Seb Country Analysis 2007 Uruguay

Uruguay SEB MERCHANT BANKING – COUNTRY RISK ANALYSIS

November 26, 2007

Analyst: Jenny Tolstoy. Tel : +46 8 763 96 05. E-mail : [email protected] The economic recovery since the financial crisis in 2002 has been impressive. Nevertheless, the still high external indebtedness and dollarization makes the economy vulnerable to changes in investor sentiment and economic downturns in neighboring economies.

Country Risk Analysis `çåíáåìÉÇ=ëíêçåÖ=êÉÅçîÉêó=Ñêçã=íÜÉ=OMMO=ÅêáëáëK=qÜÉ=ÉÅçåçãó=ÅçåíáåìÉÇ=íç=Öêçï= ê~éáÇäó=ëìééçêíÉÇ=Äó=áåÅêÉ~ëáåÖ=éêáî~íÉ=Åçåëìãéíáçå=~åÇ=áåîÉëíãÉåí=~ë=ïÉää=~ë= ëíêçåÖ=Éñéçêí=ÉîÉå=áÑ=~=ëäçïÇçïå=áå=dam=áë=ÉñéÉÅíÉÇ=íÜáë=óÉ~ê=íç=R=B=Ñêçã=T=B=áå= OMMSK=píêçåÖ=ÇçãÉëíáÅ=ÇÉã~åÇ=~åÇ=ÜáÖÜ=çáä=éêáÅÉë=éìëÜÉÇ=íÜÉ=áåÑä~íáçå=ê~íÉ=~ÄçîÉ= íÜÉ=ìééÉê=äáãáí=çÑ=íÜÉ=`Éåíê~ä=_~åâÛë= í~êÖÉí=EQKRJSKRBF=êÉëìäíáåÖ=áå= GDP íáÖÜíÉåÉÇ=ãçåÉí~êó=éçäáÅóK==cáëÅ~ä= 15% 10% éçäáÅó=~äëç=êÉã~áåÉÇ=íáÖÜí=âÉÉéáåÖ= 5% íÜÉ=ÄìÇÖÉí=ÇÉÑáÅáí=àìëí=~ÄçîÉ=N=B=çÑ= 0% dam=áãéäóáåÖ=êÉÇìÅÉÇ=éìÄäáÅ=ÇÉÄí= -5% íç=dam=íç=SO=B=íÜáë=óÉ~êK=qÜÉ=ÅìêêÉåí= -10% -15% ~ÅÅçìåí=Ä~ä~åÅÉ=íìêåÉÇ=áåíç=~=ÇÉÑáÅáí= 2002 2003 2004 2005 2006 2007 áå=OMMS=ã~áåäó=ÇìÉ=íç=áãéçêíë= (f) êÉä~íÉÇ=íç=íÜÉ=ÅçåëíêìÅíáçå=çÑ=~=ä~êÖÉ= ÅÉääìäçëÉ=éä~åí=EíÜÉ=_çíåá~=éä~åíF=~åÇ= ÜáÖÜ=çáä=éêáÅÉë=~åÇ=áë=äáâÉäó=íç=ïáÇÉå=ëçãÉïÜ~í=íç=OKU=B=íç=dam=íÜáë=óÉ~êK=eçïÉîÉêI= íÜÉ=ÇÉÑáÅáí=ëÜçìäÇ=å~êêçï=áå=OMMU=~ë=Éñéçêíë=Ñêçã=íÜÉ=_çíåá~=éä~åí=ïáää=ÅçãÉ=áåíç= ÉÑÑÉÅíK=qÜÉ=ÇÉÑáÅáí=Ü~ë=ÄÉÉå=Ñìääó=Ñáå~åÅÉÇ=Äó=caf=~ääçïáåÖ=~=ÑìêíÜÉê=ÄìáäÇJìé=çÑ= áåíÉêå~íáçå~ä=êÉëÉêîÉë=íç=~äãçëí=rpa=QÄå=Éèìáî~äÉåí=íç=S=ãçåíÜë=áãéçêí=ÅçîÉê~ÖÉK= = sìäåÉê~ÄáäáíáÉë=êÉÇìÅÉÇ=ÇìÉ=íç=éêìÇÉåí=ÉÅçåçãáÅ=éçäáÅáÉëK=píêçåÖ=ã~ÅêçÉÅçåçãáÅ= éçäáÅáÉë=áåÅäìÇáåÖ=ëíêáÅí=ÑáëÅ~ä=éçäáÅáÉëI=~ÅíáîÉ=ÇÉÄí=ã~å~ÖÉãÉåí=~åÇ=Ñáå~åÅá~ä=ëÉÅíçê= êÉëíêìÅíìêáåÖ=Ü~îÉ=êÉÇìÅÉÇ=ÉÅçåçãáÅ=îìäåÉê~ÄáäáíáÉë=ÅçåëáÇÉê~ÄäóK=qÜÉ=Åçëí=~åÇ= ã~íìêáíó=çÑ=ÉñíÉêå~ä=ÇÉÄí=Ü~ë=áãéêçîÉÇ=~ë=~=êÉëìäí=çÑ=íÜÉ=êÉé~óãÉåí=çÑ=~ää= çìíëí~åÇáåÖ=ÇÉÄí=íç=íÜÉ=fjcX=ÄçåÇ=ëï~éë=íç=äÉåÖíÜÉå=ã~íìêáíó=éêçÑáäÉX=~åÇ=áëëì~åÅÉ= çÑ=éÉëçJÇÉåçãáå~íÉÇ=ÇÉÄí=íç=áãéêçîÉ=íÜÉ=ÅìêêÉåÅó=ÅçãéçëáíáçåK=qÜÉ=Ñáå~åÅá~ä= ëóëíÉã=Ü~ë=~äëç=áãéêçîÉÇ=íç=ëçãÉ=ÉñíÉåí=íÜêçìÖÜ=íáÖÜíÉê=éêìÇÉåíá~ä=êÉÖìä~íáçåë=~åÇ= ëíêÉåÖíÜÉåÉÇ=ëìéÉêîáëáçåK=_ÉëáÇÉëI=åçåJêÉëáÇÉåí=ÇÉéçëáíë=áå=íÜÉ=Ä~åâáåÖ=ëóëíÉã= Eéêáã~êáäó=^êÖÉåíáåÉ=ÇÉéçëáíëF=êÉã~áå=ÅçåëáÇÉê~Ääó=ÄÉäçï=íÜÉ=éêÉJÅêáëáë=äÉîÉä=Erpa= OKQÄå=áå=OMMS=Åçãé~êÉÇ=íç=rpa=SKSÄå=áå=OMMNF=~åÇ=ãÉ~ëìêÉë=Ü~îÉ=ÄÉÉå=Éëí~ÄäáëÜÉÇ= íç=êÉÇìÅÉ=~=êÉéÉ~í=çÑ=íÜÉ=êìå=çå=íÜÉ=åçåJêÉëáÇÉåí=ÇÉéçëáíë=áå=OMMOK= =

important your attention is drawn to the statement on the back cover of this report which affects your rights.

SEB Merchant Banking Country Risk Analysis December, 2007

`Ü~ääÉåÖÉë=êÉã~áå=ÄçíÜ=áå=íÜÉ=ëÜçêí=íç=ãÉÇáìãJíÉêãK=aÉëéáíÉ=~=ëáÖåáÑáÅ~åí= áãéêçîÉãÉåíI=ÉñíÉêå~ä=áåÇÉÄíÉÇåÉëë=êÉã~áåë=ÜáÖÜK=^äëçI=íÜÉ=ÉÅçåçãó=áë=ëíáää= ÇÉéÉåÇÉåí=çå=^êÖÉåíáå~=ÉîÉå=áÑ=íÜÉ=íê~ÇÉ=äáåâ=Ü~ë=ïÉ~âÉåÉÇ=EÉñéçêí=íç=^êÖÉåíáå~= ÇÉÅêÉ~ëÉÇ=Ñêçã=NU=B=áå=OMMM=íç=U=B=çÑ=íçí~ä=áå=OMMSF=~ë=ïÉää=~ë=íÜÉ=Ñáå~åÅá~ä=äáåâ=ÇìÉ= íç=ë~ÑÉÖì~êÇë=êÉÖ~êÇáåÖ=åçåJêÉëáÇÉåí=ÇÉéçëáíëK=få=~=ãÉÇáìãJíÉêã=éÉêëéÉÅíáîÉI= ëíêìÅíìê~ä=êáÖáÇáíáÉë=áå=íÜÉ=ëí~íÉ=Ççãáå~íÉÇ=ÉÅçåçãó=éçëÉ=ÅÜ~ääÉåÖÉë=íç=áåÅêÉ~ëÉ=äçï= äÉîÉäë=çÑ=áåîÉëíãÉåí=~åÇ=ë~îáåÖë=åÉÉÇÉÇ=íç=áãéêçîÉ=éçíÉåíá~ä=çìíéìíK=qÜÉ= ÖçîÉêåãÉåí=áë=~áãáåÖ=~í=áãéêçîáåÖ=íÜÉ=ÄìëáåÉëë=Åäáã~íÉI=áåÅäìÇáåÖ=í~ñ=~åÇ=Ñáå~åÅá~ä= ëÉÅíçê=êÉÑçêãëX=ÇáîÉêëáÑóáåÖ=íê~ÇÉ=Ñêçã=jÉêÅçëìê=Äó=ÅçåÅäìÇáåÖ=íê~ÇÉ=~ÖêÉÉãÉåíë= ïáíÜ=íÜÉ=rpX=~åÇ=í~âÉ=~Çî~åí~ÖÉ=çÑ=íÜÉ=ïÉääJÉÇìÅ~íÉÇ=ä~Äçê=ÑçêÅÉ=Äó=Éëí~ÄäáëÜáåÖ=Ñçê= Éñ~ãéäÉ=Å~ää=ÅÉåíÉêëK=cêçã=íÜáë=éçáåí=çÑ=îáÉïI=íÜÉ=ÅçãéäÉíáçå=çÑ=íÜÉ=_çíåá~=ÅÉääìäçëÉ= éä~åí=~åÇ=~=ëáãáä~ê=éêçàÉÅí=éä~ååÉÇ=Äó=pé~åáëÜ=båÅÉ=ëÜçìäÇ=Ü~îÉ=~=éçëáíáîÉ=áãé~Åí= çå=ÇáîÉêëáÑóáåÖ=ÄçíÜ=íÜÉ=å~êêçï=éêçÇìÅíáçå=ëíêìÅíìêÉ=~åÇ=íê~ÇÉ=é~ííÉêåëK= = JJ˘JJ= = qÜÉ=ÉÅçåçãó=Ü~ë=ÇÉîÉäçéÉÇ=Ñ~îçê~Ääó=ëáåÅÉ=íÜÉ=OMMO=Åêáëáë=êÉÅçêÇáåÖ=ÜáÖÜ=dam=ÖêçïíÜ= ëìééçêíÉÇ=Äó=éêìÇÉåí=ã~ÅêçÉÅçåçãáÅ=éçäáÅáÉë=~åÇ=ëíêçåÖ=ÉñíÉêå~ä=ÉåîáêçåãÉåíK=qÜÉ= ~ìíÜçêáíáÉëÛ=êÉã~êâ~ÄäÉ=ÉÑÑçêíë=íç=êÉÇìÅÉ=~åÇ=êÉëíêìÅíìêÉ=íÜÉ=ÜáÖÜ=ÉñíÉêå~ä=ÇÉÄí=Ü~îÉ= áãéêÉëëÉÇ=áåîÉëíçêë=~åÇ=ÅêÉÇáí=ê~íáåÖ=~ÖÉåÅáÉë=íêáÖÖÉêáåÖ=ÑìêíÜÉê=ê~íáåÖ=ìéÖê~ÇÉë=ïÜáäÉ=ëíáää= í~âáåÖ=åçíÉ=çÑ=rêìÖì~óÛë=ÅçåíáåìÉÇ=îìäåÉê~Äáäáíó=íç=ÅÜ~åÖÉë=áå=áåîÉëíçê=ëÉåíáãÉåí=~åÇ= ÉÅçåçãáÅ=Ççïåíìêåë=áå=åÉáÖÜÄçêáåÖ=ÉÅçåçãáÉëK=tÉ=ÅçããÉåÇ=íÜáë=îáÉï=~åÇ=~äëç=éçáåí=íç=íÜÉ= ÜáÖÜ=ëÅçêáåÖ=çÑ=êÉëáäáÉåÅÉ=áå=çìê=ãçÇÉä=~ë=~=êÉëìäí=çÑ=ëíêçåÖ=áåëíáíìíáçåëI=êÉä~íáîÉäó=ÜáÖÜ=dam= éÉê=Å~éáí~=~åÇ=éçäáíáÅ~ä=ëí~Äáäáíó=ã~âáåÖ=íÜÉ=ÉÅçåçãó=~éí=íç=ïáíÜëí~åÇ=~=éçíÉåíá~ä=ÉÅçåçãáÅ= ëÜçÅâK==

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How to read the chart? Moving out from the center reduces risk.

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9

3

Liquidity

1 -1

Absence of event risk

S ORB

11

5

Macro balance

JPB

fåîÉëíãÉåíëLdam

13

7

RRRU

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Uruguay

Information

Average EM

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= 2

SEB Merchant Banking Country Risk Analysis December, 2007

Key data: 2002 2003 GDP (bill. US$) 18.6 12.1 GDP/capita (US$) 5589 3638 GDP, real (change) -3.4% -11.0% Investments/GDP 9.5% 12.1% Budget balance/GDP -4.7% -4.0% Govt debt/GDP 92.0% 110.0% CPI inflation (%) 13.9% 19.4% Money demand (%) 14.3% -7.0% Stock prices (%change) Interest rates 86% 21% Exch. Rate ($) 21.3 28.2 Trade/GDP (%) 28% 48% Oil price (Brent) 25 29 Billions US $ Export of goods 2.7 3.1 Imports of goods 2.5 2.5 Other: 0.1 -0.6 0.3 -0.1 Current account (% of GDP) 1.7% -0.5% FDI 0.2 0.4 Loan repayments 0.7 0.6 Net other capital flows -3.4 0.3 -2.3 1.3 Balance of payments 0.8 2.1 Reserves Total debt 10.6 11.4 o/w short term debt 4.0 3.9 Sources: Oxford Economics and SEB estimates

2004 11.2 3373 2.0% 17.0% -2.4% 97.0% 9.2% -10.9%

2005 13.3 3989 11.8% 18.9% -1.8% 75.0% 4.7% -4.5%

2006 16.9 5059 6.6% 22.7% -1.4% 66.0% 6.4% 5.3%

2007 18.6 5558 4.6% 25.3% -1.2% 62.0% 8.1%

2008 19.8 5895 4.2% 26.3% -1.2% 56.3% 6.4%

2009 21.1 6264 2.8% 27.8% -1.4% 53.2% 5.5%

4% 28.7 72% 38

1% 24.5 74% 54

2% 24.1 68% 65

0% 23.7 67% 73

0% 24.2 68% 87

0% 25.1 69% 77

4.3 2.7 -1.5 0.0 0.0% 0.3 0.7 -0.6 0.4 2.5 12.6 4.3

5.1 3.8 -1.3 0.0 0.3% 0.8 0.8 -1.2 0.6 3.1 12.3 3.9

5.7 4.7 -1.4 -0.4 -2.6% 1.3 0.9 -1.8 0.0 3.1 12.6 4.2

6.1 5.8 -0.9 -0.5 -2.8% 1.3 0.9 -1.3 0.4 3.5 13.0 4.3

6.6 6.3 -0.8 -0.5 -2.7% 1.1 1.0 -1.3 0.3 3.8 13.5 4.5

7.1 6.8 -0.8 -0.5 -2.3% 0.8 1.0 -1.1 0.3 4.0 13.8 4.5

B+ B1 B+

BBB1 B+

Rating history Fitch (eoy) Moody's (eoy) S&P (eoy) Type of government: Next elections Other: Latest PC deal Latest IMF arrangements

B BB B3 B3 B3 BBB Parliamentary Democracy October 2009

B+ B3 B

No Agreement SBA 2002. Cancelled in 2007.

E x c h a n g e ra te

C o n s u m e r P r ic e s

3 2 .5

A n n u a l p e rc e n ta g e c h a n g e

3 0 .0

3 0

2 7 .5

2 5 2 0

2 2 .5

Percent

USD/UYU

2 5 .0

2 0 .0 1 7 .5

1 5 1 0

1 5 .0 5

1 2 .5 0

1 0 .0 00

01

02

03

04

05

06

0 2

07

0 3

04

0 5

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c .o .p 1 2 m o n th s S o u rc e : R e u te rs E c o W in

S o u r c e : R e u te r s E c o W i n

L a b o u r m a rk e t

C u r r e n t A c c o u n t B a la n c e

18

2 0 0

16

1 0 0 0

135

U n e m p lo y m e n t ( lh s )

125 W a g e s (rh s )

14

115

12

105

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Index

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0 5

0 6

03

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05

06

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0 7 S o u r c e : R e u te r s E c o W i n S o u r c e : R e u te r s E c o W i n

3

SEB Merchant Banking Country Risk Analysis December, 2007

= fãéçêí~åí>=qÜáë=ëí~íÉãÉåí=~ÑÑÉÅíë=óçìê=êáÖÜíëK= = = afp`i^fjbo= = = ^ää=êÉëÉ~êÅÜ=EêÉéçêíëI=ëíìÇáÉë=~åÇ=éìÄäáÅ~íáçåëF=áë=éêçÇìÅÉÇ=Ñçê=áåëíáíìíáçå~ä=áåîÉëíçêë=çåäóK=^ää=êÉëÉ~êÅÜ= EêÉéçêíëI=ëíìÇáÉë=~åÇ=éìÄäáÅ~íáçåëF=áë=éêçÇìÅÉÇ=Ñçê=éêáî~íÉ=áåÑçêã~íáçå=çÑ=êÉÅáéáÉåíë=~åÇ=pâ~åÇáå~îáëâ~= båëâáäÇ~=_~åâÉå=^_=EéìÄäFI=EíÜÉ=_~åâF=áë=åçí=ëçäáÅáíáåÖ=~åó=~Åíáçå=Ä~ëÉÇ=ìéçå=áíK= = léáåáçåë=Åçåí~áåÉÇ=áå=~ää=êÉëÉ~êÅÜ=EêÉéçêíëI=ëíìÇáÉë=~åÇ=éìÄäáÅ~íáçåF=êÉéêÉëÉåí=íÜÉ=Ä~åâDë=éêÉëÉåí=çéáåáçå= çåäó=~åÇ=~êÉ=ëìÄàÉÅí=íç=ÅÜ~åÖÉ=ïáíÜçìí=åçíáÅÉK=^ää=áåÑçêã~íáçå=Ü~ë=ÄÉÉå=ÅçãéáäÉÇ=áå=ÖççÇ=Ñ~áíÜ=Ñêçã= ëçìêÅÉë=ÄÉäáÉîÉÇ=íç=ÄÉ=êÉäá~ÄäÉK=eçïÉîÉêI=åç=êÉéêÉëÉåí~íáçå=çê=ï~êê~åíóI=ÉñéêÉëë=çê=áãéäáÉÇI=áë=ã~ÇÉ=ïáíÜ= êÉëéÉÅí=íç=íÜÉ=ÅçãéäÉíÉåÉëë=çê=~ÅÅìê~Åó=çÑ=íÜÉ=ÅçåíÉåíë=~åÇ=áí=áë=åçí=íç=ÄÉ=êÉäáÉÇ=ìéçå=~ë=~ìíÜçêáí~íáîÉK= oÉÅáéáÉåíë=~êÉ=ìêÖÉÇ=íç=Ä~ëÉ=íÜÉáê=áåîÉëíãÉåí=ÇÉÅáëáçåë=ìéçå=ëìÅÜ=áåîÉëíáÖ~íáçåë=~ë=íÜÉó=ÇÉÉã=åÉÅÉëë~êóK= qç=íÜÉ=ÉñíÉåí=éÉêãáííÉÇ=Äó=~ééäáÅ~ÄäÉ=ä~ïI=åç=äá~Äáäáíó=ïÜ~íëçÉîÉê=áë=~ÅÅÉéíÉÇ=Ñçê=~åó=ÇáêÉÅí=çê= ÅçåëÉèìÉåíá~ä=äçëë=~êáëáåÖ=Ñêçã=ìëÉ=çÑ=íÜÉëÉ=ÉäÉÅíêçåáÅ=çê=éêáåíÉÇ=ÇçÅìãÉåíë=çê=íÜÉáê=ÅçåíÉåíëK= = vçìê=~ííÉåíáçå=áë=Çê~ïå=íç=íÜÉ=Ñ~Åí=íÜ~í=~=ãÉãÄÉê=çÑI=çê=~åó=Éåíáíó=~ëëçÅá~íÉÇ=ïáíÜI=íÜÉ=Ä~åâ=çê=áíë=~ÑÑáäá~íÉëI= çÑÑáÅÉêëI=ÇáêÉÅíçêëI=ÉãéäçóÉÉë=çê=ëÜ~êÉÜçäÇÉêë=çÑI=ëìÅÜ=ãÉãÄÉêë=ã~ó=Ñêçã=íáãÉ=íç=íáãÉ=Ü~îÉ=~=äçåÖ=çê=ëÜçêí= éçëáíáçå=áåI=çê=çíÜÉêïáëÉ=é~êíáÅáé~íÉ=áå=íÜÉ=ã~êâÉíë=ÑçêI=íÜÉ=ÅìêêÉåÅáÉë=~åÇ=ëÉÅìêáíáÉë=çÑ=ÅçìåíêáÉë= ãÉåíáçåÉÇ=ÜÉêÉáåK= = pâ~åÇáå~îáëâ~=båëâáäÇ~=_~åâÉå=^_=EéìÄäF=áë=áåÅçêéçê~íÉÇ=áå=píçÅâÜçäã=pïÉÇÉå=ïáíÜ=äáãáíÉÇ=äá~Äáäáíó= ~åÇ=áë=~=ãÉãÄÉê=çÑ=íÜÉ=píçÅâÜçäã=píçÅâ=bñÅÜ~åÖÉK== = = `çåÑáÇÉåíá~äáíó=kçíáÅÉW== íÜÉ=_~åâDë=êÉëÉ~êÅÜ=áë=ÅçåÑáÇÉåíá~ä=~åÇ=ã~ó=åçí=É=êÉéêçÇìÅÉÇ=çê=êÉÇáëíêáÄìíÉÇ=íç=~åó=éÉêëçå=çíÜÉê=íÜ~å= áíë=êÉÅáéáÉåí=Ñêçã=íÜÉ=Ä~åâK=^åó=éêáåíÉÇ=çê=ÉäÉÅíêçåáÅ=ÇìéäáÅ~íáçå=çÑ=íÜÉ=êÉéçêíë=çê=é~êíë=çÑ=íÜÉ=êÉéçêíë= ãìëí=áåÅäìÇÉ=íÜáë=ÇáëÅä~áãÉêK=qÜÉ=_~åâ=ÇçÉë=åçí=í~âÉ=~åó=êÉëéçåëáÄáäáíó=Ñçê=ã~íÉêá~ä=ÖáîÉå=íç=íÜáêÇ= é~êíáÉë=Äó=êÉÅáéáÉåíëK=

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