Uruguay Central Bank Says Dollar Savers Lost 6% a Year

A new paper from Uruguay's central bank reveals that dollar savings have been a poor choice for local investors since 1972. The report, published on October 5th, outlines a four-step plan to reduce the country's heavy reliance on the US dollar. In the early 2000s, about 90% of private deposits were in foreign currency, but by July 2026, that had dropped to 72%.

Excluding exchange-rate fluctuations, the share fell by 2.3 percentage points over the past year. Loans are now predominantly in pesos, with over 60% of public debt denominated in local currency, up from less than 10% in the early 2000s. The bank suggests that dollarisation is no longer a primary threat to financial stability, as currency mismatches have decreased and banks hold significant dollar reserves.

However, the paper argues that dollarisation restricts financial development and economic growth, with the chance of losing local purchasing power for dollar savers exceeding 60% over various time horizons. Most dollar deposits currently earn near-zero interest rates, and their value has fluctuated more than peso deposits, with a standard deviation of 9.8% over the past two decades compared to 1.5% for peso deposits.

The central bank continues to play a significant role in the Uruguayan economy, with foreign-currency liabilities making up about 69% of total liabilities, versus a median of 20% for similarly rated countries. Banks must maintain a portion of their deposits as reserves at the central bank, with a current rate of about 2.5% a year.

The central bank's decision to reduce dollarisation will be evaluated in the coming weeks, with a monetary policy committee meeting scheduled for October 8th.