For nearly a decade, it was the little engine that could, the unpretentious, resilient, small South American nation that quietly maintained a high and inclusive economic growth rate, while also serving as a regional bastion of political stability.
But Uruguay is beginning to feel the financial jolts and political traumas of its massive and volatile neighbors, Brazil and Argentina, and as a result, its once thriving economy is beginning to be falter.
To its credit, Uruguay, land of the Charrúas and home of the world’s cheapest solar energy, has one of the highest per capita incomes in Latin America.
It is also ranked by the United Nations as the least corrupt and most democratic country in Latin America.
And, for a while, Uruguay seemed to be immune to the political drama and economic chaos that has marred the images of its fellow Mercosur associates.
But in 2015, the so-called Switzerland of South America’s economy slowed, growing at an anemic 1.5 percent, compared to a more robust 3.5 percent the year before.
For 2016, the International Monetary Fund (IMF) predicted that Uruguay would register an even lower 1.4 percent growth.
Exports are down and the Uruguayan peso has depreciated significantly against the U.S. dollar over the past 12 months.
Extensive central bank intervention earlier this year helped to curb the pace of the depreciation, but as a consequence, there was a notable reduction in international reserves.
Inflation now stands at more than 9 percent, and much of the country’s transport and logistics infrastructure is in dire need of upgrading.
Still, thanks to a decade of prudent financial management, the country is not significantly burdened by foreign or domestic debt, and its new diversified economy is catching the eye of investors from around the globe, all of which bodes well for a sharp recovery by 2018.
And so, the little engine that could may well be down, but it is far from out, and its I-think-I-can-I-think-I-can bravado might just be revving up its economic motor for a dramatic comeback in two years’ time.
Thérèse Margolis can be reached at [email protected]