(Bloomberg) — Diego Labat tamed chronically high inflation in Uruguay as its central banker. Now he wants a shot at boosting the South American country’s lackluster growth as finance chief if voters give the ruling coalition another five-year mandate in October’s election.
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National Party presidential candidate Alvaro Delgado has already announced Labat would be his finance minister. Delgado, a former lawmaker and secretary to the presidency, has pledged to accelerate growth to make Uruguay the most developed country in Latin America by 2030.
The nation should aspire to grow at least 3% to 3.5% per year with upside if investors build a multi-billion-dollar green hydrogen project and trade partner Argentina recovers from its deep crisis, Labat said in an interview. A Delgado government would also seek an inflation target of 3%, down from 4.5% today, he said.
Increasing private investment through predictable regulations, healthy public finances and opening the economy to more competition is the best way to achieve those goals, Labat told Bloomberg News in Montevideo.
“Uruguay has to grow in a sustained way at higher rates,” Labat said. “We are going to have responsible fiscal management that assures a sustainable debt trajectory.”
Analysts see the economy expanding 3.3% in 2024, capping a decade of growth that averaged about 1% per year. Candidates across the political spectrum say reviving growth is essential if Uruguay is to fund its costly welfare state and address entrenched inequalities. While its 10.1% poverty rate is lower than neighboring countries, almost a fifth of children and teens live in poverty. The university system produces talented professionals but only half of Uruguayans graduate from high school.
Uruguay, a country of 3.4 million people wedged between Argentina and Brazil, goes to the polls on Oct. 27, when 11 parties including those of the ruling coalition and the opposition Broad Front will field candidates. If no candidate wins an absolute majority the two with the most votes face a runoff election in November, with polls showing Delgado and the Broad Front’s Yamandu Orsi as the most likely contenders.
Labat, 54, joined Delgado’s campaign after he resigned as chairman of the central bank in July. During his four-and-a-half-year term the institution adopted a benchmark interest rate and pursued tight monetary policy that has kept inflation within the 3% to 6% target range since June 2023. Labat previously served on the board of directors of Uruguay’s largest industrial conglomerate, state run oil and cement company Ancap, and as a senior executive at the local subsidiary of Spain’s Banco Santander.
Two plebiscites will also be put to voters in October, including a social security reform that would set a minimum retirement age of 60 in the constitution and abolish pension fund companies that manage more than 940 billion pesos ($23.3 billion).
Labat warned that approval of the social security plebiscite would probably force a Delgado administration to redirect spending and renege on its promise not to raise taxes.
“That is a totally disruptive scenario. A scenario that would put Uruguay in a very complicated situation,” he said.
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