A Chance at Redemption
Uruguay was able to avoid default earlier this year, but whether it simply prolonged the inevitable or truly preserved its good name remain to be seen.
Uruguay is hardly any better off
today than it was three months
ago, when a bond restructuring
fended off a potentially catastrophic
default. The economy probably won't
grow at all this year and with a small
industrial sector to propel a recovery
from a four-year recession, the outlook
is bleak. The currency has collapsed
since the government floated the peso in
June 2002, while salaries have remained
unchanged. Domestic consumption,
already down 22% since 1998, is
expected to continue declining this year.
A rebound in exports, which are
growing at a rate of 20%, should soften
the blow but investment remains
depressed, at around 9% of GDP.
"We've been given a second chance
because of our tradition [of honoring
debt], not because we've done anything
to remove the risk of a default," says
Isaac Alfie, who was named economy
minister August 20. "If we do nothing to
show we deserved it we'll be facing the
firing squad again in a few years."...
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