Political Risk Latin America Blog @PolRiskLatam

Uruguayan officials with different visions how to address risk of “asset bubbles”

Posted in News and Articles, Political Risk by politicalrisklatam on November 11, 2010

by Merco Press News, November 11th, 2010.

As in most of the rest of the world, conflicting visions of the latest global monetary events and its impact on emerging economies have surfaced among Uruguay’s top officials responsible for the running of the economy and finances.

Economy minister Fernando Lorenzo said Uruguay is well prepared to confront the challenge of a strong appreciation of the Uruguayan peso or the formation of “speculative bubbles” and denied any plans to tax capital inflows, as neighbouring Brazil has done.

But a member from the board of the main development bank, Banco Republica, Jorge Perazzo said there is growing concern about “asset bubbles” given the massive inflow of capital into Uruguay and did not discard following some of Brazil’s steps, without specifically mentioning any.

Central Bank president Mario Bergara said that the current world scenario of zero interest rates in developed countries and inflows of capital to emerging economies looking for higher returns is “not compatible in the long term” and therefore Uruguay has a delicate balance: accumulate international reserves on the one hand and on the other try to contain the appreciation of the local currency. (continue reading… )


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