Uruguay Dispels the False “Health or Economy” Dilemma
Uruguay is one of the few countries in the world that is defeating the coronavirus without mandatory quarantine, without destroying the economy, and while respecting individual freedom
Spanish – COVID-19 has been the ideal breeding ground for demagogic rhetoric. For months, politicians and the media have presented a false dilemma since the beginning of the global outbreak: health or economy.
The Rio de la Plata area is perhaps one that presents the starkest contrast regarding the handling of the pandemic. Two young administrations are just beginning their terms in office but with diametrically opposed positions: Alberto Fernández and Luis Lacalle Pou. One is presenting the dilemma of health or the economy as its rallying point, “putting life first,” and the other is handling a crisis on all fronts without fear of criticism of its administration or ideas.
The data and facts speak for themselves. The Uruguayan model has been tremendously more successful than the Argentine one, both in health and the economy, thus breaking the false dilemma that many presented.
Uruguay was governed for 15 years by the Frente Amplio, which stalled growth and directly slowed down the country’s economy in recent years. Lacalle Pou inherited a country with an unstable macroeconomic situation and a large fiscal deficit due to high public spending, economic deceleration and decline, growing problems of insecurity, and a need for educational reforms. Under these circumstances, Lacalle not only had to advance in his reforms and vital administrative priorities but also had to face a pandemic that was sweeping the world. So far, not only is he doing very well in the fight against COVID-19, but he has also made progress on the proposed Law of Urgent Consideration (LUC)- major unprecedented reform that is being thoroughly evaluated in the Uruguayan congress.
The LUC includes a modification of 501 articles and required the support of the Colorados and Cabildo Abierto parties to advance this executive project. The main opposition party, Frente Amplio, has attacked every one of the provisions that the current Uruguayan president has taken, criticizing the management of the pandemic – one of the most successful in the continent and the world – and also attacking the LUC that it is preparing to end several of the failures of the Uruguayan left, which had been governing the country uninterruptedly for a decade and a half.
In terms of numbers, Lacalle Pou inherited two years of rising unemployment, growing poverty, a homicide rate per 100,000 inhabitants that rose from eight to 11 between 2017 and 2018, and an increase in the percentage of violent robberies and theft. In terms of the economy, Uruguay has been experiencing a two-year slowdown in GDP. GDP growth rate fell from 2.7% to 1.8%, to 1.5% from 2017 to 2018 to 2019. Regarding education, only 36.3% of young Uruguayans finish secondary school on time. In the fiscal area, the deficit increased from 2.7 % to 4.8 %. Underneath all this, it is easy to understand why it is so urgent to approve the great reform that seeks to end the socialist state in Uruguay.
What did Uruguay do to control the spread of the virus without destroying the economy?
To put things in perspective, we must quote Uruguay’s vice-president, Beatriz Argimón: “He would never take a measure against the coronavirus that does not take into account the freedom of the individual,” she said, referring to the Uruguayan president. In other words, in Uruguaya, there was a commitment to respect individual liberties although, in most parts of the world, collective security was prioritized without giving much importance to freedom. What did Uruguay show? The two can go hand in hand- responsibility and freedom working together, not separately.
So far, Uruguay has registered a total of 738 cases, 20 total deaths, 579 recoveries, and 139 active cases. There are 213 cases per million inhabitants and six deaths.
A key element in the success of the virus containment has been the massive testing, Uruguay has performed a total of 34,794 tests, corresponding to 10,020 tests per million inhabitants. A rather high number considering the size and population index of the country.
Some of the measures to avoid the spread of the virus were included declaring a health emergency on March 13 after the first thirteen cases of COVID-19 were confirmed. On the same day, classes were suspended, mass events and non-essential activities were canceled, and borders were closed. The government also set up “Operacion Todos en Casa” (Everyone at Home Operation) to bring back all Uruguayans stranded abroad.
What differentiates Uruguay from the rest of the countries is that the government did not impose an obligatory quarantine, nor did it stop economic activity completely, knowing that a big economic contraction will lead to more poverty, higher unemployment, bankrupt companies, and, of course, more deaths from hunger.
Civic responsibility played a prominent role in Uruguay, perhaps like in no other South American country. Since there hasn’t been a strong upsurge in cases, the country is preparing for more flexibility, rural schools are back in operation, and soon, schools in the big cities will reopen.
The economic indices in Uruguay are not as bleak as other countries in the region. This is because, for example, 85% of the shops in central Uruguay have already resumed their activities. The construction sector, which had slowed down between 24 March and 13 April, returned to work and had no effect on the increase in cases, so it will be possible to continue reactivating this key sector for the country.
How Uruguay raises funds to fight the coronavirus
We can draw a parallel with another success story for the containment of the pandemic: Paraguay. Paraguay, too, has controlled COVID-19. It has had very few cases of community spread, and most of the positive cases came from abroad (almost all from Brazil), and they are being kept in shelters.
To cope with the pandemic, Paraguay has had to resort to loans by increasing its foreign debt, and the debt has reached a high percentage of the country’s GDP. The country also placed sovereign bonds in the international market for one billion USD at a rate of 4.95%. This caused Paraguay’s debt to rise to 26%, a record high, and close to the recommended maximum of 30%.
Uruguay, on the other hand, avoided taking measures that would put the country at risk in the medium and long term. So it opted for a new approach to raising the necessary funds for the response to the pandemic. First, it resorted to credit agencies with low lines instead of the bond markets. The government also created a “coronavirus fund” for public officials, including legislators and ministers, to reduce their salaries by 20% to raise money to fight the pandemic. This measure has raised a total of 12 million USD.
In terms of support for businesses to reduce the economic impact on society, the government plans to spend some 400 million USD and channel 2.6 billion USD in loans. Uruguay is dealing with its worst downturn since a regional financial crisis caused the economy to collapse in 2002.
Dispelling the false dilemma of health or economy
Uruguay is the living picture of success. Contrary to the populist discourse that prevails at this time, Lacalle’s administration has gone down the path of good judgment. It has maintained a balance between health and the economy. Without looking for external responsible parties, nor blaming previous governments, the Uruguayan president implemented his ideas, played a leading role, made freedom and responsibility work hand in hand, and has achieved recognition for the excellent handling of the pandemic without the need to restrict freedoms.