This chapter employed Johansen-Juselius Cointegration test, short-run and long-run causality tests, and error correction modelling to examine the finance and economic development of Uruguay between 1981 and 2019. The result shows that gross fixed capital formation and government expenditure have positive and statistically significant relationships with gross domestic product per capita, while the degree of openness exhibits a negative but statistically significant sign in relationship with gross domestic product per capita. The study therefore recommends that since gross capital formation and government expenditure influenced the economy of Uruguay the most, the Uruguay's government should focus on building more capacity in capital stock, which is believed to attract more investment. They should also spend on real sectors of the economy to boost the economic growth and increase the gross domestic product per capita and by extension the welfare of the economy.
Top1. Introduction
Uruguay has its independence as far back as 1828. It had strong ties with Italy, United Kingdom and France at the earlier stages of its existence. Reputed to be the second smallest country of its continent (South America) and situated at the South-eastern coast of it. Although it shares some historical and cultural similarities with some neighbouring Latin-American countries especially Brazil and Argentina (Encyclopedia Britannica, 2011)).
Politically speaking, Uruguay developed much in the 20th century as one of the most progressive in the region due to its comparative stability, comprising advanced social legislation and relatively large middle class. However, the negative effects of nearly twelve-year military rule between 1973 and 1985 was massive on its national life. Despite the restoration of democracy, the country has been plagued with downward slide in economy and factional struggles retarded its growth; the hardship culminated in large emigration of Uruguayans to North America and European countries, among others. (Galeano, 1996)
Larger part of the country’s population are crowded in its capital city, Montevideo more than its other major cities of Salto and Paysandu. Much of its commercial activities, political and social institutions are also concentrated around Montevideo.
Figure 1. Source: Encyclopedia Britannica (2011) In terms of its geography and environment, Uruguay has boundary with Brazil in the Northern and Eastern parts, the south-eastern part by the Atlantic Ocean, by Rio De la Plata in the South and the Uruguay river separates its western boundary from Argentina.
The country has a massive landscape of rolling land with an average elevation of approximately 383 feet. Also, there are broad valleys, plains (pampas), low plateaus and hills, and ridges such as Haedo Ridge (Cuchilla de Haedo) in the north and Grande Ridge (Cuchilla Grande) in the southeast (southward extension of the Brazilian Highlands). The highest point in the country is Mount Catedral which rises to 1,685 feet near the south eastern coast. Valleys and coastal plains have large deposits of sand, clay, and fertile alluvium. It has well-watered land despite the fact that no large rivers flow entirely within the country. With no marked rainy or dry season, its heaviest precipitation occurs between March and April with greater rainfalls in the winter with frequent thunderstorms at the summer.
Comparatively, only a small portion of the land is forested as largest number of trees grow along the watercourses. Most of the wildlife Uruguay was noted for had long disappeared with few ones like Jaguars found once in a while in remote areas. Reptiles and some aquatic lives also exist around the country. Overall, there exists some national parks and a wildlife reserve dedicated to preserve animals and bird species (Preston et al, 2011).
1.1 Ethno-Religious Perspectives
The indigenous people of Uruguay are mainly of European origin, historically regarded as descendants of 19th and 20th century immigrants from Spain and Italy and partly Britain and France. Original settlers in the country were migrants from Paraguay and Argentina. However, only small portion of direct descendants of Uruguay’s indigenous peoples remain, and mestizos (of mixed European and Indian ancestry) account for less than 10% of the population. Blacks and persons of mixed Black and white ancestry make up an even smaller proportion of the total. Spanish is spoken throughout Uruguay, while Rivera and other borderland towns near Brazil speak Portuguese and Spanish. (Gonzalez-Risotto and Rodriguez, 1989).
The dominant religion is Christianity of Roman Catholic denomination having about 50% of the population. While about one-third, are adherents of other Christian faiths or are non-denominational Christians. About one-sixth of Uruguayans are agnostics or atheists. Jews, mostly in Montevideo, make up a small minority, which is nevertheless one of the larger Jewish communities in South America. (Encyclopedia Britannica, 2011)