Uruguay's election on Sunday is unlikely to change the path of economic policy but will have big implications for relations with China. Arguably more important than the election itself is the outcome of the pension referendum taking place at the same time which, among other things, seeks to lower the retirement age. If approved, it would not only risk higher inflation and weaker medium-term growth but would also have negative implications for Uruguay’s public finances. Risk premia still appear relatively low, suggesting there’s some downside for local assets if the referendum is approved.
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