Press Release No. 04/183

Press Release: IMF Managing Director Rodrigo de Rato's Statement at the Conclusion of His Visit to Uruguay

September 1, 2004

Mr. Rodrigo de Rato, the Managing Director of the International Monetary Fund (IMF), made the following statement yesterday at the conclusion of his visit to Uruguay:

"This is my first visit to Uruguay as Managing Director of the IMF. My meetings with President Batlle's senior economic team and other political leaders have provided me with a welcome opportunity to obtain a closer understanding of economic and social developments and the key policy issues in Uruguay and the region.

"I would like to commend President Batlle and his government for the sound management of the economy which has delivered impressive results over the past two years. Prudent fiscal and monetary policies have been maintained; last year's landmark debt exchange has improved the medium-term debt profile; and important steps have been taken to strengthen the banking system. As a result of these policies, and supported by the favorable external environment, the economy's recovery from its long recession has been stronger than expected; financial indicators have improved steadily; and confidence is increasing. Achieving the program's fiscal objectives will be critical to laying the basis for ensuring Uruguay's debt sustainability, and sustaining the reform momentum in the banking sector is crucial for restoring a sound financial system that can support investment and growth.

"The challenge for Uruguay now is to build on these achievements and sustain the recovery of growth and employment. In this context, I have had very productive discussions with the presidential candidates on the broad framework and direction of economic policies in the coming years. I have come away from these discussions with a strong sense that there is a basic consensus in Uruguay on the need to continue with prudent macroeconomic policies and to move ahead with key structural reforms that would bolster the environment for private investment, which is crucial for Uruguay to compete successfully in the global market place.

"Raising the long-term growth potential of the country will also require improving the efficiency of public investment. Toward this end, and in reflection of our concern that public investment has been low or declining in Latin America, the Fund has initiated pilot programs in several countries aimed at strengthening the performance of public investment. One of the lessons we have learned from our involvement in Latin America is that any public investment program must be seen within a sound debt sustainability framework or it will not contribute to growth and social development, and that this generally requires more flexible budget structures, well-designed projects, and appropriate financing.

"As Uruguay heads toward its fifth general election since democracy was restored in the 1980s, I would like to commend the Uruguayan people for their long democratic tradition and strong civil society. These foundations have enabled Uruguay's citizenry and government to make the difficult choices needed to return the economy to a path of rapid growth.

"The Fund looks forward to continuing the close dialogue with the next government that will take office early next year. The Fund has provided substantial financial support to Uruguay, and we stand ready to continue our joint efforts in support of sustained rapid growth and improved living standards for all Uruguayans."