Uruguay achieves low overall compliance with international standards and codes, with a score of 25 out of 100 in our Standards Compliance Index. Uruguay's compliance in all three broad categories -- macroeconomic fundamentals, market infrastructure and financial supervision -- is low. The standard most in line with international requirements is data dissemination. Uruguay is working towards bringing its practices closer to international standards in the areas of monetary and fiscal transparency, accounting, auditing, and banking supervision. Two pieces of legislation were passed during 2004 and 2005 to strengthen Uruguay's anti-money laundering regime, and its payment system was being moved to an updated platform in order to fully comply with international requirements. However, there are three standards -- insolvency, securities regulation and insurance supervision -- where there are no independent assessments on Uruguay's compliance with international norms.

Macroeconomic Policy and Data Transparency

Uruguay has been a subscriber to the International Monetary Fund's Special Data Dissemination Standard (SDDS) since February 2004. In 2004, the IMF observed that important weaknesses in the statistical database existed, especially in the fiscal sector. Similarly, national account statistics were found to have a number of shortcomings, including the use of an outdated benchmark (year 1983), long publication lags, inadequate information on the informal economy, and incomplete quarterly accounts. More »

The International Monetary Fund (IMF), in its 2006 reviews of the Stand-by agreement with Uruguay confirmed that important reforms of the financial sector's institutional framework are under way. As programmed, draft legislation to strengthen the Central Bank, the Superintendency of Insurance and Reinsurance, the Deposit Insurance Agency, and the bank resolution framework was submitted to congress at the end of 2005 and as of June 2006 is being discussed in Senate. While the inflation objective would be set jointly with the ministry of finance, the authorities indicated that the central bank would have operational independence to achieve the objective. The independence of the central bank would be increased by setting and staggering the terms of its Board members, while strengthening its accountability to congress. In addition, a plan to improve the Central Bank of Uruguay's (BCU) financial position will be prepared by September 2006. The new bank resolution framework would follow international best practices, and the deposit insurance scheme would be run by an agency outside the central bank. A joint World Bank-IMF Financial Sector Assessment Program (FSAP) is under way, which will identify key elements for a medium-term structural reform agenda in the financial sector. More »

According to the 2001 Report on the Observance of Standards and Codes on Fiscal Transparency for Uruguay, at the time of the assessment, progress had been made in improving the transparency of fiscal policy setting and budget management. However, in a number of important respects, the full requirements of the Code of Good Practices on Fiscal Transparency were not met. In February 2004, Uruguay subscribed to the International Monetary Fund's (IMF) Special Data Dissemination Standard. Further, as part of the structural performance criteria for the IMF's economic program for the stand-by agreement, the government submitted to congress a five-year spending plan on August 31, 2005, complemented with revenue projections and deficit targets consistent with the program's fiscal targets. In 2005, the government has established a committee to steer reform of the budget process. The committee is preparing a comprehensive reform plan, including the preparation of a draft organic budget law to unify the framework regulating the formulation, coverage, classification, execution, control, and transparency of the budget process. More »

Institutional and market infrastructure

The Government of Uruguay (GoU) in its Supplementary Memorandum of Economic and Financial Policies in the 2006 Review of the Stand-by agreement with the International Monetary Fund stated that it is recognizing the importance of business environment to achieve sustained growth, part of which involves reviewing the bankruptcy framework. In a subsequent Letter of Intent to the IMF, the GoU noted that, as of June 2006, the new Bankruptcy Law was about to be submitted to the Congress. However, there is no information publicly available as to the compliance of the proposed law with the Principles and Guidelines for Effective Insolvency and Creditor Rights Systems developed by the World Bank. More »

The Decree 162/2004 issued on May 12, 2004 made International Financial Reporting Standards (IFRSs), formerly International Accounting Standards, or IASs, issued by the International Accounting Standards Board (IASB) mandatory for use in Uruguay. According to Decree 90/2005 issued on February 25, 2005, IFRSs applicable in Uruguay are those that were approved by the IASB in effect as of May 19, 2004. Decree No. 266/07 issued on July 31, 2007 made mandatory adoption of IFRSs issued by the IASB effective for the fiscal year starting January 1, 2009. More »

Equity listings in Uruguay are minimal. Although it has two stock markets, only 14 companies have registered securities with the Central Bank (BCU), 3 of which are not traded on either exchange. In 2005, the World Bank published a Report on Observance of Standards and Codes (ROSC) on Corporate Governance in Uruguay. The report notes that poor corporate governance in Uruguay has been one of the contributors to the instability and poor functioning of markets during the 2002 financial crisis, due to a general lack of confidence in the proper functioning of corporate control, especially regarding the banking sector. Overall, corporate governance falters due to a lack of transparency; no institute or code governing corporate governance; overlap and duplication amongst regulatory authorities; and the inability of the Capital Markets and AFAP Control Division of the Central Bank (AMV) and courts to enforce compliance. Since the 2002 financial crisis, Uruguay has experienced reasonable financial and economic stability, providing an adequate foundation for the deepening and growth of capital markets. To restore and further strengthen capital markets, Uruguay requires a strong set of corporate governance and investor protection measures. Efforts to advance the governance and efficiency of the state-owned and financial sectors will also contribute to the development of financial and securities markets. More »

On October 10, 2003 the Inter-American Development Bank (IDB) approved Project TC0304013: International Financial Reporting and Auditing Standards. The general objective of the project is to contribute to the supply of reliable, transparent and objective financial information on the financial performance of Uruguayan businesses that is comparable nationally and internationally. The specific objective is to achieve the timely and continuous adoption of International Financial Reporting Standards (IFRSs) and International Standards on Auditing (ISAs) by developing processes for their proper application. As of 2006, the implementation of the project was in progress. More »

According to the International Monetary Fund (IMF) Report on the Observance of Standards and Codes on Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) in Uruguay, published in December 2006, the current regime is largely underdeveloped. However, the report also states that Uruguay has put in place many of the basic legal elements for an AML/CFT regime albeit much remains to be done to fully implement and comply with most of the Financial Action Task Force (FATF) recommendations. Moreover, the IMF assessment indicates that, there is political commitment to introduce much needed reforms to meet the requirements of the FATF recommendations. While, money laundering was criminalized in Uruguay in 1998, the financial crisis of 2002 contributed to reduce attention and resources to AML/CFT issues. The Uruguayan authorities have taken important steps to address some of the weaknesses in the AML/CFT framework. Two pieces of legislation were passed during 2004 and 2005 (Law 17.835/2004 and Decree 86/2005) that, inter alia, introduced CFT measures, reinforced the role of the financial intelligence unit (FIU), and imposed AML/CFT requirements for most Designated non-Financial Business and Professions (DNFBPs). Enhancing resources and increasing the level of awareness of Money Laundering and Financing Terrorism risk across all sectors will be key challenges to effective implementation. According to the US Department of State, Law 17.835/2004 significantly strengthened the Government of Uruguay's money laundering regime. More »

According to the International Monetary Fund's (IMF) December 2006 Financial System Stability Assessment, the main systemically important payments system of the Central Bank of Uruguay (BCU), the Sistema Electrónico de Comunicaciones (SEDEC), does not fully comply with several Committee on Payments and Settlement Systems (CPSS) Core Principles (CPs), though improvements are underway. The BCU is addressing some shortfalls of the existing system to make it fully compliant with the CPSS. A project to migrate the current real-time gross settlement (RTGS) payment system to a new platform, AGATA, is underway. Areas for further improvement, according to the IMF, include the development of clear rules and procedures, the establishment of a secondary processing site, and the development of business continuity and disaster recovery plans. The IMF also states that the BCU does not fully observe some of responsibilities in applying the Core Principles for Systemically Important Payment Systems (CPSIPS). Therefore, the BCU needs to formally establish its oversight function over the payment system as a whole and have the ability to exercise its oversight function effectively. However, the IMF recognizes that the BCU's reform program will address many of the weaknesses in the payment and securities settlement system. The authorities are encouraged to make early implementation of the program a priority. More »

Financial Regulation and Supervision

The International Monetary Fund's (IMF) in its 2006 Financial System Stability Assessment (FSSA) of Uruguay indicated that there has been a conscious effort by Uruguay to address the weaknesses of the regulatory and supervisory framework. Out of 30 Basel core principles (BCPs), the 2006 FSSA assessed 9 to be fully compliant, 12 to be largely compliant, and 9 to be materially non-compliant. The main weaknesses were related to: (1) the operational independence of bank supervision; (2) the remedial capacity of the Superintendency of Financial Institutions (SIIF) with regards to state-owned banks; (3) the lack of full implementation of regulation and supervision of market and other risks; and (4) the deviation, in a number of respects, of accounting norms for banks from international accounting standards (IAS). However, the IMF reports that, as of 2006, the Uruguayan authorities were taking measures to address most of these weaknesses. Amendments to the Central Bank of Uruguay (Banco Central del Uruguay, or BCU) charter were submitted for congress' approval to strengthen the autonomy of the BCU and a regulation requiring capital charges for market risk was to be effective starting June 2006. The BCU also intended to issue the new chart of accounts by end-2006 to make accounting rules fully consistent with IAS, with mandatory full compliance by end-2008. More »

The entire financial system in Uruguay is supervised by the Central Bank of Uruguay through the Superintendency of Financial Intermediaries (SIIF). As of 2006, the International Monetary Fund and the World Bank were in the process of conducting the Financial Sector Assessment Program (FSAP) on Uruguay, aimed at identifying key elements for a medium-term structural reform agenda in the financial sector. The findings of the FSAP are expected to be presented with the IMF Article IV Consultation in mid-2006. Meanwhile, the authorities of Uruguay decided on the key elements of draft legislation to strengthen, among other issues, financial sector supervision. One of the proposals in the draft legislation is to create a single superintendency within the Central Bank for all regulated financial institutions, encompassing banking, securities markets, pensions, and insurance. The IMF concurred with the authorities that in the case of Uruguay, keeping the supervisory authority for the financial system within the Central Bank has advantages in terms of institutional strength and independence. However, there is not enough publicly available information to make an assessment as to Uruguay's overall level of compliance with the Objectives and Principles of Securities Regulation of the International Organization of Securities Commissions (IOSCO). More »

As of 2006, the International Monetary Fund (IMF) and the World Bank were in the process of conducting the Financial Sector Assessment Program (FSAP) on Uruguay, aimed at identifing key elements for a medium-term structural reform agenda in the financial sector. The findings of the FSAP are expected to be presented with the IMF Article IV Consultation in mid-2006. Meanwhile, the authorities of Uruguay decided on the key elements of draft legislation to strengthen, among other issues, financial sector supervison. One of the proposals in the draft legislation is to create a single superintendency within the Central Bank for all regulated financial institutions, encompassing banking, securities markets, pensions, and insurance. The IMF concurred with the authorities that in the case of Uruguay, keeping the supervisory authority for the financial system within the Central Bank has advantages in terms of institutional strength and independence. However, there is no information publicly available on Uruguay's compliance with the Insurance Core Principles (ICPs) promulgated by the International Association of Insurance Supervisors (IAIS). More »

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Credit Ratings

Moody's B1/Stable

Fitch BB-/Stable

Standard & Poor's B+/Positive

Macroeconomic Data

2007 GDP (Current Prices): 23 billion USD (IMF)

2007 GDP (Per Capita): 7,172 USD (IMF)

2008 GDP (Growth Forecast): 6% (IMF)

2008 Inflation (CPI): 7.4% (IMF)

2007 Unemployment: 9.2% (CIA)

2006 Foreign Direct Investment

FDI (Inward): 1.4 billion USD (UNCTAD)

FDI (Outward): -0.002 billion USD (UNCTAD)

2006 Official Development Assistance

ODA (Received): 21 million USD (OECD)

ODA (Disbursed): N/A million USD (OECD)