Uruguay 2024 Elections Outlook

Speakers: 

• Diego Pereira-Garmendia, Chief Economist for South America, JP Morgan
• Samar Maziad, Vice President and Senior Analyst, Moody's Investors Service
• Nicolás Saldías, Senior Analyst for Latin America and the Caribbean, Economist Intelligence Unit
• Eric Farnsworth, Vice President, Washington, DC, Americas Society/Council of the Americas (moderator)

"Whether you have a center-right or a center-left government, you would still have growth, compliance, and commitment to fiscal consolidation," said Samar Maziad of Moody's Investors Service. In a discussion moderated by AS/COA's Eric Farnsworth, Maziad and her fellow panelists agreed that regardless of the outcome of the Uruguay's October 27 elections, Uruguayans and international investors should expect little change to a long-standing fiscal responsibility that has contributed to the country's stable macroeconomic environment.

The EIU's Nicolás Saldías profiled the presidential candidates leading the polls: Yamandu Orsi of the leftist Broad Front opposition, whom he described as so far "shy [in] articulating his policy preferences," and Álvaro Delgado of the National Party who represents a continuation of the government of Luis Lacalle Pou. While these two will likely compete in a November runoff vote, Saldías breached the possibility of a "black swan event" in which Andrés Ojeda of the center-right Colorado Party replaces Delgado in the second round, given Ojeda's upward momentum in the polls.

Diego Pereira of JP Morgan detailed positive economic trends observed during the incumbent administration of President Lacalle Pou, including improved average annual growth, lower rates of inflation, and relatively high productivity compared to regional peers. He did, however, register concerns about Uruguay's widening fiscal deficit. "Fiscal order is paramount to the ability of the country to be able to grow, to be able to redistribute, to increase its social welfare, which is a keystone of the Uruguayan social contract," he stated. On matters of trade, he anticipated that a shift to a center-left administration would signal greater alignment with the Mercosur trade bloc and less insistence on Uruguay pursuing free trade agreements on its own.

The panelists also discussed the risks of a controversial pension reform plebiscite on the ballot in October. The reform would lower the retirement age, tie minimum pensions to the national minimum salary, and eliminate private pension fund managers. Saldías said that should the plebiscite pass, the reforms could trigger a billion-dollar increase in spending, exacerbating Uruguay's deficit and limiting any administration's capacity to address other issues like insecurity. Maziad added it would have "negative implications for growth and investment." Pereira, while acknowledging that markets were wary of the potential reform, pointed out that most polling indicated the plebiscite does not have the required level of support to be approved.

Overall, the panel shared a conviction that there would not be significant policy deviations from the incoming government, whether center-left or center-right. As Maziad articulated: "We value policy continuity. Sometimes it's slow to make changes, but that's part of the process, the Uruguayan way."