UPDATE 2-Uruguay OKs up to $500 mln in debt buyback

* Global, local bonds could be repurchased

* Uruguay plans to issue $5 billion in bonds by 2014 (Adds details on interest due through 2014, S&P upgrade)

MONTEVIDEO, Sept 6 (Reuters) - Uruguay has approved the purchase of up to $500 million in government bonds as part of its debt management policies, according to a presidential decree published on Monday.

All government bonds issued under international and local legislation are subject to the buyback, the decree stated.

The South American country plans to sell $5 billion in local and global bonds between 2010 and 2014 to help meet principal payments of $3.5 billion, the government said last week in a budget bill presented to Congress. [ID:nSGE68002Y]

The government said its priority will be to issue debt denominated in the local currency, adding that it faces interest payments of about $5.5 billion through 2014.

On Monday, Standard & Poor's raised Uruguay's long-term credit ratings to "BB", saying it expects continued prudent macroeconomic policies will help reduce the risks of relatively high government debt and high dollarization. [ID:nWNA9031]

Fitch Ratings in July also upgraded Uruguay's credit rating to "BB", two notches below investment grade, citing the country's strong macroeconomic policies, exchange-rate flexibility and high levels of international reserves. [ID:nN27270588] (Reporting by Giovanna Fleitas; writing by Hilary Burke; editing by Martin Golan and Kenneth Barry)