Uruguay had “poor” pre-pandemic international integration, but improved

RIO DE JANEIRO, BRAZIL – The Trade Vulnerability Index (IVC) is a tool that the Center for Development Studies (CED) prepares to measure “the state of a country’s international presence in the global economy,” according to the published report.

The CED splits this indicator into two: the IVC-Preference (it quantifies the proportion of exports from each country entering its destination without any type of preference) and the IVC-Integral (it adds to the other Index information on the concentration of exports in the most relevant market).

The first “is a very valuable contribution that puts into focus” the trade preference; the second indicates that when a single destination exceeds 15% of a country’s exports, it “becomes incrementally penalized.”

Consequently, the IVC-P score is the percentage of a country’s exports entering with no tariff preferences of any kind (i.e., benefiting from no free trade agreement); thus, the higher the percentage of exports entering with no preferences, the greater the trade vulnerability.

That said, in the report’s 2021 edition, CED shows that Uruguay’s IVC stands at 55.1% for Preference and 34.3% for Integral.

In 2020, these indicators had registered a value of 60.0% and 40.6% respectively, while in 2006 they stood at 57.9% and 34.5%.

According to the CED classification, Uruguay – along with Bolivia and Paraguay – is among the group of countries with a poor pre-pandemic international insertion, but which subsequently reduced their trade vulnerability.

However, the report points out that the decrease in the IVC “reflects the concentration of exports in traditional markets rather than the signing of new agreements.”

In contrast, both Brazil and Argentina showed a poor pre-pandemic integration and subsequently increased their vulnerability.

Finally, the Center for Development Studies projected that Uruguay will spend approximately US$300 million in tariffs in customs worldwide. “This value is not only important in itself, but the multiplier effect that is lost must be considered. These are resources that do not reach the pockets of producers and this results in lower income for all activities related to the export sector,” the report states.