In the recently concluded month of December, the evolution of the indicators we have been monitoring was as follows:
Uruguay’s Country Risk (measured by the UBI Index published by República AFAP) as of December 31, 2024, shows a value of 81, representing a negative variation of -6.90% for the month. Additionally, when considering the last 12 months, corresponding to the year 2024, this index saw a variation of 15.71%, despite the volatility during the period stemming from international geopolitical factors (for example, we can mention the ongoing conflict in Eastern Europe, along with the situation in the Middle East), and the internal climate, which is leading to an increase in mobilizations. It is also important to note that this was an election year in our country (the runoff election took place in November, with the candidate from the left-leaning party being elected) and, nevertheless, shows stability and favorable socio-economic indicators, which to some extent explains that, although in the first ten months of the year the index increased by 5.71% (remember that by September, the variation in the first three quarters of 2024 showed an increase of 20.00%).
This was primarily due to the uncertainty arising from the result of the plebiscite on Social Security and the pension and retirement system (including the potential elimination of the AFAPs), which was presented to the public alongside the election on the last Sunday of October, and which, not being approved, was reflected in the previously mentioned reduction for the month. In this regard, it is worth noting that the previous increase in Country Risk was also reflected in other variables (for example, the exchange rate, which showed a similar reaction when the plebiscite result was announced, as will be seen later).
Well, in November, the index rose noticeably, as mentioned, making a significant jump, likely due to the electoral cycle (among other factors). Once that cycle concluded, a decrease occurred in December, as reported above, still insufficient to offset the previous increase, but on track to do so if the trend is confirmed.
Regarding inflation, according to the publication by the National Institute of Statistics (I.N.E.), the data for December 2024 was released. The Consumer Price Index (CPI) for December 2024 recorded a monthly variation of 0.34%, with an accumulated annual increase of 5.49% and a 12-month variation of 5.49% as well. As a result, the indicator remains within the target range for the last rolling year (in fact, it has been within this range for nineteen months, marking the longest period under these conditions since the inflation targeting mechanism was introduced in 2003), which confirms the trend observed in September of the acceleration seen in the previous four months.
The acceleration observed in the accumulated figure for the last twelve months is due to the fact that December 2023, which was -0.11%, was no longer included in the measurement, while December 2024, which was 0.34%, replaced it, showing a slightly higher variation. Nevertheless, the monthly variation was lower than expected according to the latest expectations survey from the Central Bank of Uruguay (B.C.U.), which anticipated 0.4%. In this regard, the exchange rate had a notable impact, as will be further explained later. Consequently, given the inflationary pressures primarily stemming from the exchange rate, as mentioned, in the last COPOM (Monetary Policy Committee), the Central Bank of Uruguay (B.C.U.) decided to increase the reference rate (monetary policy rate) by 25 basis points, raising it from 8.5% to 8.75% as a measure to prevent inflation from rising beyond expectations.
The main contributions—expressed in percentage points on the monthly variation of the general index—primarily come from the divisions of Food and Non-Alcoholic Beverages (0.09), Housing (-0.19), Transport (0.09), Recreation, Sports, and Culture (0.17), and Restaurants and Accommodation Services (0.09).
The following is a summary of the comments on the most prominent divisions for the reference month, based on the most appropriate level of aggregation.
FOOD AND NON – ALCOHOLIC BEVREGES (0.33%)
- Meat and Other Derivative Products: 2.02%
The increase in prices is particularly notable for the following items: Nalga (3.25%), Vacío (5.73%), Cuadril (4.00%), Asado de tira (3.41%), Aguja (4.06%), Whole chicken (1.76%), Chicken cuts with bone (2.71%), Chicken cuts without bone (2.55%), Frankfurters (2.18%), Beef milanesa, prepared for cooking (1.60%), and Chicken milanesa, prepared for cooking (2.52%).
- Milk, Other Dairy Products, and Eggs: 0.51%
Price increases were recorded for Chicken Eggs (1.68%).
- Fruits and Nuts: 3.54%
Price increases were recorded for Lemons (36.82%), Oranges (5.60%), Tangerines (13.84%), and Strawberries (39.95%), while a decrease was observed in Peaches (-17.56%).
- Vegetables, Tubers, and Legumes: -6.91%
Price decreases were particularly notable for Bell Peppers (-36.43%), Tomatoes (-35.38%), Creole squash, pumpkin, and kabutia squash (-11.06%), Onions, scallions, green onions (-19.24%), Corn (-25.41%), and Potatoes, small potatoes (-1.39%).
HOUSING, WATER, ELECTRICITY, GAS, AND OTHER FUELS: -1.45%
- This is primarily explained by the effect, in the reference month, of the application of the “UTE Premia” program to the electricity supply bill (-5.03%).
TRANSPORT: 0.82%
- Increases were recorded in Cars or SUVs (2.96%), primarily explained by the variation in the exchange rate during the reference month, and in Passenger Transport with driver (6.62%), while a decrease was observed in Airfare (-3.30%).
RECREATION, SPORTS, AND CULTURE: 3.07%
- A notable price increase was recorded in International Tour Packages (12.75%).
RESTAURANTS AND ACCOMMODATION SERVICES: 1.03%
- Price increases were primarily recorded in Restaurant, Café, and Similar Services (0.85%) and in Hotel Accommodation Services (5.50%).
Inflation expectations for 2025 are around 6%, according to the survey conducted by the Central Bank of Uruguay (B.C.U.).
For its part, core inflation (which excludes fruits, vegetables, and fuels) recorded a monthly variation of 0.51%, an accumulated annual increase of 5.83%, and a 12-month variation of 5.83%.
Regarding the exchange rate, the value of the interbank dollar bill as of 30/12/2024 was 44.066; this represents a variation of 0.78% for the month and an accumulated increase of 12.93% for the rolling year, while for the entire year of 2024, it shows an increase of 12.93%. It is worth mentioning that the monetary authority did not need to intervene in the foreign exchange market to influence the values recorded for the U.S. dollar during the month. However, it did intervene with regard to the monetary policy interest rate (which was increased to 8.75%), a tool used to combat inflation.
It is important to recall that the increase recorded in September was the largest monthly increase since October 2023, which was subsequently surpassed in both November and December. This marks nine consecutive monthly increases, with the dollar reaching its highest value in five years. As previously mentioned when analyzing the Country Risk, this was initially driven by the uncertainty generated by the Social Security plebiscite, constituting another secondary effect of the same. Indeed, market participants sought to protect themselves by taking refuge in the dollar, which, logically, led to an increase in demand and, consequently, a rise in its value. In the last week of October, after the plebiscite results were known, the dollar traded lower, ending the month at levels similar to those of September (a modest variation of 0.02%, as previously mentioned). The other factor that notably influenced the exchange rate was the global strengthening of the dollar, following the electoral result in the United States, which showed a victory for Donald Trump. This factor has persisted over time, as the first factor mentioned tends to diminish as time passes.
Considering international arbitrages, it was observed that the Euro experienced a negative variation of 1.62% for the month (weakened against the dollar for the third consecutive month), showing a negative variation of 5.86% for the rolling year and a decline of 5.86% for the year 2024. The Argentine Peso showed a variation of 1.99% for the month (a new weakening against the dollar), while the rolling year saw an increase of 27.45%, with the same 27.45% increase for the year.
Meanwhile, the Brazilian Real had a variation of 2.68% for the month (a drop against the dollar, its third consecutive decline), while in the last 12 months, it showed an increase of 27.43%, alongside an increase of 24.13% for the year. In summary, in December, the dollar strengthened against all three analyzed currencies, due to the global strengthening it experienced, as previously mentioned.
On another note, various data related to economic activity were released, and we will discuss the most relevant ones:
The fiscal result for the twelve months ending in November for the Central Government excluding the Social Security Bank (GC-BPS) was -3.2% of GDP. The inflow of funds into the Social Security Trust (FSS), as outlined in Law No. 19.590 (for individuals aged 50 and over), amounted to 0.1% of GDP. Therefore, the fiscal result of the GC-BPS, excluding the FSS contributions, stood at -3.3% of GDP, representing a deterioration of 0.1% of GDP compared to the previous month.
After considering other components, such as the results of public enterprises, revenues and expenditures of the GC-BPS, the results of the Non-Monetary Public Sector, and the overall result of the Central Bank of Uruguay (BCU), the result for the Global Public Sector (SPG) was -4.1% of GDP. After adjusting for the FSS effect, it stood at -4.2% of GDP, representing a deterioration of 0.1 percentage points compared to the previous measurement.
The labor market in November showed a slight improvement compared to previous months, with an unemployment rate of 7.2%, remaining better than the pre-pandemic situation. It is observed that the unemployment rate is higher in the interior of the country (7.8%, improving by one-tenth compared to October, which had improved by eight-tenths compared to September, when it was 8.6%) compared to the capital (6.3%, improving by two-tenths of a percentage point compared to October, which had improved by eight-tenths compared to September, when it was 7.3%). Summarizing the trends for the year, the unemployment rate was 8.6% in January, 8.1% in June, 8.4% in August, 8.1% in September, 7.3% in October, and 7.2% currently, representing a monthly variation of -0.9% and an annual variation close to one percentage point.
Underemployment stood at 9% (showing a slight deterioration, as it was 8.8% in October, 9.5% in September, and 9.4% in August), while informality remained at 21.7% (unchanged from October’s level of 21.7%; it was 21.9% in September and 21.4% in August), in both cases demonstrating relative stability.
The labor force participation rate in November was 64.5% (similar to previous months, with small fluctuations both up and down; in this case, it increased by 0.2% compared to October, which had increased by 0.4% compared to September, which in turn increased by 0.3% compared to August). This is also an improvement compared to April 2019, pre-pandemic, when it was 61.5%. The employment rate stood at 59.8% (similarly; it was 59.6% in October, 59.5% in September, 58.8% in July, and 59.1% in August). In any case, these figures are better in the year-on-year comparison and also compared to 2019.
Also, as a summary of the year’s progress, at the national level, the labor force participation rate started the year at 64.3%, and in the June measurement, it stood at 63.8%. From there, activity accelerated significantly, rising to 64.2% in July, 64.5% in August, 64.7% in September, 64.3% in October, and 64.5% in November. This continues to be an upward trend following the sharp decline caused by the pandemic, bringing the rate closer to the levels observed at the beginning of 2024.
Regarding employment, in January it was at 58.8%, showed a slight fluctuation to 58.6% in June, and then reversed this trend, returning to the levels seen at the beginning of the year. It reached 58.8% in July, increased to 59.1% in August, 59.5% in September, 59.6% in October, and 59.8% in November.
The I.M.S. (Average Salary Index) recorded an annual variation of 6.47% as of October (it was 6.75% in October and 6.95% in September), which is higher than inflation, indicating real wage growth. However, it has not yet fully recovered to pre-pandemic levels. The monthly variation was 0.01%, which implies a cumulative increase of 6.21% for the year. When measured over the rolling year, this improvement stands at 6.47%, as mentioned earlier.
The D.G.I. published the preliminary revenue report for the month of November 2024, which shows the following:
The net revenue (after deducting tax refunds) shows an annual variation, in real terms, of 0.4%.
Meanwhile, gross revenue at current prices shows a variation of 5.30% in November. After accounting for the inflationary effect, the annual variation in revenue was 0.2%.
Total gross revenue over the last twelve months shows both positive and negative year-on-year variations. The annual variation for the accumulated last 12 months was 1.1%, while for the month of November 2024, it was 0.2%. Additionally, the real variation for the period from January to November 2024, compared to the same period in 2023, was 1.6%.
The decline in revenue last year is primarily explained by the lower collection of consumption and income taxes, while property taxes recorded growth.
The data for November showed that tax revenue continues to recover, after a 1.3% annual decline in 2023 compared to 2022.
Regarding Foreign Trade, Uruguay XXI issued its report for December, including the annual report.
In the report, based on data from the Union of Exporters of Uruguay (U.E.U.), it is highlighted that exports (including Free Zones) in December showed a similar year-on-year growth rate of 13%, compared to November. As a result, total exports of goods (including Free Zones) for 2024 grew by 13% compared to 2023.
Indeed, according to foreign trade reports prepared by the Union of Exporters and the Uruguay XXI Institute, exports of beef, cellulose, dairy products, and the recovery of soybeans (which had been affected by the drought in 2023) were key factors in driving export growth.
The main products exported in 2024 were cellulose, beef, soybeans, dairy products, and beverage concentrates. Soybeans and cellulose had the most positive impact, while colza and carinata, rice, and malt had a negative impact on exports in 2024.
The main destination for Uruguay’s exports in 2024 was China, accounting for 24% of the total, followed by Brazil with an 18% share, and the European Union in third place with 14% of total exports. The United States and Argentina represented 9% and 5%, respectively.
