Uruguay Country Brief

Progress made and future challenges |  World Bank Assistance |  Project Achievements |  Contacts

With a cautious macro-economic management grounded on favourable external conditions, Uruguay was able to overcome the 2002 crisis and recover its standing in terms of its Gross Domestic Product. Among other things, the country was able to consolidate a sound fiscal situation, reduce inflation, double exports while diversifying its product markets, and thus it reached a better position to access the international capital markets.

PROGRESS MADE AND FUTURE CHALLENGES

Uruguay recovered from the 2002 economic crisis that left over 30% of the population in poverty and the country is now focused on maintaining its high growth rates. The first steps taken to combat the crisis had a positive effect and allowed the recovery of 22% of the economic activity level for the period 2003-2005. During the first semester of 2007, poverty levels fell by 25% while the percentage of people in a situation of extreme poverty is currently under 2%.

Likewise, unemployment fell from around 20% by the end of 2002 to 12.2% in 2005 and to 10.7% by mid 2006; and the trend is downwards as it reached 9.7% in July 2007.

Given this economic recovery scenario, the Government priorities are to reach higher investment rates, improve the quality of public spending in social sectors, implement the necessary structural reforms to make the economy more competitive and ensure greater integration into the global economy by diversifying its export markets. An additional Government goal is to encourage social participation and increase inclusion.

In order to meet such objectives, the Uruguayan Government has undertaken a series of structural reforms. In parallel, it has expanded the social assistance network by launching a national emergency social assistance program (PANES-Plan de Asistencia Nacional a la Emergencia Social) and another series of reforms targeted to providing equal opportunities to all citizens.

The country also faces challenges such as reducing inflation levels--since the beginning of 2007 the latter have exceeded by far the goals set by the Government—and addressing the migration of youth—an outstanding issue.

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WORLD BANK ASSISTANCE TO URUGUAY

The World Bank has backed Uruguay’s development process for many decades with a series of loans that support structural reforms and fund investment projects. This support has also been provided via studies that contribute to the discussion around relevant development issues as well as to the elaboration of public policies by relevant authorities and priority investment opportunities for the country.

The Bank’s current loans and analytical services program, also known as Country Assistance Strategy (CAS), seeks to support the Uruguayan Government so it can attain equitable and sustainable economic development, in the face of three major challenges:

As part of this Strategy (covering the period 2005-2010) it was agreed with national authorities that the World Bank funds would support priority investments in infrastructure (transportation, energy, water and sanitation services), social programs (the national health insurance system, education), institutional capacity building (public administration, management of public spending) and innovation, science and technology. The portfolio is currently undergoing an innovation process and includes several newly approved projects, following the priorities embodied in the document.

At present, Uruguay has an active portfolio of nine investment projects with committed credit for a total of 268 million US dollars and a policy development loan for 100 million US dollars. In addition, the Project Portfolio in Uruguay includes four donations for a total of 14.3 million US dollars and a carbon funding project for 7.5 million Euros.

               

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THE PROJECTS

Projects approved during the present Assistance Strategy to Uruguay:

Responsible Production Project: Through subsidies mainly aimed at small farmers it seeks to promote the use of more environment-friendly production methods that provide a basis to improve agricultural produce competitiveness.

Transport Infrastructure Maintenance and Rural Access Project: Its objective is to improve access to rural areas in the country and facilitate transportation of cargo and passengers.

Additional financing of Foot-and-Mouth Disease Emergency Recovery Loan: The objective is to consolidate the results obtained so far in the struggle against this epidemic and to generalize traceability system coverage to maintain a virus-free country and reduce economic loss to a minimum.

Second phase of the OSE (Obras Sanitarias del Estado) modernization and systems rehabilitation program:  Its objectives include the expansion of water and sanitation services to benefit residents in small towns and cities of the country, improve the efficiency and sustainability of water and sanitation services and improve management performance in the state-run water utility of Uruguay.

Project to promote innovation to enhance competitiveness: Its main objective is to support the government of Uruguay to strengthen the country’s capacity to generate, transfer and adopt knowledge and new technologies to enhance competitiveness. To this end, the project will support the strengthening of a National Innovation System, will invest in training and education, will support technology and innovation transfer to the private sector and will foster the rotation of researchers between Universities and the productive sector.

Development Policy Loan: It complements government priorities in three major areas: (i) implementation of the tax reform; (ii) measures to improve the investment climate and initial steps to design a program to promote the development of capital markets; and (iii) implementation of measures to support the social protection system.

Institutions Building Technical Assistance Loan (IBTAL): Its main objective is to support steps taken by the Uruguayan Government to build on the capacity of the public sector. The main areas to be supported by this project will be: the Customs Administration, monitoring and evaluation, performance-based budgeting and e-government. In addition, this project supports the design and implementation of reforms relative to tax policy, promotion of a sound investment climate and social protection.

Non-communicable Diseases Prevention Project: Its objective is to improve the quality and access to primary attention health services relative to the major non-communicable diseases, their early detection and medical attention. Likewise, the program will seek to reduce exposure to disease-related risk factors, as well as their effects on human health.

Further to supporting these initiatives in the country, the World Bank works alongside Uruguay in an effort to address complex issues such as domestic violence and the improvement of environmental conditions. In particular, it works together with the Government to strengthen national legal institutions dealing with domestic violence issues, currently accounting for the death of one female victim every 9 days. Moreover, through an agreement recently signed with the Municipality of Montevideo, the World Bank supports the endeavour of the municipal government to eliminate thousands of tons of gases—causing atmospheric warming and climate change--released by the sanitary landfills in Montevideo.

OUTCOMES OF COMPLETED PROJECTS

These projects reflect part of the work performed by the World Bank in Uruguay:

Water and sanitation

The first phase of the OSE modernization and systems rehabilitation project  was supported by a 27 million US dollars loan approved by the Board of the World Bank in June 2000 and was core to lay the foundation of the ongoing project. OSE was able to successfully implement and disseminate an in-house reference system that compares performance of the water utility in 21 cities, on the basis of eight service quality indicators. In addition, the first phase helped improve sewer coverage in another 12 cities of the interior by expanding—according to demand—the sewerage systems. Finally, three new sewage treatment plants were built in the cities of Minas, Treinta y Tres and Durazno, with a total capacity to serve 60,000 users.

Rural development

The Foot & Mouth Disease (FMD) Emergency Recovery Loan helped Uruguay reach the status of FMD free country, with a vaccination period shortly after the outbreak of the disease in 2001; the country recovered access to markets in the FMD and non-FMD circuits and, thus, contributed to the continuous profitability of cattle breeders. This project helped finance seven vaccination campaigns covering the complete bovine herds between 2001 and 2003. During the emergency, the World Bank supported the implementation of the sanitary barriers as well as the compensation granted to cattle breeders affected by the mandatory killing of infected animals to contain the disease. Furthermore, in addition to other achievements, a Livestock Information System was put into place to ensure traceability of the stock and movements of bovine cattle. According to preliminary estimates, around 50,000 breeders benefited from this project. The program supported the market recovery process, training and sensitization of producers, practitioners and public in general, to ensure better control over the disease. At the same time, it fostered a process to set up the foundations for a regional program to eradicate FMD within the scope of Mercosur.

Education

The Second Basic Education Quality Improvement Project led to a higher school access and an improved quality of pre-school and basic education in Uruguay, focusing on the less privileged segments of the population. Within the scope of this project, a total of 136 new classrooms were built, 194 schoolrooms were refurbished in 30 schools that worked on two daily shifts and were turned into full-day classrooms and 55 schools that already provided full-day attention, were rehabilitated. Likewise, the percentage of 6^th graders obtaining satisfactory levels in Language rose from 57.1 in 1996 to 66.3 in 2002, while the level of competence in Mathematics climbed from 34.6 to 48.3 during the same period. In addition, the project facilitated training for over 1,900 pre-school teachers in both urban and rural schools.

Health

The Health sector development project supported the Government initiative to grant more autonomy to 32 public hospitals, a process that implied a stronger emphasis on institutional responsibility and accountability and led to an enhanced provision of services and overall effectiveness of the health sector. Due to the reforms, many hospitals now apply users’ satisfaction surveys, include new areas to provide customer service (e.g. offices dealing with claims or to schedule appointments), incorporate professional accounting practices and are beginning to use IT procedures for the correct identification of beneficiaries.

Compared with the basic levels of 2000, the ten hospitals that had management agreements in 2001 made considerable improvements in terms of service provision in response to a growing demand. For example, outpatient visits increased by 60% in primary attention health-care centres, surgeries increased by 10% and the average duration of hospitalization fell by 20%. Furthermore, these hospitals recorded annual savings equivalent to 8.5% of their total expenditure and reduced costs per patient by 19%.

Natural resources management

In the context of the Natural Resources Management and Irrigation Development Project a soil and water management strategy was formulated and implemented to increase, diversify and maintain agricultural production and exports of individual farmers. As a result of the project, over 2,400 farmers made investments to increase by almost 20% the irrigated areas in the country (from 35,000 hectares to a total of 190,000 hectares), where land devoted to irrigated rice crops accounted for almost 77% of the total.

Despite the fact that irrigated rice fields still maintain a relatively high importance, the Project decisively supported diversification. The expansion of irrigated rice fields (19,000 hectares) financed by the project was almost fully related to the expansion of cattle breeding systems, a process by which the irrigated rice and forage crops were integrated to the use of the soil in rotation with pastures. In addition, the expansion of irrigated areas for the production of fruits and vegetables supported by the project (16,000 hectares) represented an increase of over 100% regarding the initial area where these products were grown which contributed to a considerable growth in the production of high-value crops and non-traditional exports.

Energy

In the framework of the Power Sector Modernization Project, the Government installed a new thermo-electric power station called La Tablada which –given that it increases the energy reserve capacity in case of droughts (when hydro-electric power stations reduce their production)—contributed to improve reliable provision of electricity in Uruguay. The project also supported the rehabilitation of the Montevideo distribution network and improved the reliability and quality of customer services as it reduced both the amount as well as the duration of power cuts. Moreover, the project improved the effectiveness of the sector by enhancing the managerial capacity of the national electricity transmission and power utility (UTE-Usinas y Transmisiones Eléctricas) and reduced the loss of electricity.

Transportation

The Forest Products Transportation Project made the export of forest products more dynamic in Uruguay by readjusting its infrastructure. The World Bank loan, approved in 1997 for a total of 73 million US dollars, was invested in infrastructure and equipment in roads, railways and in the port of Montevideo. Thus, the market share for forest products exported from the port of Montevideo grew from 10% in 1997 to 40% in 2004. The program also supported efforts by the Government to reduce administration costs relative to highway networks. The investment in rehabilitation of roads allowed for the development of private ports that today play a relevant role in the exportation of forest products from Uruguay. Finally, the project enabled the continuation of operations in the port of Fray Bentos.

For more information on World Bank assistance to Uruguay, including lending breakdown and project reports, see:

Proposed Projects
All Projects

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 CONTACTS

For more information, please contact:

Public Information Service
Contact person: Valeria Bolla
Buenos Aires 570, third floor

Montevideo - Uruguay
Telephone: (598-2) 9169400, ext. 3711

sipuruguay@worldbank.org

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