Uruguay falls and is among the worst economic conditions in Latin America, what happened?

MONTEVIDEO.- The Latin America’s economic climate improved in the 2nd quarter of the year rcompared to the previous quarter and this is the fourth increase followed by the quarterly indicator. However, “its two components continue to suggest different valuations depending on the time horizon. Although expectations for the coming months are optimistic, the perception of the current situation remains rather unfavorable ”, declared the Getulio Vargas Foundation (FGV), who prepared the study.

Uruguay is one of four countries where the economic climate deteriorates in the second quarter and is among the worst in the region. The FGV’s economic climate indicator (ECI) in Latin America rose from 70.5 to 81.2 points between the first and second quarters of 2021. Despite the increase of 10.7 points, the indicator remains within the unfavorable zone of the economic cycle with a combination of assessments on the present and optimistic expectations for the near future In this sense, the result is similar to that observed in the survey of the first quarter, ”the report says.

The FGV recalled that “the ICE is a geometric mean between the current situation indicator (ISA) and the expectations indicator (IE). Both rose in the second quarter of 2021. The ISA rose 8.8 points “in the second quarter compared to the first, but” the level of the indicator, at 28.2 points, is still extremely low if the the limit of the pitch between the unfavorable and favorable zones is considered to be 100 points ”. He added that “the Latin American ISA has been in an unfavorable zone since July 2012”.

In turn, “EI also contributed to the improvement in ICE, from 143.6 points to 156 points, between quarters. IS has remained in the favorable zone since July 2016, except in the first quarter of 2020, at the height of the health crisis “due to COVID-19. In this regional context, What happens in the case of Uruguay according to the economic climate index? The economic climate improved in six countries and deteriorated in four.

“Colombia recorded the strongest positive change, 22.5 points, driven by the improvement in the ISA, as the EI of this country only increased by 4.3 points over the quarter. The country has the third highest ICE in the second quarter, behind Paraguay and Chile, ”the report said. However, “this result must be qualified in the light of the demonstrations which started in the last days of April and which intensified in the first weeks of May. The questionnaires were answered before the end of April and, in this case, the perception that the protests would spread was not clear, ”explained the FGV.

Besides Colombia, “Bolivia and Mexico showed positive variations in all three indicators. Bolivia differs from Colombia and Mexico in that the greatest variation lies in the expectation indicator and not in the assessment of the current situation, as in the other two countries. Peru recorded the second largest positive change in EI, but expectations fell slightly, “the study says.” Brazil and Ecuador are improving the economic climate only because of the increase in the IE. In Brazil, the ISA fell 7.4 points and is now the fourth worst in the region (17.6 points), ”he added. In turn, “the ECI remained relatively stable in Chile, with a decline of 1.4 points. The registered Argentina, Uruguay and Paraguay drop above 10 points. In all countries, EI fell, although only Argentina went from a favorable scenario to a negative scenario. The assessment of the current situation improves by less than 10 points in Chile and Argentina, worsens in Uruguay and remains stable in Paraguay, ”the report said.

In summary, Paraguay has the best economic climate in the region with 100 points (and the only one that is on the border between favorable and unfavorable economic climate), followed by Chile with 94.4 points (already in an unfavorable zone), Colombia has 92 points, Brazil 82.2 units and the Mexico 81.3 points. All are above the Latin American average. Below come Peru (80.9), Bolivia (69.9), Uruguay (60.3), Ecuador (51.7) and Argentina (49.8). In the case of Uruguay, it went from one of the four countries with the best economic climate in the first quarter (with 71.8 points) to one of the three worst in the second quarter.

This decrease is explained by the current situation, where the ISA in Uruguay is 0 points (the same as that of Ecuador), which places it in last place in Latin America. Was it so far in April the worst month of the Covid-19 pandemic for Uruguay, with several days as one of the countries with the highest number of infections and deaths per million population in the world. On the other hand, in expectations, the ISE of Uruguay places it among the best four in the region with 157.1 points (5.4 units less than in the first quarter), behind Brazil (182.4 points ), Colombia (176.5) and Chile (166.7).

Finally, in Uruguay, its GDP growth forecast for 2021 has been revised downwards (from 3% in the first quarter to 2.2% in this one), “in which case the result is consistent with the decline in ICE resulting from a decline in the current situation and indices of expectations, ”said the FGV. Uruguay is the second least growing economy in the region above that of Ecuador (1.9%).

The FGV study also analyzes what are the main problems for each country, based on the proportion of specialists who indicated a problem as relevant in their country. “Therefore, the higher the indicator, the more relevant the problem will be. In the Latin American aggregate, the pandemic followed by mistrust of economic policy and lack of innovation are the elements that obtained the highest score, ”he said. However, we note that in addition to the aforementioned aspects, five items obtained values ​​greater than 80 points: inadequate infrastructure; the application of the COVID-19 vaccine is slower than expected; increasing income inequalities; insufficient demand; and corruption.

These are not relevant topics: debt management; barriers to exports; In the case of Uruguay, the main problems identified by the specialists consulted (with a score of 100) are: “the COVID-19 pandemic”, “the increase in income inequalities” and “insufficient demand”. They are followed by: “lack of innovation” (85.7), “lack of international competitiveness” (85.7), “lack of skilled labor” (71.4), “inadequate infrastructure” ( 57.1) and ‘barriers to exports’ (57.1) The survey “also asked the experts what are the three main problems their country is currently facing. The percentage refers to the number of experts who identified the issue as one of the main problems in each country.In Chile, Colombia, Paraguay, Peru and Uruguay, the pandemic was the main problem indicated by the survey. Lack of confidence in economic policy is also a very serious problem in Argentina, Bolivia, Brazil, Ecuador and Mexico ”, noted the FGV.

The Country / GDA

The country (Uruguay)