Uruguay: A Quiet Latin Success Story

Posting has been erratic today because I’ve been at the Latin American Borrowers’

and Investors’ Forum

in midtown. While I was there, I was very happy to bump into an old friend:

Carlos Steneri, the director of Uruguay’s public debt management

unit. Steneri is a classic behind-the-scenes technocrat, who deserves vast amounts

of the credit that usually accrues to investment bankers and other flashier


Steneri got me caught up on what Uruguay’s been up to over the past year, and

it’s incredibly impressive: the country borrowed a total of $3 billion on the

international capital markets – that’s an eye-popping 15% of GDP –

and used it to pay down debt maturing in the short term, to finance its budget

deficit, and to wipe out at a stroke all of the money that the country owed

to the IMF, the World Bank, and the Inter-American Development Bank.

We’ve now reached the point at which the private sector can fund Uruguay much

more cheaply than the public sector: Uruguay was paying about 9.5% on its loans

from the World Bank and IDB, while it pays only about 7% on the dollar bonds

it issues. The debt wipe-out is good news for Uruguay, which no longer needs

to worry about IMF conditionality, but it’s bad news for the international financial

institutions: they need to lend money in order to survive, but who are they

going to lend to if even Uruguay can get much cheaper funding from the international

capital markets?

Steneri has been at this game for a very long time: he was not only instrumental

in Uruguay’s ground-breaking 2003 restructuring, but also in earlier restructuring

around 1991. He knows full well that the markets which seem so generous today

can close up overnight – and that in that case, he will need the IMF to

help out. He’s also quick to deflect praise for orchestrating Uruguay’s debt-management

operations: it wasn’t him, he says, it was the flood of global liquidity which

made all this possible. In fact, it’s a combination of both.

One of the reasons that Uruguay has proved so successful and resilient over

the years is the fact that it has a very sophisticated set of technocrats such

as Steneri, who are adept at doing the right thing no matter which political

party is in power. SAIS professor Riordan Roett, at the same

conference, noted this morning that across the region, leftist governments are

doing a very good job at insulating their finance ministries from political

pressure – you can see it in Uruguay, Chile, Brazil, even Peru. Would

that the same thing could happen in the US.

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