Recently, in a press release, Economy Minister Oddone stated that "Uruguay will never be cheap". He justified his position by claiming that devaluing the currency is unacceptable and that the population size makes basic services expensive.
Despite the defeatist view of someone who should aspire to something else, it must be said that it is not true that having three million inhabitants means we must be an expensive country. It is also not true that wages must be lowered to improve competitiveness.
If the minister's argument were true, how can it be explained that countries like Estonia, Iceland, or Andorra—with even smaller populations—are cheaper and more competitive?
You may also be interested in this critical follow-up on the current government's economic direction.
The real problem is an oversized and hyper-interventionist state, not the geographic size. The Uruguayan "welfare state" imposes high taxes, debt, and regulatory distortions that stifle economic activity.
This is why we are unproductive, even compared to smaller countries. The key to productivity lies in capitalization and the development of human capital.
As Professor Benegas Lynch keeps: "it is not the same to plow with your hands as with a tractor". For that, economic freedom, savings, and investment are needed. However, in Uruguay, talking about economic freedom seems like heresy.
You may also be interested in this analysis on the hidden cost of statism disguised as social justice.
Public companies and state monopolies are inefficient and pass their failures on to the consumer. Let us recall the ANCAP case: a highway robbery disguised as capitalization.
