Uruguay

Politics:

• Analysis

  Uruguay politics: Justice or democracy?

  Uruguay: Justice or democracy?

  An argument over past crimes

  FOR most of the past 180 years, Uruguay has been a model democracy. But it did not escape the wave of military dictatorships that swept through South America in the 1970s, at the height of the cold war. After power returned to civilians, they enacted an amnesty covering the crimes of the dictators and their guerrilla opponents alike.

  The amnesty has rankled with some Uruguayans and with foreign human-rights lawyers. Its many loopholes allowed prosecutors to secure convictions of two of the dictatorship's leading figures, Juan María Bordaberry and General Gregorio Álvarez. But many other attempts to press charges foundered.

  After considering one such case in 2011, the Inter-American Court of Human Rights (IACHR) decided that Uruguay's amnesty law breached the Inter-American Convention on Human Rights and "lacks legal effect". Shortly thereafter the country's left-wing president, José Mujica, a former guerrilla who was locked up in a military prison for 14 years (and confined for two of them at the bottom of a well), issued a decree annulling the application of the amnesty law.

  After heated debate, the Congress went on to approve a law scrapping the amnesty and declaring the dictatorship's misdeeds crimes against humanity, not subject to the statute of limitations. A criminal-court judge, Mariana Mota, opened investigations into more than 50 cases of murder, torture and forced disappearance under the dictators.

  But last month Uruguay's Supreme Court ruled that much of the 2011 law was itself unconstitutional, because it was retroactive. Weeks earlier the court had announced the transfer of Ms Mota to a civil court; the cases she was handling will be greatly delayed. Both decisions were greeted with angry protests outside the court, and with criticism from international human-rights groups. The UN's High Commissioner for Human Rights, Navi Pillay, worried that the ruling "could restore the shadow of impunity in a country that had just begun to reconcile itself with truth and justice."

  It is more complicated than that. Uruguayans have twice voted in referendums, in 1989 and again in 2009, explicitly to uphold the amnesty law. It is true that support for annulling the amnesty rose from 42% of the vote in 1989 to 48% in 2009. But the popular will has been clearly expressed. Just like the country, the ruling Broad Front coalition is divided over the issue. Although Mr Mujica championed the 2011 law, his predecessor, Tabaré Vázquez, also from the Broad Front, has remained silent. Some lawyers think that cases can still be brought by invoking the IACHR's judgment, but others disagree.

  Uruguay thus faces a clash between popular sovereignty and international law, at least as this has evolved in the past two decades. That is not an easy conflict to resolve.

  March 23, 2013

• Background

  Uruguay: Constitution and institutions

  The 1966 constitution was modified in 1996

  The 1966 constitution was restored at the end of the military regime in 1985 and was modified in 1996. The constitution provides for a division of power between the executive, the legislature and the judiciary. Executive power is vested in the president, who is elected every five years, and his ministers. Elections for the presidency and Congress are held every five years under proportional representation using a system of closed lists. The October 1999 elections were the first to be conducted under revised constitutional rules enacted in 1997. The new system requires each party to submit only one presidential candidate, chosen at party primaries six months before the presidential poll. If no candidate secures 50% of the vote in the first round, there is a second-round run-off between the two leading candidates one month later. Consecutive presidential re-election is not allowed. The bicameral Congress consists of a 99-member House of Representatives (lower house) and a Senate (upper house) comprising 30 senators, plus the vice-president.

  The highest judicial authority is the Supreme Court of Justice, made up of five members elected by the two legislative houses voting jointly.

  Local elections for municipal and provincial authorities, previously held at the same time as the general election, now take place six months later. The next presidential election will be in October 2009 and the next municipal election in May 2010, enabling voters to choose candidates from different parties. The new rules have simplified the voting system and strengthened the legitimacy of the president by ensuring that he enters office with an absolute majority of the popular vote.

  February 06, 2008

• Structure

  Uruguay: Political structure

  Official name

  Oriental Republic of Uruguay

  Form of government

  Presidential

  The executive

  The president, who is directly elected for a five-year term, appoints a council of ministers, comprising the ministers of administrative departments and their deputies; the vice-president is president of parliament

  Head of state

  Elected president; José Mujica, assumed office on March 1st 2010 for a five-year period that will end in March 2015

  National legislature

  Bicameral parliament elected for five-year terms by proportional representation; 31-member Senate (the upper house), 99-member Chamber of Deputies (the lower house)

  Legal system

  Supreme Court elected by the legislature; the Supreme Court nominates all other justices

  National elections

  Presidential and parliamentary elections held on October 25th 2009; a second-round presidential election on November 29th 2009 was won by Mr Mujica; the next presidential and parliamentary elections will be held in October 2014; the last municipal elections were held in May 2010; the next municipal elections are due in May 2015

  National government

  Mr Mujica governs with the support of the Frente Amplio (FA), a broad coalition of 21 political groups ranging from the centre-left to the radical left. The main parties in the FA are the Movimiento de Participación Popular (MPP); the Frente Liber Seregni (FLS), the Partido Socialista (PS) and the Vertiente Artiguista (VA)

  Main political organisations

  Government: Frente Amplio (FA)

  Opposition: Partido Nacional (PN), Partido Colorado (PC), Partido Independiente (PI)

  Key ministers

  President: José Mujica Cordano (FA)

  Vice-president: Danilo Astori (FA)

  Defence: Eleuterio Fernández Huidobro (FA)

  Economy & finance: Fernando Lorenzo (FA/FLS)

  Education & culture: Ricardo Ehrlich (FA/MPP)

  Foreign affairs: Luis Almagro (FA/MPP)

  Housing & environment: Graciela Muslera (FA/MPP)

  Industry, energy & mining: Roberto Kreimerman (FA/PS)

  Interior: Eduardo Bonomi (FA/MPP)

  Labour & social security: Eduardo Brenta (FA/VA)

  Livestock, agriculture & fishing: Tabaré Aguerre (FA/Independent)

  Planning & budget: Gabriel Frugoni (FA/MPP)

  Public health: Jorge Venegas (FA/PCU)

  Social development: Daniel Olesker (FA/PS)

  Tourism & sports: Héctor Lescano (FA/FLS)

  Transport & public works: Enrique Pintado (FA/FLS)

  Central Bank president

  Mario Bergara (FA/independent)

  January 15, 2013

• Outlook

  Uruguay: Key developments

  Outlook for 2013-17

  • The president, José Mujica, of the centre-left Frente Amplio (FA) coalition, will struggle to implement key elements of his agenda, such as public-service reform, owing to pressure from the left of the coalition and powerful unions.
  • Policymaking will remain supportive of business, coupling prudent macroeconomic policy with a welcoming investment environment, but there will be pressure from the left of the FA for greater focus on income redistribution.
  • After slowing in 2012 on the back of a weaker global economy, the Economist Intelligence Unit expects annual GDP growth to accelerate gradually over the forecast period, owing to strong investment flows, to reach 4.5% in 2017.
  • Reflecting high wage indexation and firm demand, inflation will only drop into the target range of 4-6% by late 2014, remaining towards the ceiling thereafter.
  • Strong fundamentals and improving terms of trade mean that the real effective exchange rate will be around 20% stronger in 2013-17 than its long-term average (1990-2010), although continued volatility is possible.
  • Although the current account will remain in deficit throughout the forecast period, reflecting continuing trade and income imbalances, it will remain manageable and will be covered by foreign direct investment inflows.

  Review

  • A flawed auction of the assets of the bankrupt national airline, Pluna, has tarnished the reputation of the government's economic team and highlighted persistent divisions within the ruling coalition.
  • GDP growth was weaker than expected in the fourth quarter of 2012, at 3% year on year. Competitiveness problems, driven by high inflation and real peso appreciation, were evident in negative net export data.
  • In November the government returned to global bond markets, issuing US$500m in 33-year bonds with a yield of just 4.125%.
  • Inflation rose above 9% in October-November. Although it subsided in December on the back of temporary price freezes, the Central Bank raised interest rates again at the end of December, by 25 basis points, to 9.25%
  • Obstacles remain, but the government has made progress on a deepwater port project that would provide a major boost to growth in the long term. In December the Senate approved construction of the port facility.
  • As the tourism sector prepared for a weak tourism season, reflecting exchange controls imposed by Argentina that could restrict tourist numbers, the government stepped in with fiscal incentives to try to boost the sector.

  January 15, 2013

Economy:

• Background

  Uruguay: Economic background

  Main economic indicators, 2007
  (Economist Intelligence Unit estimates unless otherwise indicated)
  Real GDP growth (%)	7.2
  Consumer price inflation (av; %)	8.1(a)
  Current-account balance (US$ m)	-430.8
  Exchange rate (av; Ps:US$)	23.45(a)
  Population (m)	3.3
  External debt (year-end; US$ m)	11,823.0
  (a) Actual.
  Source: Economist Intelligence Unit, CountryData.

  Download text file (csv format)

  February 06, 2008

• Structure

  Uruguay: Economic structure

  Data and charts: Annual trends charts

  
  

  

  January 15, 2013

• Outlook

  Uruguay: Country outlook

  Uruguay: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: The government has been weakened by its mishandling of the bankruptcy of the national airline, Pluna, in 2012, and will not be in a strong position to press on with key reforms in the remainder of its term of office, ending in 2014. The president, José Mujica, is attempting to implement reforms to the civil service and the education system, upgrade the country's creaky infrastructure, and halt a deterioration in the security environment. But persistent divisions between moderate centrist and more extreme leftist wings of the broadly centre-left Frente Amplio (FA) ruling coalition--again in evidence during the Pluna debacle, which saw the government bungle an auction for former Pluna-owned aircraft--will make it difficult for the president to achieve consensus on reforms, even among his own supporters. The centre-right opposition will, meanwhile, become increasingly tricky to deal with. The opposition will be hoping to recapture key centrist voters in 2014 and will therefore want to be seen to be working with the government to find a solution to major problems, such as security. However, emboldened by Mr Mujica's falling opinion poll ratings, the opposition has become more obstructionist in recent months and this trend seems likely to continue as the presidential election gets closer. Overall, the Economist Intelligence Unit expects government effectiveness to remain relatively weak up to the election. That said--and although we expect there to be continuing pressure from the left of the coalition to focus more on social policies aimed at reducing poverty and improving income distribution--the government will pursue sound economic policies. We also believe that, despite current internal problems, a split in the ruling coalition is unlikely, given its history of electoral success.

  ELECTION WATCH: There are no elections scheduled for 2013, but all the main political parties will be gearing up for the October 2014 general election as the forecast period progresses. We assume that divisions within the opposition will persist, allowing the FA to maintain a leading position heading into the elections, despite its own internal discord. Tabaré Vázquez, a pragmatic, unifying figure in the FA coalition and a popular former president (2005-10), will be the clear frontrunner in the presidential race, if he decides to stand. He shocked the FA leadership by announcing his retirement from politics in 2011, but in recent months has signalled a return to political activity. Despite the fact that he will be 74 by 2014, Mr Vázquez's re-emergence at the forefront of the FA has been eagerly awaited by the coalition leadership, who recognise his ability to mobilise independent voters, as well as the FA faithful. We have long based our forecasts on the assumption that Mr Vázquez will run again in 2014 and win, providing continuity for a policy framework that combines orthodox macroeconomic policy with an emphasis on social development. If he did not run, we would still, on balance, expect the FA to win re-election. However, a presidential contest without Mr Vázquez would potentially be much closer, and would introduce greater uncertainty into our forecasts.

  INTERNATIONAL RELATIONS: Relations with Uruguay's partners in the Mercado Común del Sur (Mercosur, the Southern Cone customs union) are becoming increasingly problematic. Policy unpredictability and trade protectionism in partner countries, particularly Argentina, have risen. Tensions with Argentina were recently heightened by a dispute over joint management of the Río de la Plata estuary, a key waterway and transport link for both countries, which centres on persistent delays to much-needed works to increase transport capacity on the Uruguayan side of the estuary. Reflecting difficulties in relations with Argentina, Uruguay is looking increasingly to Brazil as a trade and investment partner, notably to help finance some major infrastructure projects. However, periodic tensions may occur even with Brazil, given a rising tendency towards trade protectionism throughout Mercosur, in a context of relatively weak global trade flows and persistent currency-appreciation pressures in the region.

  POLICY TRENDS: Inflation is emerging as the key economic-policy challenge and will require tighter fiscal and monetary policy to increase the credibility of the inflation target (4-6%) and reduce inflationary expectations. Although we do not expect the government to be able to tackle some of the main underlying causes of high inflation, notably the system of wage indexation, we do expect tighter macroeconomic policy in 2013-14 to have some positive effect on inflation. More generally, we expect policymaking to remain supportive of business, combining prudent macroeconomic policy with a generally welcoming environment for investment. That said, there will be continuing pressure from the left of the ruling coalition for the government to focus more of its efforts on poverty reduction and income redistribution, which could complicate efforts to reduce the public debt ratio and combat inflation and risks giving rise to inconsistencies in the government's investment promotion policy. The government has, for example, introduced a controversial tax on agricultural landholdings, which was viewed as an attempt to appease the extreme left of the governing coalition. We continue to believe that the generally orthodox, pro-business stance is not at risk, but clear policy differences within the coalition introduce some uncertainty into our forecasts.

  ECONOMIC GROWTH: We have revised down slightly our estimates for GDP growth in 2012 and our forecasts for 2013, from 3.8% and 4.2% to 3.7% and 4%, respectively, on the basis of trends in the external sector. Net exports made a highly negative contribution to GDP growth in the third quarter of 2012 as import volume growth increased by 17.8% year on year, while export growth came in at 5.7%. The data suggest that, amid real peso appreciation, excess domestic demand will continue to spill over into imports and produce a net negative contribution from trade. Public consumption growth will slow in 2013 as fiscal policy is tightened. At an annual average 4.6%, private consumption will also be weaker in the forecast period than in recent years, reflecting slower real wage growth, but still solid. The outlook for fixed investment is bright, supported by large-scale foreign investment projects and public-private investment in infrastructure (which will be boosted by framework legislation to facilitate PPP projects). These investments will gather pace over 2013-14, so that, by the end of the forecast period in 2017, we expect annual GDP growth to have risen to 4.5%.

  INFLATION: Inflation inched close to 10% in late 2012 before subsiding at year end to 7.5%, owing to some short-term price freezes agreed with retailers and manufacturers (which we expect to be lifted in the short term). The increase in inflation partly reflected supply-side factors (rising food prices), and we expect inflation to subside gradually over the course of the forecast period as the impact of recent shocks wanes and as monetary and fiscal policy are tightened. However, long-term inflationary expectations remain well above the target range of 4-6% set by the Banco Central del Uruguay (BCU, the Central Bank), and amid a very high level of wage indexation in Uruguay, inflation will come down only very gradually, remaining above the target range until the end of 2014. Reflecting wage indexation and weak monetary policy credibility, inflation has proved persistently "sticky" in Uruguay, and we expect it will prove difficult to bring inflationary expectations closer to OECD levels, even in the medium term; our current forecast is for inflation to end 2017 at 5.6%, towards the top end of the target range.

  EXCHANGE RATES: Despite the imposition of capital controls, in the form of a reserve requirement of 40% on foreign purchases of Central Bank notes, the peso continued to appreciate in late 2012. It remained around its year-end level of Ps19.3:US$1 in early January, and we expect further appreciation pressures. Apart from record low OECD interest rates, pressure for appreciation will stem from Uruguay's strong fundamentals. We forecast strong inflows of foreign direct investment (FDI) and portfolio capital throughout 2013-17, as well as an acceleration of export growth late in the forecast period. On this basis, we continue to forecast modest nominal peso appreciation throughout the forecast period, as a result of which the real effective exchange rate will be around 20% stronger in 2013-17 than its long-term (1990-2010) average. The likelihood of huge swings in investor sentiment will, however, introduce substantial risks to our short-term currency forecasts and the possibility of periods of currency depreciation cannot be discounted.

  EXTERNAL SECTOR: The current-account deficit will continue to widen in 2013-14, but will remain manageable at an annual average of 3.8% of GDP. The trade deficit will continue to widen as imports are drawn in by large investment projects, while exports are hit by growing competitiveness problems. However, as new investment projects come on stream in the second half of the forecast period, we expect a renewed narrowing of the current-account deficit as a percentage of GDP. Combined with strong inflows of FDI, this will help to maintain a healthy level of foreign reserves coverage throughout the forecast period.

  January 11, 2013

• Forecast

  Uruguay: 5-year forecast summary

  Outlook for 2013-17: Forecast summary

  Forecast summary
  (% unless otherwise indicated)
  	2012a	2013b	2014b	2015b	2016b	2017b
  Real GDP growth	3.7	4.0	4.2	4.4	4.4	4.5
  Industrial production growth	2.2	5.2	4.6	4.4	4.4	4.2
  Gross agricultural production growth	0.6	4.9	5.4	4.5	4.4	4.4
  Unemployment rate (av)	6.0	6.0	5.9	5.8	5.6	5.6
  Consumer price inflation (av)	8.1c	7.0	6.7	5.7	5.4	5.7
  Consumer price inflation (end-period)	7.5c	7.1	6.0	5.4	5.6	5.6
  Short-term lending rate	11.3	11.6	11.0	10.5	10.0	10.0
  Non-financial public-sector balance (% of GDP)	-2.2	-1.6	-1.3	-1.1	-1.0	-1.0
  Exports of goods fob (US$ bn)	10.3	11.2	11.6	12.1	12.9	13.9
  Imports of goods fob (US$ bn)	11.9	13.0	13.8	14.6	15.4	16.3
  Current-account balance (US$ bn)	-1.8	-2.1	-2.6	-2.9	-3.1	-2.6
  Current-account balance (% of GDP)	-3.5	-3.6	-4.0	-3.9	-3.7	-2.8
  External debt (year-end; US$ bn)	11.7	12.1	12.8	13.7	14.6	13.9
  Exchange rate Ps:US$ (av)	20.31	19.17	18.94	18.70	18.46	18.22
  Exchange rate Ps:US$ (end-period)	19.30	19.07	18.82	18.58	18.34	18.10
  Exchange rate Ps:€ (end-period)	24.99	24.31	23.43	23.32	23.11	22.80
  Exchange rate Ps:SDR (end-period)	29.85	29.06	28.37	27.92	27.48	27.12
  a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Actual.

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  January 15, 2013

View detailed map

Country Briefing

Land area

176,065 sq km, of which 80% is suitable for agricultural or livestock production

Population

3,334,052 (end-June 2008; official estimate)

Main towns

Population in '000 (2004 census):

 Montevideo (capital): 1,326

 Canelones: 485

 Maldonado: 140

 Salto: 123

 Colonia: 119

 Paysandú: 113

Climate

Temperate

Weather in Montevideo (altitude 22 metres)

Hottest month, January, 17-28°C; (average daily minimum and maximum); coldest month, July, 6-14°C; driest month, February; 66 mm average rainfall; wettest month, April, 99 mm average rainfall

Language

Spanish

Measures

Metric system

Currency

1 peso (Ps) = 100 centésimos; average exchange rate in 2011: Ps19.3:US$1

Time

3 hours behind GMT

Public holidays

January 1st (New Year's Day); January 6th (Epiphany); February 27th-28th (Carnival); Maundy Thursday and Good Friday; April 17th (Landing of the 33 Patriots Day); May 1st (Labour Day); May 22nd (Battle of Las Piedras Day); June 19th (birth of General José Artigas); July 18th (Constitution Day); August 25th (Independence Day); November 2nd (All Souls' Day); Christmas Day

January 15, 2013