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Foreign Exchange

Uruguay's elegant transformation

Dragged down by Argentina's troubles, Uruguay was on its knees by mid-2002. Yet in 2003, through a series of elegant and smoothly executed transactions, the country regained its economic stability and much of its historical reputation as a sound credit. Felix Salmon reports.


URUGUAY'S TRANSFORMATION IN 2003 from pariah to economic miracle was the result of the hard work of many people and organizations.

President Jorge Batlle deserves a huge amount of the credit – not least for hiring an extraordinarily competent economic team and then shielding them from political interference.

The Washington crowd deserves praise too. Batlle is no fan of the IMF, but when the Fund finally signed on to Uruguay's plans, it did so wholeheartedly.

Then, when Uruguay found itself having to go to the international capital markets to restructure all its bonds, it got flawless execution from its advisers at Citigroup and law firm Cleary, Gottlieb, Steen & Hamilton. Behind the scenes, the country was receiving invaluable advice and support from the US Treasury, from the capital markets team at Deutsche Bank, and from the president of the Federal Reserve Bank of New York, William McDonough.

The Uruguay story started at the beginning of 2002, when Argentina's default coupled with a high-profile banking fraud to undermine confidence in Uruguay's banking system. By the middle of 2002, the country was experiencing possibly the worst bank run the world has ever seen, culminating in a bank holiday, devaluation and an IMF bailout in August.

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