The MERCOSUR Member;Uruguay, with a much smaller landmass and population then either Brazil or Argentina has as the largest sector of its Agricultural production, principally producing Rice, Wheat, Corn, Barley, Livestock, Cattle and Fish, therefore contributing to the BLOC’s extensive Export Import Trade. Agrilend views Uruguay is set to experience a period of structurally lower growth in the coming years, as investment into expanding agricultural production and re-export capacity is tempered and foreign capital begins to flow into Argentina as the new Argentine government liberalizes its investment environment. Nonetheless, Uruguay will continue to outpace Latin America’s average real GDP expansion as the country’s middle class supports private consumption growth. Inflation will remain elevated over the coming years as the Banco Central Del Uruguay will not implement significant policy measures to stymie price increases. The bank will instead focus on attempts to spur growth and encourage consumption with low borrowing costs as tempered investment weighs on economic growth. There will be significant headwinds to the country’s balance of payments as Argentines begin to repatriate assets stored in Uruguayan banks and Chinese demand growth for agricultural goods is tempered over the coming years as compared to the previous decade. This will have a negative impact on both the current and financial accounts. As well, it will lead to a continued depreciation of the Uruguayan peso. Major Forecast Changes We have revised our growth forecast for 2016 downward, to 0.8% from 0.9% as headwinds to the country’s net exports balance will weigh on real economic expansion.
Inflation rates trended upwards between 2010 and 2016, before inflation finally fell in 2017. Nevertheless, inflationary pressures remain much to high in Uruguay and have been influenced by the high rates of inflation in the country’s larger neighbors Brazil and Argentina struggle for dominance of MERCOSUR. Inflationary pressures will remain relatively high over the near term.
Export revenues have been highly uneven over the past decade as a result of the varying economic performances in the country’s key export markets. Meanwhile, Import demand is forecasted to rise over the near term, keeping Uruguay’s current account balance in deficit.
Foreign investment has trended upwards despite the economic downturn in recent years. This was the result of higher demand for Agricultural products and natural resources from Uruguay, particularly in Asia. Earlier state owned monopolies were open to foreign investments in the oil and telecommunications sector as well. As a result per capita foreign investment levels are among the highest in latin america. As far as the outlook for future foreign investment in Uruguay. Uruguay’s government needs to attract more foreign investment into the country’s manufacturing and service sectors in order to cut unemployment and expand Uruguay’s export opportunities. However, Uruguay is struggling to attract such investment as foreign competitors MERCOSUR Member Brazil and Associate MERCOSUR Member, Chile are proactively taking steps in that direction as well.
The good news for American Farmers especially in Cattle, Beef, Livestock, Milk, Dairy, and Cheese is that since China is pretty much buying all of the countries agricultural products at a pace far faster than it can produce Uruguay as well as Argentina and Brazil are seeking to invest in American farms to deliver this needed deficit quickly! All i can say is Amercian farmers should be singing moooooooooooooooo! For this is great news! For more information please contact me at email@example.com or visit us at agrilend.co