Below you will find a brief of the evolution of indicators that we have been tracking, In the recently concluded month of August:
Uruguay’s Country Risk (measured by the UBI Index published by República AFAP) as of August 30, 2024, shows a value of 66, representing a monthly decrease of 22.35%. Likewise, considering the last 12 months, this index also experienced a negative variation of 2.94% during the same period, despite the volatility caused by emerging international geopolitics (e.g., the ongoing war in Eastern Europe and the Middle East), and internal factors that led to increased protests (e.g., the water deficit affecting the country, which impacted drinking water quality, the approval of educational and social security reforms, and the national budget law). Additionally, it’s worth noting that this is an election year in Uruguay, which, despite these challenges, demonstrates stability and favorable socioeconomic indicators, partially explaining the index’s 5.71% reduction in the first eight months of the year.
📈 Regarding inflation, according to the I.N.E. publication, the data for August 2024 was released. The Consumer Price Index (Indice de Precios del Consumo or “IPC”) for August 2024 registered a monthly variation of 0.29%, an accumulated variation of 4.03% for the year, and a 12-month variation of 5.57%. . As a result, the indicator remains within the target range for the last 12 months (in fact, it has been within this range for 15 consecutive months), although it is still increasing, for the fourth consecutive month. . The slight acceleration observed in the 12-month accumulated rate is due to the removal of August 2023 (0.17%) from the calculation, and the inclusion of August 2024 (0.29%). Still, the monthly variation was lower than expected according to the BCU’s latest survey of expectations, which forecasted a 0.4% increase.
The main contributors to this monthly variation in the IPC, expressed in percentage points, were: Food and non-alcoholic beverages (0.08), Clothing and footwear (-0.04), Furniture, household goods, and other regular household items (0.04), Health (0.04), Education services (0.04), and Insurance and financial services (0.05).
Below is a summary of the most prominent divisions in the reference month, according to the most appropriate level of aggregation:
🥖🥛 FOOD AND NON-ALCOHOLIC DRINKS: 0.31%
- Cereals and cereal-based products: 0.75% The price increases in Rice (2.21%), Biscuits (1.18%) and Sweet Cookies (4.48%) stand out.
- Meat and other derived products: 1.23% The increase in the prices of Cuadril (3.28%), Minced Meat (1.04%), Ribs (4.47%), Whole Chicken (3.28%) and Ham (1.43%).
- Milk, other dairy products and eggs: -0.55%, with declines in the price of Mozzarella (-3.64%) and Chicken Eggs (-2.13%).
- Fruits and Nuts: 2.91% with notable price increases in Bananas (5.67%) and Apples (3.86%).
- Vegetables, tubers and legumes: -3.16% with price drops in Lettuce (-17.79%), Spinach (-17.64%), Peppers (-3.26%), Zapallitos and zucchini (-22.43%), Carrots (-18.64%) and Potatoes (-1.79%). Increases were recorded in Tomatoes (10.40%), Creole squash, squash and kabutiá (13.07%) and Sweet Potatoes (15.99%).
- Price increases were also recorded in products such as French fries with or without salt for snacks (2.45%) and in Tomato pulp (4.57%) and Water (2.08%).
👖👠 CLOTHING AND FOOTWEAR: -1.85%
The drop in prices, due to seasonal clearance, in women’s clothing stands out (-2.82%).
🏡🪑 FURNITURE, HOUSEHOLD EQUIPMENT AND OTHER REGULAR HOUSEHOLD ITEMS: 0.78%
- It is mainly explained by the increase in Domestic service (1.30%).
🩺🩻 HEALTH: 1.05%
- The price increase in medication tickets stands out (2.38%).
🎓📜 EDUCATION SERVICES: 0.95%
- It is mainly explained by the adjustment in enrollment and monthly fee at the levels of Preschool Education (1.25%), Primary Education (0.98%) and Secondary Education (1.29%).
💰📈 INSURANCE AND FINANCIAL SERVICES: 0.79%
- The increase in Mutual Fee (3.34%), Companion Care Service (1.96%), Automobile Insurance (0.83%) and Payments for banking services and banking houses (0.35%) stands out.
Previously, BCU authorities had indicated that year-on-year inflation was expected to remain near the upper end of the target range, with slight increases in July and August, followed by a decline in September, which has so far been consistent for July and August. The BCU still projects year-end inflation around 5% for 2024.
Underlying inflation (excluding fruits, vegetables, and fuels) registered a monthly variation of 0.39%, an accumulated variation of 3.73% for the year, and a 12-month variation of 4.71%.
💹 Regarding the exchange rate, the interbank dollar exchange rate on August 30, 2024, was 40.335, representing a monthly variation of 0.15% and an accumulated increase of 7.30% over the last 12 months, with a 3.36% increase in the first eight months of 2024. It’s worth noting that the monetary authority did not need to intervene in the currency market to influence the dollar’s value, nor did it modify the monetary policy interest rate (which remained at 8.5%), an instrument used to mitigate inflation.
📊 When considering international arbitrages, the Euro had a 2.16% increase in the month (once again recovering against the dollar), with a 1.97% year-on-year increase and a slight 0.08% rise year-to-date. The Argentine Peso weakened further with a 2.20% monthly variation (and a significant year-on-year increase of 171.76%). Meanwhile, the Real had a slight depreciation of 0.27% in the month but showed a 14.14% year-on-year increase.
On another note, various data regarding economic activity came to light. For instance, these are some of the most relevant:
The fiscal deficit, in the twelve months ending in July, was -4.1% of GDP (-4.3% if the extraordinary income from the so-called “fifties” who left the private pension funds -AFAPs- and returned to contribute exclusively to the Social Security Bank –BPS-, that is, the Social Security Trust). In the twelve months ending in June, this result was -3.8% of GDP (-4.0% without those “fifties”), therefore it showed stability, since it remains at similar levels, with slight modifications in more or less in recent months. In this case, there was a slight deterioration compared to June, reversing what happened the previous month and returning to values similar to those of May.
The fiscal result of the Central Government – Social Security Bank stood at -3.4% of GDP in the twelve months ended in June and if we also remove the effect of income from the Social Security Trust (0.1% of GDP), we arrived at the fiscal result of the GC –BPS was -3.5% of GDP (there is another 0.1% of GDP derived from a change in the calculation methodology). Consequently, there was a 0.1% decline in GDP compared to the previous month, although, ultimately, showing stability.
The labor market in July showed a slight deterioration compared to the previous months, with an unemployment rate of 8.3%, still better than pre-pandemic levels. It is observed that the interior of the country has higher unemployment (8.7%) compared to the capital (7.8%). Summarizing the year so far, the unemployment rate was 8.6% in January, 8.1% in June, and 8.3% currently, representing a monthly variation of +0.2% and an annual variation of half a percentage point. The average for the period January-July this year was 8.54%, while last year it was approximately 8.39%, representing a variation of 0.15 percentage points. This behavior shows minimal fluctuations below its pandemic peak of 11.2%, and also below its most recent post-pandemic peak of 9%, in March and April of this year.
Underemployment marked at 9.4% (slight deterioration) and informality at 21.4% (slight improvement), in both cases showing stability.
The activity rate stood at 64.2% (similar to previous months, with small fluctuations up and down; and also better compared to April / 2019 – pre-pandemic – when it was 61.5%), and the employment rate at 58.8% (with the same note). In any case, these figures are better in the year-to-year comparison and also compared to 2019.
As a summary of the year so far, at the national level, the activity rate started the year at 64.3 and in the previous month’s measurement, June, it was at 63.8. Thus, activity saw a significant increase to 64.2 in July, continuing an upward trend following the decline caused by the pandemic and approaching the levels with which it started 2024. Regarding employment, it was at 58.8 in January, had a slight fluctuation to 58.6 in June, and reverted in the current measurement, returning to the early year levels at 58.8.
The I.M.S. (Average Salary Index) had, as of July, an interannual variation of 7.36% (as of June it was 7.95%), higher than inflation, which shows a growth in real wages, although it has not yet fully recovered. pre-pandemic levels. The monthly variation was 0.90%, implying an accumulated variation of 5.96% for the year; in the rolling year measure, the improvement is 7.36%, as previously stated.
The D.G.I., which is the Uruguayan tax authority, published the collection report for July/24, which shows the following:
The net collection (after deducting tax refunds) shows an annual variation, in real terms, of 2.6%.
La recaudación total bruta alcanzó los 54.472 millones de pesos en julio 2024, lo que implica una variación de 12,4% a precios corrientes. Descontado el efecto inflacionario, la variación interanual de la recaudación fue 6,6%
Total gross collection over the last twelve months shows both positive and negative annual variations. The accumulated annual variation over the last 12 months was -0.2%, and in July 2024, the real annual variation was 6.6%. Additionally, the real variation for the period January-July 2024 compared to the same period in 2023 was -0.3%.
During 2023, the DGI’s collection recorded monthly annual declines in all months except January, May, and October. The annualized collection (twelve months accumulated) showed a constant decline throughout the year.
The drop in collection last year is mainly explained by lower collection from consumption and income taxes, while property taxes showed growth.
July data showed that tax collection continues to recover after a 1.3% annual decline in 2023 compared to 2022.
Regarding Foreign Trade, Uruguay XXI released its report for August. Based on a report from the Union of Exporters of Uruguay (U.E.U.), there was a 27% annual increase in exports (including Free Zones) in August, so in the cumulative of the first eight months of 2024, exports grew 14% compared to the same period in 2023.
Indeed, according to foreign trade reports from the Union of Exporters and the Uruguay XXI institute, exports of soybeans and, primarily, cellulose were crucial in boosting exports, while sales of beverage concentrate and rice negatively impacted the month’s performance.
Cellulose sales reached USD 293 million, more than double the amount exported in August 2023. The European Union was the main destination for this product, accounting for 55% of total sales, while China also stood out with 25% of the total. Other significant destinations were South Korea and the United States, which represented 11% and 6% of total product exports, respectively. This was the second month of the year in which cellulose exports led the exports of Uruguayan goods.
Beef ranked second, with exports of USD 185 million in August 2024, 5% more than in the same month of 2023. This growth was due to an increase in exports to the United States and the European Union, where placements increased by 78% and 22%, respectively. This increase was sufficient to offset the decline in sales to China, which experienced a 39% annual decrease. Other markets, such as Israel and Canada, also contributed to offsetting this decline.
Soybeans were the third export product in August. External sales multiplied by 13 compared to the amount reached in August 2023, totaling USD 133 million. This increase was due to a larger volume exported compared to 2023, due to the end of last year’s drought effects. However, they recorded an 18% annual decrease. Two destinations stood out this month: nearly 80% of exports went to China, while 20% were sent to Egypt.
Dairy products experienced an 18% increase in the annual comparison. In August, the sector exported USD 76 million, with Algeria as the main buyer, representing 31% of the total exported, followed by Brazil. Milk powder exports continued to lead, representing 79% of dairy exports. The next most important category, cheeses, recorded an 18% annual decrease due to a drop in cheese placements to Brazil. Together with cheese and ricotta sales, butter exports represented 18% in this category.
Beverage concentrate exports ranked fifth and totaled USD 65 million. This decline was mainly explained by decreases in exports to Mexico and Guatemala. Exports to Mexico totaled USD 11 million, representing a 37% decrease compared to August 2023. Similarly, exports to Guatemala also reached USD 11 million, but with a 13% annual decrease.
Vehicles showed a 15% annual growth, mainly driven by a 75% increase in exports to Brazil, which offset the decrease in exports to Argentina, Chile, and three other minor destinations.
Rice exports showed a negative performance in August, reaching USD 53 million, 21% less than in August 2023. The most significant annual deterioration was observed in exports to Mexico, Venezuela, and Ecuador. Brazil was the main destination, with a total of USD 21 million, a similar amount to that recorded in August 2023.
Regarding destinations (including Free Zones), in August 2024, China ranked first in the destination ranking, with sales totaling USD 263 million, representing 21% of total exports. This represented a 51% increase in the annual comparison, mainly driven by soybean exports, which were non-existent in August 2023. Cellulose exports increased by 55% in the annual comparison, becoming the second most exported product to China. Beef exports continued to decline, totaling USD 50 million, representing a 39% decrease compared to August 2023.
The European Union ranked second with exports of USD 248 million, representing a 77% increase in exports. Cellulose continued to be the main exported product, reaching USD 160 million, more than double the USD 62 million recorded in August 2023. Despite declines in rice demand in other destinations, in the European Union, Uruguayan rice reached USD 14 million, four times higher compared to the same month in 2023.
Brazil ranked third in the destination ranking in August, with product acquisitions totaling USD 219 million, equivalent to 17% of total exports. The main exported product was vehicles, with a value of USD 44 million; however, despite the good performance of this sector, it did not offset the decline in malt, dairy products, rice, and wheat exports. The latter had the most significant negative impact, with exports totaling USD 18 million, less than half of what was exported in August 2023.
The United States ranked fourth as an export destination, with a total of USD 102 million, representing a 46% annual increase. Beef exports to the United States increased by 78% and reached USD 47 million. Beef exports were the most important for this month to the United States, representing 64% of the total exported to the country. Additionally, cellulose was exported for USD 17 million, a product that was not exported to the United States in August 2023.
Turkey ranked fifth with exports totaling USD 47 million, almost exclusively consisting of live cattle. Historically, Turkey has been one of the main destinations for this type of export. In 2023, 90% of the live cattle exported went to this country, while China has generally been the second most important destination.
