Uruguay's Central Bank Warns Currency Savers of Eroding Purchasing Power Over Decades

Uruguay's central bank released a policy paper showing that residents who maintained their savings in US dollars lost approximately 6% annually in local purchasing power between 1972 and 2026, despite the country's historical preference for dollar holdings. The bank reported that 72% of private deposits remain denominated in foreign currency as of July 2026, down from roughly 90% in the early 2000s, reflecting a gradual shift away from dollar dependence. The central bank outlined a four-part plan to reduce the economy's reliance on the dollar, with a third phase of reserve adjustments planned pending market response.

Uruguay's monetary authorities have documented a long-term pattern whereby residents maintaining dollar-denominated savings experienced consistent erosion of their ability to purchase local goods and services. The analysis spans five decades of economic data, revealing that this depreciation occurred independently of interest income, which dollar accounts typically provide at minimal rates. Meanwhile, the composition of Uruguay's financial system has shifted markedly, with lending increasingly denominated in pesos and public borrowing gradually transitioning away from foreign currency dependence.

The central bank's four-stage approach to reducing dollar reliance reflects a strategic reassessment of how currency composition affects broader economic development. Officials characterize excessive dollarization not primarily as a banking stability risk—since currency matching has improved and reserves are substantial—but rather as a constraint limiting financial innovation and sustainable growth pathways for the economy.