Uruguay: $700 million Strategic Partnership Supports Long-Term Growth with Social Equity

October 14, 2010

MONTEVIDEO, October 14, 2010 - Uruguay may well be Latin America's smallest nation but it has a history strewn with great achievements.
Recognizing that in the past few years Uruguay has become one the most equitable societies in the region –economically and socially- the World Bank sealed today an expansion of their strategic relationship that will allow the South American nation preserve those gains for the long haul.
A new Country Partnership Strategy (CPS) for 2010-15 worth $700 million in financing was announced today to help Uruguay “take the next steps in consolidating economic reforms and enhancing social outcomes, thereby more closely aligning with OECD standards,” the partnership states.
Uruguay is well on its way towards achieving such golden status. Latest forecasts project an estimated growth for 2010 well above the region’s average of 5-6 percent. Additionally, Uruguay is only second to Chile in terms of opportunities for its citizens, according to the 2010 Human Opportunity Index that measures equal access to basic services such as education, health, and housing –considered key pillars for success in life.
Furthermore, Uruguay comes out of the global economic crisis mostly unscathed.  Thanks to its solid macroeconomic and social framework, and fiscal policies implemented over the previous decade, Uruguay has proved to be more resilient to recessions than many other emerging markets. It is one of only three Latin American countries –along with Panama and Peru- where unemployment rates actually dropped during the economic crisis, according to the recent poverty report ‘Did Latin America Learn to Shield its Poor from Economic Shocks?’, which concludes that “impact of the crisis ap pears to have been minimal on [Uruguay’s] overall economy”.
The new CPS includes financing and technical assistance that will allow Uruguay to consolidate its advances and make new improvements, says country director Penelope Brook.
“A mix of financial and technical assistance will support the government efforts to improve quality and efficiency of basics services and social equity,” noted Brook.
Specifically, the new partnership will focus on the following priorities:

  • Support Uruguay’s long-term growth and macroeconomic stability by reinforcing fiscal discipline and public expenditure efficiency.
  • Improve competitiveness and infrastructure to expand growth and foster a better investment environment.
  • Promote green growth and family-based rural agriculture while mitigating climate change.
  • Improve social equity and inclusion by expanding basic service coverage, especially pre-school and primary education, as well as health services.

Even as Uruguay’s star rises in the region, social and economic gains need further investments to ensure long term prospects, the new CPS notes. Improvements are critical in the areas of innovation and human capital, where the region as a whole lags behind developed countries.
Latin America & the Caribbean –minus Brazil- invest much less than the recommended 1 percent of their Gross Domestic Product in research and development –the basis for innovation. As far as education, even the most advanced countries such as Chile and Uruguay, do not compare favorably on the PISA academic scores with the worst performing OECD countries.
Uruguay’s leaders are convinced that a renewed partnership with the World Bank will help them improve the country’s economic and social standing.
“The Bank’s true contribution is its capacity to improve a country’s capacity to solve its own problems, which is pretty much what any government wants,” said Finance Minister Fernando Lorenzo.
Drawing on past experiences, the new strategy will be flexible to accommodate the government’s potential need to adjust course in the event of unforeseen domestic or external developments, and it will buttress the administration’s efforts to achieve consensus on its ambitious reform agenda.
The CPS concludes that “Uruguay indeed has a unique opportunity to reach, in the medium term, living standards and quality of institutions that are comparable to those enjoyed by advanced OECD economies”.