Argentine deterioration no threat to Uruguay, says FinMin Bergara
Uruguay will not repeat the economic and financial turmoil of a decade ago, even if Argentina’s currency woes deepen, Uruguay’s new finance minister Mario Bergara tells LatinFinance
Uruguay is in a strong position to dodge contagion from
Argentina if its neighbor’s financial problems
worsen, the country’s finance minister Mario
Bergara told LatinFinance on Thursday.
Argentina’s financial crisis in 2001 and 2002
caused economic turmoil in Uruguay, forcing the country to
restructure its debt. But this time around the Uruguayan
economy is in much better health and it has less financial and
trade ties with its troubled neighbor, Bergara said.
"In 2001 the problems were transmitted through the banking
sector. Today, the deposits that Argentines have in the
Uruguayan market represent 9% of the total," he said in an
interview during a visit to New York. He added that Uruguayan
banks hold liquid assets equal to half their total assets.
"Therefore Uruguayan banks could deal with a massive
The former central bank head said that in 2001 40% of
deposits in Uruguayan banks belonged to Argentines, and around
20% of credit from Uruguayan lenders went to Argentina
— a figure that is now close to zero.
Argentina devaluated its currency in mid-January, raising
volatility in emerging market currencies. The event went almost
unnoticed in Uruguay because the local FX market had been
trading in line with the black market exchange rate since late
2011, when the government of Cristina Fernandez tightened
currency controls, said Bergara.
"The Argentine peso started trading at the parallel exchange
rate almost immediately, therefore we have been dealing with
the depreciation of the Argentine peso for two years and it
hasn’t had any major effects," said Bergara, who
became finance minister in December, having run the
country's central bank since 2008.
In the past 10 years, the Uruguayan economy has expanded at
an average of 5.5%, contributing to it getting a third
investment grade rating last year. Meanwhile, Uruguay has
diversified its economy from exports of certain agricultural
products, making it less dependent on trade with Brazil and
Argentina, the two largest economies in South America.
Around 25% of Uruguayan exports went to Argentina in 2001,
that figure has shrunk to 5%. That means that a serious
economic crisis in Argentina would have little impact on
Uruguay’s trade balance, Bergara said. "There can
be some impact in some specific sectors that export to
Argentina specifically, but that will never have a
macroeconomic impact," he said.
He said that he hoped Argentina would soon be able to fix
the problems that prevent the country from normalizing its
relationship with the capital markets and he would like to see
Brazil’s economic growth pick up speed soon.
"The best thing that can happen to Uruguay is for its
neighbors, Argentina and Brazil to be in a healthy situation in
economic and financial areas. The best thing that could happen
to Uruguay is to be part of a region that is solid and stable,"
he said. LF