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Uruguay: A Perspective

Economic growth fuels investment needs

Uruguay is a mature democracy with solid public institutions and a stable political system. Its judiciary system is independent, rule of law is firmly embedded in the country’s national culture, and legal safeguards are broadly observed.

In recent years, the country has achieved strong growth (an average of 5.5 percent from 2004 to 2009 and 8.5 percent in 2010) driven by a robust external sector led by farm commodity exports and tourism, in addition to greater foreign investment and an expansion of domestic demand. Between 2004 and 2010, Uruguay’s public debt to GDP ratio fell from 97 percent to 58 percent, its urban poverty rate dropped from 31.9 percent to 12.6 percent, more than 234,000 jobs were created, and unemployment by the end of the period had dipped to a historic low of 5.4 percent.

The IDB is helping to meet the country’s investment needs created by its strong economic performance, particularly in the agribusiness, transport, and energy sectors.

Building on this strong foundation, the Uruguayan government is working to improve its ability to efficiently meet the needs of its citizens, in particular to maintain the country’s high levels of welfare, with its low inequality and poverty. In regards to measures to maintain fiscal sustainability, the Uruguayan government has been very active in debt management, mainly through the reduction of currency risks. Given the country’s serious debt management initiatives, reduction of currency risks, and its good growth prospects, it is expected that Uruguayan debt will be granted investment grade this year. Uruguayan debt yields are already similar to those of other Latin American countries that have their debt rated as investment grade.

Efforts to reduce poverty, inequality, and exclusion include programs targeted at vulnerable age groups or specific geographic areas. Although Uruguay’s education indicators compare favorably with those elsewhere in the region, the country must reduce primary school repetition rates, increase secondary school completion rates, and provide educational options that equip students with skills needed by the private sector.

In the private sector, the country must continue to expand economic growth and increase investment in physical capital to build on its increased investment rate in recent years, which averaged 20 percent of GDP between 2005 and 2010. Investment in infrastructure will be particularly important to enable the country to remain competitive.

As a small economy, Uruguay faces the need for greater participation in the global marketplace to achieve a minimum scale needed to produce efficiently in sectors in which the country has—or could create—comparative advantages. Deeper regional integration with MERCOSUR and broader integration with the rest of the world will further ensure the country’s growth prospects. Important in this regard will be the country’s efforts to strengthen institutions that help the private sector enter external markets by ensuring product quality and safety and other requirements demanded by its international trading partners.


Stories of change

The IDB has worked with Uruguay to help build on that country’s solid foundation of democracy and rule of law to further raise living standards of all citizens. A particular focus of Bank support has been to improve Uruguay’s competitiveness by strengthening education and putting technology to work for the private sector.  

IDB in Uruguay

The IDB is one of Uruguay’s major sources of international financing, with disbursements of Bank loans accounting for nearly half of multilateral funding for the country’s public sector over the past five years.  Read more >>

Strategic Partnerships

The IDB maintains close relations with the leading multilateral institutions that are active in Uruguay.

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