Uruguay: a tale of economic successes and failures

Arturo C. Porzecanski and Henry Willebald

Chapter 29 in The Elgar Companion to the Economies of Latin America and the Caribbean, 2025, pp 583-601 from Edward Elgar Publishing

Abstract: Uruguay has long been among the most prosperous countries in Latin America, but its economic growth trajectory has been modest and accident-prone, preventing its convergence to the living standards of high-income countries, whether they be New Zealand or similarly small economies in Europe. From the 1930s to the 1980s, governments undermined the country's comparative advantage in livestock production through discriminatory trade, tax and exchange-rate policies, while favoring new but mostly uncompetitive industries and farm crops. Uruguay's capacity to earn dollars through exports was thus reduced, and so was its ability to afford imports and sustain economic growth. Those circumstances warranted restrictive fiscal and monetary policies, market-driven exchange rates, and a reversal of misguided resource-allocation policies, yet from the 1950s through the 1980s successive governments did not deliver them. The unfortunate results were accelerating inflation, chronic currency weakness, economic stagnation, crippling financial crises, as well as social and political turmoil. Since the early 1990s, however, a new crop of enlightened political leaders has implemented increasingly appropriate macroeconomic policies and bold structural reforms. These have fostered macrofinancial as well as social and political stability; environmental sustainability, especially in energy; the attraction of foreign direct and portfolio investment; and the development of new comparative advantages in agriculture and services.

Keywords: Uruguay; Protectionism; State intervention; Economic cycles; Financial crises; Economic growth; Inflation; Structural reforms (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035317196
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