The government has hailed the 0.5% quarter-on-quarter growth in the first three months of 2003 as clear evidence that the four-year recession is finally ending. It should be noted, however, that the final quarter of 2002 was by far the worst of that miserable year, when the economy contracted by 13.5%. Year-on-year, the first quarter of 2003 showed GDP down by 9.1% on the same period of 2002.
The worry is that the agricultural sector, which is leading Argentina out of recession and keeping Brazil's economy going, is doing poorly in Uruguay: it contracted by 5% quarter-on-quarter in the first three months of 2003. Manufacturing was the best performing sector, up by 3.2%, The crucial hotel and restaurant sector had a miserable high season, falling by 3.7% quarter-on-quarter.
Economists expect the economy to pick up slowly throughout the rest of the year as more imports are priced out of the domestic market. If Brazil's economic recovery gathers some speed, imports, both raw materials such as rice and manufactured goods, should be sucked in from Uruguay.
The problem for the Uruguayan economy is that domestic demand is still painfully feeble.
Household consumption. The annual survey of household consumption by the Instituto Nacional de Estadística was published towards the end of June. It found that there were 211,000 people looking for work in 2002. In 1998, in last year of economic growth, those looking for work numbered 124,000. The 2002 figure is flattered by the huge emigration (of 75,000 people) between 2000 and 2002. The supposition is that at the beginning the bulk of the migrants were skilled or middle class who wanted to get better paid jobs elsewhere. Last year people were migrating, fewer of them skilled, simply to survive. All in all, there are 65,000 fewer people employed in the country than there were in 1998.
In fact, taking 1998 as a base is probably unfair. Output in the final quarter of 2002 was back down to 1991 levels. The economy is 25% smaller than at the start of the recession in 1998.
Informal economy. One of the apparent oddities is that the number of people working in the informal economy in Uruguay does not seem to have risen much since the start of the recession, according to the household survey. Unlike other countries in the region, only just over a third of the workforce, or 387,000 people (37% of those in work), admit to being in jobs in which they do not make social security payments. This means that they are ineligible for pensions, sickpay and paid holidays. In other countries in the region, such as Venezuela, well over half of the people in work are in the informal economy.
Uruguay's position, economists admit, is peculiar. Some argue that it suggests that the data is flawed and shows that the size of the informal economy has always been much bigger than the social security statistics would suggest. What may be happening, economists speculate, is that employers had both formal and informal employees and when the recession came employers chopped the benefits of their non-registered employees while keeping up those of their registered employees.
Putting all these figures together: 387,000 without social security coverage, 211,000 unemployed and a further 190,000 under-employed (defined as people who say that they would like to work more hours per week) means that 788,000 people are in real danger of being trapped in poverty. Of course, there is probably some double counting here (people in the informal economy may also be saying that they are unemployed) but the consensus is that there are 655,000 people who face very serious employment problems. In a population of just 3m and a workforce of 1.2m that is a terrifyingly large figure.
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