Uruguay Insulated From Global Crisis

Recent comments by Uruguayan vice president Danilo Astori have put the current economic crisis in a disturbing light: “I have no doubts we are before the most significant financial crisis capitalism has faced in contemporary history”, Mr. Astori remarked when asked about the ramifications for Uruguay of the stumbling trend in the US dollar and Euro. The vice-president said that Uruguay is much better prepared commercially and economically, should another crisis occur. Astori referenced the fact that following the August 5th decision by Standard and Poor’s to downgrade the rating of US debt from AAA to AA+, world markets collapsed, down in some cases as much as 11%. World commodities bore some abuse, and the hardest hits were apparent in oil. “In coming months we might be faced with scarce availability of credit, and therefore it is possible we will be seeing a tendency for interest rates to increase”, predicted Astori, a former economist who held the Minister of Finance position from 2005 to 2008.

He added that he believes that in the commercial market, “trade flows suffer and some prices face a decreasing tendency”, regularly in times such as this. This aside, Astori insisted Uruguay is well prepared economically for such an event and whatever the scenario, the impact should be ‘reasonably moderate’. “Uruguay has the sufficient financial resources for the next two years, at least”, stated the Vice-president. He went on to state that from a commercial standpoint “Uruguay has the advantage that in recent years it has successfully expanded and diversified trade to other parts of the world which are undergoing the situation differently, I’m talking about Asia and China”.

Astori said that this expansion will allow Uruguay to count on possibilities that it did not have in the past to face this type of credit crunch. For much of the past, Uruguay’s trade economy was closely linked to it’s neighbors in the region, Brazil and Argentina, and later, the European Union. Current shifts in Uruguay’s trade portfolio have seen China become the nation’s second trade partner and trade with other Asian countries is increasing. Since 2009, Asian countries, specifically China, have increased their ties to South America, investing heavily in the commodities sectors to feed their hunger for manufacturing feedstock. The region is undergoing development of their own manufacturing and commercial markets, which may move them into the “first-world” tier in a very short amount of time, possibly through the subversion of US and Euro currency reserve paradigm.

Posted by Larry Zwerling on Aug 9 2011. Filed under Global Finance, Headlines, International Real Estate. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry