Uruguay

This Selected Issues paper analyzes the trends in Uruguay’s competitiveness. Competitiveness is defined as ability to offer products and services of desired quality at prices that compare favorably with the prices charged by others.4 To assess competitiveness, this paper focuses on Uruguay’s product- and sector-specific global export market shares. It also estimates the sensitivity of these market shares to real effective exchange rate by using the product data from the Comtrade database and building on the work presented in IMF (2017). The paper estimates the elasticities of product market shares with respect to the real exchange rates for country groups. The overall elasticity for a country group is a weighted average of country-product elasticities. The weight attached to an elasticity associated with product k exported from country i is the average share of country i in global exports of product k between the years 2009 and 2015. IMF (2017) also uses time dummies to isolate the impact of global trends. IMF (2017) finds that elasticities are negative and statistically significant for Latin America and for emerging Asia. The elasticities in Latin America are about one half of what they are in Asia, possibly reflecting the dominance of commodity exports in Latin America—most commodities are priced in dollars reducing the estimated elasticity.