The gigantic Uruguayan state absorbs the citizens' capacity to save
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Uruguay lives under the illusion of being a serious, stable country and the "Switzerland of America." However, scratching just two millimeters (0.08 inches) beneath the surface reveals the same terminal illness that afflicts Argentina: the State has taken almost all the savings capacity from Uruguayans with higher incomes and, in doing so, has killed genuine investment.
Without domestic savings, there is no cheap credit; without cheap credit, there is no productive investment; and without productive investment, we are doomed to grow at a snail's pace or to stagnate altogether.
The numbers are brutal and do not lie
In Uruguay, Gross Fixed Capital Formation is barely around 17–18% of GDP (2023–2024 data from the Central Bank of Uruguay and the World Bank). The OECD average is 24%.
This means that, just to reach the average of wealthy countries, investment would need to grow by 37.5%.
Do we want to compare ourselves to countries that have truly taken off in recent decades? - New Zealand: 26–27% of GDP → we would need +50–55% - Estonia (the Baltic miracle that in 1995 was poorer than us): today 28–29% → we would have to increase investment by 62–65%.
We are extremely far behind. Worse still, we continue to deteriorate.
Chanchita
The tenth decile of highest incomes in Uruguay faces one of the highest effective tax burdens in the region when maximum IRPF (36%), VAT, employer contributions, Wealth Tax, Property Tax, consular fees, and countless hidden taxes are added up. Result: they are left with almost no margin to save.
Those who earn well pay even for the air they breathe, and when they try to invest, the State pursues them again with more taxes.
Without genuine domestic savings, Uruguay has become addicted to two things:
1. Foreign investment, for which "custom-made countries" must be created with grotesque tax exemptions (free trade zones, investment promotion law, fake PPPs, etc.). 2. External borrowing to finance the monstrous public deficit.
This is not development; this is beggary disguised as an investment attraction policy.
Billetes
As long as the State continues to devour 38–40% of GDP (real consolidated public spending, including state-owned enterprises and departmental governments), as long as it continues to punish those who produce and save, Uruguay will never generate its own virtuous investment cycle.
We will continue to be the country that begs UPM, Google, or any investor to come and set up a plant in exchange for not paying taxes for 30 years... because Uruguayans can no longer do it ourselves.
Without savings, there is no investment. Without investment, there is no sustained growth.
Without sustained growth, there is no escape from the lower-middle-income trap we have been in for two decades.
Uruguay has macro stability, low inflation, and investment grade. Great. However, that only serves to avoid a total collapse.
To truly grow, something is needed that neither Frente Amplio nor any multicolor Coalition dares to touch: drastically lowering the tax burden on those who generate wealth and returning to Uruguayans the ability to save and invest their own money.
Ahorro
Until we understand that the main enemy of Uruguayan growth is the size and voracity of the State, we will remain condemned to be Latin America's "best student at the back of the class": nice stability numbers... and African-country-level growth.
The clock is ticking. Estonia has already left us behind. South Korea is not even worth mentioning. Meanwhile, we continue debating whether the maximum IRPF should be 36% or 34%.
Pathetic.
