The figure of stability behind Latin America’s consistent outperformer
Danilo Ángel Astori Saragosa has been finance minister, then vice-president, and now finance minister again under the Uruguay’s left-leaning Frente Amplio (Broad Front) coalition since it began to govern in March 2005, playing a major part in 14 consecutive years of growth.
Analysts have long considered Astori a crucial stabilising and moderate figure in the Frente Amplio as it has succeeded where so many Latin American countries have failed, pushing social programmes and progressive policies at home while retaining the approval of international financial markets.
Key to striking this balance, the minister told GlobalMarkets, was having achieved the unprecedented growth streak at the same time as reducing poverty from 40% to 8%.
“We are always seeking inclusive growth,” said Astori. “GDP expansion must go hand in hand with an improvement in the population’s living standards.”
This is grounded in sound economic policy. Astori reiterated that macroeconomic order had been an “essential” part of policy, meaning “consistency and coherence” between fiscal, exchange rate, monetary and income policy.
Growth recovered from 0.4% in 2015 to 2.7% in 2017, while the fiscal deficit shrank from 3.9% of GDP in 2016 to 3.5% in 2017 thanks to what Fitch called “tax-focussed adjustment measures”.
Still, Astori recognised that the deficit, which Itaú forecasts to increase slightly in 2018, was an important challenge. “We are taking fundamental steps to correct the deficit through public spending because we understand we cannot keep increasing the tax burden on the population,” said Astori.
He highlighted that this included improving the “quality of spending”.
Uruguay’s recent performance has also impressed economists with its resilience to the severe economic troubles in Argentina and Brazil, two of its major trading partners.
This is a result of the government’s strategy of “decoupling” from its neighbours said Astori. “We depend far less on Argentina and Brazil than we used to in terms of trade and commerce,” said the minister. “We have links with 140 countries, with China at the top and the USA becoming important.”
Astori also said that efforts to attract more productive investments — including tax stimulus — had been a very important part of recent success, with priority given to job-creating industries.
In November 2017, Finnish company UPM and the government signed an agreement for pulp mill investment close to the central city of Paso de los Toros. This is expected to bring in €2bn of investment — the largest ever single investment in Uruguay.
“I think we will see investment continue to recover, alongside job creation,” said Astori. The government has also made efforts to improve financial inclusion, with a new law giving all workers the right to be paid into a free bank account and bringing more of the population into the financial system.
“There has been a transformation that has strengthened the use of electronic payments, improving conditions for both individuals and SMEs,” he said.