External investors embrace Uruguay while citizens doubt its economy

CAF —Latin America's development bank— announced it will double its portfolio in Uruguay to US$ 2 billion, a decision that crystallizes something more telling than the figure itself: the increasingly sharp contrast between foreign appetite for Uruguay's institutional solidity and the skepticism prevailing among the country's own citizens.

The announcement, which coincides with a meeting of regional finance ministers convened in Montevideo, comes at a moment when the narrative about Uruguay circulating in international financial capitals diverges substantially from domestic perception. According to a study cited in local media, Uruguay recorded a "sharp deterioration in its economic climate," and pollster Cifra warned that this perception "has been deteriorating" among the public. Nearly half of Uruguayans believe the economy is in bad shape. At the same time, the IMF's Managing Director highlighted the country's strengths during her recent visit, ratings agency DBRS praised its resilience in the face of crises, and Uruguay's sovereign risk —the lowest in Latin America— continues to attract interest from international investors: the government is sounding out the market for a new international debt issuance, a sign that credit access conditions remain favorable.

This gap between popular perception and the optimism of businesspeople and investors, documented by El Observador, is not merely a political communications phenomenon. It has roots in hard data. The economy grew just 0.4% in the second quarter of last year, and new estimates suggest it may have contracted by around 0.7% in that period, according to some consultancies. The Ceres leading index fell again, reinforcing signs of weakening, while the Central Bank acknowledges that activity is "evolving below its potential growth." Industry, construction, and commerce have been the hardest-hit sectors. For 2026, Economy Minister Gabriel Oddone himself admitted to the press that "there is a fairly high probability that we will revise projected growth downward," a statement at odds with the official narrative of gradual recovery the government has maintained since the Rendición de Cuentas.

That budget document was, in itself, a source of institutional tension. The Consejo Fiscal Autónomo warned in Parliament that the Economy Ministry's projections presented an "overestimation" of growth, questioning the methodology behind the official figures. Oddone responded that "projection errors or deviations are commonplace," but the intervention of the independent body —created precisely to oversee fiscal credibility— laid bare a friction that is no small matter in a country that stakes much of its external appeal on the predictability of its public accounts. The fiscal deficit closed 2024 at 4.7% of GDP, similar to 2019 and accompanied by an increase in public debt of more than ten percentage points.

Against this backdrop, President Orsi's government has resorted to an administered-pricing policy aimed at easing pressure on competitiveness without introducing inflationary shocks. The decision to keep prices for super 95 gasoline, diesel, and supergás unchanged for September reflects that caution, though the agricultural sector —hit by the appreciation of the peso against the dollar— continues to push for more forceful measures. The president of the Asociación Rural del Uruguay summed up the situation bluntly: "We are in a critical situation, and the minister understands it." Simultaneously, the government reduced the IMESI discount on fuel purchases at the border with Argentina, a technical adjustment with fiscal implications that also reflects the ongoing tension between competitiveness and revenue collection.

On the financial front, one positive data point stands out clearly: UTE, the state electricity company, reported profits of US$ 193 million and has already transferred US$ 70 million to the Treasury. The result consolidates the transformation of the energy matrix as one of the most genuine assets of the Uruguayan economic model, and generates fiscal resources at a time when budgetary space is tight. It is also one of the elements that major international media highlight when analyzing Uruguay: the combination of renewable energy, solid institutions, and low political risk sets it apart in a region where those qualities are scarce.

The Central Bank, for its part, submitted a draft bill to create an open finance system, a signal of financial-system modernization in line with global trends. And the Financial Stability Committee declared that the banking system "is well prepared to absorb hypothetical adverse scenarios," a reassuring message aimed at both local and foreign investors.

What will need to be watched closely in the coming weeks is the market response to the potential international debt issuance the government is exploring, the evolution of the Diálogo Social negotiations on reforms to the AFAP regime, and the impact of the competitiveness measures that Oddone promised to include in a new bill. Oddone's visit to the United Kingdom to "strengthen economic and financial ties" suggests the government is betting on diversifying its sources of financing and investment beyond the regional axis. The question dominating the local debate —whether Uruguay can grow genuinely or will remain trapped between macroeconomic stability and structural paralysis— has no answer yet. But the pressure to find one is intensifying.