URUGUAY: Crisis Years Saw Rise in Poverty, but also Software Exports

By Diana Cariboni Reprint | | Print |

Diana Cariboni

MONTEVIDEO, Jun 17 2005 (IPS) - The third Human Development Report on Uruguay by the UNDP addresses the country from two apparently conflicting perspectives: the economic and social impoverishment registered in recent years, and the potential for an economy based on innovation and knowledge.

“It is noteworthy that the economic growth experienced by Uruguay up until 1999 had a very low technology-intensive component, in comparison with other countries in the region,” Pablo Mandeville, the resident representative in Uruguay for the United Nations Development Programme (UNDP), told IPS before the report’s release Wednesday.

The main impetus behind this growth was the agro-export sector, which has also driven economic activity since 2003, during a period of high prices for commodities on the world market. But at the same time, this small South American country is Latin America’s leading exporter of software.

The new report, divided into two parts, studies the possibilities of promoting an economy based on the effectiveness and efficiency with which knowledge is generated, distributed and used in the economy as a whole.

“In Uruguay there are clusters of innovation that are more competitive and creative than the rest of the economy on average, but they still do not constitute a foundation for the spread of creative processes to the rest of society,” noted Lucía Pittaluga, a researcher with the Economics Institute at the University of the Republic.

In her view, there is concrete potential for public policies aimed at fostering knowledge-based development.

Uruguay’s primary strength in this regard is the “critical mass” of companies and other institutions involved in knowledge-intensive activities, stated the report, which was prepared over the course of two years.

The researchers interviewed 500 companies that supply knowledge-intensive goods and services, current and potential users of these goods and services, and research and development entities in five sectors: computer services and software, biotechnology, engineering services, the environmental industry and the pharmaceutical industry.

The companies surveyed account for 40 percent of Uruguay’s exports.

Nevertheless, the country has a weak entrepreneurial base that is not particularly conducive to innovation, limited experience in international markets, and a disjointed productive structure.

“While there are a group of researchers who generate top-quality scientific and technological knowledge, they are weak in relative terms,” notes the report, which does not address the role played by the education system in fostering or hindering innovation.

According to Pittaluga, education is a “pillar” of innovation, especially technical training. But education alone is not enough to ensure employment in these kinds of activities.

Little is known about knowledge-intensive economies, and their impact is just beginning to be observed. “One risk is the polarisation of the workforce,” noted the researcher, with a highly qualified, well-paid sector at one extreme, and at the other, a large pool of poor-quality jobs, as is the case in the United States.

At the launch of the new study, Uruguayan President Tabaré Vázquez announced the creation of an advisory committee to support the government’s efforts on matters of scientific research and technological innovation, along with another focusing on information technologies.

Between 1999 and 2002, Uruguay lived through a period of recession that included the worst economic and financial crisis in the country’s history.

Until 2001, this country of 3.2 million inhabitants ranked second in Latin America and the Caribbean on the UNDP’s human development list. But in 2002, an abrupt drop in gross domestic product (GDP) pushed the country to fifth place, behind Argentina, Barbados, Chile and Costa Rica.

Throughout the 1970s and 1980s, in international terms, Uruguay remained on the “medium” development list until moving up to the category of “high” human development in 1990. During the following decade, it occupied 37th to 40th place among the 174 countries listed according to their Human Development Index (HDI) scores, then plunged to 46th place in 2002, notes the report.

The UNDP’s Human Development Index is based on the premise that “the basic purpose of development is to enlarge people’s choices.”

While these choices can be infinite and change over time, the U.N. agency focuses specifically on what it considers the four “most basic capabilities” for human development: to lead long and healthy lives, to be knowledgeable, to have access to the resources needed for a decent standard of living and to be able to participate in the life of the community.

In concrete terms, the index is based on individual countries’ rates of life expectancy, school enrolment, literacy, and per capita GDP.

In the period studied in the first part of the UNDP report (1991-2002), life expectancy rose from 72.8 to 75.2 years, leading Uruguay to occupy fourth place among the 14 countries for which statistics are available in Latin America.

But infant mortality, which had decreased from 21.1 deaths per 1000 live births in 1991 to 13.6 in 2002, rose slightly to 15 per 1000 live births in 2003, reflecting the impact of the growth in poverty on children.

The country fares better in the area of education, given its high literacy rates and the universalisation of primary education achieved in the mid-20th century.

The economic and financial crisis was followed by a higher rate of secondary school enrolment, which seems to indicate that the decreased availability of employment opportunities led many young people to return to the classroom.

In terms of income, in 2002, Uruguay ranked seventh in the region with per capita GDP of 7,834 dollars, similar to the figure for Brazil.

Nevertheless, the study recognises that this statistic is not the best indicator of access to resources, and closer analysis reveals that average household income actually shrank by 30 percent between 1999 and 2004.

The report addresses the issue of poverty from the perspective of different means of measurement, based both on income and on multidimensional approaches, which incorporate health care, education and employment variables.

While 31.6 percent of the Uruguayan population was classified as poor, poverty affects a full 56 percent of the country’s children aged five and under, according to official statistics.

As for the alleged greater incidence of poverty in rural areas or towns with fewer than 5,000 residents, which are not taken into account by the official statistics, economist Andrea Vigorito told IPS that this is a “myth”.

The last study conducted in these areas, carried out in 1999 by the Ministry of Stockbreeding and Agriculture, did not reflect higher rates of poverty in rural Uruguay, noted Vigorito, also a researcher at the Economics Institute.

U.N. agencies like the UNDP and the Economic Commission for Latin America and the Caribbean (ECLAC) have stated that Uruguay is in a position to meet the Millennium Development Goals, which include halving the proportion of the world’s population living in extreme poverty and hunger by the year 2015, based on 1990 figures.

Uruguay’s new leftist Broad Front government, which took office in March, immediately implemented a national programme to combat social exclusion and extreme poverty, which is estimated to affect four percent of the population.