The little nation that could, and did

Wealthy argentines know and love Uruguay mainly because they like to summer in Punta del Este, aka, the Hamptons of South America. I am not saying that Punta del Este is not worth visiting. It is. But Argentines have always treated Uruguay as “another state of Argentina”, the “ugly step sister”, or the small little sleepy neighbor, nothing to write home about except its Summer resorts.

While Argentines were busy criticizing the sleeping beauty to the East, it was all the while enriching itself with Argentine capital flows, rebuilding its economy, and taking its just place in the map of South America.

Last week, Uruguay was returned to investment grade, BBB- ,with a stable outlook.

“The upgrade is based on Uruguay’s sound economic growth prospects and improving external and fiscal indicators, as foreign direct investment strengthens and improves economic diversification,” said a Buenos Aires-based analyst, Briozzo. “Prudent economic policies in recent years, backed by a broad political consensus, have allowed Uruguay to grow rapidly and reduce its main credit vulnerabilities.”
In the meantime, Argentina is rated B. Uruguay’s fall from grace, or grade, back in 2002, was most probably due to the fact that its good old neighbor to the West defaulted on close to 100 billion of debt, causing both a devaluation of the Uruguay Peso and a run on deposits . Good comeback, Uruguay!

I love Uruguay : it is a small country, about 3.3 million people, and, despite its high percentage of European ancestry, is more outwardly racially mixed than my beloved, if battered, Argentina. It is the second smallest country in Latin America. You guess which one is smaller. It ranks high in the Human Development Index, low on corruption, high on prosperity, high on respect for the environment, high on peace, very high on equality. As far as I can tell, it has not gone into a recession as a result of the latest economic crisis. Slowly but surely, the little engine that could chugs along. Not to mention Uruguay’s National Soccer Team which has been clobbering Argentina and other nations any chance they get, and holds the record wins in the Copa America.

As the Uruguayan engine keeps going forward, Argentina’s debt rating remains on par with Honduras and a slightly lower than Venezuela. Maybe if we looked East instead of North?