Uruguay’s push to de-dollarise boosted by new money market funds

Uruguay's efforts to reduce its reliance on the US dollar are gaining ground as more investors are allocating their wealth into peso-denominated money market funds and government bonds. This shift has been fueled by Uruguay's stable economy and low inflation rates, which have boosted confidence in the peso. Seven peso-denominated money market funds are currently operating in the country, nearly double the number from 2025, with additional offerings from brokerages and fintech companies.

This trend comes as Central Bank Chairman Guillermo Tolosa has made de-dollarization a top priority. Tolosa's approach contrasts with Argentina's President Javier Milei, who encourages dollar transactions and savings. Companies operating in both countries are noticing the increasing demand for Uruguay's peso. Balanz's money market fund, which invests primarily in the central bank's peso notes, has amassed over 155 million pesos in assets and 350 clients since its launch in March.

Uruguay's stability has been a rare exception in South America, where Argentina and Brazil have faced economic challenges. However, Uruguayans have historically been hesitant to save in pesos due to past devaluations and inflation. Nevertheless, a strong peso and tight monetary policy have kept inflation within the central bank's target range for the past three years, and people now expect inflation to remain around the 4.5 percent mark.

As investments in pesos have increased, the share of private bank deposits held in foreign currency has dropped to about 69 percent in June from around 73 percent during Tolosa's tenure at the central bank. Broker Gletir Corredor de Bolsa was an early mover in the peso money market sector, launching its fund in 2022. Growth has been modest but steady, with the fund now holding over 896 million pesos in assets and attracting more than 3,000 clients.

The shift to peso-denominated assets is also helping the Uruguayan government reduce its dependence on dollar funding. Nearly 57 percent of the country's total debt is now in pesos, up more than four percentage points from the end of 2024. Fixed-rate peso securities accounted for more than half of the US$2.1 billion in local-currency domestic bonds issued so far in 2025.

This marks a significant change from earlier years, when investors preferred inflation-indexed peso bonds. The government is proactively managing its debt by issuing more fixed-rate peso securities to mitigate foreign currency risk.