Investors embrace Uruguay's sovereign debt while households brace for growth downgrade.

Uruguay is testing international debt markets amid an economy that entered 2026 with more questions than answers, and the tension between financial market optimism and household discontent precisely captures the moment the country is going through.

According to El Observador, the government is holding consultations with investors for a possible return to the international sovereign bond market. The operation is taking shape in a context that, viewed from the outside, looks favorable: Uruguay's Country Risk Index remains at the lowest levels in Latin America, the Financial Stability Committee declared that the banking system is "well prepared to absorb hypothetical adverse scenarios," and the Central Bank submitted a draft bill to create an open finance framework that could modernize the country's financial architecture. At the same time, Minister Gabriel Oddone is leading a tour of the United Kingdom to strengthen economic and financial ties, a signal that the government is betting on consolidating its reputation among global institutional investors at a moment when external financing conditions remain relatively benign for quality issuers in the region.

The domestic picture, however, is considerably more complex. The Ceres Leading Index, which posted two consecutive months of growth in May with a 0.3% rise, was building off a weak base: the same indicator had previously registered declines that reinforced signs of a slowdown in activity. Oddone himself acknowledged to La Diaria that there is "a fairly high probability that we will revise growth projections for 2026 downward," an admission that contrasts with the more optimistic tone he used to defend the Rendición de Cuentas before Parliament, stating that the economy "is slowly beginning a path of recovery." The economy grew 1.8% in 2025, below official projections, and the first quarter of 2026 showed a gain of just 0.8% over the previous quarter, driven by consumption and exports but weighed down by the contraction of agriculture and construction.

The perception gap is perhaps the most telling data point of the day. According to a Cifra survey cited by El Observador, the economic climate "has been deteriorating" in the eyes of Uruguayans, with half the population viewing the situation as bad. This citizen pessimism collides head-on with the optimism declared by business owners and investors, most of whom foresee stability for 2026 and whose main concerns remain focused on competitiveness rather than a crisis scenario. Credit to households has now recorded seven consecutive months of decline, and delinquency is not easing — two signals pointing to a private consumer more cautious than the macro aggregates suggest.

Against this backdrop, the political debate around the Rendición de Cuentas concentrates several of the structural tensions of the moment. Oddone faces the Coalición Republicana's refusal to approve the budget instrument, while simultaneously having to neutralize proposals from Cabildo Abierto that, according to the minister, would require "a separate law." The government will include in the budget bill the global minimum tax on multinationals — in line with OECD standards — through which it expects to raise USD 350 million, a measure with international resonance given the importance of free trade zones and the knowledge economy for Uruguay, sectors that already account for 6.7% of GDP and posted record-level service exports. The Unión Industrial Argentina, in a warning that echoes from the other side of the Río de la Plata, cautioned about what it considers "the highest tax burden in the world" on Uruguay's formal economy.

The conflict in the Middle East adds an external variable that Oddone explicitly called a "negative shock" because of its impact on energy prices. Uruguay, whose electricity grid is almost entirely renewable, is relatively protected on that front, but the effects on imported inflation and the exchange rate are real: the dollar posted its largest weekly gain in six years during the period of greatest military tension, even though the Uruguayan peso continues to be perceived as expensive against Brazil, compressing export margins in the country's main regional market.

On the private investment front, the government is pinning its growth hopes on three major vectors: green hydrogen, data centers, and a new pulp mill. These projects, which require multi-year maturation timelines, are insufficient to reactivate activity in the short term, which partly explains why the virtuous cycle envisioned by the government — lower inflation, growing de-dollarization, falling rates, credit reactivation — has yet to materialize at the expected pace.

What to watch in the coming weeks: the outcome of the investor consultations for the sovereign debt issuance and the market conditions Uruguay obtains, which will be a litmus test of the real perception of credit risk; the evolution of the June Ceres Leading Index, which will determine whether the rebound of the previous two months has continuity; and the parliamentary progress of the Rendición de Cuentas, where the position of the opposition and the government's minor partners will condition the fiscal room available for the rest of the term.

**UPM (Helsinki: UPM)** — The new pulp mill stands as one of the three pillars of the private investment strategy on which the Uruguayan government is counting to hit its growth projections; the Finnish company, whose shares trade on the Helsinki Stock Exchange, maintains direct exposure to the evolution of Uruguay's real exchange rate, since its revenues are denominated in dollars while its local costs are in pesos.

**Banco Central del Uruguay — AFAP System** — The government confirmed in the framework of the Diálogo Social that it will promote "a set of transformations" to the regime governing the Administradoras de Fondos de Ahorro Previsional, ruling out — according to Oddone — any "confiscation," but leaving the door open to structural changes that would affect fund managers with international capital participation; the opposition is preparing a formal interpellation of the minister on the matter.