Latin American relations Archives

A quick read about Uruguay’s stronger-than-expected growth projections. In spite of some of the economic difficulties of its neighbors, Uruguay is proving itself, time and time again, as a beacon of stability within the region. As usual, my emphasis is in bold with my comments in italics.

IMF ups forecast for Uruguay’s growth in 2016 to 0.7% – In October it had anticipated 0.1%

Friday, December 9th 2016 – 16:30 UTC

Uruguay was doing better than the October figures were telling, according to IMF.

The International Monetary Fund (IMF) on Thursday raised its forecast for economic growth in Uruguay this year to 0.7%, a substantial increase from the 0.1% estimated in October, (this is a seven-fold increase from the original projection) and underlined the country’s resilience to the problems of its neighbors Argentina and Brazil.

”Uruguay is proving resistance to deep recessions in its large neighbors (Argentina and Brazil),“ said the IMF’s technicians mission after finishing its visit to the country for the annual review of the economy. For the year, the IMF expects Uruguay to grow by 0.7% and a slight rebound in 2017 to 1.1%, as it ”improves the external environment and private consumption“. In October, the IMF had placed calculations for Uruguay in an expansion of 0.1% in 2016 and 1.2% in 2017.

The report by the international financial institution highlights that ”despite the slowdown in activity, inflation persists at levels above the target band set by the central bank,“ ranging from 3% to 7% a year. Following the measures taken by the Central Bank this year, and having hit a year-on-year high in May of 11%, “inflation is forecast to remain below 9% in 2017 and it will be progressively reduced to approximately 6% in the medium term.”

Looking ahead, the IMF stressed that ”a slower than expected recovery in Argentina and Brazil could be a drag on the economy, and the same would happen with weaker growth projected in China.“

In addition, IMF officials stressed the need to move forward in fiscal consolidation ”as debt levels have increased significantly in recent years, and financial markets closely monitor implementation of the adjustment,” with the goal of reducing the budget deficit to 2.5% of GDP by 2019.

An article from the China Daily about recent trade discussions between Uruguay and China and how these discussions are impacting neighboring countries in LatAm. My bold and comments in italics:

China, Uruguay establish strategic partnership

Chinese President Xi Jinping (R) shakes hands with his Uruguayan counterpart Tabare Vazquez during their talks at the Great Hall of the People in Beijing, capital of China, Oct 18, 2016. [Photo/Xinhua]

BEIJING — Chinese President Xi Jinping and his Uruguayan counterpart Tabare Vazquez on Tuesday agreed to establish a strategic partnership based on respect, equality and mutual benefit. (Vazquez also signed infrastructure investment and technical agreements that will pave the way for greater agricultural exports to China)

The two heads of state made the decision during talks in the Great Hall of the People in Beijing following a red-carpet welcome ceremony.

Xi urged China and the Latin American country to maintain high-level exchanges and enhance communication at all levels to promote mutual understanding and trust. (Uruguay’s bid for a free trade agreement, however, is not without controversy. Uruguay is one of the five full members of MERCOSUR, along with Argentina, Brazil, Paraguay, and Venezuela. Argentina’s President, Mauricio Macri, said on Oct 20th that any China-Uruguay free trade agreement negotiations should be conducted through MERCOSUR. According to the bloc’s rules, full member states cannot negotiate free trade agreements with non-members without consent of their MERCOSUR peers. Vazquez responded to Macri by saying that Argentina and Brazil have been pushing for more flexible rules that would allow members to negotiate bilateral trade agreements)

China appreciates Uruguayan support for the Belt and Road initiative, and hopes both sides will strengthen integration of development strategies to upgrade economic and trade ties, said Xi.

China is willing to encourage more investment in Uruguay, channelled toward infrastructure projects, Xi stressed, adding that the country is also looking forward to expanding cooperation in agriculture, clean energy, communications, mining, manufacturing and finance.

In addition, Xi called on both sides to promote people-to-people exchanges and lift ties in culture, education, science and technology, Antarctica, tourism as well as football sport.

As for global affairs, Xi said that China is ready to strengthen collaboration with Uruguay in climate change, economic governance, UN’s 2030 Agenda for Sustainable Development, peace-keeping and South-South cooperation.

On China-Latin America relations, Xi stressed that China is a strong supporter for Latin American stability, unity and development. China is ready to work with Latin American countries to forge a community of shared future. (The other side of this argument was articulated by Argentina and Brazil when they voiced that China was the major exception to their pro-trade rhetoric. Both governments are under pressure at home that a China-Uruguay free trade deal would exacerbate their manufacturing sectors, particularly that Chinese imports could outcompete their local products. For example, Brazil wants to negotiate a trade deal that makes it easier to export the higher-value goods it produces, such as aircraft, but is reluctant to allow more Chinese imports into its borders).

Echoing Xi’s remarks, Vazquez said that the establishment of a strategic partnership will begin a new chapter of Uruguay-China ties. Uruguay welcomes more Chinese investment in the country and is willing to negotiate a free trade agreement with China.

Uruguay supports the one-China policy and backs China’s reunification, according to Vazquez.

Speaking highly of China’s significant role in global affairs, Vazquez stressed that Uruguay was ready to work with China to push forward Latin America-China relations and enhance coordination on international and regional issues.

Macri and Vazquez met on Oct 24 in Buenos Aires to further discuss Uruguay’s potential deal with China. More on that shortly