The Rural Association of Uruguay (ARU) noted that the combination of adverse impacts from drought that was expressed throughout the national territory – the declaration of agricultural emergency still valid- and the low value of the dollar in the local square “will end up resulting in a lower profitability, job loss and decreased investmentwhich will affect the economic growth of the country.
After reporting that concern was repeatedly expressed about “the negative consequences that the drop in the exchange rate has on the agricultural sector,” the union headed by Patricio Cortabarría indicated in a statement that there were contacts with the government to seek measures to help alleviate this situation and that “the only solution they mentioned was the more active participation of public companies in the exchange market”.
However, it was now reported a decision of the Central Bank of Uruguay (BCU) coordinated with the Ministry of Economy and Finance (MEF) “changed the conditions” for the payment of some Treasury Notes in UI (Indexed Units) and UP (Pension Units)which prevents those who collect maturities from participating in the exchange market“and missed opportunity to generate increased demand for dollars and upward pressurenecessary to improve the country’s competitiveness”.
The statement concludes with the following expression: “The government demonstrates a clear inconsistency in its actions and is unaware of the negative consequences that this measure will have for the country’s economy, whose main engine is the agro-exporter”.
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The current value of the dollar is a problem, denounced the ARU.
The notice
The Rural Association of Uruguay (ARU) has repeatedly expressed its concern about the negative consequences that the drop in the exchange rate has on the agricultural sector.
This situation, added to the historical drought that the country is facing, has a negative impact on companies in the sector, which will end up resulting in lower profitability, loss of employment and decreased investment, which will affect the country’s economic growth.
The ARU, along with other organizations, maintained contacts with the government to seek measures to help alleviate this situation. The only solution that the authorities mentioned was the more active participation of public companies in the exchange market.
However, on May 19, the Central Bank of Uruguay (BCU) in coordination with the Ministry of Economy and Finance (MEF) issued a statement that changed the conditions for the payment of some Treasury Notes in UI (Indexed Units) and UP (Pension Units) maturing in May and June.
Both the UI and the UP are pesos indexed to an indicator, so their natural payment is in pesos, but the MEF granted financial institutions the option of choosing the currency in which the payment is made, and it can be done in national currency or US dollars.
In this way, those who collect these maturities are prevented from participating in the exchange market and the opportunity to generate an increase in the demand for dollars and upward pressure, necessary to improve the country’s competitiveness, is lost.
With this measure, the government demonstrates a clear inconsistency in its behavior and is unaware of the negative consequences that this measure will have for the country’s economy, whose main engine is the agro-exporter.
