Political Risk Latin America Blog @PolRiskLatam

Uruguay’s leading banker calls for prudence, austerity and less triumphalism

Posted in News and Articles, Political Risk by politicalrisklatam on November 10, 2010

by Merco Press News, November 10th, 2010.

In spite of Uruguay’s good macroeconomic performance there are weak points and a productivity shock, fiscal austerity plus regional coordination to address external surprises should be considered, said Enrique Iglesias, economist, former banker and currently Ibero-America Secretary General.

“Uruguay is benefiting from a double confluence: improved management of the economy but also the Asian economic cycle which has boosted commodities prices and bottom rock interest rates. However Asians on the one hand are aware that it’s a cycle, it could have a downturn anytime and on the other the massive inflow of capital is distorting upwards the value of our currencies causing a serious competitiveness deficit”, said Iglesias currently participating at the Latinamerican banks federation forum in Punta del Este.

But there are also domestic challenges to overcome: “beware of triumphalism, it is the commodities prices that have given us the current bonanza and we urgently need to improve education, promote innovation and technology and a shock of productivity; we have to admit that we are very inefficient in Latinamerica”.

Iglesias also called for regional coordination particularly regarding the appreciation of currencies for which there are “no miraculous solutions”. Some countries are buying up dollars but that has a limit; others impose caps to capital inflow and others strict controls, “but there is not a single solution, it’s a mix of all of them plus common sense and flexibility”. (continue reading… )


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