Uruguay Central Bank Says Dollar Savers Lost 6% a Year
URUGUAY · ECONOMY
Key Facts
- —The country Uruguay is a small, stable South American democracy between Brazil and Argentina, where many savers still think in US dollars.
- —What happened The Uruguay central bank, the Banco Central del Uruguay (BCU), published a 39-page policy paper on Monday 5 October on cutting dollar use.
- —Why it matters Uruguayans who kept savings in dollar demand deposits lost on average about 6% a year of local buying power from 1972 to 2026.
- —The numbers In July 2026, 72% of private non-financial deposits were in foreign currency, down from about 90% in the early 2000s, according to the BCU.
- —The US link The BCU pays banks the top of the US Federal Reserve’s rate range minus 1.5 points on reserves for residents’ dollar demand deposits.
- —Still open A third round of reserve changes is planned, tied to how market rates and bank lending respond, with no date given.
A new Uruguay central bank paper tells savers that the US dollar has been a poor home for their money. The Banco Central del Uruguay (BCU) says dollar deposits lost about 6% a year in local buying power since 1972.
The paper, published on Monday 5 October, sets out a four-part plan to reduce the economy’s heavy reliance on the dollar. For Americans, it shows how Uruguay’s banks are tied to US Federal Reserve rates, and why property there is often priced in dollars.
What the Central Bank Found
The dollar share of private deposits fell from about 90% in the early 2000s to 72% in July 2026, the Uruguay central bank paper says. Over the past year, it dropped about 3 percentage points, or 2.3 points once exchange-rate swings are stripped out.
Loans moved much faster: more than half of bank credit is now in pesos. Over 60% of public debt is in local currency too, up from under 10% in the early 2000s.
The bank says dollarisation is no longer mainly a threat to financial stability, since currency mismatches have shrunk and banks hold huge dollar buffers.
Instead, it calls dollarisation “a restriction on financial development” and, through that, on economic growth.
Why Dollar Savers Lost Out
For a Uruguayan saving in foreign currency, the paper puts the chance of losing local buying power above 60% at every horizon studied. That chance rises from 63% over one month to 80% over 10 years and 93% over 12 years.
Those odds come from data running from March 1972 to June 2026, and they leave out interest. The paper notes that most dollar deposits already earn rates close to zero.
The value of dollar savings also swung far more. From 2005 to 2026, the yearly change in their local buying power had a standard deviation of 9.8%, against 1.5% for peso deposits.
The weekly paper Búsqueda noted that the BCU repeats arguments made by its president, Guillermo Tolosa, against saving in dollars while earning in pesos. The paper itself calls the habit “a puzzle from an economic point of view”.
The US Dollar Link
Uruguay’s banking system still runs heavily on foreign currency. Foreign-currency liabilities make up about 69% of the total, against a median of 20% among countries with a similar credit rating, the BCU says.
Banks must park part of their deposits at the central bank as reserves. Since September, the Uruguay central bank pays the top of the Fed’s rate range minus 1.5 points on reserves for residents’ dollar demand deposits.
The Fed raised that range to 3.75% to 4% on 16 September, so the payment now works out to about 2.5% a year. It was cut by half a point in March and again in September.
On the peso side, reserves on deposits of more than 30 days fell to zero in March. The requirement on peso demand deposits dropped step by step from 15% to 12% by September.
Rating agencies S&P Global Ratings, Fitch Ratings and Moody’s have all flagged dollarisation as a challenge, the paper says. Fitch said in September 2025 that reducing it could help lift Uruguay’s credit rating.
What It Means for You
People opening a dollar deposit in Uruguay now receive a specific notice on exchange-rate risk, in force since 1 October, the BCU said. The rule itself was issued in August, and existing dollar account holders are to be notified personally.
Citing the INE, Uruguay’s statistics institute, the paper says about 16% of consumer prices carry some dollar link. About 8% are set directly in dollars.
Taxes also favour the peso. Under the personal income tax, interest on fixed-rate peso deposits under one year is taxed at 5.5%, against 12% on foreign-currency deposits.
Banks also need more capital for dollar loans to households and to firms in sectors that do not earn foreign currency. Risk weights rose by 50%, up to a 150% ceiling, with exporters and other dollar earners exempt.
Property is the next target. The BCU wants homes built under the “promoted housing” (vivienda promovida) regime priced in pesos, especially in inflation-linked units (UI), the paper says.
What Is Not Known
A third stage of reserve changes is planned, with lower peso requirements and a further cut in pay on dollar reserves. The BCU says it depends on how lending and market rates respond, and gives no date.
The paper also says a decree requiring prices to be advertised in pesos is being evaluated, following Peru’s example. It gives no timetable for that decision.
In the cases the paper studied abroad, cutting excess dollarisation substantially took between 9 and 16 years. The BCU stresses that Uruguayans remain free to choose the currency they save and borrow in.
The next test comes on Thursday 8 October, when the BCU’s monetary policy committee reviews its 5.75% policy rate. Búsqueda reported that the bank will weigh a possible change that day.
More: Uruguay news in English, every day from The Rio Times.
Frequently Asked Questions
Can people still keep their savings in US dollars in Uruguay?
Yes. The Uruguay central bank says its strategy preserves people’s freedom to choose the currency they save, borrow and pay in. Since 1 October, people opening a dollar deposit receive a specific notice on exchange-rate risk.
How much of Uruguay’s savings is in dollars?
According to the Uruguay central bank, 72% of private non-financial deposits were in foreign currency in July 2026. That share was about 90% in the early 2000s.
Why does the US Federal Reserve matter to Uruguayan banks?
The central bank pays banks on reserves held against residents’ dollar demand deposits at the top of the Fed’s rate range minus 1.5 percentage points. When the Fed moves, that payment moves with it.
Is Uruguay’s banking system at risk?
The Uruguay central bank calls the system solid against the dollarisation that remains, with capital about double the legal minimum. In a test assuming a 20% loss on dollar loans to firms that sell mainly at home, all banks stayed above the minimum.
Sources: Banco Central del Uruguay: policy paper “Uruguay: Profundización financiera en moneda nacional” (PDF), 5 October 2026; Banco Central del Uruguay: press release on the policy paper, 5 October 2026; Banco Central del Uruguay: agenda, monetary policy committee meeting, 8 October 2026; Banco Central del Uruguay: monetary policy committee communiqués, 18 August 2026; Banco Central del Uruguay: Tolosa in Salto, 25 September 2026; US Federal Reserve: FOMC statement, 16 September 2026; Búsqueda: Desdolarización, Banco Central defiende su campaña a favor del peso, 5 October 2026; Búsqueda: La inflación se aceleró en setiembre, 5 October 2026; El Observador: Ahorrar en dólares, el análisis del BCU, 6 October 2026.
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