Uruguay in-focus 042012


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Uruguay in-focus 042012

  1. 1. UruguayA quarterly bulletin issued by the Debt Management Unit in focus April 2012S&P raises Uruguays rating to IG REAL SECTOR generation and the inactivity of the state Economy expanded 5.7% in 2011; oil refinery. In fact, as estimated byOn April 3, 2012, Standard & Poors analysts forecast 4.0% for this year CERES, the level of activity grew 1.3%Ratings Services raised its long-term in 2011Q4 over 2011 Q3 after seasonalforeign and local currency sovereign The Uruguayan economy recorded its adjustment and correction of the GDP.credit ratings on the Oriental Republic 9th consecutive year of expansion in All the activities increased their level ofof Uruguay to BBB- from BB+. The 2011, reaching a rate of 5.7% over the production with the exception ofoutlook on the long-term ratings is previous year. For 2010, GDP growth electricity, gas, and water. Commerce,stable. has been revised upward to 8.9% from restaurants, and hotels (9.9%), and 8.5%. On a seasonally adjusted basis transport, storage, and communications Uruguay Credit Rating Evolution (sar), Uruguay’s GDP real growth rate (12.6%) were the sectors that contributed S&P slowed down in the fourth quarter, most to the overall result in 2011. falling 1.9% due to the effect of drought AAA AA‐ A on the generation of electricity from During 2011Q4, primary activities hydro and the inactivity of the oil increased 1.6% (sar) and 4.2% over the BBB+ BBB‐ BB refinery (for maintenance). same period a year earlier driven by B+ increased agricultural production and, to B‐ CCC Nevertheless, a number of leading a lesser extent, livestock. In the former, CC indicators confirm that the economy will the increase was explained by a higher D post positive growth in 2012Q1. production of wheat and barley and the abr-94 abr-95 abr-96 abr-97 abr-98 abr-99 abr-00 abr-01 abr-02 abr-03 abr-04 abr-05 abr-06 abr-07 abr-08 abr-09 abr-10 abr-11 abr-12 According to the private think tank ongoing works for summer crop harvest CERES, their leading activity index (soybean, sorghum, maize). In theSource: Bloomberg increased 0.1% in February, posting its livestock industry record milk production 33rd consecutive monthly gain. levels were partially offset by the“The upgrade is based on Uruguays decline in the beef production due tosound economic growth prospects and Real GDP lower weight gain and declining exportsimproving external and fiscal indicators, Seasonally adjusted of live cattle. Meanwhile, forestryas FDI strengthens and improves showed a decline in production as aeconomic diversification. Prudent (%, qoq) 2005=100 (RHS) result of a declining demand.economic policies in recent years, 6% 150backed by a broad political consensus, 4% 140 Manufacturing industry decreased 7.9%have allowed Uruguay to grow rapidly 130 on a sar basis and 6.4% on anand reduce its main credit vulnerabilities” 2% interannual basis. This drop was mainlysaid S&P. “Continuing improvement in 120 due to the closure of the refinery, whichfiscal indicators, with declining debt as 0% 110 remained inactive throughout thewell as lower levels of debt dollarization, -2% quarter for maintenance, as well as thecombined with a further diversification 100 decreasing production of paper pulp,of the sources of economic growth, -4% 90 wood products, garments, yarn and 2005Q4 2006Q2 2006Q4 2007Q2 2007Q4 2008Q2 2008Q4 2009Q2 2009Q4 2010Q2 2010Q4 2011Q2 2011Q4could, over time, lead to a higher rating” fabric. Excluding these activities, theaccording to S&P’s statement. increase in other industries is Source: Central Bank of Uruguay noteworthy, in particular dairy products,Likewise, other ratings agencies syrups and concentrates, rice, rubberupgraded Uruguays credit ratings As pointed out by the Central Bank and plastic products, medicines andand/or perspectives within the first (CB), the extraordinary decline basic chemicals, metal products andquarter (See more on RECENT observed in the level of activity in the motor vehicles.DEVELOPMENTS on page 4) last quarter of 2011 was due to the impact of the drought on electric power 1
  2. 2. Electricity, gas and water registered a durable goods and automobiles and to the index after five months ofdecrease of 41.4% (sar) in 2011Q4 and a lesser extent, increase in Public consecutive falls.fell 14.4% compared with the same consumption.period of 2010. During the fourth Upon learning the official growthquarter, electric power was generated Gross fixed capital formation decreased numbers, private analysts revised theirby hydro and thermal, leading the latter by 1.3% (yoy) due to lower public sector estimations for real growth in 2012 toto a decline as the value added per unit investment and the completion of UTE 4.0% from 4.5%, according to theof production is much lower. constructions. This decline in public monthly survey published by the CB. investment could not be offset by the These projections are in line with theThe construction sector posted a increase in real estate from the private official goal.decrease of 0.2% (sar) but increased sector.6.9% on an interannual basis. The EXTERNAL SECTORgrowing level of activity during 2011 Exports of goods and services raised Current account balance closed 2011continued the positive trend seen 6.7% due to an increase, among others with a deficit of 1.8% of GDPpreviously, particularly in private goods, of meat, rice, milk, syrup, pulp,construction. Meanwhile, public rubber and plastic products, and According to preliminary estimates ofconstruction recorded decreasing levels vehicles. Within exports of services, the the CB, during 2011 the current accountof activity by most state agencies. increasing number of tourists as well as of the balance of payments registered a the growing expenditure per capita in deficit of USD 875million, equivalent toCommerce, Restaurants, and Hotels terms of physical volume stands out. 1.8% of GDP. Concomitantly, there wasrecorded an increase of 1.1% (sar) and a strong inflow of capital, equivalent to9.0% (yoy), while Transport, Storage, Imports of goods and services fell 0.6% 7% of GDP, enough to finance theand Communications grew 0.2% (sar) on-year, due to lower foreign purchases current account deficit and accumulateand 9.3% on an interannual basis. The of capital goods and intermediate reserves for USD 2.6billion (5.2% ofhigh rates of growth in data services goods, which were partially offset by GDP).and mobile telephony, passenger and increased purchases of consumerfreight services and travel agencies are goods and tourist services. Current Account, Exports and Imports Million of USDnotable. Unemployment and Employment Rate % of Economically Active Population Current Account (LHS) Exports (RHS) Imports (RHS)On the expenditure side, the increase in 14.000the level of activity was explained by the 1600 Employment Rate (RHS) 1300growth of domestic demand, which Average Unemployment Rate YTD (LHS) Unemployment Rate (LHS) 1000 700 12.000recorded a rise in the final consumption 11 63 400 10.000expenditure, partly offset by the decline 100 10 8.000 -200in gross capital formation. 9 61 -500 -800 6.000 -1100 8 Contribution to GDP Growth by Expenditure 59 -1400 -1700 4.000 On a quarterly basis 7 -2000 2.000 2005Q1 2005Q4 2006Q3 2007Q2 2008Q1 2008Q4 2009Q3 2010Q2 2011Q1 2011Q4 6 57 5 11% 9% 4 55 Source: Central Bank of Uruguay nov-08 ene-09 mar-09 may-09 jul-09 sep-09 nov-09 ene-10 mar-10 may-10 jul-10 sep-10 nov-10 ene-11 mar-11 may-11 jul-11 sep-11 nov-11 ene-12 7% The largest current account deficit is Source: National Institute of Statistics. 5% due to deterioration in the trade 3% balance, while the balance of income 1% The labor market also reflected the and transfers remained at similar levels -1% positive economic climate in the to 2010. The performance on trade balance, in turn, is explained by the 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 Uruguayan economy. The unemployment Private Consumption Gov. Consumption Gross Private Investment rate was 6.0% in February, after goods performance, not completely offset by better results in the services. Net Exports Gross Public Investment GDP Growth tumbling to a record 5.3% in December.Source: Central Bank of Uruguay In 2011 the average jobless rate was 6.0% which compares positively to the Imports’ growth in physical volumeThe increase in final consumption 6.7% of one year before. Private started to slow in the first three quartersexpenditure (5.4% yoy) was due analysts foresee an increase of 1.0% in of 2011 and finally fell in the last. In thisprimarily to the increase in Private final labor force for 2012. As well, CERES’s trend, energy imports, which had aconsumption (5.7%), mainly in the Index of Labour Demand (ICDL) grew significant share after the strong growthgrowth of consumer durables and not by 1.4% in March, the first increase of in 2011Q1 to meet the demand for 2
  3. 3. power generation, fell in the second recorded a net outflow exceeding USD Public Sector Balance and Interest % of GDPquarter and had a significant drop in the 1.8billion, in 2011 there was a nettwo remaining quarters. Exports of income of nearly USD 360million. Primary Balance Overall Balancegoods, meanwhile, showed a significant In 2011, international reserves of the 6%growth (18.6%), although at a slower CB increased by US$ 2.56 billion, 5% 4%pace than imports. Most of the growth thereby accumulating a total stock of 3%of the export value resulted from higher over US$ 10 billion. This increase is 2%prices, which have increased to a rate explained largely by the increase in 1%close to 17% in the last four quarters. In deposits of the banking system in the 0%physical volume, the evolution of CB and in the government accounts. -1%exports has been more humble, barely This represents an important change to -2% -3%exceeding 1.6% for the entire year. the situation observed in 2010, when 2004Q4 2005Q2 2005Q4 2006Q2 2006Q4 2007Q2 2007Q4 2008Q2 2008Q4 2009Q2 2009Q4 2010Q2 2010Q4 2011Q2 2011Q4 there was a decline in reserve assets ofTotal exports continued showing a US$ 361 million and the total stock was Source: Ministry of Economy and Financegrowth trend during the first quarter of below the US$ 8.0 billion.2012. In that sense, data available on The interest bill stood at 2.8% of GDP,goods exports orders shows that in External Reserve Assets falling 0.2% compared to the rolling Million of USD2012Q1 external sales increased 18.2% year to January. This is because thecompared to the same period of the 12.000 figure of February 2011, which wasprevious year, according to think tank 10.500 extraordinarily high, no longer accountsUruguay XXI. 9.000 in the annual registration. At that time, due to the debt swap operation betweenWhile in 2010 the balance of the Capital 7.500 the Central Bank and the Government,and Financial Account showed a 6.000 there was an advance payment ofpositive flow of just USD 86million, in 4.500 interest accrued to the date of the2011 the net capital inflow was USD 3.000 transaction (Debt Report January 2011).3.4billion. Flows to the private sector 1.500largely exceeded the net outflow of USD 0 Private analysts foresee a public global167million recorded in the public sector. deficit of 1.2% and 1.1% of GDP for 2012 and 2013 respectively. Capital, Current Account and FDI Source: Central Bank of Uruguay Million of USD PUBLIC DEBT PUBLIC SECTOR Net Debt fell 3.9% of GDP in 2011 Global deficit at 1.3% of GDP Capital Account Current Account FDI 5.000 4.000 Overall consolidated indebtedness of The consolidated fiscal deficit for the the public sector amounted to the equivalent of USD 25.9bn at the end of 3.000 year ended in February 2012 was 2.000 equivalent to 1.3% of GDP. 2011 (55.5% of GDP). 1.000 Public Sector Gross Debt 0 Income of the Non-financial Public % of GDP and Million USD -1.000 Sector stood at 29.1% of GDP in the -2.000 twelve months ending in February, an 100% Gross Public Debt Net Public Debt 2005Q1 2005Q4 2006Q3 2007Q2 2008Q1 2008Q4 2009Q3 2010Q2 2011Q1 2011Q4 increase of 0.2% of GDP over January 90% 2012 due to an increasing collection of 80% BPS and an improved primary result of 70%Source: Central Bank of Uruguay public enterprises (mainly Antel). 60% 50%A considerable part of these financial Current primary expenditure from 40%movements corresponded to Foreign Central Government and BPS stood at 30%Direct Investment (FDI) inflows, 24.6% of GDP, remaining constant over 20%estimated at USD 2.5billion (close to 2005Q1 2005Q4 2006Q3 2007Q2 2008Q1 2008Q4 2009Q3 2010Q2 2011Q1 2011Q4 the rolling year to January 2012.5% of GDP), at levels similar to those Regarding investment, there was anrecorded in 2010. The higher capital increase of 0.5% of GDP mainly due to Source: Central Bank of Uruguayinflows can be explained mainly by the variation in stocks of oil and derivativesperformance of the financial system, The consolidated net public debt totaled from ANCAP (0.4% of GDP) and an USD 12.7bn, equivalent to 27.2% ofboth public and private. While in 2010 increase of fixed investment (0.1% ofthe financial system as a whole GDP. Measured in terms of GDP, the GDP). total net debt decreased 3.9% last year. 3