In a Land of Red Ink, Uruguay Capital Sees Budget Surpluses

(Bloomberg) -- Uruguay’s capital Montevideo aims to post a 5 percent budget surplus this year in a country where large deficits are the norm, Governor Daniel Martinez.

“The first thing I did in the province was say ‘enough deficits, tighten the belt, put finances in order,’” Martinez, who runs the district that is home to the capital, said in an interview Monday at Bloomberg’s headquarters in New York. Last year, Montevideo reported a surplus of 777 million pesos ($25 million), or 4.1 percent of revenue.

President Tabare Vazquez is struggling to narrow the central government’s fiscal deficit in the face of a sluggish economy and political pressure to increase spending ahead of general elections next year. The government set a fiscal deficit target of 2.5 percent of gross domestic product for 2020. The current gap is about 4 percent.

Vazquez, who is legally barred from seeking reelection in 2019, and Martinez are both members of the ruling left-wing Frente Amplio party. Martinez would likely win the party’s nomination in next year’s primaries, according to a poll published by Grupo Radar last week.

Political parties are scheduled to hold primaries next June to pick the candidates who will compete in presidential elections in October. The Frente Amplio has held the presidency and enjoyed congressional majorities since 2005. Martinez declined to answer when asked if he plans to run.

As a potential candidate, Martinez, 61, can tout his deficit busting credentials and negotiating skills that helped him convince skeptical opposition lawmakers in the provincial council to approve a $94 million bond issuance to fund a portion of his public works program.

Martinez said his administration plans to spend $600 million on public works during the second half of of his five-year term that ends in July 2020.

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