Uruguay’s exports to Argentina continue to fall with no end in sight

Uruguay’s latest export data, released yesterday, showed a clear increase in Uruguay’s total exports. Soy remained Uruguay’s top export. However, the data also showed a clear decrease in exports to Argentina, which has maintained strong restrictions on imports despite the changes it has implemented to its macroeconomic policies.

Uruguay’s exports increased 7.8% in May over May 2013, according to data from the Instituto Uruguay XXI. Uruguay’s exports have increased 5% between January and May of 2014. The total value of Uruguay’s exports in May reached $1,128 million USD, $81 million USD more than in May 2013.

Brazil remained the number one destination for Uruguayan exports despite a .2% drop between January and May. China remained the second biggest destination for Uruguayan exports. Exports to China fell 14.4% since January. The Nueva Palmira free trade zone received the third most Uruguayan exports. Venezuela, following a 33.5% increase between January and May, was the fourth most significant destination.

Uruguayan exports to Uruguay fell 16.3% during the first five months of 2014 when compared to the same period in 2013. The value of Uruguayan exports to Argentina decreased $33 million USD over the same period. Argentina remains the fifth largest destination for Uruguayan exports.

With Argentina “something chronic” is happening, Álvaro Queijo, the president of Uruguay’s Exporter’s Union (UEU), told the newspaper El Observador. “On one side trade is not good and on the other, Argentina’s changes to the exchange rate at the end of January caused [Uruguayan exporters] to lose competitiveness”. “That the official exchange rate has gone from $ 6 (Argentinean Pesos) to $8 which has changed the numbers a little. Whats more, the restrictions have not changed, they have remained the same; Argentina’s industry is very reluctant to buy imports”, explained Quejio.

Quejio does not believe that there will be any significant changes in the short-term to produce an opening for trade or an improvement in Argentina’s macroeconomic conditions. “This is a process that has been going on for some time, for some two or three years, with a continuing deterioration of exports to this country. If we compare it to 2012 the drop is bigger and if we use 2011 the decrease is even more pronounced”.

Quejio reported that the sectors most affected have been clothing, graphics, chemicals and plastics. He added that Brazilian demand does not make up for the fall in sales to Argentina. The decrease in exports to China, nearly 15%, can be attributed to the significant increase in exports to the Nueva Palmira free trade zone as most products are usually shipped from there to China.

Soy Stays In Front

Soy remained Uruguay’s principal export in May. Sales to abroad increased 14.7% over May of 2013 and represented 39% of Uruguay’s total exports in May. “Despite decreasing 2.8% over sales in May 2013, frozen beef was Uruguay’s second biggest export, making 9.3% of the total” reported the Uruguay XXI institute. Concentrated milk came in third with 4.9% of the total. Exports of live cattle saw the biggest increase in May. Sales of live cattle in May of 2013 did not even reach $300,ooo USD, in May of 2014 they topped $15 million USD.

This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El Observador. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

Uruguay’s inflation rate rose again in September; Predicted to stay at 9% for 2013

Uruguay’s inflation accelerated in September to its highest point in twelve months. All of the components of the consumer price index rose in September, increases in gas, fuel, and taxi prices announced in September were the main cause of the rate’s increase,

Experts consulted by the Uruguayan newspaper El Observador  predicted that inflationary pressures will persist in the last trimester of the year, since  the economic authorities have little room to adopt counter measures.

According to data released by Uruguay’s National Institute of Statistics (INE), the price of consumption rose 1.36% during September, which brought the inflation rate over the last 12 months to 9.02%.

Uruguay’s inflation is not only outside Uruguay’s monetary policy objective of between 4% and 6% but above the 7.9% accounted for in the country’s budget.

Expert predictions

Experts consulted by El Observador predicted that Uruguay’s inflation will not accelerate further and will remain at around 9% for 2013. At the same time they noted that Uruguay’s supermarkets are under intense pressure from unions to raise wages to meet criteria suggested by the executive branch. An increase in wages could lead to an increase in consumer prices.

This Uruguayan Business Reports news article is a summarized translation of a news article that appeared in the Uruguayan newspaper El Observador. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

 

More Uruguayans on unemployment benefits in July than at any point since November 2002

The number of Uruguayan workers receiving unemployment benefits increased significantly during July 2013 reaching 38,586 people, a 19.8% increase over July 2012.

More workers received benefits this July than at any point since 2002, when 41,154 workers received benefits. There were also fewer workers eligible for Uruguay’s benefits system in 2002.

The amount of workers receiving benefits increased 12.8% during the twelve months since July 2012 according to data from the Banco de Previsión Social (BPS) reviewed by the Uruguayan newspaper El País. July’s number also represented an increase of 14% over this June’s benefits numbers.

Workers from Uruguay’s industrial manufacturing sector made up a significant part of the increase between June and July. 3,864 industrial manufacturing workers started collecting unemployment benefits in July, a 64% increase over June and 13.5% over 2012.

The sector with the second most workers collecting unemployed was construction with 8,534, although that number has been stable through  2013.

In Montevideo, 18,489 workers collected unemployment benefits compared to 20,097 in the rest of the country. After Montevideo, the cities with the highest number of workers on unemployment were Canelones with 5,919, Moldonado with 3,970, Colonia with 1,356 Paysandú with 1,097 and San Jose with 1,011.

This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El Pais. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

Uruguay fell 11 places in WEF global competiveness rankings

Uruguay fell 11 places in the World Economic Forum’s ranking of global competiveness moving from 74 in 2012 to 85 in this year’s rankings. A variety of factors led to the decline: 

Uruguay sustains one of the region’s sharpest drops, falling 11 places in the rankings to 74th position. Despite important gains in reducing the procedures and time needed to start a business (29th and 25th, respectively) and slight increases in ICT use (46th) and market size (86th), Uruguay drops systematically in all the remaining eight pillars that drive competitiveness. Worrying inflationary pressures above 8 percent coupled with relatively high government debt (101th) have deteriorated the macroeconomic conditions (63rd) of the country and cast some doubt about the sustainability of recent growth rates. Although Uruguay still benefits from one of the best functioning institutional set-ups in the region (36th), there are rising concerns about excessive red tape (89th) and wasteful government spending (95th), as well as about the business cost of crime and violence (88th). Labor markets are considered very rigid (139th), with some of the world’s most restrictive hiring and firing practices (138th) and a lack of flexibility in wage determination (144th) that does not match pay to productivity (143rd). As Uruguay’s economy moves toward higher levels of development, some doubts arise about the ability of the traditionally praised educational system to generate the skills that businesses require (107th), the overall availability of scientist and engineers (117th), and the innovation capacity of the country more broadly (69th). Improving the macroeconomic management of the country while addressing its labor market conditions, along with enhancing its innovation capacity by improving the quality of its educational system and the technological capacity of indigenous firms, will be crucial to shift the declining trend.

Chile led Latin America in 33 place, followed by Panama at 40. Brazil fell 8 places to 56 and Argentina fell 10 places to 104. The full report on global economic competitiveness is available here.

Uruguay Business Reports original news article by Donovan Carberry.

The Uruguayan peso falls to its lowest value against the dollar in four years

On August 22, 2013 Uruguay’s exchange rate hit 22.43 UYU to the dollar, the lowest the Uruguayan peso has been against the dollar in almost four years.

The dollar rose 1.84% against the Uruguayan peso on August 22, after having already risen 1.97% on Wednesday. Wednesday’s increase was the  biggest single day increase in nearly three months.

Uruguay’s vice-president, Danilo Astori commented yesterday in the Uruguayan city of Mercedes that “there is no reason to expect a drop in the dollar for the rest of the year”.

Yesterday, the average interbank exchange rate was 22.43 UYU to the dollar, the lowest the Uruguayan peso has been since September 2, 2009.

This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El Pais. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

Uruguay Business Brief: Uruguay’s GDP grew in June 2013

The Ceres leading index, which measures Uruguay’s economic activity ahead of official GDP figures, increased .7% in June. Uruguay’s central bank will release the country’s final June GDP figures in September.

June marks the sixths consecutive month in which the Ceres index has risen.

The rise in GDP was spread throughout the economy; 67% of the variables measured by the Ceres index rose in June. Greater demand for Uruguayan exports and greater domestic demand for consumer goods contributed the most to June’s increase.

This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El Pais. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

Uruguay News Brief: Uruguay’s exports fell while imports rose in July

Uruguay’s exports fell 2.3% in July 2013 compared to the year before, for a total of $1.029 billion USD reported the Uruguay XXI Institute, Uruguay’s export promotion agency. Imports rose 14.3% in July over last year to reach $841 million USD.

Uruguay’s exports have increased 4.5% this year, up $5.6 billion. Imports, excluding petrochemicals have increased by $5.3 billion USD.

This Uruguayan Business Reports news brief is a translation of a news article that appeared in the Uruguayan newspaper El País. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

Uruguay’s Consumption of Soda, Beer and Bottled Water rose 136% over the last ten years

The strength of a country’s beverage industry is closely linked to the country’s economic well-being. When the economy is going well and incomes rise, people spend more money on soda, beer and bottled water. When the economy goes poorly, beverages tend to be something that families cut back on.

Not surprisingly, ten years of consecutive economic growth has produced a tremendous expansion in Uruguay’s beverage production. In the last decade Uruguay’s consumption of soda, beer and bottled water grew 136.4% to 681.2 million liters a year according to tax data from beverage producers and importers analyzed by the Uruguayan newspaper El Observador.

Last year the average Uruguayan consumed 201 liters of bottled beer, soda or water.

Soda consumption has seen the largest growth. Last year, soda consumption rose 9.7% over the year but in it has more than tripled since 2002.

Beer has led the growth in alcoholic drink consumption. Beer consumption rose 111% since 2002. It is now the most popular alcoholic drink amongst Uruguayans. That increase came at the expense of wine. Uruguay’s demand for wine has fallen 25% in the last ten years.

Fábricas Nacionales de Cervezas (FNC) has a practical monopoly on the Uruguayan beer market. They are Uruguay’s only significant beer producer and its main beer importer.

Imported beers haven risen in popularity since 2002 when they made up only 2% of all beer drunk in Uruguay. Imported beers now make up 7.4% of Uruguay’s consumption.

This Uruguay Business Reports news article is a translation of a newspaper story that appeared in the Uruguayan newspaper El Observador. The original news article is available here. Uruguay Business Reports news translation by Donovan Carberry

Uruguay’s government divided whether to tackle inflation or exchange rates

Brazil lowers interest rates again and exacerbates competitivity issues

The Uruguayan government is divided on what should be the focus of economic policy: fighting inflation or maintaining an exchange rate that keeps exporters competitive.

Gabriel Frugoni, director of the Planning and Budget Office (OPP), is now publically questioning the Economy Ministery and Central Bank’s policy objectives and urging the government to concentrate keeping a competitive exchange rate rather than try and slow down inflation.

Mr. Frugoni, one of President Mujica’s principal economic advisors, told the Uruguayan newspaper La Diaria that “a plan which can counteract the [the effects] US [quantitative easing] policies will be necessary.”

The Uruguayan Central Bank (BCU)’s Monetary Policy Committee chose to raise the reference interest rate by a quarter of a point to 9% at their trimester meeting. The move was added at combating inflation but made Uruguay’s currency more expensive, hurting exporters.

On Thursday Oct 11, the Central Bank of Brazil decided to cut its reference interest rate by a quarter of a point bringing it to 7.25%. The divergence in monetary policy increased Uruguay’s competitively problems since Brazil is Uruguay’s number one trading partner.

According to Frugoni, Uruguay’s economic policies should ensure “a productive complementarity with the region”. He explained, “today there is inflationary pressure but we definitely will have to address competitiveness”.

The division amongst President Mujica’s government was made apparent a few hours after the interview with Frugoni was published. The presidential website published a press release in which the economy ministry’s macroeconomic assessment director, Andrés Masoller, analyzed September’s inflation data and praised the government’s focus on inflation.

This Uruguay Business Reports news article is a translation of a newspaper story that appeared in the Uruguayan newspaper El Observador. The original news article is available here. Uruguay Business Reports news translation by Donovan Carberry

Uruguay News Brief: Unemployment rate drops as more workers abandon the job search

Unemployment in Uruguay dropped significantly this summer: by 6.6% in July and 5.5% in August. However, this decline is not due to an increase in employment (which in fact fell to its lowest level since October 2010) but stems from a decrease in the number of people looking for work according to data released by Uruguay’s National Statistics Institute (INE).

The INE is reporting that there were 92,000 Uruguayans who met the technical definition of unemployed in August. That is 20,600 less than in July. However, this was not a result of increased hiring. Instead, the decrease was due to the large number of Uruguayans who gave up on looking for work (thereby no longer meeting the technical definition of unemployed). The INE estimates that far more than 21,000 workers dropped out of the labor force during August.

Work force participation in Uruguay fell from 63.3% to 62.1% in August. The employment rate fell from 59.2% to 58.7% its lowest point since October of 2010.

In additon, to the drecrease in workforce particpation Uruguay lost 10,848 jobs in August.

Unemployment dropped more in Montevideo than in the interior. However, Montevideo saw little change in its workforce participation rate (64.4% to 64.5%). Workforce participation fell 2.3% in August.

This Uruguay Business Reports news article is a translation of a news story that appeared in the Uruguayan newspaper El País. The original Spanish language article is available here. Uruguay Business Reports translation by Donovan Carberry.