Uruguay: Strong Institutions and
Business Opportunities
2012 IIF Latin American Economic Forum
March 17, 2012
Mario Bergara
http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results
Democracy and Corruption Perception Indexes
Corruption Perception Index (2011) The Economist – “The World in 2011”
Survey on Democracy Around the World
Some institutional indicators
Ranking Country
1 Norway
2 Iceland
3 Denmark
17 Uruguay
19 United States
29 France
35 Chile
45 Brazil
51 Argentina
Ranking Country
1 New Zealand
22 Chile
25 Uruguay
31 Spain
50 Costa Rica
73 Brazil
75 China
80 Peru
100 Argentina / Mexico
Source: http://www.prosperity.com/rankings.aspx
Factors considered:
• Economy
• Entrepreneurship and opportunity
• Governance
• Education
• Health
• Safety and security
• Personal freedom
• Social capital
Legatum Prosperity Index (as of 2010)
Prosperity and Economic Freedom indexes
Economic Freedom Index (as of 2011)
• Lack of corruption
• Absence of non-tariff trade barriers
• Tax burden
• Rule of the law
• Regulatory burden
• Restrictions on banks
• Labor market regulation
• Black market activities
Source: http://www.heritage.org/index/Ranking.aspx
Factors considered:
Ranking Country
1 Norway
2 Denmark
3 Finland
7 Canadá
10 United States
28 Uruguay
32 Chile
Ranking Country
1 Hong Kong
2 Singapore
3 Australia
9 United States
11 Chile
33 Uruguay
113 Brazil
138 Argentina
Some institutional indicators
Human Opportunity and Business Environment Indexes
Source: IFO and FGV - Range from 1 to 9
Some institutional indicators
Business Climate Index
Orden País HOI
1 Chile 95
2 Uruguay 92
3 Mexico 90
4 Costa Rica 89
5 Venezuela 89
6 Argentina 89
10 Brazil 79
12 Paraguay 73
14 Peru 71
Regional Index 77
Source: World Bank
Human Opportunity Index
Ranking Country
Index
(Year ending
in Jan 10)
Index
(Year ending
in Jan 12)
1 Uruguay 5.3 6.7
2 Colombia 4.5 6.5
3 Peru 6.3 6.3
4 Chile 5.7 6.1
5 Paraguay 4.6 5.9
6 Brazil 6.3 5.7
7 Argentina 3.8 5.5
8 Ecuador 3.6 5.5
Latin America 4.6 5.2
9 Mexico 3.9 4.6
10 Bolivia 3.8 4.2
11 Venezuela 2.6 3.6
WEF Global Competitiviness Index
Country
2006
2011 2006-2011
Comparison
Chile 27 31 -4
Brazil 66 53 +13
Mexico 52 58 -6
Uruguay 79 63 +16
Peru 78 67 +11
Colombia 63 68 -5
Argentina 70 85 -15
Ecuador 94 101 -7
Bolivia 100 103 -3
Paraguay 108 122 -14
Some institutional indicators
Money Laundering and Financing of Terrorism: Compliance with best practices
Ranking Country
1 EEUU
Panamá
3
Canadá
Colombia
Uruguay
6 Chile
7 Perú
8 Brasil
México
10 Bolivia
11 Costa Rica
12
Argentina
Ecuador
Paraguay
Ranking Country
1 EEUU
2 Canadá
3
Colombia
Panamá
Uruguay
6 Brasil
7 Chile
Perú
9 Bolivia
Paraguay
11
Argentina
Costa Rica
Ecuador
México
MONEY LAUNDERING +
FINANCING OF TERRORISM:
Recommendations wholly or
partially implemented
FINANCING OF TERRORISM:
Recommendations wholly or
partially implemented
Ranking Country
1 EEUU
Colombia
3 Panamá
4 Uruguay
5 México
6 Canadá
7 Perú
8 Chile
Brasil
10 Costa Rica
11 Bolivia
12 Paraguay
13 Argentina
14 Ecuador
MONEY LAUNDERING:
Recommendations wholly or
partially implemented
* Based in the last evaluations availables by December 2010
Some institutional indicators
Gross Domestic Product: a growing economy with a healthy expenditure composition
The macroeconomic outlook
6.3% 4.5%
-8.4%-4.0%
-9.3%
-9.1%
-7.0%
-2.8%4.6%
8.6%
10.3%
3.6%
3.2%
3.4%
3.8%
8.5%9.1%
8.4% 7.0%
3.9%
3.4% 2.4%
4.9%5.7%
7.5%
7.8% 6.0%
8.3%7.7% 6.6%
2.5% 0.9%
3.2%
4.9%
9.9%
10.5%
7.6% 6.3%
6.7% 4.7%
7.5%
-20%
-16%
-12%
-8%
-4%
0%
4%
8%
12%
16%
20%
80
85
90
95
100
105
110
115
120
125
130
135
140
145
150
Mar-02
Jun-02S
ep-02D
ec-02M
ar-03Jun-03S
ep-03D
ec-03M
ar-04Jun-04S
ep-04D
ec-04M
ar-05Jun-05S
ep-05D
ec-05M
ar-06Jun-06S
ep-06D
ec-06M
ar-07Jun-07S
ep-07D
ec-07M
ar-08Jun-08S
ep-08D
ec-08M
ar-09Jun-09S
ep-09D
ec-09M
ar-10Jun-10sep-10D
ec-10M
ar-11Jun-11S
ep-112011f2012f
GDP Seasonal Adjusted 2005=100 (LHS) Market Expectations, as of February 2012 % Interannual Change (RHS)
Employment and Unemployment in Record Lows
The macroeconomic outlook
4
5
6
7
8
9
10
11
12
13
14
50
52
54
56
58
60
62
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Employment (LHS) Unemployment (RHS)
External sector: increasing trade and relevance of FDI
The macroeconomic outlook
-540
-340
-140
60
260
-140
60
260
460
660
860
1 060
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
US
D m
illion
Trade Balance (RHS) Exports (LHS) Imports (LHS)
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2 000
2 200
2 400
2 600
2 800
3 000
3 200
3 400
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Oct-10 - Sep-11
USD
milli
on
Tourism services Other services (software, transport, logistic, etc)
-3000
-2000
-1000
0
1000
2000
3000
4000
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Oct-10 - Sep-11
Current Account Financial Account (including E&O) o/w FDI
Being an oil importer, the impact of high commodity prices is mixed in Uruguayan terms of trade
The macroeconomic outlook
Real Exchange Rate: similar scenario than emerging markets
The macroeconomic outlook
60
90
120
150
180
210
Ap
r-00
Au
g-00
De
c-00
Ap
r-01
Au
g-01
De
c-01
Ap
r-02
Au
g-02
De
c-02
Ap
r-03
Au
g-03
De
c-03
Ap
r-04
Au
g-04
De
c-04
Ap
r-05
Au
g-05
De
c-05
Ap
r-06
Au
g-06
De
c-06
Ap
r-07
Au
g-07
De
c-07
Ap
r-08
Au
g-08
De
c-08
Ap
r-09
Au
g-09
De
c-09
Ap
r-10
Au
g-10
De
c-10
Ap
r-11
Au
g-11
De
c-11
20
00
=1
00
Global Rest of the world Argentina+Brazil
Sovereign Spread: the market treats Uruguay as Investment Grade
The macroeconomic outlook
0
500
1000
1500
2000
2500
3000
Feb-00
Jul-00
Dec-00
May-01
Oct-01
Mar-02
Aug-02
Jan-03
Jun-03
Nov-03
Apr-04
Sep-04
Feb-05
Jul-05
Dec-05
May-06
Oct-06
Mar-07
Aug-07
Jan-08
Jun-08
Nov-08
Apr-09
Sep-09
Feb-10
Jul-10
Dec-10
May-11
Oct-11
Mar-12
bps
EMBI+ Uruguay
Inflation is the main concern in the balance of risks
The macroeconomic outlook
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
Apr-05
Jul-05
Oct-05
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
CBU Target CPI Inflation rate Inflation Expectations (12m)
Monetary policy has tightened and has been complemented with changes in the structure of reserve requirements
The macroeconomic outlook
18
19
20
21
22
23
24
25
0%
5%
10%
15%
20%
25%
30%
Ma
r-07
Jun
-07
Se
p-0
7
Dec
-07
Ma
r-08
Jun
-08
Se
p-0
8
Dec
-08
Ma
r-09
Jun
-09
Se
p-0
9
Dec
-09
Ma
r-10
Jun
-10
Se
p-1
0
Dec
-10
Ma
r-11
Jun
-11
Se
p-1
1
Dec
-11
Ma
r-12
Ca ll/Aver ag e Mar ket Rat e Mon eta ry Po licy Ra te UYU/U SD (RH S)
The external reserve assets position remains strong
The macroeconomic outlook
0500
100015002000250030003500400045005000550060006500700075008000850090009500
10000105001100011500
Nov-02
Mar-03
Jul-03
Nov-03
Mar-04
Jul-04
Nov-04
Mar-05
Jul-05
Nov-05
Mar-06
Jul-06
Nov-06
Mar-07
Jul-07
Nov-07
Mar-08
Jul-08
Nov-08
Mar-09
Jul-09
Nov-09
Mar-10
Jul-10
Nov-10
Mar-11
Jul-11
Nov-11
Mar-12
US
D m
illion
On the fiscal front, Uruguay keeps a prudent stance
The macroeconomic outlook
-3.8%
-3.8%
-4.1%
-2.8%
-1.9%
-0.7%
-0.5%
0.0%
-1.5%
-1.7%
-1.1%
-0.8% -1.2%
-1.2%
-0.9%
0.2%
3.0%
3.8%
4.0% 3.6%
3.5%
1.3% 1.1%
1.9%
2.2% 1.8%
-1.1%
-1.2%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Jan-12
2012f
2013f
% G
DP
Overall Public Sector Balance Primary Balance Market expectations, as of February, 2012
Public debt declines and remains in a very sustainable track
The macroeconomic outlook
26%32%
59%
69%67%
52% 47%
41%
27%
37%
31%28%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Oct-10-S
ep-11
% G
DP
Gross Public Debt Net Public Debt
Portfolio management of the government’s balance sheet reduces macro risk
Strong dedollarization of
public debt in both gross
and net terms, which
reduces real exchange
rate risk
Maturity transformations
improved liquidity risk.
Commodity risk:
Treasuries in the past
showed a strong negative
correlation with oil.
The macroeconomic outlook
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
2002
2003
2004
2005
Q1
2005
Q2
2005
Q3
2005
Q4
2006
Q1
2006
Q2
2006
Q3
2006
Q4
2007
Q1
2007
Q2
2007
Q3
2007
Q4
2008
Q1
2008
Q2
2008
Q3
2008
Q4
2009
Q1
2009
Q2
2009
Q3
2009
Q4
2010
Q1
2010
Q2
2010
Q3
2010
Q4
2011
Q1
2011
Q2
2011
Q3
DX Denominated Debt (% of Total)
35%
40%
45%
50%
55%
60%
65%
70%
75%
2002200320042005Q12005Q22005Q32005Q42006Q12006Q22006Q32006Q42007Q12007Q22007Q32007Q42008Q12008Q22008Q32008Q42009Q12009Q22009Q32009Q42010Q12010Q22010Q32010Q42011Q12011Q22011Q3
Residual Maturity > 5 years (% of Total)
Financial Stability: although growing, domestic credit is still low, and no signs of overheating in domestic asset prices
The macroeconomic outlook
2 8003 0003 2003 4003 6003 8004 0004 2004 4004 6004 8005 0005 2005 4005 6005 8006 000
20 00024 00028 00032 00036 00040 00044 00048 00052 00056 00060 00064 00068 00072 00076 000
Oct-07
Jan-08A
pr-08Jul-0
8O
ct-08Jan-09A
pr-09Jul-0
9O
ct-09Jan-10A
pr-10Jul-1
0O
ct-10Jan-11A
pr-11Jul-1
1O
ct-11Jan-12
Mill
ions
of
US
D
Mill
ions
of
UY
P
In Uruguayan Pesos In Dollars
Non-Performing Loans
Solvency
Liquidity
Healthy and well supervised financial sector
Deposits
The macroeconomic outlook
65%
68%
71%
74%
77%
80%
83%
86%
89%
0
5 000
10 000
15 000
20 000
25 000
Sep-00
Jan-01
May-01
Sep-01
Jan-02
May-02
Sep-02
Jan-03
May-03
Sep-03
Jan-04
May-04
Sep-04
Jan-05
May-05
Sep-05
Jan-06
May-06
Sep-06
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
US
D m
illio
n
$ (Residents) U$S (Residents) USD (Non Residents) % Dolarization (Residents)
0%
2%
4%
6%
8%
10%
Jan-06
May-06
Sep-06
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
40%
50%
60%
70%
80%
90%
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
30 days 90 days
100%
125%
150%
175%
200%
225%
250%
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Resilience to face external shocks
Extensive coverage of international reserves
Friendly maturity schedule of public debt
Sound financial system
Excellent relationship and funding availability from multilateral
organizations: contingent loans
Steady improvement in credit ratings
Decrease in dollarization and exchange risk exposure
Macroprudential approach: measures on financial stability
Increasing diversification and share of emerging countries in
trade structure
Continuous primary fiscal surplus, overall NFPS spending below
30% of GDP
The macroeconomic outlook
Policy Perspective
Enhancing the prudence of macroeconomic policy: coherent
fiscal, monetary and financial policies
Focus on financial stability: micro and macro-prudential
perspectives as complementary approaches
Identify bottlenecks for sustainable growth
Physical capital: Infrastructure
Human capital: Education
The macroeconomic outlook
Mario Bergara
Uruguay: Strong Institutions and
Business Opportunities
2012 IIF Latin American Economic Forum
March 17, 2012
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