'2002 Financial Crisis & Riots' History

2002 Financial Crisis & Riots

Do you feel that the government and conditions that led into 2002 might be repeated? If yes, why? If not, what changes suggest the future will be different?

Finally, how did the Argentine crisis of 2001 affect Uruguay other than through the economics? Were there refugees?

THanks! P

I wasn't here back then so can't comment. I'm told that most of the rioting went on in Bs As (they seem to be better at rioting than we are :)

Since then bank regulation has been tightened up with hard-line rules about the banks not lending out more than a very small proportion of their on-call deposits... which has resulted in very high liquidity levels. The drawback is that you don't get any interest on instant access money but the upside is that should a host of foreign depositors cause a bank run, the ROU banks are now in a position to pay up.

The Socialist/Radical government of the last 5 years has (generally speaking) behaved rather well in terms of fiscal policy as demonstrated by returns on ROU dollar bonds. Three years ago they were viewed as dodgy and yielded 12%+ but now they only yield 5 and a bit %. They have also been given lots of praise from the IMF and World Bank but I'd sooner judge the ROU gov's proberty by its bond yields.

You never quite know what will happen in Argentina and although the ROU's formerly heavy dependence on trade with Argentina has been reduced thanks to the bridge closure, Argentina is still the elephant in the Uruguayan room. In the early 2000s their collapse (and more especially the actions of a couple of their bankers) helped to spark ours but I'd be hopeful that we might possibly survive (but be damaged by) a similar implosion in the future.

What Pepe Mujica will do over the next 5 years remains to be seen. I'm biased as I like the old devil personally but that's no guarantee that he'll do well :-)

As for refugees... I've been seeing a steady flow of relocating farmers as well as Portenos buying houses and farms nearby ever since I arrived 3 and a bit years ago which has more than doubled local land prices. On Friday last a newly arrived Argentino/Scots couple from Bs As called by and introduced themselves. I suppose this area is popular as its within 2 hours of Bs As.

As always Patrick has explained more eloquently than I could hope to (and he has been living here longer and has more experience with banking here and around the world) so I won't add much to his answer.

There is one part I would emphasize and that is the part I have quoted above. They are not quite as closely intertwined as they were before, but the saying "when Argentina sneezes Uruguay catches a cold" is still somewhat relevant, no matter how strong Uruguayan banks are. Uruguay is small, Argentina is the big neighbour with the big market. Trade and money flows between the two and like it or not what affects Argentina affects Uruguay.

If Argentina's ridiculous "leaders" continue to make stupid decisions to save their own political face then country is headed down a slippery slope and fast. Yes Uruguayan banks are probably some of the most prudent around, and for a little country that few people have heard of they have weathered a devastating global economic crisis very well. However it would be foolish to think that Uruguay is immune from the actions of its powerful neighbours, and if the rich Portenos lose their money you can be sure than Uruguay will lose too.

Nobody knows what will happen with Mujica, he hasn't even taken his seat yet and it will take more than words to see where Uruguay is headed under his rule, but if Astori's economic policies continue then the security of Uruguayan banking should also continue.

2002 is in the past, it was a good lesson and showed that the credit report that is so important to normal people like us, is also very important to a Country. It pays to pay your bills.

In the last 2 years Uruguay survived the biggest World crisis that I remember in my life and did it with a growth of 3 1/2%.

They did it with prudent decisions and a iron elbow (as Patrick would say)

Here in the United States we're still trying to figure out how to sanitize our economy.

Ancap (very far from perfect)being run by the Government were able to control the Oil prices much better than the USA and Europe, where the Oil companies never cared about those Countries only their own profit.

That will bring another question, how important will it be for the Governments to have control in Companies or Sectors that are essential for the economy of a Country ?

There are many advantages to be gained from being in an asymmetric relationship with a more powerful neighbour/s and that is that you can learn, in virtual obscurity, from their very public mistakes. There are, of course, disadvantages, just ask the Welsh, Poles, Belgians, Dutch etc..

It seems Uruguay and Canada have found similar solutions to the reality of their relationships with the neighbour(s): social welfare programs and banking regulations to name a few.

That being said ... there are some obvious differences: size, natural resources etc..

In the end, it depends on the citizens, how they see themselves and how they chose to govern themselves.

Petrobas owns the second largest distribution center for petroleum products in Uruguay and was given a license to explore the Rio de la Plata.

Saman the Rice producer, most important in Uruguay, is Brazilian.

Textile companies are also under the control of companies from that Country.

The powerful ITAU Bank operates in Montevideo and is expanding.

In the near future Brazilian companies will dominate the Uruguayan Stock Market.

I wonder what is the difference between Left or Right at the time to accept who invests.

I believe the diversity of the Countries investing in Uruguay, will make Uruguay more Independent, as we think we are.

Any more 2002 first-hand accounts? How the government handled it? How the expat community handled it? How things calmed?

I don;t see 2002 in the past. Were this the case, the spreads would be much smaller. Actions taken during the crisis are the last best indicator for future crisis behavior. What "guarantees" to the international community and its capital have been established legally?

The 2008 crisis is less relevant since booming commodity growth in Argentina and Brazil would have masked over any intrinsic institutional and domestic weakness.

Thanks.

As far as I know Uruguay has never defaulted on its international loans so has a rather better record than places like the UK or Germany :-)

At the time of the crisis BROU (the state owned retail bank) froze assets for nearly a year but continued to accrue interest on depositors' money until it unfroze the accounts.

I still reckon that we were spared the recent crash mostly because of the financial proberty of both the government and the general population which largely live within their means. Levels of personal credit here are miniscule compared with the north and the lack of borrowings on most domestic houses means that there isn't the amplification of bad times when the economy slows. Compared with northern boom time, we live in a permanent slump but when the north busts, our strange economy looks quite shiny in comparison.

When I first arrived here 1 GBP = 49 $UY. Now 1 GPB = 29 $UY and according to my spies, things financial are about to get much worse in the UK this week-end. :-(

Interview on TV program "Vidas".

Its a difficult thing to do as most ex-pats had their reasons for leaving in the first place and usually settle into their new society.

My own country (Ireland) tried to do it when the Celtic Tiger first appeared as Ireland has more passport holders overseas than in Ireland and an estimated 70 million worldwide who think of themselves as Irish. Its a sad fact that to most ex-pats, their country of origin remains fixed in their minds at the time of their departure and can seem like a strange foreign place when they return 10, 20 or 30 years later.

Its the continuous Irish rain which keeps me overseas :-)

I moved from one province to another 30 years ago and I concur with your observation that when people return to their country of origin, it's like being in a dream where everything is vexatingly familiar but foreign at the same time. Also, as you point out, that everyone usually has a reason for leaving.

There are going to be a lot of countries competing for skilled workers then because that's the by-word here as the birth rate is below sustainable. I wonder how prepared the Uruguayans are to let in people, in significant numbers, who don't share the same cultural and religious backgrounds. We have a very open door policy in Canada but it's not without repercussions. Sikhs and muslims pose a problem for some because of their dress: male turbans for the former, female headgear for the latter. There's been open debate about "reasonable accommodation".

Although the ROU is mostly a nation of immigrants, the vast majority are of European descent. Various Uruguayo/a friends tell me that racism isn't a problem here but as I reply, its easy to be non-racist if you don't have large numbers of different races present :-)

Last year I felt it my duty to tick off a cashier in Tata (Colonia) for making grossly racist remarks about her Indian supervisor. On the other hand, the vast majority of Orientales I know are remarkable for their tolerance and politeness so maybe they would accept new immigrants in large numbers.

However, bearing in mind our economy, the difficulties involved in starting/running businesses, the popular attitudes towards entrepreneurs and the general dislike of change, I can't see sudden floods of new arrivals on the horizon yet :-)

One of the things that I can't seem to get clear in my research is why did all of the immigrants come to Uruguay in the first place. Was it for free land? Factory jobs? From what I understand, it's original natural resource were livestock heards, the result of someone dropping of cattle and horses and leaving them to reproduce.

For that matter, what sort of job market would an immigrant coming to Uruguay today encounter? What sorts of skills are they looking for? Is there a lot of industry in Uruguay and if so, what is it?

You mention, above: "the difficulties involved in starting/running businesses, the popular attitudes towards entrepreneurs and the general dislike of change". The first and last points I've seen mentioned here on various blogs but what is the attitude towards entrepreneurs? I'm guessing "not positive".

There I go again .... interrogation, interrogation.

By Indian I mean from India... Tata is an Indian owned supermarket. Most of the original Indio (native) inhabitants seem to have come to unfortunate ends and most of the few survivors live north of the Rio Negro.

The forefathers of most of my neighbours came here because of political and/or religious persecution at home. Rosario (a local town) attracted numbers of French Canadians during and after the 7 Years War as they didn't like being rounded up by the Brits and sold as slaves. Our local Swiss arrived mob handed in the mid 1860s and were of the anarchist persuasion. Our Piemontese population were Alpine Italian protestants as well as followers of the Valdensian religion who came here in search of a persecution-free life. They settled into agriculture, assorted support services and industries.

No doubt different parts of the ROU attracted different immigrants with different motivations. I met an extraordinary old gentleman running the shop at Cerro Chato who engaged me with questions about the apparent political domination of England by the Scots. It seems that his family fled Germany in 1938 (he was Jewish) and settled in Lebanon but the troubles there in the early 70s caused him to relocate to Cerro Chato :-)

Successful industries here seem to come and go. There used to be a large textiles industry but not now. El Anglo at Fray Bentos used to be the world's biggest meat plant but now its a slightly creepy museum. Currently, computer work and timber pulp are in fashion but IMV its just a matter of time before well-intentioned labour and other laws crush them too. The only industry which has survived generations of well-meant government interference is agriculture.

Industrialists and entrepreneurs are generally viewed as wicked exploiters of the working man (to put it mildly.) You'll see lots of graffiti in MVD expressing unfavourable views about them :-)

I would have thought that meatpacking would still be a big industry but as a recent news item about a shipwreck off the coast of Lebanon with a cargo of live Uruguayan cattle or sheep, it would seem that they are taking the animal, and not its carcass to the buyer. Isn't there a lot of rice and soya production? I am surprised to hear you talk of timber pulp as Uruguay is described, in the litterature that I've read, as a rolling, "wet" pampa. I guess with all that rain, trees would want to live there.

Tata is also the name of an Indian automaker, if my mind hasn't gone totally ga-ga, that has come out with a subcompact at a rediculously low price that could put wheels under the Indian masses ... sort of a modern day version of prewar Germany's Volkswagen. Well, having a grocery chain and making cars aren't mutually exclusive. We often forget how incredibly wealthy a lot of Indians are.

The British deported most of the Acadians, a name given to the French living in what today we call the maritime provinces. They were scattered all over, even as far as the Falklands, apparently but most to the American colonies. After the American revolution, some returned to their homeland, but a lot went to Louisiana which was still a French possession. Their own pronunciation of Acadien sounds like A-cajun, hence the modern day Cajun of Louisiana. Canadian, at the time, referred to French speaking people living along the St-Lawrence and the Great lakes.

The Québécois were considered to be conservative, dominated by the Catholic church and resistant to change. Remarkably, in the early 60's the threw off the church and turned themselves into a modern, forward looking state. They called it «la révolution tranquille», who's to say the Uruguayans won't have there own «revolución tranquilla» and change the direction their society is moving in. Or maybe they're happy as they are.

The welfare state and leftist leanings stem back nearly 100 years as does our concept of the "secular state."

Traditional Uru-politics involving Colorado -v- Blanco was a largely urban -v- rural split in which the urban Colorados were usually dominant. The recent coming of the Broad Front (even lefter) largely took over the Colorado's former constituency leaving them in 3rd place.

The rest of the Spanish speaking world celebrates Santa Semana but we have "The Week of Tourism" instead :-)

Meat packing, grain handling, jam manufacture, dairy products and other industries which stem from agriculture seem to struggle along OK.. except for when they are on strike.

Tata are also into software and have their Spanish language support HQ in MVD.

Large Countries and Uruguay.

We always have to fight, complain, scream loud, write on the walls looking for attention from the big boys to give us a break.

Then we try to unite the small and get big (Mercosur)and what happened we're still small.

Many years ago I read a book that said that Little Uruguay was created by British-Jewish Banks in London to put a CORK between the two biggest countries in South America and keep the peace and their business with this new part of the World.

It could be true because there was no logical reason why Uruguay should survive in this location. No Oil, no minerals just land and cows.

But World Wars came and Europe and the Usa needed the South American Countries to provide the basic needs of the Troops.

Thank God for the end of the War but that was the end of prosperity for these small country way way down south.

We have beatiful Beaches along the coast, one after the other but we have three or four Months of Summer, not warm enough to bring Tourist all year round.

Expats mentioned about Uruguayan materials and parts that are shipped to others Countries to make things. You can only sell what other Countries want to buy, even if we complain, cry or write on the walls.

Cargo of live Uruguayan Cattle to Lebanon that is another sample of sell what you can. We're capable of cutting that Cow totally.

We dont have Venezuelan Oil or Chilean Copper, Peruvian or Bolivian natural resources. Lately they paid attention to us just because of all the Leftist Countries in South America, we are the only one who keeps some sense and respect for every Country in the World There will always be free Press, separation of Church and States (no one should be involved in the other one's business), Elections and a total respect and love for Democracy.

We dont have too much more or maybe we have plenty and we dont know it.

La Revolucion tranquila - Great - (Gandhi missed using this words)

You must a registered user and logged in to use this feature:

• Login
  (Register)

• Post: Uruguay, Montevideo - Cost of Living (Prices)
• Good news from Bloomberg on the economy (Politics)
• Presidential Primaries 2009 (Politics)

Related posts on other sites:

• 2012 The Future? (Spiritual and Metaphysical Forum)
• What caused Argentina's Economic Crisis in 2001? (Argentina Forum)