This week the government began to speak of pending issues that had been postponed for a relatively long time and many analysts blame that on the reopening of the meat market. What is your opinion in this regard?

The issue of foot-and-mouth disease was an additional blow to the rest of the problem we already had. The Argentine recession and the constant depreciation of the real that affects the competitiveness of our products has virtually caused a sort of strong demand. The opening of the meat market has been one of the few good news we have had in recent times and I think it serves to temper down the government’s mood so that it can adopt measures to palliate the situation.

We must be realistic, there is no government, no Economy Ministry that can reasonably isolate itself from the highly complex hemispheric and regional situation. This is not an Argentine or Brazilian problem alone. It is not Uruguayan either. The recession and downturn since the middle of 2000 is a Hemispheric problem affecting most of the major Latin American countries and is now acquiring global dimensions since in terms of industrial production Japan, the United States and Europe are technically in recession.

I think it is necessary to take measures but as I always say in times of crisis we must avoid making too many mistakes and not getting desperate thinking that reality will be totally different than what it is due to the external factors we have.

One way of contributing may be by opening certain sectors that have been closed in Uruguay for long to competition such as telecommunications, fuels distribution and from then on attract investments to sectors that offer reliable prospects for the next 20 or 30. I think that could encourage investments now when even the most traditional investments are depressed. Anyway, we must consider this are palliatives that can temper troubled waters down but the country by no means can isolate itself from the regional and hemispheric recessionary scenario.

I firmly believe that the Mercosur serves as an integration platform to the world. If we use the bloc to fight against one another then the plan is due for failure. The reason is simple: Argentina and Brazil are two of the world’s closest economies. To illustrate the case, Ireland sells 75% of what it produces abroad and then imports 80% of what it needs, that is to say, it specialized in what is good at, sells it abroad and imports what it needs to consume locally. That allows it to have some scale and diversity which would otherwise be impossible for small countries.

Comparing this example to our countries, Argentina exports 10% of what it produces, Brazil 9%, Uruguay 15% and Chile 35%. Then, even in the Latin American concert, our economies are very closed. Despite the efforts made to integrate and open up our trade borders we still have not achieved a global integration that leads us to higher levels of specialized production, scale and diversity that allows us to have a viable growth strategy.

I am a staunch advocate of Mercosur because I believe that in the phrase ‘united we stand’. If we capitalize on that union as we are about to do so in the talks with the United States toward a bilateral trade agreement or with the European Union toward the same goal in such a way that we, as a region, advance toward integration into the world then I applaud it.

Many think that due to the Argentine and Brazilian crises the best thing to do is move away from the bloc and be safe. To what extent do Uruguayan politicians support this idea?

I consider that we, Uruguayans, following the prudent and calm nature of our Nation still believe that when one spends ten years building a process then one cannot make a hasty decision when the first problem arises. This is in fact the first acid test of the Mercosur, where Argentina is trapped in crisis and Brazil is devaluing its currency every day (not because it wants to but because circumstances impose so).

Asymmetries exist because the countries are being tested in difficult times. I think good agreements just as good friends appear in times of difficulty and so now our task is focused on protecting a 10-year long effort, we must rise to the occasion and make a viable project. I also think that the only way to achieve it is by anchoring the Mercosur into a negotiation that expands us, enlarges our possibilities and markets with the United States and Europe. Both the US and Europe will be less interested in negotiating with every partner in particular than the Mercosur as a whole and that situation may be the glue that keeps us together in hard times.

‘In the case of Uruguay there is another key aspect which is the fulfillment of obligations: when Uruguay was cornered by difficulties it conducted extremely costly adjustments to comply with its obligations’

If we consider Argentina exceeded 1850 country risk points, Brazil neared 1200 and Uruguay 300, how can we explain such different indexes when the three countries are undergoing crises that involve them in a similar way economically?

I think there are two or three factors to take into account. One is that Uruguay qualifies for investment grade and when that rating is achieved it is possible to access a market that proves inaccessible for those that are not graded the same. This gives some inertia to investment grades for rating firms are quite reluctant to change the rating to countries when they have already reached investment grade.

In the case of Uruguay there is another key aspect which is the fulfillment of obligations: when Uruguay was cornered by difficulties it conducted extremely costly adjustments to comply with its obligations and by the mid-80s it generated fiscal surplus to service the debt.

This reputation is a clear sign that the political system is mature and responsible and should the country face adverse conditions, like now, the decisions related to our obligations will surely be made. An this is because it is a matter of survival to us. While Argentina is a country that can turn to the Treasury and international organizations because it is too big to fall, Uruguay is smaller and so we must stand on ourselves. We know we cannot be at risk for aid will not come so easily as it gets to other countries. That is why Uruguay with soaring fiscal deficits due to the drop in collection and slowdown and not due to sprawling, has conformably accessed the credit market to finance the unbalances.

You have a very optimistic view toward the Uruguayan economy...

Sure because I believe in the history of my country. Since 1985 Uruguay has been growing. The per capita income has grown. Now we are experiencing a three year recession, slowdown and stagnation of hemispheric-regional reach and so it cannot be attributed to our errors. This does not mean we do not have things to do since it is an endless process that will call for our every day effort because growth is an elusive concept.

Uruguay’s per capita income has grown since 1985 up to now by 3.5% a year, entailing that the material prosperity of the common people doubles every 20 years. Had our country grown by those levels from 1955 to 1974 (period of stagnation and zero growth) today we would have Spain’s per capita income. After Chile, Uruguay has reported the best performance in Latin America since 1985 or 1974 from an optimistic perspective, greater than those of Mexico, Argentina and Brazil. In a long-term view, we did much better in the last 25 years than Argentina and Brazil. This shows we have a strong administration capacity and separate the country from its geography when necessary to drive it toward a more Chilean direction than that of our neighbors.

In my view, Batlle has proposed two major battles. First, competition openness of previously monopolized sectors. Not privatization and not privatization of monopolies but opening competition in telecommunications, fuels, electricity and ports.

An opening that allows the country to exploit the advantages it has as a communication hub and logistics center. If we consider Uruguay has become an incredible software exporter in the last ten years then we can see possibilities are limited and we need to free them. These monopolies are placing surcharges on the country’s producers, surcharges for those who are thinking of investing in the country and also restrict entry of new investments in those sectors. In Ceres we have showed that if electricity, telecommunications and fuels open to competition and prices decrease compared to international levels, around 40 thousand jobs would be created on the basis of the cost reduction it would produce.

Batlle’s other big bet is a look outside. Uruguay’s fate cannot be the region but the world. That is why he has been a staunch advocate of the Mercosur toward the integration with the United States and Europe and a staunch advocate of the FTAA integration process.

I believe that if the Batlle Administration achieves significant progress in these two areas, which are not the only ones for there are many other challenges too, when the troubled waters calm down Uruguay will be ready to grow at staggeringly high rates in the years ahead’

* Interview conducted at the VII Annual World Bank Conference on October 17, Montevideo, Uruguay.