(Bloomberg) — As central banker, Diego Labat got Uruguay’s chronically high inflation under control. Now, as finance chief, he’s looking to seize the opportunity to boost the South American country’s sluggish growth if voters give the ruling coalition another five-year mandate in October’s elections.
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The National Party’s presidential candidate, Alvaro Delgado, has already announced that Labat will be his finance minister. Delgado, a former deputy and secretary to the president, has promised to accelerate growth to make Uruguay the most developed country in Latin America by 2030.
The country should aim for growth of at least 3 to 3.5 percent a year, with potential if investors build a multibillion-dollar green hydrogen project and trading partner Argentina recovers from its deep crisis, Labat said in an interview. A Delgado government would also aim for an inflation target of 3 percent, up from today’s 4.5 percent, he said.
The best way to achieve these goals is to increase private investment through predictable regulations, healthy public finances and opening the economy to more competition, Labat told Bloomberg News in Montevideo.
“Uruguay must grow sustainably and at higher rates,” said Labat. “We will have responsible fiscal management that ensures sustainable debt development.”
Analysts expect economic growth of 3.3 percent in 2024, ending a decade in which the country grew by an average of about one percent per year. Candidates from across the political spectrum believe that a revival of growth is essential if Uruguay is to finance its costly welfare state and eliminate deep-rooted inequalities. Although the poverty rate of 10.1 percent is lower than in neighboring countries, almost a fifth of children and young people live in poverty. The university system produces talented professionals, but only half of Uruguayans complete high school.
Uruguay, a country of 3.4 million people between Argentina and Brazil, will go to the polls on October 27. Eleven parties, including the ruling coalition and the opposition Broad Front, will field candidates. If none of the candidates wins an absolute majority, there will be a runoff in November between the two with the most votes. Polls suggest Delgado and Yamandu Orsi of the Broad Front are the most likely candidates.
Labat, 54, joined Delgado’s campaign after he resigned as central bank chairman in July. During his four-and-a-half-year tenure, the institution introduced a benchmark interest rate and pursued a tight monetary policy that has kept inflation in the 3-6 percent target range since June 2023. Labat previously served on the board of Uruguay’s largest industrial conglomerate, state-owned oil and cement company Ancap, and as a senior executive at the local subsidiary of Spain’s Banco Santander.
Voters also face two referendums in October on social security reform that would enshrine a minimum retirement age of 60 in the constitution and abolish pension funds that manage more than 940 billion pesos ($23.3 billion).
Labat warned that approval of a referendum on social security would likely force the Delgado government to redirect spending and renege on its promise not to raise taxes.
“This is a completely destructive scenario. A scenario that would put Uruguay in a very complicated situation,” he said.
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