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Last Updated: Tuesday, 19 August, 2003, 17:23 GMT 18:23 UK
Uruguay's economy minister resigns
Uruguayans celebrating after the 1999 election
Uruguay's Economy Minister Alejandro Atchugarry, who guided the small South American country through its worst financial crisis, has unexpectedly resigned.

Mr Atchugarry told reporters that he was stepping down because the "political work" of containing the worst effects of the fallout from a bruising 2002 economic crisis had been completed and only a "technical period" of work remained.

He is to be succeeded by the government's chief economic advisor, Isaac Alfie, who will take office in the next few days.

Mr Alfie pledged to continue the work of his predecessor.

"The course will be maintained," he said.

In June, Uruguay reached agreement with the IMF over its $3bn (1.8bn) loan agreement, after the IMF reduced its targets for inflation to 19% from 27% and said the economy will only contract by 1% rather than 2% in 2003.

In March, the country agreed to restructure $11bn in debts to the private sector, stretching out payments over five years.

That led to an upgrade in Uruguay's credit rating by Standard and Poor's.

However, Mr Alfie will still face difficulties in getting his economic package through the Congress.

Mr Atchugarry's budget plans were rejected last month amid calls for lower taxes by the National Party, despite the IMF's target of limiting deficits to 3% of GDP.

And Mr Alfie will face a continuing strike by public sector health care workers concerned about low pay, some of whom have occupied major hospitals.

Debt crisis

Mr Atchugarry, a former Senator and Colorado Party loyalist close to president Jorge Batlle, took office in July 2002 at the height of the economic crisis.

He replaced Alberto Bension, another economy minister who found himself bereft of support as the country's currency plunged amid bank closures and fears of default.

Uruguay's difficulties had their origins in Argentina's economic crisis.

In December 2001, after struggling for years with the strictures placed on its economy by the IMF and other agencies, Argentina defaulted on its foreign debt of more than $140bn.

That triggered a chain of events including mass unemployment, a fall of three quarters in the peso's value - and a knock-on effect elsewhere in Latin America.

Brazil's debt-ridden economy was seen by some as the next to go, but the huge country weathered the storm.

But in Uruguay, the collapse of cross-border trade was devastating.

Despite a long-held reputation as one of the securest places in South America for foreign money, the economy imploded and shrank more than 10% in 2002 alone.

There was a run on the banks, initially by Argentinean depositors, leading to bank closures.

Soon after the currency was devalued, leading to difficulties in debt repayments and inflationary pressures.




SEE ALSO:
Uruguay gets IMF thumbs up
04 Jun 03  |  Business
Uruguay seeks debt restructuring
12 Mar 03  |  Business
IMF breakthrough for Uruguay
21 Feb 03  |  Business
Uruguay's banks face lengthy queues
05 Aug 02  |  Business
Uruguay's economy minister resigns
23 Jul 02  |  Business
Country profile: Uruguay
03 Jan 03  |  Country profiles


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