Orsi Likely To Win, Referendums Failed: What Uruguay’s First Round Told Us

1. Uruguay’s Electorate Is Further To The Left Than Originally Believed.
   
   

   1. Many analysts and pollsters incorrectly forecast that the plebiscite on nighttime police raids would pass. The country voted to maintain the current limits on security services, rather than a “tough on crime” approach. This indicates a further-to-the-left stance, as more right-leaning candidates supported the raids. The crime debate has involved narcotrafficking groups operating in Uruguay.

Both Referendums Fail To Pass
Percent in Favor of Ballot Referendums, Social Security and Nighttime Raids

Source: Corte Electoral, Joseph Weiman.

2. A Second Round Is Needed.

   1. Yamandú Orsi’s center-left Frente Amplio (FA) coalition secured 43.9% of the votes, but a runoff vote will still be needed. This is not a surprise as there were runoffs in 2004, 2009, 2014 and 2020. It is likely that Orsi will win this election. The FA was in power from 2005 to 2020 and maintains a strong support base. The Coalición Republicana (CR, formerly the Coalición Multicolor) received 45%, split among parties.

3. The Social Security Reform Failed, Likely Due to Cohesive Rejection By Parties.

   1. The social security reform did not pass, in line with my previous view. Orsi, and his main opponents from the CR, all said they would vote against the social security reform. One of the strictest elements was the replacement of the private pension funds with a public entity. Support for the social security referendum had been falling in recent months from 52% in May to 43% in August, and 42% in September. It is likely many voters disapproved of only one of the three referendum elements (including changing the retirement age from 65 to 60, ensuring pension payments are at least equal to the minimum wage and removing the private pension fund – AFAP – to install a public entity). The provision to change the age to 60 was quite popular (Lacalle Pou changed it to 65 from 60). Orsi stated he would improve the social security system, but asked his voters to let him do this once in office, rather than through the referendum.

In the second round, Uruguay will likely select Yamandú Orsi as its president. Orsi would maintain Uruguay’s standing as a stable country with robust macroeconomic credentials. As the mayor of Canelones, a large city near Montevideo, Orsi worked with the ruling CR, led by President Luis Lacalle Pou, during the COVID-19 pandemic. This indicates he is willing to work with various parties, reducing policymaking risks. He also sought private sector investment and prioritized climate change. Orsi will likely follow many of the Lacalle Pou administration’s policies and will also likely increase social spending. For the private sector, Orsi will be slightly less friendly than Lacalle Pou, but not in a significant way that would impede investment.

As president, Orsi would likely boost spending on youth unemployment and climate change programs, while seeking a fiscal surplus. He has mentioned an initiative to boost agricultural productivity growth and has picked Gabriel Oddone - a former partner at an accounting firm and a signal to the private sector - as his economy minister. Besides the FA’s promise of a fiscal surplus, Oddone, for his part, declared the social security referendum “would not be the end of the world.” I appreciated this sentiment, as Uruguay will likely continue to benefit from low political, macroeconomic and security risks into the medium term.