Brazil & Southern Cone - March 2026

In his election campaign, centre-left President Yamandú Orsi had promised not to rock the boat and to run a middle-of-the-road government. One year after his inauguration in March 2025, Uruguay’s economic performance is also middle of the road. However, despite some favourable tailwinds that included a massive inflow of money into emerging markets last year, the economy is slowing, public finances are deteriorating, and Orsi seems to be leaning towards policies that could slow activity further.

On the positive side, annual inflation in February was 3.1%, the lowest since August 1956. That in turn has allowed the central bank to lower interest rates by a total of 350 basis points since July, providing a massive impulse to the economy.

The problem is that lower inflation is not directly attributable to Orsi’s actions. Inflation had been slowing since 2023 and did so more quickly last year as the dollar depreciated, making imported goods cheaper. At the same time exports of goods in 2025 increased by 5% to US$13.5bn, the highest in a decade. Beef exports surged to a record US$2.7bn, driven by a 19% price rise as well as increased volumes.

Economic slowdown

Annual GDP growth slowed to an estimated 2.3% in 2025, from 3.1% in 2024, and is projected to slide further to below 2% this year. The main culprit is a fall in investments as large-scale projects of previous years came to an end and many entrepreneurs have taken a wait-and-see approach to Orsi’s administration.

One of the major concerns is the state of public finances. According to figures released by the ministry of economy and finance in late January, Uruguay’s consolidated public sector fiscal deficit widened to 4.4% of GDP in 2025, up from a deficit equivalent to 4.1% of GDP in 2024. In part the increase was due to liabilities left by the previous administration, but also to Orsi’s reluctance to cut spending after he promised more social welfare outlays during the campaign.

Instead, he increased taxes on multinational companies and, in an attempt to protect local retailers from cheap online competitors like Temu, raised taxes on duty free parcels. But critics say he then botched the move by increasing the amount consumers can import tax-free. The domestic retail association was not impressed.

Indicative of investor sentiment, Uruguay’s bonds and stocks saw only mild gains during Orsi’s first year in office. These were far smaller than other markets in the region. For example, the Montevideo stock exchange inched up just over three percent, while the Ibovespa in neighbouring Brazil roared ahead at 43%. Uruguay’s 2045 dollar-denominated bond gained a modest 3.5% over the year through 1 March, compared with 12%-15% returns for emerging market bonds on average.

Orsi himself acknowledged in his state of the union address at the beginning of the legislative session on 2 March that much of the first year had been spent cleaning house. “With successes and failures, we began by organising in order to be able to transform,” Orsi said, adding that “there is no possible transformation without firm foundations, there are no sustainable projects on fragile foundations.”

International outlook

In theory there are increased chances for export growth through the recent EU-Mercosur trade deal and Uruguay’s acceptance to the CPTPP trade pact of Pacific rim nations including Japan, Canada, and Australia. On the flipside Uruguay may face geopolitical headwinds as much of the western hemisphere has shifted to the right. A failure to gain the favour of US President Donald Trump could mean losing trade and investment opportunities.