Fitch Revises Uruguay's Outlook to Positive; Affirms IDR at 'BB-'

NEW YORK--(Business Wire)--
Fitch Ratings today revised the Outlook for Uruguay's ratings to Positive from
Stable. In addition, Fitch affirmed Uruguay's foreign currency Issuer Default
Rating (IDR) at 'BB-' and its local currency IDR at 'BB'. Fitch also affirmed
Uruguay's country ceiling at 'BB+' and the short-term IDR at 'B'.

The Positive Outlook reflects Uruguay's strengthening macroeconomic policy
framework, as well its greater resilience as evidenced by its response to and
the impact of the global financial crisis and a steady improvement in its fiscal
and external solvency ratios in recent years. Fitch believes that Uruguay's
resilience to external economic shocks has increased as a result of greater
exchange rate flexibility, rising international reserve levels, lower external
financing needs (external amortizations plus current account deficit) and
prudent measures that have strengthened the banking system.

Uruguay's credit profile is supported by manageable financing needs, relatively
high GDP per capita as well as institutional integrity and political stability,
which reduces the risk of a marked departure from the current macroeconomic
policy framework.

'The ability of the authorities to allow the exchange rate to act as a buffer to
absorb the fallout from the global financial crisis without negative effects on
inflation or the highly dollarized financial system represents a notable shift
in the policy framework and improves the capacity of the country to face future
external shocks,' said Erich Arispe, Director in Fitch's Sovereign Group.

Uruguayan authorities acted decisively against inflationary pressures stemming
from domestic supply shocks in first-quarter 2009. As a result, inflation,
measured in annual terms, declined to 6.4% in June from 9.2% in January.
'Policymakers demonstrated their commitment to keep inflation under control and
prevent the activation of indexation mechanisms by rising interest rates in
spite of economic deceleration,' added Arispe.

Nevertheless, the global financial crisis is likely to have a negative impact on
economic performance and fiscal accounts. Moreover, while Uruguay's trade and
financial links with Argentina have considerably declined since 2001, the
country's growth prospects remain somewhat exposed to economic and financial
crises in Argentina. Growth is expected to remain flat in real terms in 2009,
while Uruguay's general government deficit is likely to increase to 3.3% of GDP
from 1.1% in 2008, as a result of lower revenues and the maintenance of planned
expenditure levels. Fitch notes that fiscal policy adjustments in terms of
expenditure restraint will be necessary to return debt dynamics back to a
declining path over the forecast period.

Uruguay's relatively high fiscal and external solvency ratios and the exposure
of public debt to currency risk remain as credit weaknesses. General government
debt, at 52% in 2008, compares unfavorably with the 'BB' median. In addition,
approximately 72% of general government debt is denominated in foreign currency.
Astute and proactive liability management efforts have partially mitigated
associated risks by reducing general government financing needs to 5.1% of GDP
in 2009, which is lower than the 5.8% for the 'BB' median.

On the external front, Uruguay's net public external debt (NPXD), at 39% of
current external receipts (CXR), continues to be an outlier in the 'BB' rating
category, where most sovereigns are net public external creditors. In spite of
continued improvement, Uruguay's external liquidity, at 148%, remains weaker
than rating peers, especially taking high levels of dollarization in the
financial system into consideration.

Continued resilience to the global financial crisis and a sustained increase in
international reserves, as well as a recovery of the country's GDP growth
trajectory would be positive for Uruguay's ratings. Fiscal policy adjustments
that restore debt dynamics to a declining trend would also benefit the
sovereign's creditworthiness. On the other hand, a greater than anticipated
deterioration in fiscal accounts resulting in negative debt dynamics would be
viewed negatively, while a weakening in the macroeconomic policy framework
leading to investor risk aversion or macroeconomic instability could also weigh
on the Uruguay's credit profile.

Fitch's rating definitions and the terms of use of such ratings are available on
the agency's public site, www.fitchratings.com. Published ratings, criteria and
methodologies are available from this site, at all times. Fitch's code of
conduct, confidentiality, conflicts of interest, affiliate firewall, compliance
and other relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings, New York
Erich Arispe, +1-212-908-9165
Casey Reckman, +1-212-908-9155
Media Relations:
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com

Copyright Business Wire 2009