No announcement yet.

Tiny Uruguay getting Big Notice

  • Filter
  • Time
  • Show
Clear All
new posts

  • Tiny Uruguay getting Big Notice

    Anyone who has been in the Commodities section here knows I am a fan of Uruguay, and have invested in agricultural land there. Invariably when I tell people I meet what I do, they often ask me "Aren't you afraid they are going to nationalize your land?". I often reply that they should take a look at all the land use regs in the US to see what real land utilization is like. Personally, I have never had a fear the government will take my land away from me in Uruguay. This is primarily based in the idea that Weyerhauser is the largest landholder in Uruguay, and may Brasilians and Argentines own land there too. Any attempt at land nationalization would mean some form of military incursion to 'set things right' again. No President of a country the size of WA state with a military of about 10,000 people would welcome such an action.

    Then I am often asked about the "socialist" nature of the country, to which I ask if they have looked at the US 'socialism' of late, including 46MM people on food stamps, welfare, and various other programs. Small countries like Uruguay cannot afford to run the kind of defecits we do or they will go bust in a hurry. Good governance is forced upon them IF they want to stay in business.

    Finally I am asked if "things work' there, like anyplace south of the Texas border is inhabited by lazy maexican-looking people who lounge away the day and say 'manana' all the time. Frankly, it amazes me how little Americans know about the rest of the world.

    Anyway, I though you all might enjoy this little summary of how little Uruguay is hitting the big-time.
    Tiny Uruguay outshines neighbor Argentina with investors

    By Vinod Sreeharsha McClatchy Newspapers
    SAO PAULO, Brazil — For decades, Argentina treated its neighbor to the east, tiny Uruguay, as little more than a colonial outpost. In the eyes of much of the world, it endured a fate perhaps even worse: near-total obscurity.

    But the long-overlooked South American nation, which lacks Argentina’s flair for political melodrama and Brazil’s clout and ambition, finally is emerging from their shadows, becoming a darling among investors and even a model for democracy.


    Uruguay’s breakthrough into a sought-after investment partner is largely a result of how it handled a devastating financial crisis 10 years ago, when unemployment was soaring, its growth rate was a negative 11 percent and its currency had lost 94 percent of its value. In July, the credit rating agency Moody’s upgraded Uruguay’s sovereign rating to investment grade for the first time since. This followed a similar move by Standard & Poor’s earlier this year that put Uruguay’s bonds five levels ahead of Argentina’s and on par with debt from Brazil, Mexico, Peru, Colombia and Chile.

    Uruguay’s average annual growth of 6 percent from 2007 to 2011 surpassed that of Brazil, Colombia and Peru, South America’s heavyweights. Its growth forecast for this year also leads that pack.

    It isn’t only economic indicators that are catching people’s attention. In the most recent annual Democracy Index – assembled by the Economist Intelligence Unit, a research firm with ties to The Economist magazine – Uruguay was the only South American country in the “Full Democracy” category. Its overall 17th rank was even ahead of the United States, at 19, and the United Kingdom, at 18.

    Two other countries, Chile and Israel – often talked about as models of democracy by Washington pundits – ranked 35 and 36, respectively, relegating them to the “flawed democracy” category.

    Uruguay surpassed the United States in the index in civil liberties, functioning of government, and electoral process and pluralism.

    In a separate ranking, Reporters Without Borders, a journalism advocacy group, ranked Uruguay 32nd in press freedom; it ranked the United States 47th.


    “A very small country does not have the luxury of committing errors,” Steneri said. “If Uruguay had gone bankrupt, who would care?”

    Desperate, Uruguayan officials then went over the IMF’s heads, directly lobbying the United States, the fund’s largest shareholder. Here it unexpectedly found a friend in the George W. Bush administration, and in Treasury Undersecretary John Taylor.

    Taylor, today a supporter of Republican presidential candidate Mitt Romney, convinced the IMF to support an experimental Bush plan to back dollar deposits in Uruguay, at a cost of $1.5 billion, and stop insisting on default and immediate and aggressive debt restructuring. The Wall Street Journal, for one, took the administration to task, opining against the move in an editorial titled “Back to Bailouts.”


    All the while, Uruguay remains a country where leftists have governed since 2004. Mujica, the president, is a former Tupamaro guerrilla.
    Uccelli is unconcerned. “The Uruguayan model has served the country well.”

    If anything, other analysts say, the importance of government involvement in the economy is one reason that Uruguay tries to make sure that it’s solvent, predictable and run efficiently.

    “It is not a question of ideology,” said Alberto Bernal, with Miami-based Bulltick Capital. “You can be as much of a leftist as you want, but don’t change the rules of the game. If you say you are going to respect laws, then respect them.”

    By contrast, with Uruguay’s neighbor, Bernal says, “There is no certainty in Argentina, because you know the rules of the game could change.”

    Sreeharsha is a McClatchy special correspondent.