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LATIN AMERICA | 25-10-2020 14:37

South America’s posh summer spot to stay shut on Covid

Uruguay, home to luxury beach resort Punta del Este, will keep its international borders closed this summer, President Luis Lacalle Pou confirmed last week.

One of South America’s top summer destinations will remain closed to foreign tourists this summer.

Uruguay, home to luxury beach resort Punta del Este, will keep international borders closed this summer, President Luis Lacalle Pou said late Thursday. The country, which boasts the lowest Covid-19 infection and mortality rates in South America, will opt to protect its public health gains over the economy as the virus rages in neighbouring Argentina and Brazil. Uruguay has recorded just 2,701 virus cases and 53 deaths.

“It’s the first time in history the country will have a summer season with its international borders closed,” Tourism Minister Germán Cardoso told reporters Friday.

The government will announce incentives next week to foment domestic tourism, he said.

The decision will mean foregoing a significant inflow of cash for an economy expected to contract 4.2 percent this year. Uruguay’s tourism industry, which depends heavily on the summer season in the Southern Hemisphere between December and February, accounted for seven percent of GDP in 2019, according to government data. About 3.2 million visitors entered the country from abroad last year, with 69 percent of that from Argentina and Brazil. Tourists spent nearly US$1.8 billion in 2019.

Uruguay’s decision to keep non-resident tourists out of the country may also widen its balance-of-payments gap and put pressure on the peso, according to TPCG strategist Victoria Faynbloch. The peso, which has lost 12.5 percent against the US dollar this year, closed almost unchanged at 42.66 per dollar on Friday.

Foreign tourists

Wealthy Argentines in particular have flocked to Punta del Este for decades and own a lot of property dotting the coastline.

To be sure, even if borders were opened, the economic crisis hitting Argentina and the slump in the Brazilian real likely would have kept most middle-income visitors in their home countries anyway. Uruguay is a pricey destination because its currency is heavily overvalued versus its neighbours, says Ignacio Munyo, executive director at local think tank Ceres.

That leaves Uruguay’s struggling hotels and restaurants hoping that the 2.2 million Uruguayans who spent US$1.2 billion on international travel last year, will opt to vacation at home instead of risking a brush with Covid in Europe or North America. The roughly 500,000 Uruguayan expatriates who visit Uruguay every year could be another band-aid. Citizens and foreigners with Uruguayan residency can still enter the country.

Under normal circumstances, many Uruguayans would also be crossing borders to spend their summer vacations in Argentina and Brazil where their money goes a lot further, Munyo said.

“The cost of closed borders is compensated in part by domestic tourism,” he said. “It’s going to be one of the best domestic tourism seasons in a long time.”

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by Ken Parks, Bloomberg

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