abstract: 'Uruguay began liberalizing its economy in the 1970s. The process

  continued through the 1990s when the country joined Mercosur. The

  reforms were mainly oriented at liberalizing trade and financial flows,

  much less was done in terms of privatization and public sector reform.

  Uruguay established itself as a regional financial and offshore banking

  centre. In the early 1990s, inflation was stabilized on the basis of

  high capital inflows and a stabilization policy that used the exchange

  rate as a nominal anchor. The ensuing real exchange rate appreciation

  harmed export growth with the rest of the world and, along with the

  surge in capital inflows, pushed up import demand. Real appreciation of

  the exchange rate against Uruguay''s trading partners in Mercosur was

  virtually nil and exports benefited from the new set of trade

  preferences within the group. This made macroeconomic performance in

  Uruguay strongly dependent on the business cycle in Argentina and

  Brazil. When these two countries shifted away from a fix on the nominal

  exchange rate, starting with the floating of the Brazilian real,

  Uruguay''s exports were severely hit pushing the economy into recession.

  The recession was deepened with Argentina''s crisis at the turn of the

  century. Uruguay''s economic recovery from the sharp decline in the first

  half of the 1980s thus lasted until 1998. Employment increased, despite

  job losses in agriculture and manufacturing following productivity

  growth associated with the opening process. Employment growth was

  particularly strong in services. Job shedding in manufacturing was also

  associated with a fall-out of many firms in import-competing sectors.

  Real labour incomes also increased during this period of growth. Skilled

  workers were the main beneficiaries as structural adjustment made

  production more skill intensive. Labour income inequality increased, but

  overall employment and real wage increases allowed for a visible

  reduction in poverty. These trends reversed after 1998. Simulations with

  the computable general equilibrium for Uruguay confirm the positive

  effects of trade liberalization in the context of an appreciated

  exchange rate on growth and poverty reduction. The simulations also

  suggest that further negotiated trade liberalization in the context of

  the Free Trade Area of the Americas or the World Trade Organization

  (WTO) would reinforce these effects. With further unilateral trade

  liberalization export growth would require maintaining the exchange rate

  competitive, while employment growth would be served with allowing for

  some appreciation of the currency. In the case of negotiated,

  multilateral trade liberalization the nature of the exchange rate regime

  does not appear to matter for Uruguay in order to reap the gains from

  trade. World market prices would move in favour of Uruguay''s exports,

  particularly under a WTO scenario that would benefit its agricultural

  exports. Unskilled workers would be the principal beneficiaries of such

  a scenario and poverty and inequality would be reduced. It seems to

  confirm Uruguay''s paradoxical relationship with trade integration.

  Mercosur brought both trade benefits and greater vulnerability to the

  volatility of the economies of its large neighbours, Argentina and

  Brazil, while WTO equally would bring trade gains but enhance the

  country''s vulnerability to the volatility in primary commodity markets.'
affiliation: 'Laens, S (Corresponding Author), CINVE, Montevideo, Uruguay.

  Laens, Silvia; Perera, Marcelo, CINVE, Montevideo, Uruguay.'
author: Laens, Silvia and Perera, Marcelo
author_list:
- family: Laens
  given: Silvia
- family: Perera
  given: Marcelo
booktitle: 'WHO GAINS FROM FREE TRADE: EXPORT-LED GROWTH, INEQUALITY AND POVERTY IN

  LATIN AMERICA'
da: '2023-09-28'
editor: Vos, R and Ganuza, E and Morley, S and Robinson, S
files: []
isbn: 978-0-203-96583-2
language: English
number-of-cited-references: '21'
pages: 361-392
papis_id: 9b450d588204d90f1a09e2950b34ad5b
ref: Laens2006uruguayexport
series: Routledge Studies in Development Economics
times-cited: '0'
title: Uruguay - export growth, poverty and income distribution
type: Article; Book Chapter
unique-id: WOS:000278891300013
usage-count-last-180-days: '2'
usage-count-since-2013: '4'
volume: '50'
web-of-science-categories: Economics
year: '2006'