Event

For the first time a Uruguayan vice-president has resigned from the post. Raúl Sendic stepped down amid mounting public pressure over corruption accusations. The ruling left-wing coalition Frente Amplio (FA) claims that Sendic used public funds for personal use while heading the state-owned oil company. Lucia Topolansky, senator and wife of ex-President Jose Mujica, took over the post. She has become Uruguay's first female vice-president.

Impact on country risk

The departure of Sendic can exacerbate tensions in the party ruling the country since 2005. Sendic is a member of the more radical branch of the FA and played a key role in maintaining party unity with President Vázquez's more moderate faction. President Tabaré Vázquez, in power since 2015, has already been facing a difficult policymaking environment due to weak public support and widening divisions within his FA. The president faces the challenge of curbing the fiscal deficit (estimated in 2017 at -3.4% of GDP) which is pushing up public debt (estimated at almost 61% of GDP at the end of 2016). Furthermore, he has to deal with an economic slowdown (1.7% in 2017). The deceleration is triggered by the recessions in 2016 in important trade partners (Brazil and Argentina) and the relatively low prices of its main export product: food. Nevertheless, as the neighbouring countries are emerging from their recessions, economic growth is likely to accelerate in Uruguay in the coming years. Despite the ongoing challenges, the Uruguayan economy is relatively healthy. Indeed, the country is enjoying moderate external debt (estimated at around 45% of GDP at the end of 2016) which is expected to only slightly increase in the coming years due to the relatively small current account deficits (-1.5% of GDP expected in 2017). Moreover, the country has a high level of foreign exchange reserves (covering almost 13 months of import).

Analyst: Jolyn Debuysscher, j.debuysscher@credendo.com