Uruguay: Stable and Attractive

BY CHRONICLE STAFF

Normally, the election of a leftist, ex-guerrilla as president would cause local and foreign investors alike to stop all new investments and instead get their money out as quick as possible.

However, Sunday’s election of Jose Mujica, a former member of the infamous Tupamaros guerrillas in the 1970's, as president of Uruguay became a non-event for many investors.

“We believe the outcome of yesterday’s runoff will have little material impact on policy direction, as Mujica has actively campaigned on pledges to continue the moderate economic policies of President [Tabare] Vasquez, which have generally emphasized fiscal discipline, financial stability and free-market practices,” JP Morgan analyst Franco Uccelli said in an analysis today. “Moreover, Mujica has indicated that he will defer to his running mate, former Finance Minister Danilo Astori, on all economic policy matters. Accordingly, we expect Mujica’s election to be a non-event from a credit standpoint and hence have virtually no impact on Uruguay’s bond valuations.”

URUGUAYAN LULA?

U.S.-based consultancy IHS Global Insight calls Mujica an “Uruguayan Lula,” comparing him to Brazil’s president Luiz Inacio Lula da Silva, who had a radical past before he became president in 2003 and followed moderate economic policies. Mujica himself has stated he aims to follow Lula-type policies rather than those of Venezuela’s strongman Hugo Chavez.

“While Mujica does belong to the more leftist wing of the [ruling] FA [Frente Amplio coalition], concerns about a shift in direction on economic or social policies appear unfounded,” IHS Global Insight said in a commentary today. “A drift to the left is all the more unlikely as Uruguay is not awash with hydrocarbon revenue, which has underpinned the rise and consolidation of radicalism in countries such as Ecuador, Venezuela, and Bolivia.”

However, not all is rosy.  “Even though Mujica has Astori as a guarantee for the continuation of Vazquez policies and has modernized his thinking, both his too-spontaneous personality as well as the hard-line sector that surround him and have their own weight, creates an environment with some tension,” warns Gabriel Salvia, president of Argentina-based think tank Cadal.

LATIN AMERICAN STAR

If Mujica manages to continue Vazquez’ policies, that would mark another benefit of doing business in Uruguay, which already scores high on nearly all international rankings for key issues ranging from economic freedom to corruption and crime. Uruguay this year replaced Chile as the Latin American country with the highest technology level, according to the Latin Technology Index from Latin Business Chronicle.  

Unlike neighboring Argentina, Uruguay offers a solid democracy. In fact, it is one of only three countries in all of Latin America that ....

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Keywords: Competitiveness, Democracy, Security, Technology, Trade