#1An H Photo credit: Uruguay XXI. República Oriental del Uruguay Investor Presentation February 2023 Ministerio de Economía y Finanzas 1#2Key Credit Highlights 1 Strong economic growth continued in 2022, driven by foreign direct investment, industrial production and higher commodity exports; leading indicators show a 2 slowdown going into 2023. Steady annual improvement of public finances: fiscal targets met in 2022, for third year in a row. 7 3 Tighter monetary policy focused on reducing inflation and anchoring inflation expectations within target band. 4 5 Stable current account dynamics amid real exchange rate appreciation, and large external buffers; banking sector with strong capitalization, although still-high financial dollarization. Government forges ahead with structural and market-friendly reforms, including social security, public enterprises, education and international trade integration. Uruguay among the top global performers on ESG fundamentals, and is a bastion of institutional, social and political stability with lowest country risk in LATAM. Debt management strategies aimed at de-risking debt portfolio, while keeping borrowing costs contained; sustainable financing strategies aligned with environmental commitments under Paris Agreement. 2#31 The economy continued to strengthen in 2022 3 Garza (Garza Mora Ardea) Photo credit: Leonardo Colistro. อ#41 The economy continued to expand in 2022, overperforming pre-pandemic levels; Uruguay leads in GDP per capita in Annual real GDP change (1) (In %) 8 4 O -4 LATAM. Real GDP (2) (Seasonally adjusted physical volume index, 2019Q4-100) 5,0 4.4 105 1111 100 95 90 -6.1 -8 85 2017 2018 2019 2020 2021 2022* 2019Q4 Components of real GDP demand (2) (Seasonally adjusted physical volume index, 2019Q4-100) 2020Q4 Nominal GDP per capita 2022 (3) (Current prices, US dollars) 140 -Fixed capital formation 134 20,000 18,732 Exports of goods and services -Final consumption 120 15,000 120 100 102 10,000 5,000 104,4 2021Q4 2022Q3 (1) 80 2019Q4 2020Q4 2021Q4 2022Q3 Source: Central Bank of Uruguay and latest Minister of Finance projection for 2022. (2) Source: Ministry of Economy estimates based on data from BCU. (3) LIFE Source: For Uruguay, annual nominal GDP in USD through 2022Q3 from Central Bank of Uruguay and population from National Institute of Statistics. For the rest of LATAM countries: WEO October 2022, International Monetary Fund estimates on nominal GDP in dollars and population for 2022. 4#51 Goods exports hit record high in 2022 on the back of higher commodity prices; significant tourist sector recovery Export of goods (1) expected in 2023. Commodities exports prices (2) (Index base 100-Jan 2017) (Annual, in millions of FOB USD) 13356 160 14000 7000 2010 2014 Export of goods by destination (1) (% in total, 2022) 140 120 100 135.6 80 2018 2022(*) Jan-17 Mar-18 May-19 Jul-20 Sep-21 Dec-22 Tourists inbound (3) (Number of people, in thousands) 3,000 China 28% 38% European Union Brazil 2,000 Argentina 15% United States 1,000 6% 9% 14% ☐ Rest of the world 2019 Pandemic 2,467 2020(*) 2021(*) 2022 5 (1) Source: Uruguay XXI (figures include exports from the Free Trade Zones to the rest of the world). (*) For 2022, preliminary data. (2) Source: CPA Ferrere, based on Bloomberg and National Institute of Meat of Uruguay (INAC). Weighted-average of soybeans, meat, rice, dairy products, and pulp exports. (3) Source: Ministry of Tourism. (*) 2020 and 2021 are estimations based on migrations data, made by Ministry of Economy.#61 Market-friendly business regulations and new tax incentives for fixed capital formation underpinned investment dynamics. Uruguay ranked #1 as "the safest country in Latin America to invest in" by Euromoney in 2022. • Uruguay offers a favourable environment and financial freedom for doing business. Foreign. investors are granted the same incentives as local investors: there is no tax discrimination or restrictions for transferring profits abroad. New tax breaks for big-ticket construction projects and social housing ✓ Recent changes to the General Investment Promotion Regime (COMAP) providing more tax incentives encouraging employment creation (housing, offices and urbanization construction) and clean energy technologies. Investment presented according to promotion regime (1) (USD millions) 4,000 Investor-friendly policies and regulations, respect for rule of law and trade openness. 3,000 2,000 Uruguay grants several incentives to different types of activities, from industrial to commercial and service activities performed in the country. 1,000 ■COMAP ■Great Economic Dimension Social Housing 2015 2016 2017 2018 2019 2020 2021 2022 (1) Source: Ministry of Economy and Finance of Uruguay. The COMAP (by its acronym in Spanish) is the agency for the investment promotion regime. 6#71 Finnish company UPM completed the construction of the second pulp mill, the largest-ever private investment in the country. UPM's pulp mill and Central Railway project (1) December 26th, 2022. The works of the new UPM plant have been completed. It is expected to start operating by the end of the first quarter of 2023. ■ UPM invested a total of approximately US$ 3.5 billion (4.8% of GDP) to build a 2.1 million-tonn greenfield eucalyptus pulp mill in Durazno and a port terminal in Montevideo. US$ 1 billion investment in a Central Railway running from Paso de los Toros city to the port of Montevideo (273 km long). Public-Private- Partnership (PPP) modality. FDI net capital inflows (2) (Rolling 4-quarters, in % of GDP) 4 2 -2 งอ 4,35 -4 2016Q4 2018Q2 2019Q4 2021Q2 2022Q3 (1) Source: Ministry of Economy and Finance of Uruguay and UPM. (2) Source: Central Bank of Uruguay 7#81 Labor market indicators reflect the recovery process with a higher degree of formalization, with upturn in real wages Employment and real wages (1) Unemployment Insurance and formal job creation (2) Real wage (YoY % change) 5 4 3 Employment rate (average of last 12 months) Number of insurance beneficiaries, in thousands. 200 59 160 58 2 120 1 57 -2 -3 80 56 40 55 Contributing jobs to Social Security, in thousands. 1500 1450 1400 46.425 54 54 1350 Dec-16 Dec-18 Dec-20 Dec-22 Apr-19 Mar-20 Feb-21 Jan-22 Dec-22 (1) Source: National Institute of Statistics. (2) Source: BPS, Social Protection Bank#91 Leading indicators and a severe drought during the summer point to slower economic growth in 2023. Exports of goods (1) (YoY change in dollar amount, in %) Industrial Production (*) (2) (YoY real change, in %) 30 60 30 -30 Mar-20 Feb-21 Tax revenue collection (3) (YoY real change, in %) 20 10 -10 -20 Apr-20 Dec-20 (1) Source: Ministry of Economy and Finance.. Aug-21 15 О -2,5 T -15 -30 Jan-22 Dec-22 Jun-20 Apr-22 -0,2 Dec-22 Sep-21 لس Hydric Map and Drought Severity Index (4) (As of January 16, 2023) Category Normal to humid condition Dry anormal condition Moderate drought Severe drought Extreme drought Excepcional drought -0,5 Dec-22 Colour (2) Source: Ministry of Economy and Finance. (*) Data does not include state owned refinery. (3) Source: Tax Collection Office, Ministry of Economy and Finance 9 (4) Source: National Agricultural Information System. The Drought Severity Index combines rainfall estimates based on satellite data, surface temperatures and a vegetation index based on Rhee (2010)#102 Fiscal discipline aligned with fiscal rule Cisnes en lago. Photo credit: Leonardo Colistro. 10#112 Steady annual improvement in public finances based on strong commitment to fiscal discipline ... Central Government`s fiscal balance (1) (In % of GDP) 2017 2018 2019 2020 2021 2022(*) -1 -3 -5 Interest payments Primary balance -7 -Overall balance -5,8 -4.3 Source: Central Bank of Uruguay; Ministry of Economy and Finance of Uruguay. Does not Include extraordinary inflows to the Social Security Trust Fund. (*) Based on annual GDP projection for 2022. -3.2 11#122 ...meeting all three pillars of the Central Government's fiscal rule for the third year in a row, underpinning fiscal credibility. Indicative target on structural fiscal balance, to account for business cycle fluctuations and one-off/temporary spending and revenue items. Structural balance (In % of GDP) Indicative target cap on real growth in primary expenditure in line with estimated potential real GDP growth Primary spending (1) (Annual real variation, in %) Legally binding maximum level of annual net indebtedness in dollar amount. Net indebtedness (USD mm) -1 -2 -3 -4 3 Real primary spending growth Indicative target 4,000 Net Indebtedness Legal limit 3,500 2.3 2.3 3,113 2.1 2 3,000 1.6 2,990 2,563 -2.4 -2.7 -2.6 1 0.6 -3.2 2,000 1,000 2,100 -4.4 -5 -4.4 Structural balance Indicative target -6 -1 2020 2021 2022* 2020 2021 2022 2020 2021 2022** (**) Preliminary. Source: Ministry of Economy and Finance of Uruguay. (1) Potental real GDP growth rate was revised as of February, 2022, from 2.3% to 2.1% (i.e. the indicative target for real primary spending growth is 2.1%). (*) Based on GDP projection for 2022. 1,813 12#132 New Fiscal Framework Establishment of the Fiscal Advisory Council. Creation of the Expert Committee. Debt sensitivity analysis. Validation of Structural Balance. Fiscal Advisory Council On September 29, 2021, the Fiscal Advisory Council (FAC) was established. The FAC is a technical, honorary and independent body composed of three members. It is tasked with assessing the overall implementation of the fiscal rule. The Expert Committee (EC) was created on December 29, 2021. The EC has eleven members representing Universities, consulting firms and think tanks. Will provide technical parameters to the Ministry of Economy and Finance used for the calculations and projections of the structural fiscal balance. On June 2022, a debt sensitivity analysis was conducted to quantify the uncertainty associated with the baseline debt projections. Key variables that drive debt dynamics are exposed to random shocks. These shocks are based on the historical behavior of each variable. A range of debt-to-GDP trajectories are obtained, which allows for an evaluation of the risk distribution around specific projection in the baseline scenario. On July 7, 2022, the FAC concluded that the calculation of the structural fiscal balance presented in the 2021 Budget Review was in accordance with the official methodology. On February 22, 2023, the FAC publish the report with the review of the calculation of the Structural Fiscal Result. The deficit stood at 2.4% of GDP in 2022, 0.8 percentage points lower than effective, because the latter continued to be impacted by the cyclical position of the economy (negatively affected revenues and positively affected expenditures). Access the Executive Summary in English, in the following link: https://www.gub.uy/ministerio-economia- finanzas/politicas-y-gestion/informes-del-consejo-fiscal-asesor Implementation of the new fiscal institutional framework marks the first time that the Ministry of Economy and Finance has clear, well-defined metrics and indicative targets to assess its fiscal policy and promote accountability. Furthermore, estimates for unobservable values (structural fiscal balance) have the methodological validation of the independent Fiscal Advisory Council. Source: Ministry of Economy and Finance. 13#142 Widening of primary fiscal deficit in the last quarter of 2022 was mostly explained by increase in public investment spending, and cyclically softer tax revenues. Central Government's primary balance (1) (Last 12 months, in % of GDP) Central Government's revenues and primary expenditures (1) (Last 12 months, in % of GDP) 2 1 -1 -2 -3 -4 Covid-19 Fund Balance Primary Balance exlcuding Covid-19 Fund Primary Balance 0.5 0.6 -0,9 31 29 20 22 27 -Revenues Primary Expenditures 26,9 26 -5 25 Mar-19 Dec-19 Sep-20 Jun-21 Mar-22 Dec-22* Dec-18 Oct-19 Aug-20 Jun-21 Apr-22 Dec-22* (1) Source: Ministry of Economy and Finance of Uruguay. Does not Include extraordinary inflows to the Social Security Trust Fund. (*) Based on GDP projection for 2022. 14#153 Enhancing the monetary policy framework and anchoring inflation expectations Cardenal Copete Rojo (Paroaria Coronata) Photo credit: Leonardo Colistro. 15#161 3 Monetary policies focused on bringing down inflation and anchoring inflation expectations within target. 18 Commitment to Lower Inflation Key focus is to lower inflation and anchor inflation expectations within the target band in a sustainable way. --- — - - - - -➖➖➖ ➖ — — - — - - - - - - - - - - - - Short-term Interest Rate as 2 3 4 5 new Policy Instrument Enhanced Transparency in Communication Counter-cyclical Monetary Policy Stance Financial De- Dollarization ■ New monetary policy instrument under inflation targeting regime. Designed to improve market signals and allows for fine-tuning of monetary policy at higher frequency. Higher frequency in Monetary Policy Committee (MPC) meetings, published minutes of MPC, relaunched inflation survey, among others. Publication of Central Bank's inflation projections and survey of firms' inflation expectations. As the pandemic eased and inflationary pressures build up, the Central Bank shifted towards a more contractionary monetary policy stance, increasing the reference rate by an cumulative 700 bps since September 2020, to the current 11.50%. Rebuilding markets in local currency to mitigate financial dollarization and developing FX derivatives markets ■ Adjustments to the level and differentiation of tax rates on interest receipts on by bank deposits and market securities, by type of currency. ■ Encouragement to the participation of public enterprises in the FX derivatives markets. Source: Central Bank of Uruguay. 16#173 Inflation still above the upper ceiling of inflation target band, with monetary policy on a contractionary stance. Headline inflation (1) (YOY, in %) 12 8 Inflation target band 4 Interbank interest rate and Monetary Policy Rate (MPR) (1) (In %) 12 MPR 11 10 8,05 8 7 0 LO 5 4 Interbank interest rate (average) Implementation of the MPR regime 11,50 3 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23 Apr-20 Mar-21 Feb-22 Jan-23 (1) Source: National Institute of Statistics and Central Bank of Uruguay. (2) Source: Central Bank of Uruguay. Before September 2020, the monetary policy instrument was growth in M1' monetary aggregate. 17#18Inflation is trending down, mostly driven by the tradable component; 3 Central Bank expects headline inflation to revert within the target Tradable and non-tradable inflation (2) band by 2023Q3. Central Bank's projected inflation path and inflation (YOY, in %) 14 10 (YOY, in %) 12 -Tradable inflation Non-tradable inflation D 9,4 10 8 expectations (2) 6 5,5 Inflation target band Inflation target band 4 Central Bank's projected Inflation path as of December 2022 Year-end Inflation Expectation 7,1 6,6 2 2 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23 Dec.-19 Dec.-20 Dec.-21 Dec.-22 Dic.-23 Dec.-24 (1) Source: Central Bank of Uruguay. Tradable inflation excludes fruits and vegetables, while Non-Tradable inflation excludes administered prices (such as utility bills and cigarettes). (2) Source: Central Bank of Uruguay, Quarterly forecasts of the baseline scenario as of December 2022. Median inflation expectations based on Central Bank's market survey as of January 2023. 18#193 Exchange rate has appreciated and showed relative stability over the last three years, including during risk-off episodes. Currency performance vs USD, during 2022 (1) (in %) Argentine Peso Turkish Lira Colombian Peso Japanese Yen Indian Rupee Indonesian Rupiah Chinese Renminbi New Zealand Dollar Australian Dollar Euro Malaysian Ringgit Chilean Peso Singapore Dollar Russian Ruble Peruvian Sol Nominal exchange volatility in LatAm (1) (Quarterly average of absolute value of daily percent changes) 1.6 1.2 0.8 0.4 Mexican Peso Brazilian Real Uruguayan Peso -10.7 0.0 -50 50 Nominal Appreciation Nominal Depreciation (1) Source: Bloomberg. (2) Source: ECLAC, based on Bloomberg. Uruguay 2019Q1 2019Q4 2020Q3 2021Q2 2022Q1 2022Q4 19#204 Stable current account; banking sector with low exposure to the region 20 Photo credit: Uruguay XXI.#214 Moderate current account deficit fully financed by FDI, on the back of a resilient balance of goods Current account balance (1) (Rolling 4-quarters, in % of GDP) and services... Goods and services balances (2) (Rolling 4-quarters, in % of GDP) 2.0 1.0 0.0 -1.0 -2.0 -3.0 2017Q1 (1) (2) Source: Central Bank of Uruguay. 1 -2,3 3 อ 9 Balance of Services Balance of Goods 7 6,8 -Trade Balance of Goods and 0,4 Services 6,3 5 -1 2019Q4 2022Q3 2017Q1 2019Q4 2022Q3 21#223 despite real exchange rate appreciation; large international reserve buffers are a significant external backstop Real Effective Exchange Rate of Uruguay (Index base 100 = average 2017) 140 -Multilateral excluding Arg and Bra 130 -Multilateral -Regional 120 110 m 100 90 80 my т 100,9 International reserves in Latam (2) (As of end 2022, in % of GDP)* 30 20 10 89,1 78,7 70 Jan-17 Mar-18 May-19 Jul-20 Sep-21 Dec-22 (1) Source: Central Bank of Uruguay. (2) Source: International Monetary Fund. (*) Projected GDP 21,2 22 22#234 Banking sector remains well-capitalized, with high liquidity levels and low exposure to the region, yet with still-high financial dollarization Solvency and dollarization of the banking system Banking system's exposure to non-residents (To the non-financial sector, % of total) 1/ Number of times of minimum regulatory capital 2.0 1.5 1.0 Dollarization of Deposits (% of total) 84 60 41.5 40 20 80 2001 20 18.1 76 Mar-15 Sep-16 Mar-18 Sep-19 Mar-21 Sep-22 Source: Central Bank of Uruguay. 72 10 2001 Deposits Loans 8.7 2022* 2,8 2022* 1/ End-period; data for deposits includes only private non-financial sector. (*) As of October 2022. 23#245 IIIII Photo credit: Uruguay XXI Government-led structural reforms BABA 24#255 Government forges ahead with structural and market-friendly reforms: "keeping the high-beam headlights on" Urgent Consideration (UC) Law1/ 2020-2024 Budget Law 2021 Budget Review Social Security Reform Approved on July 9th, 2020 Changes in the tax code for small businesses. ■Changes in the regulatory framework for energy markets. ■Commission of experts of the Pension Reform submitted the diagnosis on March 23rd 2021 and has 90 days onwards to present a comprehensive reform to Congress. ■ Draft of new fiscal framework. Approved on December 18th, 2020 ■ New governance for public enterprises: performance targets and accountability. ■ Environmental and ESG-focused policies (Helsinski Principles). Implementation of new fiscal institutionality. Approved on November 3rd, 2022 ■ Fullfillment of the three pillars of the Fiscal Rule in 2021 ■ Proposes additional expenses for three specific areas: education, I+D and citizen security. ■ Provides for further public policies to foster the long-term growth of the Approved by Senate on December 28st, 2022. Now in Chamber of Deputies. Parametric changes to all schemes. Established a common system for all the schemes that exist in the country. ■ Creation of an independent regulatory agency that oversees the entire regime. Mechanisms to encourage voluntary savings. 1/ On March 27th, 2022, a public referendum was held on whether to repeal, or uphold, 135 articles of the Urgent Consideration Law voted in 2020. The majority of the population (51,3%) voted in favour of upholding them. Source: Ministry of Economy and Finance of Uruguay. 25#265 Impactful structural reforms underway Social security reform: - Convergence of the different subsystems towards a uniform base regime (mixed system), and parametric changes to all schemes (extension of working life, minimum contribution time, benefit calculation formula). - Creation of an independent regulatory agency that oversees the entire regime. - Variety of mechanisms to encourage voluntary savings, allows the combination of work and retirement and widens the set of assets menu for pension funds. • Educational reform: - More extended-day educational centers and tutorials. – Professionalization of management teams with training and information systems for planning. - New competency-based curricular framework. - Towards a university teacher training. • Commercial integration and free trade: - Positive outcome of the feasibility study on a China-Uruguay Free Trade Agreement -initiated in September 2021-, leading to formal trade talks. - Uruguay and Brazil agreed on the reduction of the Common External Tariff of Mercosur and on preferential access of goods from free trade zones. - In December 1st, Uruguay submitted a formal request to enter the Trans-Pacific Partnership Agreement in a meeting with the head of Trade and Export Growth and head of New Eland Primary Industries, Damien O'Connor. 26#276 Strong ESG foundations Photo credit: Uruguay XXI 27 22#2820 40 9 ESG Emerging markets' ESG Score Uruguay is among the top global performers on ESG fundamentals. = (Index, 100 best performance; as of end-January, 2023) 80 Uruguay (#4) 60 bal Croatia Costa R Trinidad And Takhst Kazakhs Dominican Morocco Senegal Indonesia ine Se Vietnam El Me Gabon e D'ivo ol 0.00 2.00 Market cap in ESG-Adjusted EMBI (JESG EMBI) (In %, as of end-January, 2023) 6.00 4.00 Uruguay (#9) UAE Saudi Arabia Indonesia Hungary 61 countries Source: J.P. Morgan Chase & Co. using data from RepRisk, Sustainalytics and Climate Bonds Initiative. Top-20 countries of a total of 61 countries Disclaimer: "Information has been obtained from sources believed to be reliable but J.P. Morgan does not warrant its completeness or accuracy. The Index is used with permission. The Index may not be copied, used, or distributed without J.P. Morgan's prior written approval. Copyright 2021, J.P. Morgan Chase & Co. All rights reserved." Panama Qatar Philippines Chile Uruguay Oman Brazil Romania Dom. Republic Turkey Mexico Peru olombia Bahrain South Africa 28#296 E SG The country is at the forefront of environmentally-friendly policies, with a significant reduction in the carbon intensity of economic activity Uruguay: Carbon intensity as a share of GDP (1) (Green House Gas emissions as a share of real GDP, in %) 40 Total GHG emissions intensity 30 CO2 emissions intensity 20 10 5 Among emerging countries, Uruguay is ranked: • ⚫ #1 in the Environmental Pillar Index from MSCI (2021) Among Latin American and Caribbean countries, Uruguay is ranked: ⚫ #1 in the Energy Transition Index from the World Economic Forum (2021) 1990 1991 1995 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2018 2019 (1) Source: National Inventory of Green House Gas Emissions and Ministry of Economy and Finance. 3 29 20#309 ESG The Government is committed to climate action policies The goal is to make economic growth consistent with a pathway towards low greenhouse gas emissions and a climate-resilient economy, through macroeconomic, fiscal and financing policies. The Government joined the Coalition of Finance Ministers for Climate Action The 2020-2024 Government Budget Law, explicitly incorporated the Helsinki Principles Central Bank announced a diversification strategy of the international reserves portfolio towards a green bonds' investment fund The Government launched its Long Term Strategy on Climate Change, with an aspirational goal of net-zero Co₂ by 2050 Launch of the "Sustainable Finance Roundtable": BCU & MEF agreed on a commitment to carry out a Sustainable Finance agenda Issuance of SSLB September October December 2020 2021 2022 July October November December April September October November December Creation of the Ministry of Environment The Central Bank joined the Network for Greening the Financial System The Ministry of Industry and Energy and the Ministry of Finance launched the national road-map for green hydrogen production A tax on CO2 emissions from the use of gasoline was approved by Congress Uruguay takes over as Chair of the Development Committee of the World Bank and IMF; as part of the proposed agenda, the country will advocate for cheaper multilateral loans for countries that implement strong environmental policies Publication of the Sovereign Sustaniability-Linked Bond Framework (SSLB). With a horizon of 2030, Uruguay presented its Second Nationally Determined Contribution, estalishing objectives and measures to mitigate the impact, and adapt to the effects of, climate change in the country.#31Uruguay has a relatively low poverty rate and gender inequality, and the highest share of middle class people in LatAm ESG Poverty compared to LatAm (1) (In % of total population, year 2021)* 60 40 20 Share of middle class compared to LatAm (3) (Year 2020, in % of total population)* 60 50 MEX COL BOL ECU PER BRL PAN CHL URY (*) Except for Brazil (2019), Panama (2019), Mexico (2020) and Chile (2020). Argentina is not included because the poverty rate is only calculated for urban areas. 40 Gender inequality compared to LatAm (2) (Inequality Index, 2021) 30 0.5 Lower gender inequality 0.4 20 0.2 0.1 COL BOL BRL PAN PER ECU MEX ARG URY CHL 1) Source: ECLAC 2) 10 URY CHL ARG CRI PAR BOL BRA COL MEX ELS ECU PER 3) Source: United Nations Development Program (UNDP), Human Development Reports 2020; Gender Inequality Index is a composite measure reflecting inequality in achievement31 between women and men in three dimensions: reproductive health, empowerment and the labour market. Source: Inter-American Development Bank; Middle class defined as percentage of population that lives in households with per capita income between USD 12,4 and USD 62 a day.#326 ESG Uruguay is a bastion of institutional, political and social stability in LatAm, ranking alongside most developed nations Democracy index (1) (Score from 1 to 10, year 2022) 10 0000 Adherence to the Rule of Law (2) (Numerical score out of 1, year 2022) 0.8 8 6 4 2 "Full Democracy" 0.6 0.4 0.2 0.0 III Civil Unrest (3) (Index out of 10, first quarter of 2020) 10 Political Stability and Absence of Violence/Terrorism (4) (Percentile rank, 2021) 100 8 6 4 2 (1) Source: The Economist Intelligence Unit (2023). (2) Source: World Justice Project (2022). (3) Source: Verisk Maplecroft (2020). (4) Source: Worldwide Governance Indicators., World Bank. 80 60 40 40 20 о 32#336 Uruguay ha the lowest Corruption Perception in 2022 along with Canada, well below region average. ESG CORRUPTION PERCEPTIONS INDEX 2022 With a Score of 74, Uruguay has significantly lower perceived corruption that average of the main regions of the WESTERN EUROPE ASIA PACIFIC & EUROPEAN UNWorld 66/100 AVERAGE SCORE AMERICAS 45/100 AVERAGE SCORE ARAB STATES 43/100 33/100 AVERAGE SCORE AVERAGE SCORE (1) Source: Transparency International (2022). TRANSPARENCY INTERNATIONAL the global coalition against corruption SCORE COUNTRY/TERRITORY 40 Suriname 39 Colombia 74 Canada 74 Uruguay 38 Argentina 69 United States 38 Brazil of America 36 Ecuador 67 Chile 36 Panama 65 Barbados 36 Peru 64 Bahamas 33 El Salvador 60 Saint Vincent and 32 Dominican the Grenadines Republic 55 Dominica 31 Bolivia 55 Saint Lucia 31 Mexico 54 Costa Rica 28 Paraguay 52 Grenada 24 Guatemala 45 Cuba 23 Honduras 44 Jamaica 19 Nicaragua 42 Trinidad 17 Haiti and Tobago 14 Venezuela 40 Guyana #cpi2022 www.transparency.org/cpi This work from Transparency International (2022) is licensed under CC BY-ND 4.000 33 33#347 Resilient debt structure and sustainable financing strategies Photo credit: Uruguay XXI. 34 34#35Government debt burden set into a slightly downward path since 7 pandemic shock, while proactive debt management strategies aim to de-risk debt portfolio while keeping borrowing costs contained Gross and net debt stock of the Central Government (As of end-period, in % of GDP) Currency and maturity composition of debt (As of end-period) 80 Gross debt Debt in local currency (% of total) 80 -Average time to maturity (in years, RHS) 16 -Net debt 61.5 59.9 60 57.3 60 40 20 56,4 55.3 53.3 40 20 12.9 12 52.3 2016 2017 2018 2019 2020 2021 2022* 2005 2011 2017 2022* Source: Debt Management Unit, Ministry of Economy and Finance of Uruguay (*) Preliminary 35 55 8#367 In October 2022, Uruguay issued a Sustainability-Linked Sovereign Bond (SSLB) tied to climate and nature conservation indicators The issuance was underpinned by the SSLB Framework published on September 20th, 2022, and developed a specific webpage with all the information related to this project (http://sslburuguay.mef.gub.uy/). The Bond embeds two complementary Key Performance Indicators (KPIs) tied to climate change mitigation and nature conservation goals: GHG reducing the intensity of Greenhouse Gas emissions preserving the area of native forests The Sustainability Performance Targets (SPTS) are based on quantitative goals set for 2025 and are in line with Uruguay's Nationally Determined Contribution (NDC) under the Paris Agreement. Uruguay's Sovereign Sustainability-Linked Bond (SSLB) Framework FOR SUSTAINABILITY-LINKED BONDS FOCUSED ON CLIMATE AND NATURE-BASED TARGETS September 2022 URUGUAY The project benefited from technical assistance from the Interamerican Development Bank (IADB) and the United Nations Development Program (UNDP). 36#377 The SSLB Bond pioneered an alternative approach for sustainability-linked debt financing Uruguay implemented an innovative financing mechanism that linked the country's cost of capital to its delivery of ambitious climate and nature goals. Introduced an interest rate structure for SSLBs that features a potential coupon adjustment (increase, constant or decrease), depending on whether the country fails to meet, delivers, or overperforms on its SPTs, respectively. Embedding better-aligned financial incentives in sovereign fixed- income instruments can achieve the integration of nature and climate considerations into sovereign debt markets, providing positive incentives for countries to contribute to global public goods. 37#387 Central Government's funding needs and financing sources Flow of funds (Annual, in USD million) 2022 (") 2023 (") FINANCING NEEDS 5,140 4,210 Primary Deficit (1) 722 191 Interests Payments (2) 1,667 1,771 Amortizations of Bonds and Loans (3) 2,604 2,222 Change in Financial Assets 147 26 FUNDING SOURCES 5.140 4,210 Disbursements from Multilaterals and Fin. Instit. 571 356 Total Issuance of Market Debt (4) 3,992 3.785 Others (net) (5) 576 69 Memo Item: Government Net Indebtedness (GNI) 1,813 1,893 (*) Preliminary. The sum of the components may differ from the totals due to rounding. (1) Excludes extraordinary transfers to the public Social Security Trust Fund (SSTF). (2) Includes interest payments to the SSTF on its holdings of Central Government debt, but does not net out market price valuation gains on above-par bond issuances. (3) For 2023, includes the obligations coming due on a contractual basis and bonds repurchased and early redeemed through February 28st 2023. (4) Includes bonds issued domestically and in international markets. (5) Captures other financial sources of cash inflows for the Treasury, as well as financing operations that do not impact gross debt statistics Source: Ministry of Economy and Finance of Uruguay. 38#39● 7 Cornerstones of debt management strategy and sustainable financing Increase local currency funding in domestic and international markets while developing its secondary market (liquidity, depth, and points in the curve). Keep refinancing risk low through proactive LM operations, precautionary liquidity buffers and contingent credit lines. • Diversify sources of funding and continue broadening the investor base, particularly ESG-focused accounts. . Align sovereign funding strategies (in bond market issuance and multilateral loans) with achieving. ambitious environmental targets to address climate change and nature conservation. 139#407 Large liquidity buffers and precautionary credit lines of the Central Government provide financial backstops Liquidity buffers of the Government and short-term debt service obligations (1) (In US$ million, as of end-December 2022) 3,500 3,000 2,500 2,000 with Credit Lines Multilaterals 1,500 1,000 Liquid Assets 500 ■Foreign Currency Local Currency Precautionary liquidity buffer Debt service obligations over the next 12 months (1) Debt service includes amortization plus interest payments. Source: Debt Management Unit, Ministry of Economy and Finance of Uruguay Available precautionary credit lines with multilaterals totalize USD 1.5 billion: • • Corporación Andina de Fomento (USD 750 million); Fondo Latinoamericano de Reservas (USD 665 million) Inter-American Development Bank (USD 100 million) 40#417 By end-2022, Uruguay reached its highest-ever investment grade rating and lowest EMBI in its history. Uruguay's sovereign credit ratings (1) (As of January 31, 2023) Baa1/BBB+ /BBB (high) Baa2/BBB /BBB Baa3/BBB- /BBB (low) Sovereign risk premia (2) (EMBI spread, in bps. As of January, 2023) 800 Investment Grade 650 500 350 200 -MEX BRL COL PER PAN -URY CHL Uruguay 50 R&I DBRS S&P Moody's Fitch 105 Outlook: (Stable) (Stable) (Stable) (Stable) (Stable) Apr-19 Jan-20 Oct-20 Jul-21 Apr-22 Jan-23 (1) Source: Moody's, S&P, R&I, DBRS-Morningstar and Fitch (2) Source: Bloomberg 41#42República Oriental del Uruguay ANNEX#43Summary of Key Innovations in Uruguay's SSLB Framework Whole Economy Sustainability-Linked Bonds ކ By integrating "whole economy" Paris-aligned commitments into a national financial strategy, Uruguay will introduce a class of financial instruments that can enable Uruguay, and other State Actors, to achieve our shared climate change objectives Mainstream NDC Commitments ✓ Create benchmarks for Sovereign GHG emission intensity reduction and Native Forest Area maintenance goals Help strengthen the credibility in the NDC system Pave way for KPI standardization in order to scale up sustainable finance instruments for sovereigns Robust inter-ministerial coordination The responsibilities and accountability across participants of task force will be agreed and laid out in a Memorandum of Understanding The work of the task force will be backed by an executive decree executed by all Five Ministries involved in the work related to SSLBS ΞΑ Financing mechanism that is incentive-compatible Uruguay seeks to explicitly link its cost of capital to the achievement of the country's forward-looking environmental targets under the Paris Agreement The proposed two-way pricing structure will penalize Uruguay if it does not deliver on its NDC goals (SPT 1.1 & SPT 2.1) and will reward the country if it over performs on its ambitious NDC targets (SPT 1.2 & SPT 2.2). Reporting Uruguay will be the only non-Annex I country to start reporting GHG emissions on annual frequency and with a shorter time lag, on par with industrialized countries Uruguay's efforts to shorten data "lags" and external verification period for GHG emissions to approximately 17 months External Verification United Nations Development Program ("UNDP") will provide accelerated independent external review of both KPIs throughout the 43 life of the bond#44Contingent Payoff Structure that is Incentive Compatible: Step-Up / Neutral / Step-Down Mechanism KPI-1 Reduction in aggregate gross GHG emissions per real GDP Unit by 2025, with respect to baseline (in %) Less than 50% reduction More than 52% reduction -50% -52%☆ Step Up Coupon Failure to Meet SPT 1.1 +15 bps to SSLB Coupon No Change in Coupon Meets SPT 1.1 but does not exceed SPT 1.2 Step Down Coupon Outperforms SPT 1.2 - 15 bps to SSLB Coupon 44#45Contingent Payoff Structure that is Incentive Compatible: Step-Up / Neutral / Step-Down Mechanism KPI-2 Maintenance of Native Forest area by 2025, in % of baseline More than 103% Less than 100% Step Down Coupon Outperforms SPT 2.2 - [X1] bps to SSLB Coupon 103% No Change in Coupon Meets SPT 2.1 but does not exceed SPT 2.2 100% Step Up Coupon Failure to Meet SPT 2.1 + [X1] bps to SSLB Coupon 45#46The Framework is anchored on a robust, timely and transparent system of reporting and verification Accelerated timetable on reporting and verification 1 October 20, 2022 May 31, 2023 Dec 31, 2025 October May 31, 2027 2H2027 2034 # # USD SSLB Issuance First SSLBI Annual Report Observation Date External Verification & Reporting of KPIs and SPT; Coupon Step-Up / Down triggered, if applicable Coupon Step-Up, or No Change, or Step- Down Effective as of the next interest payment date, interest begins to accrue at the initial rate plus or minus the Step-Up / Step-Down, if applicable, until the SSLB maturity SSLB Maturity (1) versus the United Nations Framework Convention on Climate Change for developing countries. 46 46