’s largest water company, providing water and sanitation services to all of the country and sewage services outside Montevideo.

For a description of the functions and operations of Banco de la República and of Banco Hipotecario, see “The Banking Sector.”

Results of Non-Financial State-Owned Enterprises

During the past ten years, non-financial state-owned enterprises have in the aggregate recorded operating profits.

The following table sets forth selected financial data for the principal state-owned enterprises as of the dates and for the periods indicated.

Principal Public Sector Enterprises

(in millions of US$)(1)

 

     Total Assets      Total Liabilities      Net Profits (Losses)      Percentage of
State Ownership
 

ANCAP

     1,607        818        39        100

ANP

     695        91        39        100

AFE(2)

     250        14        (21      100

ANTEL

     1,454        352        141        100

OSE

     1,592        535        —          100

UTE

     6,996        3,657        169        100

 

(1) 

Except as otherwise indicated, data as of and for the year ended December 31, 2019. Converted into U.S. dollars at the rate of Ps.37.336 per US$1.00, the market rate on December 31, 2019.

(2) 

Data as of and for the year ended December 31, 2018. Converted into U.S. dollars at the rate of Ps.32.390 per US$1.00, the market rate on December 31, 2018.

Source: Individual financial statements of each public enterprise.

In October 2018, Congress approved the 2017 Rendición de Cuentas, which included an authorization for public enterprises to access markets to hedge currency risk, allowing them to attain a more efficient exposure to the financial and market risks associated with their operations. Further, Banco Central’s agreements with UTE and ANCAP were amended to permit forward currency contracts to mitigate the effects of foreign exchange variations in the financial results of such public enterprises and Banco Central, distributing foreign exchange risk among such institutions that are better equipped to absorb such risk.

Infrastructure Projects

In July 2015, the government announced a plan to improve the infrastructure of roads and highways that entails a US$2.4 billion investment over five years. In 2015 and 2016, investments of approximately US$253 million and US$299 million, respectively, were made in the rehabilitation of roads. In 2017, the government and the private sector jointly invested approximately US$531 million in the rehabilitation of roads under this plan. In 2018, investments of approximately US$596 million were made in road infrastructure.

Large-scale Foreign Direct Investments and Public-Private Partnerships for Infrastructure Development

In December 2012, the government announced the first project under the public-private participation framework involving the construction, operation and maintenance of a prison with capacity for 1,960 inmates. The project, which required an investment of US$100 million, was completed in January 2018. For 2019 and 2020, investments under public-private partnerships are expected to be around US$240 million and US$630 million, respectively, and are expected to include road and educational projects and a new railway project, as described below.

 

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On November 8, 2017, the government and the Finnish company UPM entered into an investment agreement outlining the terms for the construction of a second pulp mill with a 2 million tons annual production capacity. According to UPM’s estimates, the plant will require an on-site investment of €2 billion. On July 23, 2019, UPM confirmed the investment in a second pulp mill.

As part of the construction permit process required by the Uruguayan authorities, UPM submitted an environmental and social impact study prepared by the consulting companies EIA-Estudio Ingenierĺa Ambiental (Uruguay) and Ecometrix (Canada). The report concluded that if the project is carried out under the outline considered, and the bespoke recommended corrective measures and the applicable Environmental Management Plans are implemented, the project will meet environmental regulation requirements. On April 30, 2019, the Ministerio de Vivienda, Ordenamiento Territorial y Medio Ambiente (Ministry of Housing, Zoning and the Environment) held a public hearing where the environmental impact study and the characteristics of the project were discussed.

In September 2018, the National Ports Administration (“ANP”) of Uruguay launched an international public bidding process for the building and operation of a port terminal in Montevideo specialized in the storage and shipping of pulp, chemicals and other inputs related to pulp production, with a concession tenure of 50 years. The bidding process was arranged in anticipation of the possible building of a new pulp mill, and UPM was the only bidder. On July 25, 2019, UPM and ANP entered into an agreement to build a dedicated port terminal in Montevideo. According to UPM’s preliminary estimates, the port facilities will require investments of approximately US$260 million.

On December 5, 2017, the government called for bids under a Public-Private Partnerships financing scheme for the construction of a new railway line connecting the center of the country with the port of Montevideo, and the related transportation infrastructure. The railway line seeks to generate the necessary conditions for the new paper pulp mill to be built by UPM, which is expected to be located in the center of the country. The government estimates that the new railway line will require investments of approximately US$839 million and will have the capacity to transport approximately 4.5 million tons of paper pulp per year. The bidding process received several offers. However, only Grupo Via Central (comprised of Saceem, Berkers, Sacyr and NGE) and a consortium led by Spanish construction firm Acciona reached the final stage of presenting economic proposals. In August 2018, the Ministerio de Transporte y Obras Públicas (Ministry of Transport and Public Works) disqualified Acciona’s offer for failure to meet the bidding process requirements. In September 2018, Acciona filed two administrative appeals challenging the bidding process, alleging that Acciona had been improperly disqualified. Such appeals do not have the legal effect of suspending the bidding process, which the Ministry of Transport and Public Works is still conducting. In November 2018, the Tribunal de Cuentas (Audit Court) approved Grupo Vía Central’s economic proposal for the construction of a new railway line connecting Paso de los Toros in the center of the country with the port of Montevideo and the related transportation infrastructure. In April 2019, IDB Invest, a member of the Inter-American Development Bank (IDB) Group, approved a financial package of approximately US$500 million for the new railway, with a term of up to 17 years and consisting of a senior loan of up to US$440 million and a subordinated loan of up to US$60 million, financed by IDB Invest and a group of commercial banks and international investors. In May 2019, the Ministerio de Transporte y Obras Públicas (Ministry of Transport and Public Works) signed a contract with Grupo Vía Central to commence works on the new railway.

As of December 31, 2019, the Public-Private Partnerships infrastructure portfolio involved railways (with investments estimated at US$839 million), roads (with investments estimated at US$690 million), educational infrastructure (with investments estimated at US$289 million) and housing (with investments estimated at US$35 million).

Minera Aratirí S.A. Arbitration

On July 3, 2018, three individuals alleging to be investors of Minera Aratirí S.A. (“Aratirí”), a company incorporated in Uruguay, presented a claim against the Republic before the United Nations Commission on International Trade Law, alleging a violation by Uruguay of the Treaty of Protection and Promotion of Investments between the Republic and the United Kingdom. The claim relates to an iron ore project submitted in 2011 by Aratirí and claims compensation for approximately US$3.5 billion.

Agreement with Petrobras

In July 2019, representatives of Uruguay and Petrobras S.A. (“Petrobras”) met to discuss the operation of gas distribution concessions held by Conecta S.A. (“Conecta”) and Montevideo Gas S.A. (“Montevideo Gas”), 55% and 100% controlled by Petrobras, respectively, in light of the companies’ adverse financial conditions and labor unrest. The government and Petrobras agreed to (i) take all necessary steps to finalize Conecta’s and Montevideo Gas’ concessions before September 30, 2019, (ii) terminate all open litigation, renouncing to any further claims arising under such concessions, and (iii) that the government would assume the operation of both concessions.

Gas Sayago S.A. (“GSSA”)

On March 26, 2019, UTE and ANCAP launched a public bidding process to sell 100% of GSSA’s shares, which were held by UTE (79.35% of shares) and ANCAP (20.65% of shares). On December 16, 2019, UTE’s board of directors decided to terminate the aforementioned bidding process. On December 31, 2019, GSSA extraordinary shareholders meeting took place, where a resolution approving the dissolution and liquidation of the entity was approved.

 

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Employment, Labor and Wages

Employment

The employment rate decreased from 59.0% in 2015 to 56.7% in 2019. Unemployment rose from 7.5% in 2015 to 8.9% in 2019.

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,  
     2015     2016     2017     2018     2019  

Nationwide:

          

Participation rate(1) (2)

     63.8     63.4     62.9     62.4     62.2

Employment rate(3)

     59.0       58.4       57.9       57.2       56.7  

Unemployment rate(4)

     7.5       7.8       7.9       8.3       8.9  

Montevideo:

          

Participation rate(1) (2)

     65.7       65.8       65.2       64.5       64.5  

Employment rate(3)

     60.6       60.4       59.9       58.9       58.8  

Unemployment rate(4)

     7.8     8.2     8.2     8.7     8.8

 

(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 a percentage of the labor force.

Sources: National Institute of Statistics and Banco Central.

The composition of employment by activities in Uruguay generally reflects the composition by activities of the GDP. Unionized labor in Uruguay is concentrated primarily in the public sector and the manufacturing, construction and financial services sectors of the economy.

The following table sets forth information regarding the percentage of the labor force by sector of the economy for the periods indicated.

Labor force (1)

(% by sector)

 

     2015     2016     2017     2018     2019  

Agriculture, livestock, fishing and mining

     9.0     8.4     8.9     8.5     8.4

Manufacturing, electricity, gas and water, and construction services

     20.3       19.9       19.6       19.0       18.8  

Services

     70.7       71.7       71.5       72.4       72.8  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     100.0     100.0     100.0     100.0     100.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

Data refers to total country population.

Source: National Institute of Statistics.

Strikes and other actions by unions occur on occasion, normally in the form of general, one-day strikes. In cases of strikes that threaten to have a material adverse effect on private or public sector functions, the government can declare that the labor functions which are the subject of the strike provide “essential services” to the country, thereby making the strike illegal. In various instances during the past ten years, the government has threatened to disband or disbanded strikes on the basis that the services provided were essential to the country. According to the “Indice de conflictividad laboral” (labor conflict index) published by Universidad Católica del Uruguay, conflicts increased in 2013 compared to 2012 as a consequence of some general strikes and a rise in sectorial conflicts. In 2015,

 

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the labor conflict index increased compared to 2014 mainly due to the labor unions’ general opposition to measures contemplated in the five-year budget of the Tabaré Vázquez administration that were designed to reduce the public sector deficit and the impact of the 2015 economic slowdown. In 2016, the labor conflict index evidenced a decrease in conflict compared to 2015, mainly due to wage improvements. In 2017, the labor conflict index again evidenced a decrease in conflict compared to 2016, mainly due to improvements in wages and safer working conditions. In 2018, the labor conflict index was 14% higher than in 2017, registering an increase compared to the two previous years. Education was the sector with the greatest level of conflict, accounting for 59% of total conflicts. In a year of intense wage-negotiation, 52% of sectoral conflicts were due to wage claims. In 2019, the labor conflict index decreased, being the lowest during the 2015-2019 period, in line with what has happened in prior electoral years.

In June 2019, the International Labor Organization’s (“ILO”) Conference Committee on the Application of Standards recommended that Uruguay revise its collective bargaining legislation, after receiving complaints from certain labor unions and business representatives alleging that the collective bargaining legislation affected their freedom of contract. In August 2019, following the recommendations of the ILO, the Republic submitted to the ILO’s Committee of Experts a report describing a series of measures adopted towards the full implementation of the ILO’s practices on collective bargaining and on the right to unionize. On October 31, 2019, in furtherance of the ILO’s request, the Executive Power submitted draft legislation to Congress (while it was in session), including amendments to the collective bargaining law, which were not approved by Congress as of the end of the 2019 legislature period.

Wages

The following table sets forth information relating to wages for the periods indicated.

Average Real Wages

(annual average % change from previous year,

unless otherwise indicated)

 

     2015     2016     2017     2018     2019  

Average real wages

     1.6     1.6     3.0     0.2     1.3

Public sector

     0.9       1.9       1.9       0.5       1.8  

Private sector

     1.9     1.4     3.5     —         1.0

 

Source: National Institute of Statistics.

Since 2005, increases in nominal wages have been discussed within the context of a collective bargaining mechanism involving the principal sectors of the economy, with government participation in the negotiations and frequently providing for backward-indexation of wages. Under the collective bargaining rules, each private sector of the economy negotiates wage increases twice a year while the public sector does so once a year. In 2015, the government introduced new wage-setting guidelines for the private sector, to moderate the indexation of wages to past inflation and reduce inflation inertia. The government’s guidelines proposed a 3-year declining path of wage increases set in nominal terms, that varied by sector depending on growth performance. A second round of wage negotiations under the 2015 wage-setting scheme took place during 2018. In March 2018, the government introduced a revised set of guidelines, incorporating lower nominal wage increases (compared to 2015) in the context of reduced inflation. For the first year of the three-year cycle, the nominal wage adjustment proposed to unions and companies was 6.5% (low-growth sectors), 7.5% (medium-growth sectors) and 8.5% (dynamic sectors). For the second year, the nominal wage adjustment proposed was 6%, 7% and 8%, respectively, and for the third year, 5%, 6% and 7%, respectively.

In 2015, real wages increased by 1.6% on average, with an increase in public sector real wages of 0.9% and an increase in private sector real wages of 1.9%. In 2016, real wages increased by 1.6% on average, with an increase in public sector real wages of 1.9% and an increase in private sector real wages of 1.4%. In 2017, real wages increased by 3.0% on average with an increase in public sector wages of 1.9% and an increase in private sector real wages of 3.5%. In 2018, real wages increased by 0.2% on average with an increase in public sector wages of 0.5% and no increase in private sector real wages. In 2019, real wages increased by 1.3% on average, with an increase in public sector real wages of 1.8% and an increase in private sector real wages of 1.0%.

 

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Poverty and Income Distribution

According to the most recent estimates of the National Statistics Institute, the percentage of Uruguayan households with an income below the minimum amount needed to purchase essential food and non-food requirements was 5.9% in 2019, compared to 6.4% in 2015.

While Uruguay has disparities in the distribution of wealth and income, which decreased in recent years, such disparities are of a lesser magnitude than those of other Latin American nations such as Brazil, Colombia or Chile. According to the 2019 Social Outlook report published by the ECLAC, in 2017, 22.3% of household income in Uruguay was concentrated in the hands of the top 10.0% of the population in comparison to 38% for Brazil, 33% for Colombia and 31% for Chile, according to ECLAC’s methodology of calculation.

The following table sets forth the data on the accumulated income distribution for the periods indicated.

Evolution of Accumulated Income Distribution of Uruguay

(% of national income)

 

Income Group

   2015     2016     2017     2018     2019  

Lowest 40%

     18.5     18.8     18.8     18.9     18.8

Next 30%

     26.3       26.4       26.3       26.3       26.3  

Next 20%

     27.8       27.8       27.6       27.7       27.8  

Highest 10%

     27.3       27.0       27.3       27.2       27.1  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     100.0     100.0     100.0     100.0     100.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Source: National Institute of Statistics.

The government has sought to address problems relating to poverty through health care accessibility and other social policy measures. See “The Economy—The Economic Policies of the Lacalle Pou Administration.” Uruguay has a public health system that gives access to services on a sliding-scale basis, where fees are based on a citizen’s ability to pay, and guarantees medical care for workers. The government also maintains funds for the extraordinary medical expenses of the needy.

 

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FOREIGN MERCHANDISE TRADE

Uruguay’s exports primarily comprise commodities (farm products, such as meat and grains, and paper pulp).

In 2015, merchandise exports decreased by 12.0% (measured in U.S. dollars) compared to 2014, mainly as a result of a decrease in export prices of agricultural products, processed meats, dairy products and wheat and rice mills and, to a lesser extent, a 0.5% decrease in the aggregate volume of exports. In 2016, merchandise exports decreased by 6.7% (measured in U.S. dollars) compared to 2015, mainly as a result of a decrease in exports of agricultural products. In 2017, merchandise exports increased by 9.6% (measured in U.S. dollars) compared to 2016, mainly as a result of an increase in exports of agricultural products. In 2018, merchandise exports decreased by 0.7% (measured in U.S dollars), mainly as a result of a decrease in exports of agricultural products driven primarily by a severe drought that affected the 2017/2018 harvest season. In 2019, merchandise exports increased by 1.1% (measured in U.S dollars), mainly as a result of an increase in exports of agricultural products.

In 2015, merchandise imports decreased by 17.4% (measured in U.S. dollars) compared to 2014, mainly as a result of decreases in imports of intermediate goods, but also with decreased imports of consumer goods and capital goods. In 2016, merchandise imports decreased by 14.3% (measured in U.S. dollars) compared to 2015, mainly as a result of a decrease in imports of intermediate goods. In 2017, merchandise imports increased by 3.9% (measured in U.S. dollars) compared to 2016, mainly as a result of an increase in imports of consumer and intermediate goods. In 2018, merchandise imports increased by 5.1% (measured in U.S. dollars), mainly of capital and intermediate goods. In 2019, merchandise imports decreased by 7.3% (measured in U.S. dollars), mainly as a result of a decrease in imports of intermediate, consumer and capital goods.

A significant portion of Uruguay’s merchandise trade has involved its neighbors and principal trading partners, Argentina and Brazil. With the initial consolidation of the Mercosur in the 1990s, Brazil and Argentina became Uruguay’s principal trading partners. By 1998, those two countries together accounted for more than 50% of Uruguay’s exports. This regional concentration has subjected Uruguay’s economy to the volatility that has characterized the economies of Uruguay’s neighbors. To mitigate the adverse impact on Uruguay’s foreign trade resulting from imbalances that develop within Mercosur, the government has actively promoted Uruguayan exports in markets outside Mercosur within the framework of regional as well as bilateral agreements. See “República Oriental del Uruguay—Foreign Policy and Membership in International and Regional Organizations.” The increased competitiveness of Uruguayan exports in the global economy since 2002 resulted in exports to the region becoming less significant as a percentage of Uruguay’s total exports.

Mercosur member states remain the main destination of Uruguay’s exports and source of its imports. Exports to Argentina and Brazil accounted for 17.1% in 2015, 19.6% in 2016, 19.1% in 2017, 17.1% in 2018 and 15.7% in 2019. Even more significantly, Argentina and Brazil accounted for 30.2% of total imports in 2015, 31.3% in 2016, 32.0% in 2017, 30.8% in 2018 and 31.9% in 2019. In 2015, exports to Brazil, which declined significantly compared to prior years, included milk and dairy products, plastics, meat and motor vehicles, exports to Argentina included pulp, wire and plastics and exports to Venezuela consisted mainly of milk and dairy products and chemicals. In 2016, exports to Brazil included milk and dairy products, plastics and cereals, exports to Argentina included wire, motor vehicles and parts, and chemicals, and exports to Venezuela consisted mainly of chemicals and rice. In 2017, exports to Brazil included milk and dairy products, plastics and cereals, and exports to Argentina included wire, motor vehicles and parts, and chemicals. In 2018, exports to Brazil included milk and dairy products, plastics and cereals, exports to Argentina included wire, motor vehicles and parts, and chemicals. In 2019, exports to Brazil included plastics, milk and motor vehicles and parts, while, exports to Argentina included wire, chemicals and electrical supplies. Although Uruguay’s dependence on regional trade has lessened, a continued slowdown in Argentina and Brazil could continue to significantly weigh on Uruguay’s economy. Despite significant international reserves and a robust debt profile, Uruguay’s fiscal imbalances and other economic rigidities may hamper the economy’s ability to absorb regional and other external shocks.

The United States is another of Uruguay’s major trading partners. The United States has attracted an increasing percentage of Uruguay’s total merchandise exports in recent years. In 2015, the weight of exports to the United States increased to 5.9% of total exports, while imports from the United States decreased slightly to 9.0% of total imports. In 2016, the weight of exports to the United States decreased to 5.4% of total exports while imports from the United States accounted for 6.9% of total imports. In 2017, the weight of exports to the United States decreased to 5.0% of total exports

 

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whereas imports accounted for 10.9% of total imports. In 2018, the weight of exports to the United States remains at 5.0% of total exports whereas imports from the United States accounted for 7.9% of total imports. In 2019, the weight of exports to the United States decreased to 4.9% whereas imports from the United States accounted for 9.2% of total imports.

Beginning in 2015, exports of paper pulp increased significantly, compensating for decreased exports of other goods. In 2015, merchandise exports totaled US$8.9 billion, representing a 12.0% decrease compared to 2014, mainly due to a decrease in the price of non-traditional exports. Exports of paper pulp accounted for 14.1% of Uruguay’s total exports in 2015. In 2016, merchandise exports totaled US$8.3 billion, representing a 6.7% decrease compared to 2015, primarily due to a decrease in non-traditional exports. Exports of paper pulp accounted for 15.6% of Uruguay’s total exports in 2016. In 2017, merchandise exports totaled US$9.1 billion, representing a 9.6% increase compared to 2016, primarily due to an increase in certain traditional exports (processed meats and paper pulp). Exports of paper pulp accounted for 14.7% of Uruguay’s total exports in 2017. In 2018, merchandise exports totaled US$9.0 billion, representing a 0.7% decrease compared to 2017, primarily due to a decrease in agricultural product exports. Exports of paper pulp accounted for 18.6% of Uruguay’s total exports in 2018. In 2019, merchandise exports totaled US$9.1 billion, representing a 1.1% increase compared to 2018, mainly as a result of an increase in agricultural products, processed meats and plastics products.

Merchandise exports have historically been concentrated on agriculturally based traditional and manufactured products, such as wool, meat, rice, textiles and more recently, paper pulp. Uruguay was first declared free of foot and mouth disease in 1995. This measure granted Uruguay access to broader markets and allowed it to obtain higher prices for its beef. Uruguay’s traditional export markets include Brazil, Chile, Israel and the European Union. Since 2008, paper pulp accounts for a significant portion of Uruguay’s exports. The government has promoted pulp mills to increase and diversify exports, increase productivity and long-term prospects for Uruguay’s economy. See “Balance of Payments—Foreign Investment.” In 2015, exports of paper pulp and other foodstuffs increased by 41.9% and 8.6%, respectively, compared to 2014, while exports of agricultural products, dairy products and wheat and rice decreased by 34.0%, 23.5% and 32.2%, respectively, each as compared to 2014. In 2016, exports of oil and refined products, wheat and rice, and chemicals increased by 53.1%, 12.9% and 5.6%, respectively, each as compared to 2015, while exports of motor vehicles and parts, plastic products, agricultural products and textiles decreased by 67.3%, 21.5%, 18.6% and 15.7%, respectively, each as compared to 2015. In 2017, exports of agricultural products, processed meats, dairy products, wheat and rice, textiles, paper pulp, plastic products, motor vehicles parts and others increased by 23.4%, 6.7%, 4.7%, 14.3%, 7.1%, 3.6%, 17.2%, 53.0% and 24.2% respectively, each as compared to 2016, while exports of leather goods, chemicals, oil and refined products and other foodstuffs decreased by 13.7%, 2.0%, 49.7% and 7.1% respectively, each as compared to 2016. In 2018, exports of processed meats, dairy products, textiles, paper pulp, chemicals, oil and refined products, plastic products, motor vehicles and parts and others increased by 8.6%, 14.0%, 10.8%, 25.1%, 3.6%, 32.2%, 23.0%, 43.5% and 4.7% respectively, each as compared to 2017, while exports of wheat and rice, other foodstuffs and leather goods decreased by 14.8%, 2.4% and 9.1% respectively, each as compared to 2017. In 2018, agricultural products decreased by 52.6% when compared to 2017, mainly as a result of a severe drought that affected the 2017/2018 harvest season. In 2019, exports of agricultural products, processed meats, other foodstuffs and plastic products increased by 90.1%, 8.6%, 7.7% and 8.0% respectively, each as compared to 2018, while exports of dairy products, wheat and rice mills, textiles, leather goods, paper pulp, chemicals oil and refined products, motor vehicles and parts and other decreased by 3.5%, 16.7%, 18.2%, 31.7%, 9.3%, 10.6%, 81.4%, 9.3% and 18.1% respectively, each as compared to 2018.

In 2015, total imports decreased by 17.4% compared to 2014, of which 28.3% represented consumer goods, 52.6% intermediate goods and 19.1% capital goods. In 2016, total imports decreased by 14.3% compared to 2015, of which 30.7% represented consumer goods, 50.1% intermediate goods and 19.1% capital goods. In 2017, total imports increased by 3.9% compared to 2016, of which 33.6% represented consumer goods, 53.1% intermediate goods and 13.3% capital goods. In 2018, total imports increased by 5.1% compared to 2017, of which 31.5% represented consumer goods, 55.4% intermediate goods and 13.0% capital goods. In 2019, total imports decreased by 7.3% compared to 2018, of which 32.6% represented consumer goods, 53.8% intermediate goods and 13.6% capital goods.

 

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The following tables set forth information on exports and imports for the periods indicated.

Merchandise Trade

(in millions of US$ and % of total exports/imports)

 

    2015     2016(1)     2017(1)     2018(1)     2019  

EXPORTS (FOB)

                   

Agricultural products

  US$ 1,402       15.7   US$ 1,141       13.7   US$ 1,408       15.5   US$ 669       7.4   US$ 1,272       13.9

Processed meats

    1,761       19.8       1,752       21.1       1,868       20.5       2,028       22.4       2,203       24.1  

Dairy products

    623       7.0       564       6.8       591       6.5       673       7.4       650       7.1  

Wheat and rice mills

    350       3.9       396       4.8       452       5.0       386       4.3       321       3.5  

Other foodstuffs

    711       8.0       707       8.5       657       7.2       641       7.1       690       7.6  

Textiles

    194       2.2       163       2.0       175       1.9       194       2.1       159       1.7  

Leather goods

    294       3.3       275       3.3       238       2.6       216       2.4       148       1.6  

Paper pulp

    1,255       14.1       1,296       15.6       1,342       14.7       1,680       18.6       1,523       16.7  

Chemicals

    515       5.8       463       5.6       454       5.0       470       5.2       420       4.6  

Oil and refined products

    22       0.2       34       0.4       17       0.2       22       0.2       4       —    

Plastic products

    148       1.7       116       1.4       136       1.5       168       1.9       181       2.0  

Motor vehicles and parts

    245       2.8       80       1.0       123       1.3       176       1.9       160       1.7  

Other

    1,393       15.6       1,328       16.0       1,649       18.1       1,726       19.1       1,414       15.5  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total exports

  US$ 8,914       100.0   US$ 8,316       100.0   US$ 9,110       100.0   US$ 9,050       100.0   US$ 9,145       100.0
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

IMPORTS (CIF)

                   

Consumer goods

  US$ 2,683       28.3   US$ 2,500       30.7   US$ 2,844       33.6   US$ 2,804       31.5   US$ 2,685       32.6

Intermediate goods

    4,991       52.6       4,079       50.1       4,489       53.1       4,930       55.4       4,439       53.8  

Capital goods

    1,816       19.1       1,557       19.1       1,125       13.3       1,159       13.0       1,122       13.6  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total imports

  US$ 9,489       100.0   US$ 8,137       100.0   US$ 8,458       100.0   US$ 8,893       100.0   US$ 8,246       100.0
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Merchandise trade balance

  US$ (575     US$ 179       US$ 652       US$ 157       US$ 899    
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

 

(1)

Preliminary data.

Source: Banco Central.

 

D-40


Geographical Distribution of Merchandise Trade

(in millions of US$ and % of total exports/imports)

 

     2015     2016     2017     2018     2019(1)  

EXPORTS (FOB)

                         

Americas:

                         

Argentina

   US$ 390        4.4   US$ 429        5.2   US$ 437        4.8   US$ 410        4.5   US$ 363        4.0

Brazil

     1,133        12.7       1,200        14.4       1,300        14.3       1,136        12.6       1,075        11.8  

United States

     525        5.9       446        5.4       455        5.0       454        5.0       447        4.9  

Other

     1,062        11.9       853        10.3       826        9.1       854        9.4       767        8.4  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total Americas

     3,109        34.9       2,928        35.2       3,018        33.1       2,853        31.5       2,652        29.0  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Europe:

                         

European Union:

                         

France

     37        0.4       32        0.4       34        0.4       40        0.4       34        0.4  

Germany

     260        2.9       219        2.6       200        2.2       164        1.8       118        1.3  

Italy

     81        0.9       79        1.0       86        0.9       81        0.9       59        0.6  

United Kingdom

     70        0.8       62        0.7       47        0.5       56        0.6       44        0.5  

Other EU

     430        4.8       517        6.2       499        5.5       495        5.5       467        5.1  

Total EU

     878        9.9       909        10.9       866        9.5       835        9.2       722        7.9  

EFTA(2) and other

     323        3.6       392        4.7       427        4.7       498        5.5       328        3.6  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total Europe

     1,201        13.5       1,302        15.7       1,293        14.2       1,333        14.7       1,050        11.5  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Africa

     201        2.3       131        1.6       274        3.0       329        3.6       325        3.6  

Asia

     1,335        15.0       1,140        13.7       1,721        18.9       1,740        19.2       2,183        23.9  

Middle East

     335        3.8       216        2.6       284        3.1       280        3.1       126        1.4  

Free Trade Zone(3)

     1,227        13.8       1,273        15.3       1,221        13.4       1,548        17.1       1,471        16.1  

Other

     1,506        16.9       1,328        16.0       1,299        14.3       967        10.7       1,338        14.6  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

   US$ 8,914        100.0   US$ 8,316        100.0   US$ 9,110        100.0   US$ 9,050        100.0   US$ 9,145        100.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

IMPORTS (CIF)

                         

Americas:

                         

Argentina

   US$ 1,235        13.0   US$ 1,084        13.3   US$ 1,064        12.6   US$ 1,102        12.4   US$ 974        11.8

Brazil

     1,626        17.1       1,462        18.0       1,646        19.5       1,641        18.4       1,655        20.1  

United States

     850        9.0       561        6.9       921        10.9       705        7.9       762        9.2  

Other

     812        8.6       669        8.2       660        7.8       795        8.9       681        8.3  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total Americas

     4,523        47.7       3,776        46.4       4,291        50.7       4,244        47.7       4,072        49.4  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Europe:

                         

European Union:

                         

France

     130        1.4       109        1.3       107        1.3       153        1.7       130        1.6  

Germany

     404        4.3       386        4.7       205        2.4       226        2.5       211        2.6  

Italy

     160        1.7       132        1.6       140        1.7       158        1.8       134        1.6  

United Kingdom

     180        1.9       148        1.8       90        1.1       62        0.7       60        0.7  

Other EU

     727        7.7       686        8.4       767        9.1       519        5.8       448        5.4  

Total EU

     1,602        16.9       1,461        18.0       1,309        15.5       1,118        12.6       983        11.9  

EFTA(2) and other

     171        1.8       147        1.8       146        1.7       250        2.8       148        1.8  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total Europe

     1,773        18.7       1,608        19.8       1,454        17.2       1,368        15.4       1,131        13.7  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Africa

     474        5.0       533        6.6       242        2.9       780        8.8       751        9.1  

Asia

     2,587        27.3       2,089        25.7       2,329        27.5       2,369        26.6       2,184        26.5  

Middle East

     100        1.1       93        1.1       111        1.3       105        1.2       79        1.0  

Other

     33        0.3       38        0.5       31        0.4       28        0.3       29        0.4  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

   US$ 9,489        100.0   US$ 8,137        100.0   US$ 8,458        100.0   US$ 8,893        100.0   US$ 8,246        100.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

(1)

Preliminary data.

(2)

European Free Trade Association.

(3)

Reflects exports from Uruguay to the free trade zones within its territory, for further export, typically as part of a manufactured good comprising inputs produced in third countries, to destinations of which Uruguay does not maintain statistics.

Source: Banco Central

 

D-41


FOREIGN TRADE ON SERVICES

Uruguay’s services trade has traditionally been heavily concentrated on Argentina and Brazil and has been driven principally by tourism, transportation and financial services and, since 2007, transactions made from free economic zones.

In 2015, gross tourism receipts increased by 0.3% and the number of tourist arrivals increased by 5.5%, mainly driven by a 15.3% increase in tourists arriving from Argentina. In 2016, gross tourism receipts increased by 3.3% and the number of tourist arrivals increased by 12.3%, mainly driven by an increase in tourists arriving from Argentina. In 2017, gross tourism receipts increased by 27.9% and the number of tourist arrivals increased by 18.4%, mainly driven by an increase in tourists arriving from Argentina. In 2018, gross tourism receipts decreased by 7.7% and the number of tourist arrivals decreased by 5.8%, mainly driven by a decrease in tourists arriving from Argentina. During 2019, gross tourism receipts decreased by 18.6% and the number of tourist arrivals decreased by 13.2%, mainly driven by a decrease in visitors from Argentina.

Revenues from Tourism

 

     Number of
Tourist Arrivals
(in thousands)
     Gross Tourism
Receipts
(in millions of US$)
 

2015

     2,965        1,766  

2016

     3,328        1,824  

2017

     3,941        2,334  

2018

     3,712        2,155  

2019

     3,221        1,754  

 

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

(% by country)

 

     2015     2016     2017     2018     2019  

Argentina

     57.6     64.3     67.4     62.5     54.2

Brazil

     14.5       13.0       12.8       12.6       15.2  

Other

     28.0       22.7       19.8       24.9       30.6  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     100.0     100.0     100.0     100.0     100.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Sources: Banco Central and the Ministry of Tourism.

Until the 2002 banking crisis, financial and insurance services, primarily banking and corporate services, contributed to the growth in services exports. Deposits by non-residents with the financial sector totaled approximately US$6.6 billion at December 31, 2001. In 2002, deposits by non-residents with the financial sector decreased significantly to less than US$2.3 billion at December 31, 2002, including approximately US$1.2 billion held with BGU, Banco de Crédito, Banco Montevideo and Banco Comercial, all of which had their operations suspended and have since been liquidated or, in the case of BGU, closed. Following the banking crisis in 2002, deposits by non-residents recovered, reaching US$3.0 billion as of December 2019, representing 13.3% of total foreign currency deposits held by the non-financial private sector with the Uruguayan banking system (excluding deposits held with banks in liquidation). In 2012, the tax authorities of Uruguay and Argentina entered into a cooperation agreement to facilitate sharing of tax information. This agreement was ratified by Uruguay’s Congress in January 2013. Similar agreements were concluded with Iceland, Denmark, Norway and Canada (in 2012, 2013 and 2014, respectively).

 

D-42


BALANCE OF PAYMENTS

On September 29, 2017, Banco Central released a new version of balance of payments and international investment position data, with revised information going back to 2012. The new data conforms to the principles outlined in the sixth edition of the International Monetary Fund’s Balance of Payments Manual (BPM6). Further, Banco Central took advantage of the opportunity to make other improvements to its data collection methodology, including broadening the sample of firms surveyed, from approximately 200 corporate groups to approximately 490.

An important source of compositional changes in the balance of payments data occurs through new coverage of intermediation activities by so-called “merchanting” firms in the new surveys. Resident merchanting firms purchase goods (mostly commodities) from non-residents and subsequently resell them to non-residents, without the goods entering the economic territory of Uruguay. These international trade intermediation activities were not accounted for under the previous methodology.

In 2019, Uruguay’s balance of payments (variation in Banco Central reserve assets) registered a deficit of US$1.1 billion compared to a deficit of US$0.4 billion in 2018, a surplus of US$2.4 billion in 2017, a deficit of US$2.2 billion in 2016 and a deficit of US$1.7 billion in 2015. Banco Central’s international reserve assets stood at US$14.5 billion at December 31, 2019, US$15.6 billion at December 31, 2018, US$16.0 billion at December 31, 2017, US$13.5 billion at December 31, 2016 and US$15.6 billion at December 31, 2015.

Balance of Payments(1)

(in millions of US$)

 

     2015(2)     2016(2)     2017(2)     2018(2)     2019(2)  

Current Account

          

Merchandise trade balance

   US$ 1,306.9     US$ 1,910.9     US$ 2,390.5     US$ 2,424.8     US$ 2,920.4  

Exports

     11,145.2       10,374.1       11,058.8       11,535.3       11,502.2  

Imports

     (9,838.3     (8,463.2     (8,668.3     (9,110.4     (8,581.8

Services, net

     413.4       822.1       1,260.0       834.2       380.8  

Primary Income

     (2,387.6     (2,604.6     (3,422.8     (3,411.8     (3,072.5

Secondary Income(3)

     176.3       182.7       191.8       206.4       190.0  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current account

   US$ (491.1   US$ 311.1     US$ 419.6     US$ 53.8     US$ 418.6  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Capital Account

   US$ 175.5     US$ 16.9     US$ 4.9     US$ 44.4     US$ 52.2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial Account(4)

          

Direct Investment

     (815.1     1,114.8       2,235.8       1,108.0       472.5  

Portfolio Investment (5)

     986.0       2,035.6       (1,912.0     (1,636.3     1,173.6  

Financial Derivatives

     (303.0     39.1       (259.2     51.2       123.6  

Other investment

     1,069.9       (1,222.7     (927.0     741.9       194.6  

Variation in Banco Central reserve assets(6)

     (1,676.5     (2,188.5     2,448.7       (408.1     (1,110.6

of which:

          

Gold(7)

     (5.4     (0.1     —         —         —    

Special Drawing Rights (“SDRs”)

     —         (42.4     0.2       (0.2     (0.4

IMF Position

     (24.8     (3.0     (44.3     19.4       13.8  

Foreign Exchange

     547.3       (1,014.7     1,241.2       (810.6     814.5  

Other holdings

     (2,193.6     (1,128.3     1,251.6       383.2       (1,938.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total financial account, net

   US$ (738.7   US$ (221.8   US$ 1,586.2     US$ (143.3   US$ 853.7  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Errors and Omissions(8)

   US$ (423.1   US$ (549.7   US$ 1,161.8     US$ (241.4   US$ 382.8  

 

(1) 

Calculated in accordance with the methodology set forth in the IMF Balance of Payments Manual (Sixth Edition).

(2) 

Preliminary data.

(3) 

Current transfers consist of transactions without a quid pro quo, including gifts.

(4) 

A positive (negative) value means that net acquisition of financial assets abroad by residents was higher (lower) than net incurrence of financial liabilities with non-residents, implying net capital outflows (inflows).

(5) 

Includes public bonds, commercial paper, notes and commercial banks’ foreign portfolio investment.

(6) 

Change in Banco Central international reserve assets does not reflect adjustments in the value of gold.

(7) 

As presented in this chart, gold reserves have been valued at their corresponding market prices as of December 31 of each year.

(8) 

Constitutes a residual item, which is periodically revised as additional information regarding the current and capital and financial accounts becomes available.

Source: Banco Central.

 

D-43


Current Account

Uruguay’s current account consists of the merchandise trade balance, foreign trade on services net, primary income (interest and dividend payments) and secondary income (current transfers).

In 2015, the current account recorded a deficit of US$491.1 million. The US$1.3 billion decrease in the current account deficit compared to 2014 was mainly attributable to an improvement in interest and dividends and trade of services.

In 2016, the current account recorded a surplus of US$311.1 million. The US$802.2 million increase in the current account balance compared to 2015 was mainly attributable to an improvement in the merchandise trade and trade of services balances.

In 2017, the current account recorded a surplus of US$419.6 million. The US$108.5 million increase in the current account surplus compared to 2016 was mainly attributable to an improvement in the merchandise trade and trade of services balances.

In 2018, the current account recorded a surplus of US$53.8 million. The US$365.8 million decrease in the current account surplus compared to 2017 was mainly attributable to the decrease in the surplus generated by foreign trade of services, net.

In 2019, the current account recorded a surplus of US$418.6 million. The US$364.8 million increase in the current account surplus compared to 2018 was mainly attributable to a decrease in interest and dividends and an improvement in the merchandise trade balance.

Financial Account

Uruguay’s financial account includes direct investment, portfolio investment, financial derivatives, other investment and variations in Banco Central reserve assets.

In 2015, Uruguay’s financial account recorded a negative balance of US$738.7 million as a result of net inflows of foreign direct investment, which totaled US$0.8 billion, and a US$1.7 billion decrease in Banco Central reserve assets driven by foreign currency sales.

In 2016, Uruguay’s financial account recorded a negative balance of US$221.8 million, mainly due to a US$2.2 billion decrease in Banco Central reserve assets driven by a decrease in deposits of the banking system and other institutions with Banco Central, which was partially offset by a US$2.0 billion portfolio investment net outflows.

In 2017, Uruguay’s financial account recorded a positive balance of US$1.6 billion, mainly as a result of foreign direct investment net outflows, which reached US$2.2 billion and a US$2.4 billion increase in Banco Central reserve assets attributable to an increase in deposits of the banking system and other institutions with Banco Central.

In 2018, Uruguay’s financial account recorded a negative balance of US$143.3 million, mainly as a result of foreign direct investment net outflows, which reached US$1.1 billion and a net portfolio investment inflow, which reached US$1.6 billion.

In 2019, Uruguay’s financial account recorded a positive balance of US$853.7 million, mainly as a result of foreign direct investment net outflows, which reached US$472 million, US$1.2 billion portfolio investment net outflows and a US$1.1 billion decrease in Banco Central reserve assets.

Under regulations adopted in August 2012 by Banco Central, non-residents that purchased Banco Central bonds issued in pesos or UIs, through local financial institutions, were required to deposit with Banco Central a percentage of the investment made in Banco Central’s debt. This deposit could not be withdrawn until the bond was redeemed by Banco Central or transferred to an Uruguayan resident or a foreign investor that had previously satisfied the prior-deposit requirements. The minimum percentage that investors were required to deposit with one or more local financial institutions was originally set at 40%. In June 2013, this percentage was raised to 50%.

 

D-44


In June 2013, Uruguay implemented similar requirements for the purchase by non-residents of local treasury bills and bonds issued in pesos or UIs. The minimum percentage that non-residents were required to deposit with one or more local financial institutions was 50% of the investment made in these bills and bonds.

In September 2014, the Macroeconomic Coordination Committee, which is comprised of representatives of the Ministry of Economy and Finance and Banco Central, removed the reserve requirements for non-residents’ holdings of central government local currency-denominated securities and reduced the level of mandatory deposit requirements for investments in Banco Central’s short-term debt from 50% to 30%. On May 1, 2015, Banco Central removed all remaining reserve requirements on non-residents’ holdings of its securities and have not implemented similar measures since then.

International Reserves

As of December 31, 2019, the international reserve assets of Banco Central stood at US$14.5 billion, compared to US$15.6 billion at December 31, 2018.

This decrease in international reserve assets of Banco Central was mainly due to an increase in net sales of foreign currency by Banco Central, which was partially offset by an increase in deposits by deposit-taking entities and other institutions with Banco Central. The following table shows the composition of the international reserve assets of Banco Central, and the banking system at each of the dates indicated.

International Reserve Assets of the Banking System(1)

(in millions of US$)

 

     As of December 31,  
     2015     2016     2017     2018     2019  

Banco Central

   US$ 15,634 (2)    US$ 13,472 (3)    US$ 15,963 (4)    US$ 15,557 (5)    US$ 14,505 (6) 

Of which gold represents

     4       4       4       4       5  

Public Banks

     2,189       2,628       3,018       929       777  

Private Banks

     4,869       4,319       3,195       3,385       4,033  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

International reserve assets

   US$ 22,692     US$ 20,419     US$ 22,176     US$ 19,871     US$ 19,315  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

All figures are at market value as of the date indicated.

(2) 

This amount includes US$6,584 million of reserves and voluntary deposits of the Uruguayan banking system, including US$2,457 million of public sector financial institutions, with Banco Central.

(3) 

This amount includes US$5,542 million of reserves and voluntary deposits of the Uruguayan banking system, including US$2,481 million of public sector financial institutions, with Banco Central.

(4) 

This amount includes US$5,558 million of reserves and voluntary deposits of the Uruguayan banking system, including US$2,461 million of public sector financial institutions, with Banco Central.

(5) 

This amount includes US$5,581 million of reserves and voluntary deposits of the Uruguayan banking system, including US$2,576 million of public sector financial institutions, with Banco Central.

(6) 

This amount includes US$6,012 million of reserves and voluntary deposits of the Uruguayan banking system, including US$2,343 million of public sector financial institutions, with Banco Central.

Source: Banco Central.

The voluntary deposits and reserves held with Banco Central by the Uruguayan banking system can be withdrawn by banks at any time. Changes in Banco Central’s policies and other external factors (including interest rates) affecting the banks’ medium- and long-term portfolio decisions could cause and, in the past, have caused the banks to withdraw these voluntary deposits. Variations in commercial bank reserves and voluntary deposits of the Uruguayan banking system with Banco Central cause Banco Central’s international reserve assets to fluctuate from time to time.

Foreign Investment

Uruguay has a legislative framework that provides for the equal treatment of foreign and local investors and access by foreigners to all economic sectors. Foreign investments in Uruguay generally do not require prior governmental authorization, and foreign investors are not required to register investments with the government and can freely remit their profits and capital investments abroad. Investment in certain sectors, including financial services, requires prior authorization on the same terms as domestic investors.

 

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Foreign investment in Uruguay was traditionally directed towards the industrial, construction and tourism-related sectors and land. However, since 2004, Uruguay has attracted significant foreign investment in paper pulp mills, renewable energy (wind) and real estate projects. In 2015, estimated foreign direct investment accounted for net inflows of US$815.1 million, compared to net outflows of US$1.1 billion, US$2.2 billion, US$1.1 billion and US$472.5 in 2016, 2017, 2018 and 2019, respectively.

 

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MONETARY POLICY AND INFLATION

Banco Central was established in 1967 and is in charge of issuing currency, managing foreign exchange reserves, regulating the financial and insurance system, as well as pension funds and the securities market, and evaluating and advising the government regarding the establishment of new banks. Banco Central has primary responsibility for implementing monetary policy, intervening in the money market and advising the government on monetary and credit matters in accordance with general objectives set by the government. In addition, it trades in the foreign exchange market and is responsible for the observance of foreign exchange regulations.

Banco Central’s charter was most recently amended in 2010. Under the current charter, the Board of Directors of Banco Central is composed of three members, each serving a five-year term. Each new president of Uruguay is entitled to appoint a new Board of Directors, subject to ratification by Congress.

Banco Central’s charter defines Banco Central’s monetary and foreign exchange management capacity and its supervisory powers. Pursuant to its charter, Banco Central cannot finance the activities of the government except to the extent that it may hold government securities that have an aggregate principal amount of up to 10.0% of the government’s previous year’s expenditures net of interest payments on public debt. However, Banco Central can serve as a financial agent of the government under Article 49 of its charter and has a duty under article 3 to ensure the orderly functioning of the payments system.

Law No. 18,401 created the Corporación de Protección al Ahorro Bancario or Corporation for the Protection of Bank Savings as an agency independent of Banco Central, removing Banco Central’s responsibility for the administration of the mandatory deposit insurance program introduced in 2002. Law No. 18,401 placed the supervision and regulation of the banking sector and the regulation of insurance companies, the stock market and pension funds under a single agency, the Superintendencia de Servicios Financieros.

Monetary Policy

Until June 2002, Banco Central managed Uruguay’s inflation stabilization policy by setting a peso/U.S. dollar exchange rate band that drifted at a present monthly rate of devaluation and allowed the peso/U.S. dollar exchange rate to fluctuate within a band without prompting Banco Central intervention in the foreign exchange markets. This “crawling peg” system succeeded in reducing inflation from a rate of 129.0% (as measured by the CPI) in 1990 to 3.6% in 2001. In June 2001 and January 2002, Banco Central widened the band and accelerated the rate of devaluation of the peso in an attempt to mitigate the ongoing adverse effects on Uruguay’s economy, first of Brazil’s 1999 devaluation and subsequently of Argentina’s devaluation in January 2002. Inflation targets were administered through a foreign exchange policy.

Sensitive to the risk of a run on the currency and to avoid the need to adopt exchange controls and restrict capital flows, Uruguay completed its transition to a fully floating exchange system and floated the peso effective on June 20, 2002. Since the peso was allowed to float, Banco Central pursued interventions solely to ensure the orderly operation of the foreign exchange market. As of December 2002, the nominal exchange rate had risen 94.0% in comparison to December 2001. The year-to-year inflation rate for the same period was 25.9%.

Having relinquished the use of exchange rate policies to determine inflation objectives, Banco Central adopted the peso monetary base as a nominal anchor and committed to a monetary base increase one year ahead consistent with the inflation objective set for the period. In 2003, the program was designed to generate an inflation rate between 17.0% and 23.0% and the policy was successful in the sense that the target on monetary base was achieved and inflation rate was lower than projected (10.2%). In the first quarter of 2004, a target range for the monetary base was introduced, which implied more flexibility in the intermediate target and more commitment with inflation itself. Since then, the inflation objective was set to a range with floors and ceilings that declined from quarter to quarter, from 9.0-14.0% in the third quarter of 2004 to 4.5-6.5% by the end of 2006.

In September 2007, Banco Central began defining monetary policy by reference to short-term interest rates as the new intermediate target. As a consequence, Banco Central introduced a short-term interest rate that was initially set at 5.0% and established the average money market rate as the instrument to monitor its new inflation target. The interest rate band was set at 4.0-6.0%.

 

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In January 2008, the monetary policy rate was kept constant at 7.25%, but the tolerance of the inflation target range was changed to 3.0-7.0% in recognition of the difficulties to keep a close track of this target in a context of high volatility in commodity and asset prices. On October 3, 2008, Banco Central raised the monetary policy rate to 7.75%, taking into account the strong domestic demand compared to aggregate supply in a context of international uncertainty.

In light of the deepening international financial markets crisis, Banco Central decided, in the last quarter of 2008, to allow a broader fluctuation of the average money market rate. It also established a program to repurchase Peso-denominated Monetary Regulation Bills, giving holders the option to elect the currency of redemption, to reduce volatility in the foreign exchange market. As financial markets recovered stability, Banco Central once again focused on the monetary policy rate as an operational target and raised the rate to 10.0% in January 2009, given the persistent inflationary pressures. In March 2009, the global economic recession scenario, along with the decrease of inflationary expectations in the middle term, contributed to the decision to lower the monetary policy rate to 9.0%. In June 2009, the authorities decided to lower the monetary policy rate further to 8.0% considering inflation performance and as aggregate demand pressures diminished. Although inflationary pressures emerged in the second half of 2009, the monetary policy rate remained unchanged until December 2009. At that time, Banco Central decided to lower the rate to 6.25%, taking into account the decrease of uncertainty in the international context and a favorable assessment of domestic risks. Additionally, in December 2009, it narrowed the inflation target range from 3.0-7.0% to 4.0-6.0%. In September 2010, Banco Central raised the monetary policy rate to 6.50% to mitigate increasing inflationary pressures. In March 2011, Banco Central once again increased the monetary policy rate to 7.50% in response to prevailing inflation expectations for the subsequent 18 months, attributed primarily to inflationary pressures generated by the international markets and a growing domestic demand. In June 2011, Banco Central increased the monetary policy rate from 7.5% to 8.0% in response to prevailing inflation expectations. In December 2011, Banco Central again increased the monetary policy rate to 8.75%. In March 2012, Banco Central decided to maintain the monetary policy rate at 8.75%. In October and December 2012, Banco Central increased the monetary policy rate to 9.0% and 9.25%, respectively, responding to increasing inflation expectations.

On June 28, 2013, Banco Central discontinued the use of a monetary policy rate determined by reference to a short-term interest rate as its principal monetary policy tool and reverted to using the monetary base by managing monetary aggregates, focusing on variables such as the amount of money in circulation and bank deposits levels to define monetary levels. Banco Central’s use of short-term interest rates as its main monetary policy tool in an international environment characterized by depressed interest rates was considered, at the time, ineffective to control inflation. Capital inflows resulted in an appreciation of the Uruguayan peso.

Banco Central currently manages monetary aggregates (MI) to control inflation. Further, in July 2014, Banco Central broadened the inflation target range from 4.0- 6.0% to 3.0-7.0% and has maintained that range to the date of this annual report. To regulate liquidity in the market, Banco Central conducts periodic auctions of Banco Central notes denominated in domestic currency. The ability of Banco Central to implement an effective monetary policy could be curtailed by the high degree of dollarization of the Uruguayan economy. As of December 31, 2019, 74.1% of all deposits held with the banking system continued to be denominated in foreign currencies (primarily U.S. dollars).

Liquidity and Credit Aggregates

The following tables set forth the composition of Uruguay’s monetary base (expressed in terms of Banco Central’s monetary liabilities) as of the dates indicated.

Monetary Base

(in millions of US$(1))

 

     As of December 31,  
     2015      2016      2017      2018      2019  

Currency, including cash in vaults at banks

   US$ 2,276      US$ 2,372      US$ 2,658      US$ 2,472      US$ 2,269  

Other

     805        1,079        980        1,093        1,064  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Monetary base

   US$ 3,082      US$ 3,451      US$ 3,638      US$ 3,566      US$ 3,333  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) 

Exchange rate at the end of the period.

Source: Banco Central.

 

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The following tables show selected monetary indicators and liquidity and credit aggregates for the periods indicated.

Selected Monetary Indicators

(percentage change based on peso-denominated data)

 

     For the year ended December 31,  
     2015     2016(1)     2017(1)     2018(1)     2019(1)  

M1 (% change)(2)

     5.6     8.4     15.0     8.9     5.1

M2 (% change)(3)

     9.2       14.3       13.1       10.3       5.7  

Credit from the financial system (% change)

     20.2       7.5       6.1       12.4       13.2  

Average annual peso deposit rate (period end)

     7.9     6.0     5.3     5.3     6.5

 

(1) 

Preliminary data.

(2) 

Currency in circulation plus peso-denominated demand deposits.

(3) 

M1 plus peso-denominated savings deposits.

Source: Banco Central.

Liquidity and Credit Aggregates

(in millions of US$(1))

 

     2015      2016(2)      2017(2)      2018(2)      2019(2)  

Liquidity aggregates (at period end):

              

Currency, excluding cash in vaults at banks

   US$ 1,702      US$ 1,786      US$ 1,960      US$ 1,862      US$ 1,686  

M1(3)

     5,883        6,514        7,619        7,371        6,719  

M2(4)

     7,638        8,916        10,260        10,054        9,218  

M3(5)

     26,109        27,710        28,729        28,557        28,666  

Credit aggregates (at period end):

              

Private sector credit

     14,549        15,209        15,478        15,502        14,919  

Public sector credit

     1,165        1,274        1,229        1,488        1,504  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total domestic credit

   US$ 15,714      US$ 16,483      US$ 16,707      US$ 16,990      US$ 16,423  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Deposits:

              

Uruguayan Peso deposits

   US$ 5,936      US$ 7,130      US$ 8,300      US$ 8,192      US$ 7,532  

Foreign currency deposits

     23,060        22,372        21,276        21,322        22,587  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total deposits

   US$ 28,996      US$ 29,502      US$ 29,576      US$ 29,514      US$ 30,119  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Deposits of non-residents

   US$ 4,589      US$ 3,577      US$ 2,807      US$ 2,819      US$ 3,142  

 

(1) 

Exchange rate at the end of the period.

(2) 

Preliminary data.

(3) 

Currency in circulation plus peso-denominated demand deposits.

(4) 

M1 plus peso-denominated savings deposits.

(5) 

M2 plus deposits of residents in foreign currency, principally U.S. dollars.

Source: Banco Central.

Inflation

 

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The following table shows changes in the CPI and the WPI for the years indicated.

Changes in CPI and WPI

(% change from previous year at period end)

 

     CPI     WPI  

2015

     9.4     6.6

2016

     8.1       (1.9

2017

     6.6       5.4  

2018

     8.0       10.0  

2019

     8.8     20.1

 

Source: National Institute of Statistics.

In 2015, the inflation rate reached 9.4%, mainly due to the inflationary effects of the depreciation of the peso. Inflation began to subside in 2016, decreasing to 8.1%, while the inflation rate for wholesale prices was negative by 1.9%. In 2017, the inflation rate declined to 6.6%, mainly due to the stability observed in prices of non-tradable goods and the effects of the appreciation of the peso. In 2018, however, the inflation rate climbed to 8.0% (above the 3.0-7.0% target range set by Banco Central), mainly due to the inflationary effects of the depreciation of the peso. In 2019, the inflation rate reached 8.8% (above the 3.0-7.0% target range set by Banco Central), mainly due to the depreciation of the peso and an increase in beef prices driven by an increase in processed meats exports to China.

The weighted average annual interest rate for 91 to 180-day term deposits in U.S. dollars in the banking system was 0.3% in December 2015, 0.2% in December 2016 and December 2017 and 0.4% in December 2018 and 2019. The weighted average annual interest rate for 91 to 180-day term deposits in pesos in the banking system stood at 7.7% in December 2015, 5.9% in December 2016, 5.2% in December 2017, 6.0% in December 2018 and 7.1% in December 2019.

The decrease in the level of deposits held with the Uruguayan banking system and the uncertainties affecting the economy in 2002 and early 2003 resulted in significant increases in loan default rates and insolvencies with virtually no credit being extended to local businesses by local financial institutions. Since the beginning of 2003, the number of loan defaults and insolvencies has abated. As of December 31, 2015, the ratio of NLPs to total loans was 2.1% while the provision for NPLs ratio stood at 5.3% (both including Banco Hipotecario). As of December 31, 2016, the ratio of NLPs to total loans was 3.2% while the provision for NPLs ratio stood at 5.8% (both including Banco Hipotecario). As of December 31, 2017, the ratio of NLPs to total loans was 3.4% while the provision for NPLs ratio stood at 6.3% (both including Banco Hipotecario). As of December 31, 2018, the ratio of NLPs to total loans was 3.2% while the provision for NPLs ratio stood at 6.3% (both including Banco Hipotecario). As of December 31, 2019, the ratio of NLPs to total loans was 3.0% while the provision for NPLs ratio stood at 6.0% (both including Banco Hipotecario). For a discussion of Uruguay’s current monetary policy, see “—Monetary Policy.”

The following table shows the value in pesos of one UI as of the dates indicated:

 

Value in pesos as of December 31,    UI

2015

   Ps.3.2426

2016

   Ps.3.5077

2017

   Ps.3.7275

2018

   Ps.4.0270

2019

   Ps.4.3653

 

Source: National Institute of Statistics.

Foreign Exchange

Between 1990 and June 2002, the Uruguayan peso gradually lost value relative to other currencies. Banco Central allowed the peso/U.S. dollar exchange rate to fluctuate within a band of its value (initially set at 3.0% and increased to 6.0% in June 2001) and the bounds of the band were adjusted upward by 0.6% (1.2% after June 2001) each month. Interest rates for deposits in foreign currencies generally tracked movements in international interest rates. Interest rates for deposits in pesos, however, fell during the first months of 2000.

 

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In January 2002, Banco Central adjusted the monthly rate of devaluation of the Uruguayan peso from 1.2% to 2.4% and the width of the band of fluctuation for the peso to U.S. dollar exchange rate from 6.0% to 12.0%, responding to Argentina’s economic crisis and its impact on the region as a whole. The continued devaluation of the Argentine peso, and increasing uncertainties as to the future of the Brazilian economy increased the risk of a speculative run on the peso. On June 19, 2002, Banco Central allowed the peso to float. A steep devaluation of the peso followed, reaching its lowest point on September 10, 2002, when the exchange rate reached Ps.32.325 per US$1.00. Starting in 2003, the peso strengthened against the U.S. dollar. In 2008, the appreciation of the peso was temporarily interrupted by the financial crisis. Between June 1, 2013 and April 26, 2016, the peso depreciated 57.3% in line with the fluctuation recorded in other emerging economies. From April 26, 2016 to December 31, 2017, the peso appreciated 9.9% against the U.S. dollar. During 2018, the peso initially appreciated by 2.0% against the U.S. dollar throughout April 2018, and depreciated by 15.1% against the U.S. dollar between May and December 2018. During 2019, the peso depreciated 15.3% against the U.S. dollar in line with similar fluctuations recorded for currencies from other emerging economies against the U.S. dollar.

Since the mid-1970s, Uruguay has not imposed foreign exchange convertibility or remittance controls. Uruguayan residents are permitted to buy or sell foreign exchange without restriction, and there are no restrictions on the repatriation in foreign currency of capital or dividends by foreign investors.

The following table shows the high, low, average and period-end peso/U.S. dollar exchange rates for the dates and periods indicated.

Exchange Rates

(pesos per US$)

 

     High      Low      Average      Period-End  

2015

     29.873        24.075        27.318        29.873  

2016

     32.530        28.003        30.084        29.256  

2017

     29.663        27.809        28.654        28.764  

2018

     33.214        28.151        30.739        32.390  

2019

     38.012        32.425        35.284        37.336  

 

(1)

Daily interbank end-of-day bid rates.

Source: Banco Central.

 

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THE BANKING SECTOR

Prudential Regulation, Supervision and Financial System

Banco Central supervises the banking system and requires regular monthly filings of balance sheets, income statements and statements of stockholders’ equity, as well as daily reports on foreign exchange exposure and other information from the banks in the Uruguayan financial system. According to Banco Central’s charter, as most recently amended, Banco Central exercises its supervision and inspection powers over public and private financial institutions through the Superintendencia de Servicios Financieros or Financial Services Superintendency. Although the Superintendency has technical and operational autonomy, Banco Central retains certain powers in relation to receivership of impaired institutions and revocation of banking licenses. Following international best practices, the supervision of financial institutions by Banco Central is based both on the level of risk that each bank adopts and the management of those risks evidenced by each institution. To improve the supervision of local financial institutions that are affiliated with Spanish financial groups, the Superintendency entered into a Memorandum of Understanding with the supervisory authorities of Spain, Banco de España, that allows both agencies to share relevant information.

The Financial Services Superintendency imposes lending limits and cash and liquidity reserve requirements, among other requirements. Financial institutions are required to classify loans made to non-financial borrowers in accordance with the following criteria that, in addition to the performance of payment obligations, factor in the borrower’s projected ability to remain current:

 

Category 1A:    Loans secured with liquid collateral. This category includes loans secured by highly liquid collateral which banks can have access to through the exercise of set-off rights. No provisions are required for this category.
Category 1B:    Financial sector borrowers including non-resident banks and other financial institutions, whose payments are not past due and have an international credit score rated between BBB- and BBB.
Category 1C:    Borrowers with strong ability to repay their obligations. Payment obligations may not be past due by more than 10 days. In addition, based on the bank’s assessment, the borrower should be expected to remain current on its payment obligations even under extremely adverse scenarios. Provisions of 0.5% are required for this category.
Category 2A:    Borrowers with adequate ability to repay their obligations. Payment obligations may not be past due by more than 30 days. In addition, based on the bank’s assessment, the borrower should be expected to remain current on its payment obligations under adverse circumstances. Provisions of 1.5% are required for this category.
Category 2B:    Borrowers with potential financial difficulties. Payment obligations may not be past due by more than 60 days. In addition, based on the bank’s assessment, the borrower should be expected to remain current on its payment obligations under somewhat adverse circumstances. Provisions of 3.0% are required for this category.
Category 3:    Borrowers with an impaired ability to repay their obligations. Payment obligations may not be past due by more than 120 days. In addition, based on the bank’s assessment, the borrower would have difficulty in repaying its obligations on the original terms under moderately adverse circumstances. Provisions of 17.0% are required for this category.
Category 4:    Borrowers with a substantially impaired ability to repay their obligations. Payment obligations may not be past due by more than 180 days. In addition, based on the bank’s assessment, the borrower would have a high probability of defaulting on its future obligations. Provisions of 50.0% are required for this category.
Category 5:    Irrecoverable: Borrowers included in this category have payment obligations past due by more than 180 days and based on the bank’s assessment are unable to repay the loan. Provisions of 100.0% are required.

 

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Home loans and consumer loans must also be classified and reserved in accordance with the prior classification taking their specific characteristics into consideration.

Banco Central substantially adheres to the requirements of the Basel Committee on Capital Adequacy of the Bank of International Settlement and, as a general rule, since September 1998 has required ratios of total capital to risk-weighted assets equivalent to 8.0% in the case of banks, financial cooperatives, financial houses and off-shore banks, and 12.0% in case of financial cooperatives holding a limited license. Minimum capital requirements must cover credit, market and operational risk requirements under Basel II recommendations. In addition, Banco Central requires banks to maintain a minimum capital requirement for systemic risk of up to 2% and an additional capital conservation buffer of 2.5% of the bank’s risk-weighted assets. Banco Central has maintained a maximum leverage ratio of 25 times capital and has defined a roadmap for the implementation of Basel III, which was fully implemented by the end of 2019.

In order to mitigate the exposure of Uruguayan banks to the foreign exchange risk created by the denomination of a significant portion of their loan portfolio in U.S. dollars—impact on the creditworthiness of borrowers that could arise from volatility in foreign exchange rates—loans denominated in foreign currency are given a weight of 125% instead of the normal 100% applied to loans denominated in pesos and significant shifts in the dollar/peso exchange rate must be taken into consideration by the banks in assessing the borrowers’ ability to repay their obligations (and classifying the foreign currency-denominated loans in accordance with the categories described above).

Banco Central requires banks and cooperatives that apply for licenses to have a minimum capital (“responsabilidad patrimonial básica”) in UIs, of UIs 130 million. The minimum capital required for financial houses and cooperatives with limited licenses is UIs 65 million, and for off-shore banks is US$4.5 million. As of December 31, 2019, one UI was equal to Ps.4.3653.

The Uruguayan Banking System

Commercial banks in Uruguay typically provide full-service banking. Of the nine private banks operating in Uruguay as of December 31, 2019, seven were Uruguayan corporations majority-owned by foreign banks and two were branches of foreign banks. In accordance with current legislation, the Republic guarantees up to US$10,000 of deposits in foreign currency and up to UIs 250,000 of deposits in pesos, including, in both cases, capital and accrued interests.

Under Uruguayan banking legislation, banks organized in Uruguay are considered national banks even if their capital is held by a foreign bank. Foreign banks may set up branches in Uruguay that enjoy the same operating privileges as banks incorporated in Uruguay. Financial houses, the majority of which are owned by foreign banks, may conduct any type of financial operations except those reserved exclusively to banks, such as accepting demand deposits both from Uruguayan residents and from nonresidents and time deposits from Uruguayan residents. Financial cooperatives are financial institutions organized as cooperatives, which can only provide banking services to their members. There are two kind of licenses granted to financial cooperatives: the first limiting its financial operations to operating predominantly in pesos and imposing a fixed ceiling on the amount of individual loans, and the second having a broader scope and allowing cooperatives to perform the same operations as banks, making them subject to the same regulatory requirements. As of December 31, 2019, there were no financial cooperatives holding broad banking licenses in Uruguay.

Banco de la República serves as the government’s commercial bank and also operates as a commercial and development bank for industrial and farming activities. As of December 31, 2019, Banco de la República held approximately 45.0% of deposits of the private non-financial sector within the financial system (excluding off-shore banks and financial houses). Following the financial crisis of the early 1980s, Banco de la República enhanced its position as the predominant provider of long-term financing and of promotional medium-term loans for industrial and farming activities, as many private banks geared their business toward short-term loans. Certain private banks have extended medium-term loans to corporations and individuals, primarily to purchase goods, and long-term mortgage loans in connection with the purchase of real estate.

 

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The 2002 Banking Crisis

Volatility in Argentina at the end of 2001 initially caused an increase in deposits by non-residents with the Uruguayan banking system. As of December 31, 2001, U.S. dollar deposits in the financial system totaled US$14.2 billion compared to US$12.4 billion as of December 31, 2000. However, Uruguay’s two largest private banks were affiliated with Argentine banks and experienced an increase in deposit withdrawals in December 2001 and January 2002. Between December 2001 and January 2002, depositors withdrew a total of US$564 million from those two institutions.

The deposit outflow spread through the rest of the financial system in the second quarter of 2002 as the contagion effects of Argentina became clearer. On June 21, 2002, Banco Central took control of Banco Montevideo/La Caja Obrera, Uruguay’s third-largest private bank, and removed its management.

Although the government received approximately US$500 million from the IMF on June 29, 2002, and provided liquidity assistance to the local banks, confidence in the Uruguayan financial system continued to erode. Between June 1 and July 30, 2002, total deposits in the financial system decreased by US$2.2 billion. On July 30, 2002, after a sharp decrease in Banco Central’s international reserve assets to approximately US$650 million, the government declared a bank holiday (which ultimately continued for four business days).

The Uruguayan authorities sought the financial assistance of the IMF, the World Bank and the IADB for a program that would safeguard Uruguay’s payment and financial system without unnecessarily channeling additional resources to support financial institutions that had become insolvent. The cornerstone of Uruguay’s program consisted of providing the liquidity needed by the two state-owned banks (Banco de la República and Banco Hipotecario) and the three banks under the control of Banco Central at the time (Banco Comercial, Banco Montevideo/La Caja Obrera and Banco de Crédito) to honor sight deposits existing as of July 30, 2002. The IMF program also contemplated a mandatory rescheduling of U.S. dollar-denominated time deposits held with Banco de la República and Banco Hipotecario and the suspension of the activities of Banco Comercial, Banco Montevideo/La Caja Obrera and Banco de Crédito. The rescheduled deposits were repaid commencing in 2004.

On August 4, 2002, Congress passed Law No. 17,523, known as the Law for the Strengthening of the Financial System. The law (i) provided for the establishment of a fund for the stability of the Uruguayan banking system, the FESB, (ii) extended the maturities of all U.S. dollar-denominated time deposits held with Banco de la República and Banco Hipotecario to three years, (iii) transferred foreign currency-denominated liabilities of Banco Hipotecario to Banco de la República, and (iv) facilitated the liquidation of insolvent banks.

On August 4, 2002, Uruguay gained access to US$1.4 billion of additional assistance from the IMF, the World Bank and the IADB. The proceeds of this financing were contributed by the government to the FESB, thereby providing the liquidity needed by Banco de la República, Banco Hipotecario, Banco Comercial, Banco Montevideo/La Caja Obrera and Banco de Crédito to honor sight deposits existing as of July 30, 2002 and thereby prevent a meltdown of Uruguay’s payment system.

On December 27, 2002, Congress enacted an amendment to the banking law (Law No. 17,613) aimed at strengthening the banking system. The law imposed reporting obligations on bank employees that acquire knowledge of irregularities, authorized the Superintendency of Financial Institutions to impose fines on the state-owned banks, and created a public register for bank shareholders. The law also provided the basis for the liquidation of the four private banks whose operations were discontinued in connection with the bank holiday declared on July 30, 2002, and the creation of a new financial institution with the portfolio of recoverable assets previously owned by the liquidated banks, expanded the powers of Banco Central in connection with the liquidation of financial institutions and the application of prudential regulations to state-owned banks, and mandated a deposit insurance program (which was implemented in March 2005). Following the adoption of the law, the government completed the reorganization of the discontinued banks into a new commercial bank, which was set up as a private bank, although its capital was initially owned by the government, and acquired the recoverable assets of three of the liquidated banks (Banco Comercial, Banco Montevideo and La Caja Obrera), assumed certain deposits and commenced its operations in March 2003. The non-recoverable assets of the three liquidated banks are held by liquidation funds, which were initially managed by Banco Central and were subsequently transferred to a private asset management company following a public bidding process. Deposits of the liquidated banks that were not assumed by the new commercial bank entitle depositors to a pro-rata share of the assets held by the corresponding liquidation fund.

 

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During the 2002 crisis, with the exception of the country’s two largest banks, foreign-owned banks in Uruguay funded deposit outflows from their own resources.

The share of NPLs on total loans issued to the non-financial sector increased during the 2002 crisis. For all active private institutions excluding off-shore banks, NPLs increased from 5.0% to 16.0% on a net basis (from 10.0% to 25.0% on a gross basis) from December 2001 to December 2002. The deterioration of the loan portfolio can be attributed to the deepening of the recession and the devaluation of the peso. Devaluation affected the ability of local borrowers that did not have access to foreign exchange revenues to pay back their debts, which were mostly denominated in dollars. The increase of NPLs also, however, reflected the effect of the dramatic reduction of the stock of credit, from US$3.2 billion in December 2001 to US$2.0 billion in December 2002. To fund the deposit outflow, most banks ceased extending loans, thereby contributing to the increase in the share of NPLs.

Banco Central took measures to improve the soundness of the banking system, raising the minimum capital required to hold a license to operate as a financial intermediary institution (“responsabilidad patrimonial básica”) and also issuing instructions to banks requiring that the value of any collateral be reappraised after July 30, 2002 to factor into such valuation the impact of the devaluation of the peso.

Uruguay’s Banking System Following the 2002 Crisis

Beginning in March 2003, the level of deposits by the non-financial private sector started to increase and by December 2003, such deposits had reached US$7.6 billion (excluding deposits held with off-shore banks and financial houses). The successful reprofiling of the government’s foreign currency-denominated debt in June 2003 assisted in reducing the uncertainties and volatility that had affected Uruguay’s banking system since the end of 2001.

In 2003, the authorities introduced special liquid asset requirements with respect to deposits by non-residents to mitigate risks that could arise if runs on such deposits comparable to those observed during the 2002 crisis recurred.

The government also implemented certain structural reforms affecting state-owned banks. Following the transfer of all deposits to Banco de la República during the last quarter of 2002, the government streamlined the operations of Banco Hipotecario and limited its license to receive deposits. As of December 31, 2017, financial institutions had on average a total capital to risk-weighted assets ratio above the ratio required by Banco Central. As of December 31, 2018, Banco Hipotecario had US$1.91 billion of assets and US$1.01 billion of capital. As of December 31, 2019, Banco Hipotecario had US$1.82 billion of assets and US$0.86 billion of capital, and remained in full compliance with Uruguay’s current minimum capital adequacy ratios requirements.

In December 2003, Banco de la República transferred a portion of its loan portfolio, comprised mainly of past due loans, to a financial trust. A special vehicle was established to administer the transferred loans under the terms of the arrangements setting up the financial trust; Banco de la República was entitled to receive proceeds arising from recoveries under the transferred the loans in accordance with a pre-set cash flow schedule. The government guaranteed the recovery rate contemplated in the trust agreement and agreed to cover any deficit if the recovery rate were not realized. The guarantee was never called upon and it was released in December 2006 as Banco de la República achieved better than expected cash flows, from the recoveries.

At December 31, 2004, the non-financial private sector’s deposits held with the banking system (excluding deposits held with off shore banks and financial houses), of which 89.5% were denominated in foreign currencies, stood at US$8.2 billion. Approximately 54.3% of those deposits were held with Banco de la República, Banco Hipotecario and Nuevo Banco Comercial. The improved liquidity of the financial institutions also extended to Banco de la República, which was able to commence the repayment of the deposits whose maturity had been extended in August 2002 on an accelerated basis.

As inflation rates dropped and the peso appreciated, interest rates declined, but this did not result in an immediate expansion of bank credit. See “Monetary Policy and Inflation.”

In March 2005, the government established a deposit insurance regime to protect holders of U.S. dollar-denominated deposits of up to US$5,000 and peso-denominated deposits of up to the current equivalent of US$20,000 coverage in the event of a liquidation of the bank where such deposits are held. The government provided initial support for this regime through a US$20 million loan plus an additional credit line of US$40 million, which are expected to be replaced over time by insurance premiums to be paid by the financial institutions on account of deposits taken.

 

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During 2005, the non-financial private sector’s deposits with the banking system and solvency ratios improved and the share of NPLs on total loans, decreased. Deposits (including deposits in off-shore banks) increased by US$222 million in 2005, to a total of US$9.4 billion as of December 31, 2005. Despite the increase in deposits, credit extended to the non-financial sector remained relatively stable during 2005. Solvency ratios of the banking system on average remained above the 10.0% total capital to risk-weighted asset ratio required by Banco Central and 6.4% above the level at December 31, 2004. At December 31, 2005, the regulatory capital of private banks (including Nuevo Banco Comercial) was 2.2 times above the minimum regulatory requirement, while capital of the Banco de la República was at 2.1 times the minimum requirement. Finally, the share of NPLs on total loans (based on payment delinquencies) of private banks (including Nuevo Banco Comercial) decreased from 7.6% in December 2004 to 3.6% in December 2005, while it remained within a range of 7.0% and 8.0% in 2005 for Banco de la República.

In 2008, the Uruguayan financial system felt some of the impacts of the global financial crisis, mainly affecting bank earnings. Deposits of the non-financial sector with the financial system (excluding the central government and social security agencies) increased in 2008 by 19.0% or US$2.1 billion up to US$13.3 billion.

In 2015, deposits of the non-financial private sector with the banking system increased by 4.0%, from US$26.9 billion as of December 31, 2014, to US$27.9 billion as of December 31, 2015. As of December 31, 2015, approximately 80.9% of these deposits were denominated in U.S. dollars and 16.3% constituted deposits by non-residents. Credit extended to the domestic non-financial private sector by the banking system remained stable, totaling US$14.3 billion as of December 31, 2015 (of which approximately 56.3% were denominated in U.S. dollars). Credit extended to the foreign non-financial private sector by the banking sector represented 1.0% of total extended credits. The share of NPLs to total loans (based on payment delinquencies) stood at 2.1% as of December 31, 2015 (2.0% excluding Banco Hipotecario).

Regulatory capital as of December 31, 2015 represented 12.9% of risk-weighted assets (including Banco Hipotecario), while the equity adequacy and minimum regulatory capital (adjusted by risks) ratio stood at 1.43. During 2015, bank credit to the non-financial sector represented approximately 29% of Uruguay’s GDP.

In 2016, deposits of the non-financial private sector with the banking system increased by 1.0%, from US$27.9 billion as of December 31, 2015, to US$28.2 billion as of December 31, 2016. As of December 31, 2016, approximately 77.3% of these deposits were denominated in U.S. dollars and 12.6% constituted deposits by non-residents which decreased by approximately US$1.0 billion when compared to December 31, 2015, mainly as a result of withdrawals following the implementation of Argentina’s tax amnesty law. Credit extended to the domestic non-financial private sector by the banking system increased to US$15.0 billion as of December 31, 2016 (of which approximately 54.1% denominated in U.S. dollars). Credit extended to the foreign non-financial private sector by the banking sector represented 1.0% of total extended credits. The share of NPLs to total loans (based on payment delinquencies) stood at 3.2% as of December 31, 2016 (3.3% excluding Banco Hipotecario) mainly as a result of the economic deceleration.

Regulatory capital as of December 31, 2016 represented 14.1% of risk-weighted assets (including Banco Hipotecario), while the equity adequacy and minimum regulatory capital (adjusted by risks) ratio stood at 1.62. During 2016, bank credit to the non-financial sector represented approximately 28% of Uruguay’s GDP.

In 2017, deposits of the non-financial private sector with the banking system increased by 0.6% from US$28.2 billion as of December 31, 2016 to US$28.4 billion as of December 31, 2017. As of December 31, 2017, approximately 73.3% of these deposits were denominated in U.S. dollars and 9.8% constituted deposits by non-residents. Credit extended to the domestic non-financial private sector by the banking system increased by 1.5% totaling US$15.2 billion as of December 31, 2017 (of which approximately 51.3% denominated in U.S. dollars). Credit extended to the foreign non-financial private sector by the banking sector represented 1.0% of total extended credits. The share of NPLs to total loans (based on payment delinquencies) stood at 3.4% as of December 31, 2017 (3.7% excluding Banco Hipotecario).

Regulatory capital as of December 31, 2017 represented 14.2% of risk-weighted assets (including Banco Hipotecario), while the equity adequacy and minimum regulatory capital (adjusted by risks) ratio stood at 1.78. During 2017, bank credit to the non-financial sector represented approximately 26.6% of Uruguay’s GDP.

 

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In 2018, deposits of the non-financial private sector with the banking system decreased by 0.1% from US$28.40 billion as of December 31, 2017 to US$28.38 billion as of December 31, 2018. As of December 31, 2018, approximately 73.6% of these deposits were denominated in U.S. dollars and 9.8% constituted deposits by non-residents. Credit extended to the domestic non-financial private sector by the banking system increased by 0.3%, totaling US$15.2 billion as of December 31, 2018 (of which approximately 51.5% denominated in U.S. dollars). Credit extended to the foreign non-financial private sector by the banking sector represented 0.7% of total extended credits. The share of NPLs to total loans (based on payment delinquencies) stood at 3.2% as of December 31, 2018 (3.4% excluding Banco Hipotecario).

Regulatory capital as of December 31, 2018 represented 15.0% of risk-weighted assets (including Banco Hipotecario), while the equity adequacy and minimum regulatory capital (adjusted by risks) ratio stood at 1.88. Bank credit to the non-financial sector represented approximately 28.3% of Uruguay’s GDP.

In 2019, deposits of the non-financial private sector with the banking system stood at US$29.2 billion as of December 31, 2019. As of December 31, 2019, approximately 76.2% of these deposits were denominated in U.S. dollars and 10.4% constituted deposits by non-residents. Credit extended to the domestic non-financial private sector by the banking system decreased by 3.8%, totaling US$14.7 billion as of December 31, 2019 (of which approximately 50.5% denominated in U.S. dollars). Credit extended to the foreign non-financial private sector by the banking sector represented 0.9% of total extended credits. The share of NPLs to total loans (based on payment delinquencies) stood at 3.1 % as of December 31, 2019 (3.4% excluding Banco Hipotecario).

Regulatory capital as of December 31, 2019 represented 15.2% of risk-weighted assets (including Banco Hipotecario), while the equity adequacy and minimum regulatory capital (adjusted by credit, market, operational and systemic risks) ratio stood at 1.90. Bank credit to the non-financial sector represented approximately 27.7% of Uruguay’s GDP.

The authorities continue to monitor the overall condition of the banking sector closely to take early action on a case-by-case basis and correct any trend that could adversely affect the banking system as a whole.

 

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The following tables set forth classifications of loan assets of the Uruguayan banking system as of the dates indicated:

Classification of Aggregate Assets of the Uruguayan Banking System (1)

(as of February 28, 2020 in millions of Uruguayan pesos)

 

     1A     1B     1C     2A     2B     3     4     5     Total  

Banco de la República

     137,107       8       92,367       20,685       21,599       29,544       7,437       10,831       319,577  

Privately owned banks

     125,126       611       193,440       57,877       66,786       16,444       10,180       8,504       478,969  

Financial houses

     120       —         16       33       —         24       —         —         194  

Off-shore banks

     2,054       —         554       3       —         —         —         —         2,611  

Cooperatives

     46       —         419       40       26       82       10       85       695  

Total

     264,453       620       286,795       78,639       88,411       46,044       17,627       19,409       802,047  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Percentage

     32.3     0.1     35.8     9.8     11.0     5.8     2.2     2.2     100.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

The information presented in this table is classified on a quarterly basis on February, May, August and November of each year based on a credit risk analysis. Gross credit and contingent risks to the financial and non-financial sector.

Source: Banco Central.

Credit Classification of the Banking System (1)

(Based on payment behavior of clients)

(as of December 31, 2019)

 

Institution Type

   Performing
Loans
    NPLs  

Banco de la República

     98.4     1.6

Banco Hipotecario del Uruguay

     99.0     1.0

Private banks

     99.0     1.0

Cooperatives

     97.9     2.1

Financial houses

     100.0     —    

Off-shore banks

     100.0     —    

Total

     98.9     1.1

 

(1) 

Loans to both financial and non-financial sector, net of provisions.

Source: Banco Central.

Total Provisions of the Banking System for

Gross NPLs (1)

(as of December 31, 2019)

 

Institution Type

   Provisions  

Banco de la República

     225

Banco Hipotecario del Uruguay

     499

Private banks

     144

Cooperatives

     110

Financial houses

     —    

Total

     193

 

(1) 

Total provisions as a percentage of gross NPLs to financial and non-financial sector.

Source: Banco Central.

 

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The following table shows the number of financial institutions and percentage of loans and deposits corresponding to each category.

The Uruguayan Financial System

 

     As of December31,  
     2015      2016      2017      2018      2019  
     (Number)      (Number)      (Number)      (Number)      (Number)(1)      (Loans)(2)     (Deposits)(3)  

Financial Institutions:

                   

State-owned

     2        2        2        2        2        37.3     47.3

Privately-owned(1)

     14        14        14        11        11        62.1     52.6

Cooperatives

     1        1        1        1        1        0.1     0.1
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total

     17        17        17        14        14        100.0     100.0
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

(1) 

At December 31, 2019, includes nine banks, one financial house and one off-shore agency (IFE).

(2) 

Loans to non-financial sector, net of provisions.

(3) 

Non-financial private sector deposits.

Source: Banco Central.

The following table shows the bank credit provided to the private sector by Uruguay’s financial system for the periods shown.

Bank Credit to the Private Sector

(% of total credit)

 

     Banco Central(1)     Private
Commercial Banks(2)
    Banco de la
República
 

As of December 31,

   Pesos     Foreign
Currency
    Pesos     Foreign
Currency
    Pesos     Foreign
Currency
 

2015

     0.8     0.1     18.9     44.3     18.2     17.7

2016

     0.3       0.1       21.3       44.1       19.0       15.3  

2017

     0.3       0.1       21.5       41.4       20.5       16.2  

2018

     0.3       0.1       23.2       43.1       18.7       14.6  

2019

     —         —         25.0     42.9     18.8     13.3

 

(1)

Central Bank credit to the private sector was fully provisioned as of December 31, 2019.

(2) 

Includes private banks, financial houses and financial cooperatives.

Source: Banco Central.

Since the early 1980s, the majority of bank credit provided in Uruguay has been denominated in foreign currency, principally in U.S. dollars. At December 31, 2019, the amount of credit denominated in foreign currencies represented 50.5% of total credit to the non-financial private sector, including Banco Hipotecario.

The Uruguayan financial sector also includes four domestic and eleven foreign insurance companies (including the state-owned insurance company). Insurance companies are regulated on a variety of matters by Law No. 16,426, dated October 14, 1993, Decree 354/94, dated August 17, 1994, and several circulars issued by the Superintendencia de Servicios Financieros of Banco Central.

Prevention of Money Laundering

In December 2017, Congress enacted Law No. 19,574, to consolidate existing regulations on anti-money laundering into a single harmonized legal text. Further, Law No. 19,574, as further amended, expanded the list of transactions that require reporting, as well as the entities required to report suspicious transactions of the non-financial sector and requirements on politically exposed persons.

 

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Countering the Financing of Terrorism Law

On May 15, 2019, Congress enacted legislation aimed at discouraging the financing of terrorism and the proliferation of weapons of mass destruction in accordance with the United Nations Security Council Resolutions.

 

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SECURITIES MARKETS

Until 1994, the Montevideo Stock Exchange was the only stock exchange in Uruguay. In September 1994, BEVSA, the Electronic Stock Exchange, was established for use exclusively by banks and other financial institutions. Foreign exchange transactions and certificates of deposit account for most of the amount traded in the Electronic Stock Exchange.

From 2015 to 2016, the aggregate trading volume on both exchanges decreased from US$32.7 billion in 2015 to US$27.1 billion in 2016, mainly due to a decrease in the issuance of government bonds and a decrease in transactions with certificates of deposit. In 2017, total trading volume increased to US$30.2 billion, mainly due to an increase in the issuance of certificates of deposit by the private sector. In 2018, total trading volume increased to US$35.2 billion, primarily as a result of an increase in the issuance of certificates of deposit by banking entities. In 2019, the aggregate trading volume decreased to US$30.8 billion, primarily as a result of a decrease in transactions involving securities issued by the central government and certificates of deposits and other securities issued by the private sector.

Consolidated Montevideo Stock Exchange &

Electronic Stock Exchange Securities Trading Volume

(in millions of US$)

 

     2015      2016      2017      2018      2019  

Private sector securities:

              

Equities

   US$ 80      US$ 50      US$ 9      US$ 6      US$ 4  

Bonds

     247        61        15        35        79  

Certificates of deposit and other

     14,010        11,278        15,836        22,611        21,115  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total private sector securities(1)

     14,337        11,390        15,860        22,652        21,198  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Public sector securities:

              

Central government

     17,803        15,695        14,150        11,820        9,471  

Public enterprises

     602        4        205        684        149  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total public sector securities

     18,405        15,700        14,355        12,504        9,620  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   US$ 32,742      US$ 27,090      US$ 30,215      US$ 35,156      US$ 30,818  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Number of listed companies:

              

Equities

     7        9        8        8        7  

Bonds and other debt issuers

     50        46        54        57        61  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   US$ 57      US$ 55      US$ 62      US$ 65      US$ 68  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Source: Banco Central, based on reports of the Montevideo Stock Exchange and Electronic Stock Exchange.

The Uruguayan securities market has been undergoing institutional, legal and operational changes aimed at attaining greater levels of activity. Banco Central, through the Superintendencia de Servicios Financieros, has the power to regulate and supervise the securities markets, including setting professional ethical standards, requiring information, such as periodic reports from listed companies, setting controls and penalties and regulating the relationship between issuers and investors in the stock market. The basic regulatory framework for the Uruguayan securities market is set forth in Law No. 18,627 (issued in 2009 to replace Law No. 16,749), as amended, governing public and private offerings of equity and debt securities in Uruguay, and Law No. 16,774 defining the necessary characteristics and terms for the regulation and supervision of mutual funds and providing management guidelines and professional secrecy and adequacy standards.

 

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PUBLIC SECTOR FINANCES

The Uruguayan public sector comprises the central government, local governments, non-financial public sector institutions (including government-owned companies), financial public sector institutions (including Banco Central, Banco de la República and Banco Hipotecario), and a state-owned insurance company, Banco de Seguros del Estado. The consolidated Uruguayan public sector fiscal accounts reflect the revenues and expenditures of the central government, including local governments, non-financial public sector institutions, and Banco de Seguros del Estado. Central government expenditures are financed chiefly through tax collections, domestic and external borrowings, and transfers from state-owned companies. Tax collections comprise value-added taxes, excise taxes, income taxes, net worth taxes, tariffs and other minor taxes. Central government expenditures consist primarily of wages, salaries and transfers to the social security system, with interest on public debt and the purchase of goods and services accounting for most of the balance. Banco Central generally runs deficits principally due to interest payments on deposits of the financial sector net of remunerated assets, and its own operational costs.

 

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The following table sets forth a summary of public sector accounts (calculated on a cash basis) and as a percentage of GDP for the periods indicated.

Public Sector Finances

(in millions of US$ and % of total GDP)

 

     2015     2016     2017(1)     2018(1)     2019(1)  

NON-FINANCIAL PUBLIC SECTOR REVENUES

   US$ 15,456       29.0   US$ 15,471       29.3   US$ 17,717       29.7   US$ 18,636       31.3   US$ 17,274       30.8

Central government

     10,495       19.7       10,741       20.3       12,587       21.1       12,907       21.7       11,859       21.2  

Value-added taxes

     4,890       9.2       4,767       9.0       5,489       9.2       5,454       9.2       5,160       9.2  

Income taxes (corporate and personal)

     2,870       5.4       3,182       6.0       4,080       6.8       4,240       7.1       3,926       7.0  

Taxes on capital

     604       1.1       611       1.2       663.       1.1       700       1.2       682       1.2  

Other taxes on goods and services

     1,389       2.6       1,324       2.5       1,604       2.7       1,571       2.6       1,463       2.6  

Tax credit certificates

     (902     (1.7     (907     (1.7     (1,244     (2.1     (1,259     (2.1     (1,307     (2.3

Foreign trade taxes

     565       1.1       511       1.0       600       1.0       679       1.1       627       1.1  

Others

     1,080       2.0       1,252       2.4       1,396       2.3       1,523       2.6       1,308       2.3  

Social Security Revenues (BPS)(2)

     3,979       7.5       3,937       7.5       4,580       7.7       5,291       8.9       4,937       8.8  

Public Enterprises Primary Balance

     982       1.8       793       1.5       550       0.9       437       0.7       478       0.9  

NON-FINANCIAL PUBLIC SECTOR PRIMARY EXPENDITURES

   US$ 15,337       28.8   US$ 15,770       29.9   US$ 17,775       29.8   US$ 18,215       30.6   US$ 17,537       31.3

Central government - Banco de Previsión Social (BPS) Current Primary Expenditure

     14,104       26.5       14,489       27.4       16,543       27.8       16,892       28.4       16,217       29.0  

Wages and salaries

     2,659       5.0       2,720       5.1       3,106       5.2       3,183       5.3       3,105       5.5  

Non personnel expenditures

     1,998       3.7       2,056       3.9       2,188       3.7       2,270       3.8       2,206       3.9  

Pension payments

     4,997       9.4       5,040       9.5       5,952       10.0       6,061       10.2       5,815       10.4  

Transfers

     4,450       8.4       4.674       8.8       5,298       8.9       5,378       9.0       5,092       9.1  

Investment(3)

     1,233       2.3       1,280       2.4       1,231       2.1       1,324       2.2       1,319       2.4  

Local Governments Primary Balance(4)

     67       0.1       39       0.1       43       0.1       29       —         (43     (0.1

Banco de Seguros del Estado (BSE) Primary Balance

     (145     (0.3     20       —         (65     (0.1     (90 )&nbs