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Uruguay EXTERNAL SECTOR
Two concerns dominated Uruguay's foreign economic
relations
during the 1980s. The first, both a fiscal and an external
problem, was the foreign debt. Uruguay's external debt of
about
US$6.7 billion (US$6.2 of this was foreign debt to the
United
States) in 1989 (US$4.2 billion belonging to the public
sector)
was not an issue affecting international financial
markets, like
the much larger debt burdens of Brazil or Mexico (each
over
US$100 billion). Even so, Uruguay's indebtedness was
onerous in
comparison with the size of its economy and was one of the
highest per capita debts in the region. For both the
Sanguinetti
and the Lacalle governments, debt reduction and debt
rescheduling
were priorities.
The second major concern was trade, primarily for its
importance to overall economic growth. Trade-related
activities
were responsible for about 12 percent of GDP in 1988.
Exports,
which were the source of Uruguay's wealth in the early
twentieth
century, were seen as the key to the revival of the
economy.
Demand within Uruguay was simply too small to support
large
production increases. Trade was especially important in
the 1980s
because of the debt burden. In order to make payments on
mostly
dollar-denominated loans, Uruguay needed foreign exchange
(dollars). Thus, the trade balance (the difference in
value
between exports and imports) took on added significance.
To spur
economic growth and to earn foreign exchange, Uruguay
joined
other Latin American nations in restraining imports and
augmenting exports. Despite its positive trade balance,
however,
Uruguay's foreign debt continued to increase.
Data as of December 1990
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