URUGUAY, THE MOST ATTRACTIVE EMERGING COUNTRY TO INVEST
The country is positioned hand in hand with the most developed nations according to ESG factors and ranks first among emerging economies according to J.P. Morgan.
Uruguay is one of the most attractive destinations for doing business, it is synonymous with trust, transparency and economic resilience. The country leads important regional indexes in this sense, and has managed to position itself at the same level as the most developed nations according to ESG factors, according to the BlueBay and Verisk Maplecroft consulting firms. Likewise, it leads among the emerging markets in the J-ESG-EMBI index of the renowned financial company J.P. Morgan, which incorporates a medium-term sustainability perspective in its country risk assessment.
ESG (Environmental, Social, Governance) factors imply the application of environmental, social and governance aspects in the evaluation of credit risk and in the design of investment strategies.
As criteria such as ecological and social sustainability become more important in capital allocation decisions, large companies and investors have begun to focus their attention on these items when doing business, incorporating non-financial aspects into risk and opportunity analysis. In this way, a medium-term sustainability view is added to the traditional assessment, which helps to optimize the risk-return equation.
In the report "The role of ESG factors in sovereign debt investment", jointly prepared by BlueBay Asset Management, one of the largest specialists in fixed income asset management in Europe, and Verisk Maplecroft, a global risk analysis company specialized in ESG data, climate and political risk, 80 risk factors are weighted in a nine-dimensional typology, to evaluate the performance of 97 countries in the lapse of five years.
In its situation analysis, the report considers environmental aspects such as vulnerability and response to climate change, regulatory framework and water scarcity, social aspects such as freedom of expression and opinion, income inequality, right to privacy and rights of women and girls, and political governance aspects such as corruption, effectiveness of the regulatory system, government stability and respect for property rights.
For the period 2013-2018, Uruguay is positioned at the same level as the most developed countries in the world, above nations such as Singapore, Greece and Taiwan. With an overall performance that places it in the highest score group, the country records its best performance in aspects such as future and current governance, social resilience, current social situation, future environmental and current environmental situation.
Likewise, "the inclusion of the temporal dimension and aspects such as resilience" is of vital importance insofar as it allows "to distinguish between factors that are relevant in the present from those that are relevant for the future". This aspect is "crucial for the materialization of the investment", since "quantifying resilience - the capacity of an entity to manage or minimize the negative effects of a risk or shock - is key in a world characterized by turning points," he says in the report.
On its part, the consultant J.P Morgan incorporated the ESG factors to weigh its evaluation in the Emerging Markets Bond Index (EMBI) - main indicator of the country risk - , and thus to obtain the J-ESG indicator. Due to its rating in that index, Uruguay ranks first among the emerging economies.
By January 2020, Uruguay maintains the highest weighting (4.8%) in the J-ESG index among emerging markets, with a weighting 98% higher than that obtained in the conventional EMBI index (2.4%), according to the Sovereign Debt Report 2020 of the Debt Management Unit (UGD) of the Ministry of Economy and Finance (MEF). Surpassing nations such as Panama, the United Arab Emirates or China, the country combines the advantages of an emerging market with the certainties and stability that characterize its business climate.
At the forefront of the sustainable revolution, Uruguay stands out in the world for its contribution to building a global economy that respects the environment and ensures efficient use of natural resources. In addition to underpinning the continent's energy transition, the country is the regional leader in democracy, digital government and participation, and the Latin American nation with the lowest percentages of poverty and inequality.
A stable and predictable country with clear rules of the game, Uruguay has a number of competitive advantages that make it an exceptional investment destination. Attractive tax benefits and government incentives are combined with qualified, multilingual, highly competitive and flexible talent. In addition to a modern technological infrastructure, which makes the country a first-class business hub, it has made a spectacular leap towards ecological sustainability, with a firm commitment to renewable energies.
A country that offers the advantages of an emerging market and minimizes investor risk, reliable and transparent, and that is called to play a leading role in the economy of the future.