All Uruguayan sectors that during 2023 complained about the exchange difference with Argentina Now they moved the focus further north. The problems are repeated: a cheap competitor is added to tourism, businesses in neighboring areas complain about purchases from the other side of the border and industrialists warn of “competitiveness” problems.
With the arrival of Javier Miley to the Presidency of Argentina, a good part of the problems were solved mainly by the reduction of the exchange gap and for the possibility of being able to collect old debts. But now the Chamber of Industries of Uruguay (CIU) is attentive to possible effects of the Brazilian devaluation.
The new president of this business union, Leonardo Garciasaid that businessmen in the sector are beginning to “monitor” the Brazilian situation after having “quite a few problems with trade with Argentina.” “The greatest difficulty for the industrial sector to finally begin to grow sustainably is competitiveness. We need competitiveness“said the businessman, in an interview with the weekly Search.
García projected that Starting in “March or April” “significant growth” will begin to be noticed in Argentinawhich will help “drive the national industry.” But he warned: “What is happening in Brazil is negative and reminds me a lot of what happened in recent years with Argentina. It generates a significant exchange rate difference and makes competition difficult.”.
If the end of 2023 is taken into account and compared to the expected end of 2024, the drop in prices in Brazil would have been 17.4%, given that there was an inflation of 4.9% and an increase in the dollar of 27%. In UruguayMeanwhile, the drop in prices measured in the US currency was much smaller: 7%. This percentage is explained by a Consumer Price Index of 5% and an increase in the dollar price of 13%, according to a report by Consulting Teams.
In conclusion, For Uruguay, there is a relative increase in price compared to Brazil of approximately 10%. “This adds to the historical competitiveness with our neighbor, the lowest in more than two decades,” adds the Teams analysis.
For Garcia, The devaluation in Brazil will not only affect exports and warned that it is necessary to “be very careful with smuggling.”. “The government has to focus there, because when the gap is small the border area is affected, but when smuggling begins to grow it reaches the Center of Montevideo,” said the president of the CIU.
“This immediately affects the industry and also employment. Uruguay has to be attentive, no matter the political position of neighboring countries, and be very clear about where it is going.“said the industrial representative.
The consultant’s report Teams published days ago affirms that smuggling is one of the “negative effects” of the devaluation of Brazil. It projects that companies that sell to Argentina will be favored (mainly those that sell chemical products, pharmaceuticals and auto parts), while the most disadvantaged will be those that sell or compete with production with Brazil in the sale of vehicles, dairy products and plastic.
These impacts, however, will be offset “in part” by the increase in the cost of Argentina.
In the interview, the industrialist also He considered it “very important” to closely follow what happens between Argentina and the United States. “Uruguay may have the opportunity to benefit from this relationship because of what the United States market means,” he declared.
García projected that 2025 will be a “quite stable” year, without “major growth.” This is due to the “uncertainty” generated by the new government that will take office in March – beyond its political sign, he clarified – and the situation in Brazil. “This generates great caution, because there are no large investments in the industrial sector; I would say that the investment last year was quite flat,” he defined.
