In 2002 the small farm-driven economy suffered bank closures, high unemployment and soaring poverty during a devastating financial crisis in Argentina, due to a direct “link” between the two financial systems that has weakened since.
“A problem in Argentina back then was a problem in Uruguay,” Labat said. Argentina was then Uruguay’s second biggest trading partner. Today it has fallen to number four, after China, Brazil and the European Union.
“Today a problem in Argentina is no longer a problem here.”
The opposing fortunes of the two countries is stark.
Uruguay’s annual inflation rate was 4.1% in August, the lowest since 2005 and less than a third of Argentina’s rate of 12.4% in the single month of August alone.
Uruguay’s peso, similarly valued to Argentina’s in 2018, now gets you almost 10 times as many dollars officially, and closer to 20 times in reality, with most Argentines trading on parallel markets as formal access to dollars is tightly limited.
Argentina’s net central bank reserves are also estimated to be in the red, hurting its ability to make payments as it battles to keep a $44 billion International Monetary Fund (IMF) program alive. Uruguay’s meanwhile have been stable at around $8 billion.