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Uruguay's new president Luis Lacalle Pou and his economy  minister Azucena Arbeleche, the first woman to ever hold that position. (Photo: Uruguay President's Office)
Wednesday, March 4, 2020
Perspectives

Uruguay: New President, New Course


Luis Alberto Lacalle Pou plans to cut wasteful spending, boost private sector.

BY LATIN AMERICA ADVISOR
Inter-American Dialogue

Luis Alberto Lacalle Pou on Sunday was sworn in as Uruguay’s president, the first right-of-center politician to lead the nation since 2005. What will Lacalle Pou prioritize during his five-year presidential term? What do his cabinet picks suggest about his government’s direction, and which ministers will take on leading roles during his administration? What are the most pressing challenges that Lacalle Pou will face as Uruguay’s president, and how well prepared is he to address them?

Nicolás Saldías, senior researcher at the Wilson Center’s Latin America Program and Argentina Project and a PhD candidate at the University of Toronto: The main priority of President Lacalle Pou and his coalition partners will be tackling Uruguay’s large budget deficit, which stood at 4.6 percent in 2019. Their proactive approach to cut the deficit by reducing state employment, wasteful spending and a possible pension reform highlights the importance of signaling to creditors and investors the government’s willingness to enact unpopular measures early in his administration. Although the IMF considers Uruguay to be in an ‘enviable’ position with strong fundamentals, such as large foreign exchange reserves, the downside risks of a possible Argentine default and the effect of the coronavirus need to be hedged by committing to macro-prudential policies now to ensure the country maintains its coveted investment grade status. The appointment of Azucena Arbeleche as the minister of economy suggests a moderate and technocratic economic policy program—she is the first woman to hold that powerful post. The appointment of Colorado presidential candidate and current Sen. Ernesto Talvi as minister of foreign affairs suggests the government will advance with trade liberalization, an anti-authoritarian foreign policy (especially against Venezuela) and improving relations with the United States. Another important appointment is Jorge Larrañaga as minister of the interior. A proponent of ‘mano dura’ policies and a rival to Lacalle Pou inside the National Party, his tenure as minister suggests a more punitive approach to Uruguay’s complicated insecurity crisis. Going forward, the main challenge for Lacalle Pou will be the survival of his ideologically unwieldy coalition, especially as the costs of governing become apparent.

Arturo C. Porzecanski, chair of the International Economic Relations Program at American University’s School of International Service: Lacalle Pou’s three top priorities will be to reduce street crime, improve the business climate and shift foreign policy away from support for undemocratic regimes. Lacalle Pou has made three excellent appointments of relevance to the attainment of these objectives. He picked Sen. Jorge Larrañaga, a perennial rival from his own party, to be the new interior minister. Larrañaga is known for having an aggressive law-and-order agenda, and he twice sponsored constitutional referendums on crime-related issues, which did not pass but revealed some of his top priorities: reducing to 16 the age of criminal responsibility, toughening prison sentences for crimes and establishing a national police force. Lacalle Pou appointed economist Azucena Arbeleche, also from his own party, as the country’s first female economy minister. She is a strong believer in private initiative as the driver of economic progress and wants the government to play a supportive role by improving the investment climate while cutting back its own deficit spending. And he chose economist Ernesto Talvi, who was another party’s presidential candidate, to be the foreign affairs minister. The forthcoming change in orientation was made clear when the incoming administration pointedly did not invite Cuba’s president, Miguel Díaz-Canel, nor Nicaraguan President Daniel Ortega nor Venezuela’s Nicolás Maduro, to the inaugural ceremony. Given that Lacalle Pou has put together a coalition of five right-leaning parties that hold a majority of seats in both houses of Congress, chances are that his administration’s priorities, though they will be opposed by the outgoing Frente Amplio party and the PIT-CNT labor union confederation, will mostly be passed and implemented.

Ignacio Bartesaghi, dean of the business studies department at the Catholic University of Uruguay: President Lacalle Pou receives the country with some challenges in the economic area. This is, in particular, due to the high fiscal deficit and the sluggish growth registered in past periods, which, additionally, saw a rise in the unemployment rate. The region’s economic situation has been marked by progress with Argentina’s debt restructuring and Brazil’s still-needed economic recovery, which is being affected by the impact of coronavirus. Among the most important challenges, Lacalle Pou will have to improve the country’s public safety, one of the population’s biggest concerns. He has to implement significant reforms in education, and his government will have to address deficits that are still present in the infrastructure sector. Additionally, a social security reform cannot be postponed. Moreover, it will be key to increase the country’s competitiveness and productivity in order to attract new investments, which will also need a reduction of production costs. To do this, a more efficient state is necessary, with more competitive fuel and energy prices, with a more flexible labor system, as well as a better insertion of Uruguay into the world. To address these challenges, Lacalle Pou has a team that is balanced in terms of the political and technical aspects, relatively young, with political and professional experience in different areas, and it’s representative of the coalition that won the elections. However, in Congress, he will face a strong opposition that could slow down and even hinder aforementioned reforms, especially those that require special majorities. The new Uruguayan president will exercise a more fresh, pragmatic leadership, one less loaded with ideologies, which has generated expectations in a large part of the population. 

Daniel Buquet, professor of political science at Universidad de la República in Uruguay: On March 1, a right-wing government entered office in Uruguay after 15 consecutive years of leftist governments. But, unlike those of the left, which were majority party governments, the new executive’s party will have only about 30 percent of legislative support, one of the lowest in the country’s history. To deal with this situation, the president formed a coalition of five parties, which covers a broad ideological spectrum, from the center to the extreme right. This coalition is also the most fragmented and heterogeneous that has so far ruled the country. The cabinet appointments include names from the ruling party and faction leaders of coalition members, in order to transform the Council of Ministers into a decision-making body at the highest level. The appointments also indicate several stances of public policy. For example, Pablo Mieres of the Independent Party as labor minister indicates dialogue with unions and moderation; Ernesto Talvi of the Colorado Party as foreign minister indicates trade openness and alignment with the regional Lima group; Azucena Arbeleche in the economy ministry indicates a reduction of public spending and market-friendly measures; and Pablo Da Silveira in education indicates a reduction in the autonomy of education subsystems and the promotion of competitiveness. Both Arbeleche and Da Silveira are members of president’s party. The government’s main challenge in the short term is the reduction of the fiscal deficit, and in the medium term, it is to keep the coalition together, which, due to its ideological heterogeneity and the electoral incentives that will prevail, is destined to disintegrate.

Republished with permission from the Inter-American Dialogue's daily Latin America Advisor

 

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