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Uruguay has a dollar dilemma

The country’s bankers are frustrated: the system is sound, their banks are generally well run, and yet they are among the worst performers in Latin America. Something has to give. Some hope it will be the country’s attachment to the dollar.


Uruguay’s banking system has a problem – even if it is a nice problem to have. Its banks are awash with cash that they can only partially lend out.

“The Uruguayan banking system is sound, it’s very liquid and it has strong fundamentals, but we have much more deposits than credit we can grant locally, and that’s a big issue,” says Horacio Vilaró, general manager of the Uruguayan unit of Brazilian lender Itaú.

“On average, we lend 40% of our possibilities and place the remaining deposits abroad at international money market rates, so you can only profit on that 40% and not the 100% of your deposit base,” explains Vilaró. “If you’re not structured to make your money here on commissions and fees, then you face a problem because you have too many resources that are not producing interest.”

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