Normally it is difficult to hear or read bad news about Uruguay. It is a country that has offered nothing but stability and peace in recent decades to its citizens and to many Latin Americans and Europeans who have chosen to live or invest in Uruguay. It is enough to read what the World Bank says succinctly about Uruguay: “The country stands out in Latin America for its egalitarian society, high per capita income and low levels of inequality and poverty. Relatively speaking, the country’s middle class is the largest in Latin America and the Caribbean, accounting for more than 60% of the population.” Having a large middle class means that this middle class consumes electricity: in air conditioners, washing machines, dishwashers and other appliances, which of course increase electricity consumption, and this became a “problem” that needed to be solved. We will come back to this later. Recent governments contributed to good macroeconomic management and favorable external conditions supported an economic expansion that lasted for decades, with the exception of the recession caused by COVID-19 (2020). After the pandemic, Uruguay resumed its growth path, but always adhered to the recipe of strict fiscal discipline. In other words: They don’t waste their money in opulent, bureaucratic state apparatuses. Of course, as a good Latin American country, it still has problems and differences, but they are not as pronounced as the four socialist dictatorships of Latin America. Uruguay, along with Paraguay, Costa Rica and Panama, is at the forefront of LATAM growth and is a true haven to live, work, vacation and invest. In 2022, the economy grew by 4.9%. By 2023, GDP growth is expected to slow to 1.5% due to a historic drought, but is expected to rebound to 3.2% in 2024. So if a country has a large middle class, it must provide them with electricity at a cheaper cost and permanently, with an uninterrupted flow of electricity that also comes from a friendly source. To this end, they have set out to become a country that produces electricity from renewable energies, since they do not have gas or oil in sufficient quantities and importing derivatives is always costly. With this problem solved, the country neighboring Brazil and Argentina can now become a Latin American center for renewable electricity generation. Uruguay was able to implement a government stimulus policy, reduce the consumption of fossil fuels (petroleum derivatives) for electricity generation and began to use renewable energy. Uruguay is fully engaged in what we call the energy transition. Between 2000 and 2022, the installed capacity increased from 2,104 MW to 4,929 MW, with the energy mix being as follows: 54% wind, 22% heat, 14% biomass and 10% solar energy. It is worth noting that renewable energy has always played an important role in Uruguay to have a robust electricity generation network and meet the demand of a growing middle class. In 2019, renewable energy accounted for 98% of the matrix (50% hydro, 30% wind, 15% biomass and 3% solar). Today, in 2024, electricity consumption in Uruguay is slightly at 13 TWh, with consumption higher in summer. According to the Electricity Market Authority (ADME), 95% of the country’s electricity generation will come from clean sources in 2023. Importantly, Uruguay is also expanding its electric vehicle fleet: there will be 5,500 electric vehicles in circulation by the end of 2022. The challenge for LATAM and Uruguay is the second generation energy reforms: 1) electrification of transport, 2) hydrogen industry and 3) electricity generation from wind and solar energy.
This is spectacular Uruguay can generate more than 2,500 TWh with just 5% of its land area and 27% of its sea area; and this amount could be exported to huge economies like Brazil or Argentina, providing a new source of dollar income for the little giant of the South. The country could stop importing electricity and instead export excess electricity to these countries. Some achievements of Uruguayan energy policy: 1) reduction in fossil fuel consumption, 2) increased presence of renewable energy in industry, 3) electricity costs without government subsidies that distort the market, and 4) contribution to reducing greenhouse gas emissions and improving air quality. We will see what happens in 2024 and we will see what the private sector will do with further investments in wind turbines, solar systems, distribution systems, electric vehicles and others to continue to contribute to Uruguay’s growth.
Uruguay: Der kleine Riese in Südamerika » latinapress Nachrichten (latina-press.com)