There’s a big winner in Argentina’s latest financial crisis — neighboring Uruguay
Argentina’s new financial crisis following the surprise July 2 resignation of its former economy minister is rocking the country, and driving many nervous Argentines to rush to buy goods as prices rise by the minute. One of the very few winners from the country’s latest drama is neighboring Uruguay.
In recent years, Uruguay has benefited from the disastrous populist policies of Argentine President Alberto Fernández and his powerful vice president, Cristina Fernández de Kirchner, who has effectively taken control of Argentina’s government over the past few weeks.
Uruguay, a small country of only 3.4 million people, has been luring some of Argentina’s wealthiest business tycoons to take up Uruguayan residence over the past two years, offering them economic stability, a 10year tax holiday for their foreign income and a more relaxed lifestyle.
A record number of 12,489 Argentines applied for Uruguayan residence last year, a 145% increase from 2019, according to Uruguay’s foreign ministry figures.
The flow of wealthy Argentines to more business-friendly Uruguay is only likely to grow in light of Argentina’s latest crisis. According to a poll by the Voices Research firm and published
July 6 by the daily La Nación, 53% of Argentines already said they wanted to live abroad when the survey was conducted late last year.
Ignacio Munyo, director of Uruguay’s Center of Economic and Social Reality Studies (CEDES), a private sector-funded think tank, told me that Uruguay’s economy will grow by 5% this year. That would make it one of Latin America’s bestperforming economies.
Munyo says that much of Uruguay’s growth will be due to a $3 billion Finnish investment in a paper mill, the largest-ever investment in Uruguay, as well as by another huge investment in a train project and an increase in soybean and beef exports. But the influx of wealthy Argentines will surely add to Uruguay’s growth, he said.
“They are having an important impact,” Munyo told me, referring to the Argentine newcomers. “It’s still mainly a local impact in the area where most of them live, but it’s no doubt relevant.”
I saw that with my own eyes during an April visit to the seaside resort of Punta del Este, where most of the wealthy Argentine immigrants live. In the past, Punta del Este was a vibrant city only during the summertime, when many Argentines vacationed there, but a sleepy — almost deserted — town in fall and winter.
But, to my surprise, I saw many apartments in high-rise buildings with their lights on during my visit, which was way past the January-February high tourism season.
When I mentioned this to Uruguayan friends, many joked that Punta del Este should build a monument to Cristina Kirchner — the person who has done the most for the city’s economic development.
Other Uruguayan cities may follow. The city of Colonia has just authorized a planned 100,000 people suburb known as +Colonia, aimed at attracting new foreign — mainly Argentine — residents.
“When things go bad in Argentina, there tends to be growing interest in Uruguay,” +Colonia developer Eduardo Bastitta told me.
You don’t have to be a genius to understand why Argentina is once again bankrupt: The country is spending much more than it takes in.
Argentina’s government collects taxes from 11 million workers, while it supports 13 million retirees and recipients of social subsidies, says Fausto Spotorno, director of the UADE university’s business school.
And instead of cutting public spending, the Fernández government keeps printing more money, leading to a projected 85% inflation rate this year.
Argentina has seen this movie many times before, but this time there is an additional factor: an open political rift between the president and the vice president that is paralyzing the government’s decision-making process. Nobody seems to be in charge, while the country’s economy keeps sinking.
The only good news is that Argentina is scheduled to hold elections in October 2023, and that the opposition Juntos Por el Cambio coalition is leading by a comfortable margin in the polls. The popularity of Fernández and his vice president has plummeted in recent months.
In the meantime, while Argentines wonder how they will survive until the 2023 elections, Uruguay will continue benefiting from its more businessfriendly policies.