#1Institutional Investor Presentation República Oriental del Uruguay Ministry of Economy and Finance October 2018 1#2Congress, National Assembly Strong Institutions and Social Cohesion 2#3Uruguay remains a bastion of institutional stability in a volatile region Ranking position in LATAM Political Stability (Worldwide Governance Indicators, 2017) 1st 1st Rule of Law (World Justice Project, 2017-2018) 1st 1st Prosperity 1st (Legatum Institute, 2017) 2nd 2nd Global Peace (Institute for Economics & Peace, 2018) 2nd (*) 18th place worldwide as a Full Democracy Lowest Corruption Perception (Transparency International, 2017) Full Democracy (*) (The Economist Intelligence Unit, 2017) Press Freedom (Reporters Without Frontier, 2018) Economic Freedom (Heritage Foundation, 2018) 3#4Macroeconomic Stability 2371 4#5Uruguay has experienced over a decade and a half of uninterrupted economic growth Real GDP Growth (Annual change, in %) 8 00 6 4 2 Avg. 2005-2017: 4.3% 2.5 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018* (*) Projected Source: Central Bank of Uruguay 5#6Growing income per capita Growth with equality: the best distributed income and highest GDP per capita in the region GDP per capita and Gini Index 20,000 16,000 Panama 12,000 Costa Rica Chile Mexico Brazil 8,000 Peru Ecuador Colombia Paraguay 4,000 0 0.55 0.50 Bolivia 0.45 Increasing income distribution GDP per capita: 17,379 Uruguay Argentina 0.40 Gini Index: 0.391 Source: International Monetary Fund, World Economic Outlook Database, October 2018 for GDP per capita in nominal USD; Social Outlook of Latin America 2017 for Gini Index data 0.35 6#7Investment has been falling and employment lags the cyclical recovery Gross Fixed Capital Investment (Last 12 months, in % of real GDP) 25 20 20 15 10 5 Labour market indicators (Average of last 12 months, in %) 9.0 8.0 7.0 6.0 Employment Rate 62.0 Unemployment Rate 60.0 58.0 56.0 0 5.0 54.0 2011 2012 2013 2014 2015 2016 2017 2018Q2 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Aug-18 Source: Central Bank of Uruguay Source: National Bureau of Statistics 7#8The government has launched a set of policies to boost investment and employment... Promote investment and employment Support small businesses Facilitate tax compliance . Changes to the Investment Promotion Regime to boost investments with positive externalities Additional tax benefits for promoted investment projects executed in 2018 Benefits for domestic farm equipment production Extension of automatic tax credits for SME investments • • Simplified Net Worth Tax for SMEs Simplified procedures for corporate restructuring Improvements for tax-payers: ✓ Reduced tax debt payments costs ✓ More payment channels Reinforcement of Tax Administration rights 8#9...and private investment is reacting to the stimulus Number of projects presented (Total for Jan-Aug each year) 500 400 300 Total investment presented (Total for Jan-Aug each year, in USD million) 1,600 +82% 398 1,200 +257% 800 219 200 100 400 0 0 2015 2016 2017 2018 2015 2016 538 2017 1,279 2018* (*) Includes USD 412 million corresponding to three projects submitted by UPM. 6#10No restrictions on foreign investor activity in Uruguay Without limits for the endowment of foreign capital in companies Equal treatment for foreigners and locals No restrictions for the repatriation of profits Free exchange market No local counterpart is required, no prior authorization or registration Only one tax system throughout the whole territory 10 10#11Reduced linkages with the Region Carrasco Montevideo Airport 11#12Decoupling in the midst of a regional downturn Cumulative Real GDP Growth (Index base 100=2011) 120 116 Uruguay 112 108 Brazil 104 100 2018Q2 Real GDP Growth (YoY change, in %) 3 +19.6% 2.5 2 1 0 -1 -2 +0.6% -3 1.0 -4 Argentina -1.7% -4.2 96 -5 2011 2013 2015 2017 2018Q2 Uruguay Brazil Argentina Sources: Central Bank of Uruguay (BCU); Central Bank of Brazil (BCB); National Institute of Statistics and Censuses (INDEC, Argentina). 12#13Reduced reliance on the region for export revenues and sources of FDI inflows Exports of Goods by Destination (Last 12 months to August 2018, as a share of total) Foreign Direct Investment Inflows by Country of Origin 1/ (As a share of total, 2017) 2/ Argentina 5% Brazil 16% United Argentina 2% Brazil 1% States Others 54% 6% Others 50% Source: Central Bank of Uruguay China 19% Spain 24% United States 23% 1/ Includes equity contributions and profits reinvestments and excludes loans with related companies. 2/ Only considers countries with positive inflows. Source: Uruguay XXI with data from the Central Bank of Uruguay 13#14Argentina remains the main source of inbound tourism, yet the weight of other services has increased recently Tourist Arrivals and Receipts (Last 12 months) Foreign Visitors (in million) 5 4 3 2 1 Exports of Services (Last 12 months, in USD millions) Tourism Receipts (in USD billion) 2.5 6,000 Others Argentine Tourism exports 5,000 4,000 2 3,000 1.5 2,000 1,000 1 0 2010 2012 2014 2016 2018Q2 2010 Source: Ministry of Tourism 1/ ■Tourism Other 2012 2014 2016 2018Q2 1/ Software, transport and logistics Source: Central Bank of Uruguay 14#15In addition, financial linkages with non-residents through the banking sector have diminished Credit to Non-residents by Local Banking System (% of total credit, end-period) Deposits by Non-residents in Local Banking System (% of total deposits, end-period) 20 20 16 12 8 0 50 50 40 40 2001 2018* (*) As of August Source: Central Bank of Uruguay 30 50 20 20 10 10 2001 2018* 15#16Sovereign credit spreads are indicative of the ongoing differentiation Sovereign Risk (G-Spread in 10-Y dollar bonds, in bps) 800 700 600 500 400 300 200 100 мл Argentina Brazil Mexico Colombia Uruguay Peru 0 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Source: Bloomberg 16#17Fiscal Policy Outlook Cerro de los Caracoles, Uruguay 17#18Central Government deficit is gradually contained... Central Government deficit (Last 12 months, in % of GDP) 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Aug-14 -0.5 Source: Ministry of Economy and Finance Aug-15 Aug-16 Aug-17 Total Deficit Primary Deficit 3.0 0.3 Aug-18 18#19... and policy priority is to shore-up overall public finances 2 1 Consolidated Public Sector deficit (In % of GDP) Non-financial Public Settor Central Bank Consolidated Public Sector Projections 1.0 2.8 2.5 2.9 0 2010 2011 2012 2013 2014 2015 2016 2017 Aug-18* 2019 2020 (*) Last 12 months 1/ Includes Public Enterprises Source: Ministry of Economy and Finance 19#20Tax collection and social security contributions have moderated recently in real terms... Tax revenues (Real annual change, in %) 7 6 5 4 3 2 1 Social security contributions (Real annual change, in %) 8 7 6 5 3 2 1 1.5 0 -0.2 -1 0 2013 2014 2015 2016 2017 Jan- Sep -2 18 2013 2014 2015 2016 2017 Jan-Aug 18 Source: Ministry of Economy and Finance 20 20#21while real expenditures are decelerating Central Government - current primary expenditure (Real annual growth, in %) 7 00 6 LO 5 4 3 2 1 2.0 0 2013 2014 2015 2016 2017 Jan-Aug 2018 Source: Ministry of Economy and Finance 21 24#22Growth in number of retirees and associated pension expenditure has stabilized... Total number of pensioners (Annual change, in %) 4 3 2 1 0 Pension expenditures (Last 12 months, in % of GDP) 10.5 10.0 9.5 0.2 9.0 -1 ' j Source: Ministry of Economy and Finance 10.1 8.5 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Aug-18 22 22#23and nominal wage deceleration will further reduce pressures on indexed pension expenditures next year Nominal Wages (Annual change, in %) 14 12 10 10 8 7.8 6 2011 2012 2013 2014 2015 2016 2017 Jan-Sep 18 Source: National Bureau of Statistics 23#24Recent Budget Review Law was prudent Change in Fiscal Deficit on election years (In % of GDP from previous year - Consolidated Public Sector) 3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 Projected ------ -0.5 -1.5 1984 1989 1994 1999 2004 2009 2014 2019 Source: Ministry of Economy and Finance 24 24#25A MOONCE 06 MAERSK MAERSK SEALAND MAERSK SEALAND P& Robust External Sector Port of Montevideo 25 25#26Improvement of external accounts Current Account Balance (Last 12 months, in % of GDP) 1 0 -1 -2 -3 0.2 Trade Balance in Goods & Services (Last 12 months, in USD million) 4,000 3,000 2,000 1,000 -4 0 2013 2014 2015 2016 2017 2018Q2 2013 2014 2015 2016 Source: Central Bank of Uruguay 2017 2018Q2 26 26#27Solid external buffers Current Account Balance compared to LATAM (Last 12 months to 2018Q2, in % of GDP) 2 1 0 -1 -2 -3 -4 -5 ווי International Reserves compared to LATAM (As of June 2018, in % of GDP) 35 30 50 25 20 15 10 -6 5 -7 -8 0 Uruguay Brazil Chile Peru Mex. Colombia Arg. Panama Uruguay Peru Brazil Colombia Mex. Chile Arg. Panama Source: Central Bank of Uruguay; Central Bank of Mexico and National Bureau of Statistics and Geography of Mexico; National Bureau of Statistics and Censuses (INDEC) of Argentina; Central Bank of Brazil; Central Bank of Colombia; Central Reserve Bank of Peru; Central Bank of Chile; National Bureau of Statistics and Censuses of Panama. 27 27#28Nominal Exchange depreciation in line with other Emerging Markets Nominal Exchange Rate (pesos per USD; daily) 34 34 33 33 32 31 30 50 20 29 28 27 24 Emerging Market Currencies vs USD (2018 YTD change as of 10/30, in %) Argentine Peso Turkish Lira Indian Rupee Uruguayan Peso Russian Ruble 14.3: Chilean Peso Brazilian Real Indonesian Rupiah Colombian Peso Peruvian Sol Singapore Dollar Mexican Peso Malaysian Ringgit Depreciation against USD 25 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Oct-18 26 26 Source: Central Bank of Uruguay Source: Bloomberg T T T 0 20 20 40 40 60 60 80 60 100 120 28#29Central Banks has intervened on both sides of the FX market to smooth out undue volatility Central Bank FX Intervention (In USD million) FX Sales through CB Bills Repurchase #REF! FX Purchases Average Monthly Nominal Exchange Rate 600 400 200 0 -200 -400 -600 -800 Jan-17 Stock of Central Bank Bills (In USD million) 10,000 8,000 34 33 6,000 32 32 31 4,000 30 29 29 28 28 2,000 8,148 27 27 0 Aug-17 Mar-18 Oct-18 Sep-12 Mar-14 Sep-15 Mar-17 Sep-18 Source: Central Bank of Uruguay 29#30During the regional sell-off, the Central Bank (CB) sold dollars in exchange for local- currency CB bills, mostly tendered by Pension Funds (PF). This allowed PF to buy-up global nominal peso government bonds, allowing for an orderly unwinding of non-resident positions by increasing liquidity during financial stress Central Bank FX Intervention (In USD million) 600 FX Sales through CB Bills Repurchase FX Purchases -Average Monthly Nominal Exchange Rate 400 200 I T I 0 T -200 -400 -600 I -800 Dec-17 Mar-18 Jun-18 Sep-18 Source: Central Bank of Uruguay 34 Yield of Nominal Peso (UYU) Bonds (In %) 13 12 11 10 Maturing 2028 Maturing 2022 32 32 CB Bills Repurchase 8 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18 implication 30 30 Residents' Holdings of UYU Bonds (In % of total outstanding) 28 26 26 25 45 20 15 24 24 Source: Bloomberg (upper); Ministry of Economy and Finance (below) 10 5 0 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18 30#31Inflation and Wage Developments 31#32Inflation has hovered around the upper ceiling of inflation target band Inflation (Annual, in %) 12 10 10 8 6 4 Inflation Target Band Tradable and Non-Tradable Inflation (Annual, in %) Headline inflation 12 Core inflation 10 8,3 8,1 8 6 4 Non Tradable Sector Tradable Sector 8.6 7.6 2 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Source: National Bureau of Statistic & Central Bank of Uruguay 32#33Deceleration in nominal wage growth reflects wage-setting guidelines that reduced indexation Government's guidelines for 2018 wage negotiations (Annual increases in nominal wages, in %) Economic sector's situation: Year Laggard Intermediate Dynamic 2018 6.5 7.5 8.5 2019 6.0 7.0 8.0 2020 5.0 6.0 7.0 Source: Ministry of Economy and Finance and Ministry of Labour and Social Security As of September, 23 out of 170 arrangements have been completed. Of these, 21 followed Government's Guidelines. Among these are the Construction and Health Sector, that toghether account for 21.6% of aggregate salaries. Regarding their clasification, 17% were clasified as Dynamic, 70% as Intermiediate and 13% as part of the Laggard sector. 33 33#34bank Solid Financial Sector 34 34#35Over and above, the financial system as a whole enjoys excellent health Non-Performing Loans and Degree of Provisioning (Local and Foreign currency, in %) ■Delinquency ■Degree of provisioning 8 6 4 2 3.6 Solvency Profile (Number of times of the minimum regulatory capital) 1.9 6.5 1.8 1.7 1.6 0 1.5 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Return on Equity (Last 12 months, in %) 25 22 20 15 1.88 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 19.6 10 5 0 Jan-17 May-17 Sep-17 Jan-18 May-18 Sep-18 Source: Central Bank of Uruguay 35 55#3699821 TEATRO SOLIS isss Structure of Government Debt and Precautionary Pre-Funding Solís Theatre 36#37Proactive debt management reduced FX exposure which mitigates higher volatility risks Central Government (CG) Debt (In % of GDP, end-period) 80 60 60 60 40 40 20 20 Currency and Maturity Composition of CG Debt (End-period) Gross Debt Net Debt 100 80 47.0 60 Debt in Foreign Currency (in % of total) -Average time to maturity (in years) 41.7 40 40 20 20 14.6 15 55 12 112 9 6 2005 2007 2009 2011 2013 2015 2017 2018Q3 2005 2007 2009 2011 2013 2015 2017 2018Q3 Source: Debt Management Unit, Ministry of Economy and Finance 37#38Pre-funding policy of Government limits roll-over and FX risks Government's Financial Buffers and Debt Service Obligations 1/ (In USD million, as of September 2018) 5,000 4,000 3,000 Foreign Currency 2,000 1,000 Local Currency 0 1/ Debt Service includes amortization plus interest payments Source: Debt Management Unit, Ministry of Economy and Finance Debt Service Next 12 Months 1/ Credit Lines with Multilaterals Liquid Assets Foreign Currency Local Currency 38#39Central Government's flow of funds Uses and Sources of Funds (In USD million) 2018(*) 2019(*) FINANCING NEEDS 3,352 3,012 Interest Payments 1,640 1,647 Amortization (a) 1,658 1,580 Primary Deficit (b) 54 -215 FUNDING SOURCES 3,352 3,143 Multilateral Disbursements 360 350 Total Bond Issuance 2,700 2,950 Foreign market 1,750 Domestic market 950 Net Others 165 180 Use of Assets (c) 127 -467 (*) Preliminary (a) Includes repurchases and early bond redemptions for USD 217 million in 2018. (b) Negative value indicates a primary surplus of the Central Government. (c) Positive indicates a reduction in Central Government reserves. Source: Ministry of Economy and Finance 39#40Montevideo Port Transformational infrastructure and energy policies underpin medium-term outlook 40 40#41Uruguay is going green, diversifying its energy mix towards renewable sources and reducing fiscal risks Installed Capacity in MW (According to generation source) 5,000 4,000 3,000 2,000 1,000 2005 2006 2007 2008 2009 2010 2011 Thermal Hydro Eolic Biomass ■ Solar Source: Ministry of Industry, Energy and Mining Electricity Generation Matrix 2017 (By generation source, in % of total) 26 18 22 52 62 ■ Thermal ■ Hydro ■ Eolic ■ Biomass ■ Solar 41#42Increasing investment as the PPP program matures Executed PPP investment and pipeline of projects (In USD million) 700 ■Roads and Highways 600 Education 500 ■Central Railway 400 300 200 100 2018 Source: PPP Unit, Ministry of Economy and Finance 2019 2020 42#43ARGENTINA Central Railway Project poised to start early 2019 Paso de los Toros BRAZIL • 273 km of railways between the port of Montevideo and the city of Paso de los Toros (located in the centre of the country). • Montevideo • • Planned investment: USD 825 million Employment to more than 1,000 people. Transportation of 4.5 million tons per year. 43#44Investment and infrastructure plans are key to establish foundations for long term economic growth Second UPM pulp mill will imply: ➤ Largest investment in Uruguay's history ➤ Estimated to lead to a permanent GDP increase of 2% > Implemented Partially done Not started PHASE I Discussions with the Government of Uruguay Nov. 2017 - April 2018 Source: UPM official webpage Investment Agreement signed GATE 1 PHASE II Development of infrastructure Pre-engineering Potential UPM Permitting Necessary conditions Investment Decision GATE 2 April 2018 October 2018 GATE 3 PHASE III Investment Project Development of Infrastructure 44