Argentina and Uruguay, threats and opportunities: a shared river and a "sea" of differences, by Arturo García Rosa

Arturo García Rosa
President & Founder, SAHIC

Argentina and Uruguay, threats and opportunities: a shared river and a "sea" of differences

A new government in both countries, soon

The two brother countries that once were almost one, are preparing to undergo a period which appears to be very important for each one of them.

Argentina and Uruguay share a long history of agreements and misunderstandings, with the latter marked by, apart from football issues (the "rioplatense" rivalry  between these countries is as old as the popularization of this sport on both shores), issues more related to the attitudes of the politicians in power than to the will of its inhabitants.

Uruguayans and Argentines share much more than what sets them apart and it is, in any case, in the latter where they feed the pleasure of continuing to share, learning from each other and enjoying being " brothers ", which they are somehow despite the vast river that separates their capital cities (Montevideo and Buenos Aires). 

With similar origins, histories and different realities, they are preparing for a new process of presidential change in a special moment for each country, facing a very complicated international context.

In Uruguay, the Frente Amplio is preparing to fulfill its third uninterrupted mandate leading the national government (Tabaré 2005-2010, Mujica 2010-2015 and Tabaré once again 2015-2020), facing a scenario in which the polls appear to give for the first time in these last 15 years, a certain chance to the opposition, led after the results of the primary elections in last June 30, by the leader of the White Party, Luis Lacalle Pou (son of former president Luis Lacalle 1990-1995).

In the case of Argentina, after three mandates of "Kirchnerism", one of the many expressions that Peronism presented in its chameleonic history since founded by  General Juan Domingo Perón 70 years ago,  the term of President Macri (2015-2019) is about to conclude. Some had considered "a miracle" to having defeated the devastating populism that hit Argentina in the years of Kirchnerism and which, for the most part, has characterized all the Peronist variants that were in power for 36 of the last 48 years of democracy.

Most recent democratic years in Argentina has three quarters devastated by Peronism, 25 years of military governments and only 12 years of different democratic manifestations that failed to reverse the decline of a society dreaming with a great future that is more and more far away.

A decadence that some are reluctant to accept but which is manifested in almost every detail of everyday life. Let´s take as an example the recent primary elections last weekend, where efforts of all kinds were squandered to subject the population of voting age to the obligation to vote in order to ratify political egos, conducting a "big survey" paid by the public monies, so badly administered by the governments of one or the other party.

As a result of that " big public survey " that masked the primary elections that never should have been carried out, at least in the conditions that the politicians have used it, it seems to be clear that Peronism is ready to return once more to the government and, with it, the ghost of the restoration of populism and other even more lethal practices as, for example, the persecution of those who are not aligned with the liberating and egalitarian thought that Peronism, in any of its forms, claims to represent, "monopolize" and defend.

When?

It won't be long now, even though the state of affairs may seem like "almost a lifetime". Next October 27, the first round of presidential elections will be held on both sides of the Río de la Plata.

In Uruguay, it seems that the fate of the second round, which is scheduled in both countries for November 24, is inevitable and only there would it be revealed who will be president for the period 2020-2025: the Frente Amplio or the opposition Coalition surely led by the Partido Blanco of Lacalle Pou.

In Argentina, on the other hand, the results of the " big national survey " seem to indicate that everything could be defined in the first electoral round. And that definition would seem to come with the unmistakable Peronist folklore and the unpredictability of an uncertain future that stimulates a good part of the population, that today seems to be the majority, and frightens (in some cases terrifies) another good part that seems to be the minority today.

Threats and opportunities

Regarding the issue of interest to us, I refer of course to the issue of the hospitality and tourism industry, and leaving aside the political issues, which are not our matter though affect the business anyway, it seems that another coincidence is taking place, apart from the coincidence of sharing the river that separate these two countries: on both shores, it could be elected a new government from a different party than the one in power.

In any case, with the differences that would undoubtedly exist if things were not like that and the winners were others, for the hospitality and tourism business industry- once the fire of the conflict and the uncertainty of the first moments are extinguished- two different realities will be installed on both sides of the river.

Tourism in Uruguay, largely dependent on the Argentine reality, will receive a new blow, I would say at least in 2020 and with the great uncertainty of not knowing until when. A new blow and in proportions that will undoubtedly surpass all the capacity of “charrúa” creativity to assist with promotions and different measures, public and private, to mitigate the impact that the state of affairs will bring to a population (Argentines) that will see years before getting out of the present situation, in a world where commodity prices are not and will not be what they were for a long time, while globalization takes a long nap under the large shadow of the trade war between United States and China.

Uruguay has become a very expensive country and this is not a good start for the mentioned “charrúa” creativity. According to economist Walter Molano, Chief Economist at BCP Securities, specialist in emerging markets, "Uruguay is extremely expensive and overvalued" !!!

A very bad 2020 season is coming, which will also have a tremendous impact on Uruguay's overall economy, doubting that its main tourist destination, the “crown jewel”, the Saint Tropez of America, can continue trusting its destinations to the real estate crazy business which is out of all planning, under the figure of multiple exemptions in pursuit of a better future that never arrives and threatens the future that the city and country deserve.

The rise of the condo hotels, mainly in Montevideo, and the Argentine situation, for destinations such as Punta del Este in the first place and other border destinations, anticipates bad weather for the hospitality and tourism industry in the coming years, at least for 2020 and 2021.

In Argentina, on the other hand, although the political situation is likely to be, as almost always, worse than in Uruguay (for example, in Uruguay you can see that every former president can walk on the streets, attend social or business meetings in an absolutely normal way, while in Argentina this could not happen or even seems impossible to happen), we can see a new period of great growth is coming in the hospitality and tourism industry. I would say that even more significant than the one experienced in the 2002-2011 decade, after the great crisis at the end of 2001 and beginning of 2002, when the business doubled its numbers, growing 100%.

A market that will close 2019 with a total number of international arrivals of about 8 million, with a bright future that promises to continue growing and quickly reach figures over 12/14 million, in a reality of domestic tourism that will grow in a similar way, in a context of almost zero new offer, clearly shows that good years are coming. For the installed offer, we have the opportunity to see how their performances will exceed the most optimistic estimates. For those who are looking for opportunities, Argentina appears as a market where the rates of return will become very high thanks to a combination of lower investments in dollar terms, in a market with rising occupations and rates. And we will clearly see this scenario in the 2020-2025 five-year period.

Undoubtedly, a shared river and a "sea" of differences.

Camila Lavori