ISSUES FROM THE PAST, SOLUTIONS FOR THE FUTURE
Populated with 3.4 million people on a land that is merely one sixth of Ontario province, Uruguay is the iconic story of “failure, recovery, and prosperity” on the world stage. First came a devastated economy due to the Argentine financial crisis back in 2002, then a subsequent increase of the national debt hindering its economic performance, in spite of the previous long history of political instability. Amidst of these circumstances, Uruguay not only successfully restored its economic performance, it is able to repay its $1.6 billion loan from IMF ahead of schedule. Its newly elected left-winged government back in 2000s was able to legalize unorthodox legislations including same-sex marriage and marijuana. In spite of these remarkable transformation and development, Uruguay is suffering fundamental issues from ever-growing inflation, agriculture-related environmental devastation, and illicit drug trafficking and distribution; urgent issues that need resolution in order to maintain its political, economic and social stability and to continue contribute to the well-being of South America.
Staggering High Inflation Rate
Uruguay was ranked in world’s top 10 countries with the highest inflation back in 2013; in today’s world, this statistic unfortunately remains the same as it places devastating impact on the well-being of Uruguay’s fragile yet stable economic development. As well stated by Vice President of Uruguay, Danilo Astori, “It is the main macroeconomic problem of Uruguay.” Today, it continues to be the country biggest problem for its economy. In simple terms, inflation is “the rate at which the general level of prices for goods and services is rising”. It lowers the purchasing power of Uruguayan pesos, thus resulting goods and services to be more expensive year after year. Uruguayan government aimed to keep the inflation within the annual target margin between 4% and 6%. At the end of 2013, the country’s inflation was left off at 8.52%. In addition, it was 3 year in a row where the inflation rate exceeds 8%. Since then, the Uruguayan government has taken numerous measures such as tightening fiscal and monetary policy to contain the vicious growth. For example, the government attempted to ease inflationary pressure by reducing Value Added Tax (similar to Ontario's HST) on certain everyday food items such as fruits and vegetables as well as on electricity and phone tariffs. However, it was later proven that it was not sufficient to combat inflation. For years, expert suspect one of the causes may be due to declining tax revenues and increased government spending, which in turn produces large government deficits thus accelerates rates of inflation. The government chose to monitor the growth back in 2014, while stating the nation’s economy is sustainable and has firm belief that the foreign investment will continue to counteract the increasing government debt. It is also important to note that “Uruguay is vulnerable to agricultural commodity price shocks and a deterioration of the economic situation in Argentina. Argentineans account for 60% of all tourists, while tourism accounts for 6% of GDP”, as well identified in a report by Rabobank. Fast forward to today, inflation rate not only has not been reduced, but Uruguayan government’s initial projection is failed as the country has a high vulnerability to foreign economic shock such as Argentina and a global recession that has occurred in 2020. With the inflation rate reaching record height, it is essential to implement systematic solutions to address this issue in order to attain realistically sustainable economy.
Uruguay's Economy Minister, Mario Bergaraon, on Inflation, Growth and Trade
Environmental Devastation due to Agricultural Activities
What faced by Uruguay today in 2030 are also continuing challenges in resolving environmental devastation of water pollution and ongoing ecological threats. These problems root back to the fundamental building blocks of Uruguay’s economy and its economic development. Since European first colonized Uruguay back in late 1500s, agriculture was established as a source of wealth. This continues today. With the ongoing inclination of urbanization around the world, Uruguay still remains as one of the few countries that is dependent on agriculture. Back in 2014, agriculture and agri-industry of Uruguay account for 12% of GDP, and for about 70% of total exports. This statistics remains relatively the same today. Unfortunately, the statistics regarding the related negative environmental effects not only remained the same but increased substantially. Rattle ranching has provided Uruguay with economic edge as an exporter of meat and tannery goods. At the same time, it fuels the meat packing and tannery industry’s ongoing pollution to the country’s clean water source. In addition, agricultural activities in pursuing high profit led to heavy use of fertilizers and pesticides. This caused many human health disorders of Uruguayans. Furthermore, Uruguay formerly possessed one of world’s most unique eco-region known as Uruguayan savannah. However, agriculture and cattle ranching heavily altered the local natural ecology, threatening local wildlife. As of 2014, it is calculated that 80% of the Uruguayan territory is dedicated to cattle ranching. After years of legislation and policy reform, Uruguayan government had taken measures in resolving growing environmental concerns and achieve no realistic result. The combination of agri-industry and profit-driven agricultural practices pose fatal threat to the Uruguayan population as well as the well-being of the local ecology. Amidst of the current fast-paced social and economic development, it is essential to resolve these issues in timely fashion as circumstances may drastically change and lead to irreversible devastation.
Illicit Drugs Consumption and Trafficking
Along with loopholes in its financial system, Uruguay’s strategic location has been established by criminal organizations as safe haven for international drug trafficking; this issue substantially undermines the well-being of Uruguay’s social development. In November 2009, the country welcomed its elected left-wing party to power, which later led the country through remarkable transformation. Its political agenda included implementing measures against the rigorous growth of illicit drugs in the country. After more than a year’s public deliberation and a 14-hour parliamentary debate, on July 31st 2013, Uruguay became the first country in the world to legalize marijuana in effort to regulate its consumption through strict control of production and distribution. However, resolving the increasing consumption of cocaine base and synthetic drugs is a complicated and difficult process. For example, since 2013, Uruguayan government attempted to price marijuana cheaply enough to tempt users away from harder drugs such as cocaine and crack. Today, Uruguay continues its failure to address this complex issue. Uruguay’s advantage of being a natural harbour has served as a small-scale transit country for drugs, mainly bound for Europe. Entwined with Uruguay’s financial system, finding resolution to control and regulate has ever been more adverse. According to a US State Department report, Uruguay's highly dollarized economy -- with the US dollar often used as a common business currency -- makes the country vulnerable to money laundering. The report also cites transnational organized crime, especially that originating in Brazil, to be of concern. Furthermore, Uruguay has a zero-tax policy for foreign individuals and organizations. While it attracts international bodies to bank in the country, it gave international crime organizations an ideal environment to operate. As Uruguay is being used by cartels to carry out its distribution, any delay to address this issue will put greater number of people at risks by exposing them to potential drug cartel violence and convenient accessibility to illicit substances.
Key to the Future
From ever-growing inflation rate to the illegal drugs trafficking, onto the environmental damages pose by agricultural activities, these issues are critically endangering crucial components of a healthy society. As the past had laid the foundation for these issues, Uruguay must resolve these issues in effort to retain and further develop its political, social and economic achievements.
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Agriculture-related Environment Devastation
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Illicit Drugs Trafficking and Distribution
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- Rex A. Hudson and Sandra W. Meditz, editors. Uruguay: A Country Study. Washington: GPO for the Library of Congress, 1990. Retrived from: http://countrystudies.us/uruguay/41.htm
- Rex A. Hudson and Sandra W. Meditz, editors. Uruguay: A Country Study. Washington: GPO for the Library of Congress, 1990. Retrived from: http://countrystudies.us/uruguay/32.htm
- Michael Lohmuller, Michael. "Uruguay Anti-Money Laundering Chief Targets Churches and NGOs." InSight Crime, Organized Crime in the Americas. InSight Crime, 28 Mar. 2014. Web. 09 June 2014. <http://www.insightcrime.org/news-briefs/uruguay-anti-money-laundering-chief-targets-churches-and-ngos>.