Uruguay: Strong Institutions and Business Opportunities - bcu… › NoticiasArchivosAdjuntos › jp morgan › IIF - … · External sector: increasing trade and relevance of FDI

Uruguay: Strong Institutions and

Business Opportunities

2012 IIF Latin American Economic Forum

March 17, 2012

Mario Bergara

http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results

Democracy and Corruption Perception Indexes

Corruption Perception Index (2011) The Economist – “The World in 2011”

Survey on Democracy Around the World

Some institutional indicators

Ranking Country

1 Norway

2 Iceland

3 Denmark

17 Uruguay

19 United States

29 France

35 Chile

45 Brazil

51 Argentina

Ranking Country

1 New Zealand

22 Chile

25 Uruguay

31 Spain

50 Costa Rica

73 Brazil

75 China

80 Peru

100 Argentina / Mexico

Source: http://www.prosperity.com/rankings.aspx

Factors considered:

• Economy

• Entrepreneurship and opportunity

• Governance

• Education

• Health

• Safety and security

• Personal freedom

• Social capital

Legatum Prosperity Index (as of 2010)

Prosperity and Economic Freedom indexes

Economic Freedom Index (as of 2011)

• Lack of corruption

• Absence of non-tariff trade barriers

• Tax burden

• Rule of the law

• Regulatory burden

• Restrictions on banks

• Labor market regulation

• Black market activities

Source: http://www.heritage.org/index/Ranking.aspx

Factors considered:

Ranking Country

1 Norway

2 Denmark

3 Finland

7 Canadá

10 United States

28 Uruguay

32 Chile

Ranking Country

1 Hong Kong

2 Singapore

3 Australia

9 United States

11 Chile

33 Uruguay

113 Brazil

138 Argentina


Human Opportunity and Business Environment Indexes

Source: IFO and FGV - Range from 1 to 9


Business Climate Index

Orden País HOI

1 Chile 95

2 Uruguay 92

3 Mexico 90

4 Costa Rica 89

5 Venezuela 89

6 Argentina 89

10 Brazil 79

12 Paraguay 73

14 Peru 71

Regional Index 77

Source: World Bank

Human Opportunity Index

Ranking Country

Index

(Year ending

in Jan 10)

Index

(Year ending

in Jan 12)

1 Uruguay 5.3 6.7

2 Colombia 4.5 6.5

3 Peru 6.3 6.3

4 Chile 5.7 6.1

5 Paraguay 4.6 5.9

6 Brazil 6.3 5.7

7 Argentina 3.8 5.5

8 Ecuador 3.6 5.5

Latin America 4.6 5.2

9 Mexico 3.9 4.6

10 Bolivia 3.8 4.2

11 Venezuela 2.6 3.6

WEF Global Competitiviness Index

Country

2006

2011 2006-2011

Comparison

Chile 27 31 -4

Brazil 66 53 +13

Mexico 52 58 -6

Uruguay 79 63 +16

Peru 78 67 +11

Colombia 63 68 -5

Argentina 70 85 -15

Ecuador 94 101 -7

Bolivia 100 103 -3

Paraguay 108 122 -14


Money Laundering and Financing of Terrorism: Compliance with best practices

Ranking Country

1 EEUU

Panamá

3

Canadá

Colombia

Uruguay

6 Chile

7 Perú

8 Brasil

México

10 Bolivia

11 Costa Rica

12

Argentina

Ecuador

Paraguay

Ranking Country

1 EEUU

2 Canadá

3

Colombia

Panamá

Uruguay

6 Brasil

7 Chile

Perú

9 Bolivia

Paraguay

11

Argentina

Costa Rica

Ecuador

México

MONEY LAUNDERING +

FINANCING OF TERRORISM:

Recommendations wholly or

partially implemented

FINANCING OF TERRORISM:



Ranking Country

1 EEUU

Colombia

3 Panamá

4 Uruguay

5 México

6 Canadá

7 Perú

8 Chile

Brasil

10 Costa Rica

11 Bolivia

12 Paraguay

13 Argentina

14 Ecuador

MONEY LAUNDERING:



* Based in the last evaluations availables by December 2010


Gross Domestic Product: a growing economy with a healthy expenditure composition

The macroeconomic outlook

6.3% 4.5%

-8.4%-4.0%

-9.3%

-9.1%

-7.0%

-2.8%4.6%

8.6%

10.3%

3.6%

3.2%

3.4%

3.8%

8.5%9.1%

8.4% 7.0%

3.9%

3.4% 2.4%

4.9%5.7%

7.5%

7.8% 6.0%

8.3%7.7% 6.6%

2.5% 0.9%

3.2%

4.9%

9.9%

10.5%

7.6% 6.3%

6.7% 4.7%

7.5%

-20%

-16%

-12%

-8%

-4%

0%

4%

8%

12%

16%

20%

80

85

90

95

100

105

110

115

120

125

130

135

140

145

150

Mar-02

Jun-02S

ep-02D

ec-02M

ar-03Jun-03S

ep-03D

ec-03M

ar-04Jun-04S

ep-04D

ec-04M

ar-05Jun-05S

ep-05D

ec-05M

ar-06Jun-06S

ep-06D

ec-06M

ar-07Jun-07S

ep-07D

ec-07M

ar-08Jun-08S

ep-08D

ec-08M

ar-09Jun-09S

ep-09D

ec-09M

ar-10Jun-10sep-10D

ec-10M

ar-11Jun-11S

ep-112011f2012f

GDP Seasonal Adjusted 2005=100 (LHS) Market Expectations, as of February 2012 % Interannual Change (RHS)

Employment and Unemployment in Record Lows


4

5

6

7

8

9

10

11

12

13

14

50

52

54

56

58

60

62

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

Employment (LHS) Unemployment (RHS)

External sector: increasing trade and relevance of FDI


-540

-340

-140

60

260

-140

60

260

460

660

860

1 060

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

US

D m

illion

Trade Balance (RHS) Exports (LHS) Imports (LHS)

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2 000

2 200

2 400

2 600

2 800

3 000

3 200

3 400

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Oct-10 - Sep-11

USD

milli

on

Tourism services Other services (software, transport, logistic, etc)

-3000

-2000

-1000

0

1000

2000

3000

4000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Oct-10 - Sep-11

Current Account Financial Account (including E&O) o/w FDI

Being an oil importer, the impact of high commodity prices is mixed in Uruguayan terms of trade


Real Exchange Rate: similar scenario than emerging markets


60

90

120

150

180

210

Ap

r-00

Au

g-00

De

c-00

Ap

r-01

Au

g-01

De

c-01

Ap

r-02

Au

g-02

De

c-02

Ap

r-03

Au

g-03

De

c-03

Ap

r-04

Au

g-04

De

c-04

Ap

r-05

Au

g-05

De

c-05

Ap

r-06

Au

g-06

De

c-06

Ap

r-07

Au

g-07

De

c-07

Ap

r-08

Au

g-08

De

c-08

Ap

r-09

Au

g-09

De

c-09

Ap

r-10

Au

g-10

De

c-10

Ap

r-11

Au

g-11

De

c-11

20

00

=1

00

Global Rest of the world Argentina+Brazil

Sovereign Spread: the market treats Uruguay as Investment Grade


0

500

1000

1500

2000

2500

3000

Feb-00

Jul-00

Dec-00

May-01

Oct-01

Mar-02

Aug-02

Jan-03

Jun-03

Nov-03

Apr-04

Sep-04

Feb-05

Jul-05

Dec-05

May-06

Oct-06

Mar-07

Aug-07

Jan-08

Jun-08

Nov-08

Apr-09

Sep-09

Feb-10

Jul-10

Dec-10

May-11

Oct-11

Mar-12

bps

EMBI+ Uruguay

Inflation is the main concern in the balance of risks


3%

4%

5%

6%

7%

8%

9%

10%

11%

12%

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

Apr-12

Jul-12

Oct-12

Jan-13

CBU Target CPI Inflation rate Inflation Expectations (12m)

Monetary policy has tightened and has been complemented with changes in the structure of reserve requirements


18

19

20

21

22

23

24

25

0%

5%

10%

15%

20%

25%

30%

Ma

r-07

Jun

-07

Se

p-0

7

Dec

-07

Ma

r-08

Jun

-08

Se

p-0

8

Dec

-08

Ma

r-09

Jun

-09

Se

p-0

9

Dec

-09

Ma

r-10

Jun

-10

Se

p-1

0

Dec

-10

Ma

r-11

Jun

-11

Se

p-1

1

Dec

-11

Ma

r-12

Ca ll/Aver ag e Mar ket Rat e Mon eta ry Po licy Ra te UYU/U SD (RH S)

The external reserve assets position remains strong


0500

100015002000250030003500400045005000550060006500700075008000850090009500

10000105001100011500

Nov-02

Mar-03

Jul-03

Nov-03

Mar-04

Jul-04

Nov-04

Mar-05

Jul-05

Nov-05

Mar-06

Jul-06

Nov-06

Mar-07

Jul-07

Nov-07

Mar-08

Jul-08

Nov-08

Mar-09

Jul-09

Nov-09

Mar-10

Jul-10

Nov-10

Mar-11

Jul-11

Nov-11

Mar-12

US

D m

illion

On the fiscal front, Uruguay keeps a prudent stance


-3.8%

-3.8%

-4.1%

-2.8%

-1.9%

-0.7%

-0.5%

0.0%

-1.5%

-1.7%

-1.1%

-0.8% -1.2%

-1.2%

-0.9%

0.2%

3.0%

3.8%

4.0% 3.6%

3.5%

1.3% 1.1%

1.9%

2.2% 1.8%

-1.1%

-1.2%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Jan-12

2012f

2013f

% G

DP

Overall Public Sector Balance Primary Balance Market expectations, as of February, 2012

Public debt declines and remains in a very sustainable track


26%32%

59%

69%67%

52% 47%

41%

27%

37%

31%28%

20%

30%

40%

50%

60%

70%

80%

90%

100%

110%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Oct-10-S

ep-11

% G

DP

Gross Public Debt Net Public Debt

Portfolio management of the government’s balance sheet reduces macro risk

Strong dedollarization of

public debt in both gross

and net terms, which

reduces real exchange

rate risk

Maturity transformations

improved liquidity risk.

Commodity risk:

Treasuries in the past

showed a strong negative

correlation with oil.


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2002

2003

2004

2005

Q1

2005

Q2

2005

Q3

2005

Q4

2006

Q1

2006

Q2

2006

Q3

2006

Q4

2007

Q1

2007

Q2

2007

Q3

2007

Q4

2008

Q1

2008

Q2

2008

Q3

2008

Q4

2009

Q1

2009

Q2

2009

Q3

2009

Q4

2010

Q1

2010

Q2

2010

Q3

2010

Q4

2011

Q1

2011

Q2

2011

Q3

DX Denominated Debt (% of Total)

35%

40%

45%

50%

55%

60%

65%

70%

75%

2002200320042005Q12005Q22005Q32005Q42006Q12006Q22006Q32006Q42007Q12007Q22007Q32007Q42008Q12008Q22008Q32008Q42009Q12009Q22009Q32009Q42010Q12010Q22010Q32010Q42011Q12011Q22011Q3

Residual Maturity > 5 years (% of Total)

Financial Stability: although growing, domestic credit is still low, and no signs of overheating in domestic asset prices


2 8003 0003 2003 4003 6003 8004 0004 2004 4004 6004 8005 0005 2005 4005 6005 8006 000

20 00024 00028 00032 00036 00040 00044 00048 00052 00056 00060 00064 00068 00072 00076 000

Oct-07

Jan-08A

pr-08Jul-0

8O

ct-08Jan-09A

pr-09Jul-0

9O

ct-09Jan-10A

pr-10Jul-1

0O

ct-10Jan-11A

pr-11Jul-1

1O

ct-11Jan-12

Mill

ions

of

US

D

Mill

ions

of

UY

P

In Uruguayan Pesos In Dollars

Non-Performing Loans

Solvency

Liquidity

Healthy and well supervised financial sector

Deposits


65%

68%

71%

74%

77%

80%

83%

86%

89%

0

5 000

10 000

15 000

20 000

25 000

Sep-00

Jan-01

May-01

Sep-01

Jan-02

May-02

Sep-02

Jan-03

May-03

Sep-03

Jan-04

May-04

Sep-04

Jan-05

May-05

Sep-05

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

Jan-12

US

D m

illio

n

$ (Residents) U$S (Residents) USD (Non Residents) % Dolarization (Residents)

0%

2%

4%

6%

8%

10%

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

Jan-12

40%

50%

60%

70%

80%

90%

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

30 days 90 days

100%

125%

150%

175%

200%

225%

250%

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Resilience to face external shocks

Extensive coverage of international reserves

Friendly maturity schedule of public debt

Sound financial system

Excellent relationship and funding availability from multilateral

organizations: contingent loans

Steady improvement in credit ratings

Decrease in dollarization and exchange risk exposure

Macroprudential approach: measures on financial stability

Increasing diversification and share of emerging countries in

trade structure

Continuous primary fiscal surplus, overall NFPS spending below

30% of GDP


Policy Perspective

Enhancing the prudence of macroeconomic policy: coherent

fiscal, monetary and financial policies

Focus on financial stability: micro and macro-prudential

perspectives as complementary approaches

Identify bottlenecks for sustainable growth

Physical capital: Infrastructure

Human capital: Education


Mario Bergara

Uruguay: Strong Institutions and

Business Opportunities

2012 IIF Latin American Economic Forum

March 17, 2012

Documents

Uruguay: Strong Institutions and Business Opportunities - bcu… › NoticiasArchivosAdjuntos › jp morgan › IIF - … · External sector: increasing trade and relevance of FDI