Uruguay refinances while growth stalls below one percent.

Uruguay today completed a sovereign debt issuance of USD 1.25 billion in international markets, an operation that under any other circumstances would pass as a routine liability management exercise, but which arrives at a moment of notable tension between the official recovery narrative and an accumulation of signals pointing in the opposite direction.

The transaction, which according to El Observador included the issuance of new notes, the reopening of existing bonds and a buyback of prior debt, was preceded by an investor sounding described by the same source days ago, following standard procedure for issuances of this size. The government, which closed 2025 with a fiscal deficit of 4.1% of GDP according to La Diaria — a figure in line with what the Ministry of Economy and Finance had projected, although the Fiscal Council warned Parliament of what it characterized as an overestimation of the growth projections embedded in the Accountability Report — needs to refinance maturities in a year that is starting without momentum of its own.

That is precisely the data point drawing attention today. The leading activity index compiled by Ceres fell again, reinforcing signs of weakening that the institution itself had already flagged in earlier readings. The economy grew just 1.8% in 2025, below official forecasts, and the year began, in the words of several analysts, essentially flat: what growth there was in 2025 stemmed in large part from statistical carryover from prior quarters. The first quarter of 2026 showed an expansion of between 0.8% and 0.9% quarter-on-quarter, depending on the source, but the private analyst consensus has already consolidated downward revisions to its full-year projections, with estimates in several cases falling below 1%.

Minister Gabriel Oddone acknowledged this week that there is a high probability the government will need to revise its 2026 growth projection lower, though he ruled out stagnation and reaffirmed the fiscal stance. His position is being complicated on several fronts simultaneously. The Coalición Republicana, the grouping of opposition parties, refused to back the Accountability Report, and Oddone responded that he is not walking away from negotiations. Meanwhile, Deputy Abdala, from the same bloc, warned that agreements are meant to be honored, in reference to the conversations PIT-CNT held with Oddone himself over changes to the social security regime, where the government has confirmed it will push transformations to the AFAP system that are already generating friction both within the Frente Amplio and with the private sector.

Pressure on competitiveness, which businesses and investors identify as their main concern for 2026 according to a recent survey, is being amplified by the regional environment. Conditions in Argentina and Brazil are challenging a Uruguayan economy that operates on thin margins: the weak dollar erodes agricultural exporters' revenues, though the government reduced the IMESI discount for fuel purchases along the Argentine border to ease the pressure from the price gap that is diverting consumers. Argentine wheat sourced from Vaca Muerta, meanwhile, is gaining share in the supply to state refiner ANCAP, illustrating how regional energy integration is advancing pragmatically beyond commercial frictions.

On the infrastructure front, state utility UTE announced the development of a third 500-kilovolt transmission corridor to reinforce supply to the south of the country, after completing the northern electric ring. Investment in transmission networks is consistent with the government's bet on long-term private projects — green hydrogen, data centers, and a new pulp mill — that the MEF identifies as the drivers of the eventual growth acceleration. Exports of services from the so-called knowledge economy posted record growth, and the tech industry, which already weighs meaningfully on GDP, remains the sector with the greatest relative dynamism.

In the labor market, the Federación Argentina de Empleados de Comercio y Servicios published new wage scales with increases, in a context where Uruguay's wage councils system continues to function as a bargaining anchor. The head of AEBU, the banking union, argued that if the economy and the banks are doing well, wages should rise — a phrase that captures the expectation of organized sectors in a year in which the Uruguayan Central Bank maintains that the financial system is well-prepared to absorb adverse scenarios.

What investors should watch in the coming weeks is whether the downward revision to projected growth translates into an adjustment of the fiscal rule — Oddone has already outlined changes to the mechanism that will be incorporated in the budget — and how the political negotiation around the AFAPs evolves, as their reform represents the most sensitive piece of the Frente Amplio government's economic agenda. The IMF managing director's visit to Montevideo to meet with President Orsi, amid calls for greater fiscal effort, adds external pressure the government cannot ignore while it refinances debt at rates that, for now, remain manageable.

**ANCAP (state-owned, unlisted)** — The state refiner has consolidated Argentine crude from Vaca Muerta as a key piece of its supply, according to El Observador, in a reconfiguration of its supply chain with direct implications for bilateral commercial flows with Argentina. Reliance on Argentine unconventional production exposes ANCAP to the operational and price volatility of the Patagonian field.

**UTE (state-owned, unlisted)** — The state utility announced the development of a third 500-kilovolt transmission corridor following completion of the northern electric ring, an infrastructure investment that underpins the incorporation of new renewable energy projects and data centers into the national grid. Grid expansion is a necessary condition for Uruguay to be able to market renewable generation surpluses into the region.