https://youtu.be/N8Gj0XtPtjo
What significance do Argentina and Brazil hold for Uruguay? What is the current situation in our neighboring countries? What impact could they have on our country? These were some of the questions addressed by Javier De Haedo—an economist, independent consultant, and public policy advisor—at the event “Argentina and Brazil: More Than Just Neighbors?”
The lecture, which took place on Wednesday, June 15, 2016, at the School of Management and Social Sciences, was part of the "Let's Talk with the Professors" lecture series organized by the Department of Economics.
The influence of the neighbors
“From a macroeconomic perspective, Uruguay is a satellite of its neighbors,” said De Haedo. While he acknowledged that this is a strong statement, he added that “we cannot imagine Uruguay experiencing an economic boom while its neighbors are in a recession.”
According to *El Economista*, if that were the regional context, Uruguay would likely also find itself in a “difficult economic situation.”
Although all three countries are subject to both positive and negative shocks, these impacts are amplified for Uruguay through its neighbors. “We experience the initial shock —just like they do—but it is amplified—through them—due to the close ties we share and the significant weight they carry in our client portfolio,” he noted.
He also noted that “Uruguay’s growth is roughly on par with that of its neighbors.” It has similar economic cycles and growth rates, although this has not been the case in recent years.
Argentina and Brazil saw their economies slow down and even begin to decline, while Uruguay continued to grow and “decoupled” from the trend. However, according to the expert, this situation “is coming to an end.”
Brazil and Argentina Today
“The change in government in Brazil has been very beneficial for Uruguay,” said the professor of the Economic Outlook Seminar in the Economics program, noting that “there is greater alignment” between the Uruguayan government and Michel Temer’s administration than there was with Dilma Rousseff’s.
He noted that inflation in that country has eased somewhat and that the current account balance and foreign direct investment have improved. However, he emphasized that political uncertainty and economic contraction persist, unemployment has risen, and the fiscal situation remains negative.
Regarding the situation in Argentina, he argued that currently “the fiscal adjustment being implemented is less than necessary, and this is being offset by more debt than would be desirable.”
He also predicted that the summer of 2017 “will be one of the best summers in Uruguay’s history,” because Argentina will be “extremely expensive,” and that, for our country, will be “spectacular.”
Argentina office
Who is more important to Uruguay? Brazil or Argentina? According to De Haedo, the general consensus is that it is Brazil. The reason is that, if one looks exclusively at foreign trade, Brazil “is much more important.” However, when it comes to tourism, Argentina carries more weight. When both factors are taken into account, the impact is roughly equal.
However, the speaker said that Argentine tourism in Uruguay is “far more significant than exports of goods to Brazil,” as it has a much greater impact on both public and private revenue.
To illustrate his point, he noted that “we export vacuum-packed beef tenderloin to Brazil,” while in Argentina we serve it “on a plate at a restaurant in Punta del Este.”
“Brazil is slipping away from us, and it’s hitting us hard—it hurts—but maybe we can send that same beef tail to another market. Argentina is slipping away from us, and that dish, at the restaurant in Punta del Este, we can’t sell it to anyone.”