#1República Oriental del Uruguay: Investor Presentation January 2018#2Disclaimer THIS PRESENTATION HAS BEEN PREPARED BY THE REPUBLIC OF URUGUAY (“URUGUAY") SOLELY FOR INFORMATION PURPOSES AND DOES NOT CONSTITUTE A RECOMMENDATION REGARDING THE SECURITIES OF URUGUAY. NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, IS MADE AS TO, AND NO RELIANCE SHOULD BE PLACED ON, THE FAIRNESS, ACCURACY, COMPLETENESS OR CORRECTNESS OF THE INFORMATION OR ANY OPINION CONTAINED HEREIN. THE INFORMATION CONTAINED IN THIS PRESENTATION SHOULD BE CONSIDERED IN THE CONTEXT OF THE CIRCUMSTANCES PREVAILING AT THE TIME AND WILL NOT BE UPDATED TO REFLECT MATERIAL DEVELOPMENTS THAT MAY OCCUR AFTER THE DATE OF THE PRESENTATION. NEITHER URUGUAY NOR ANY OF ITS AFFILIATES, AGENTS, DIRECTORS, EMPLOYEES, OFFICIALS OR ADVISORS SHALL HAVE ANY LIABILITY WHATSOEVER (IN NEGLIGENCE OR OTHERWISE) FOR ANY LOSS ARISING FROM ANY USE OF THIS PRESENTATION OR ITS CONTENTS OR OTHERWISE ARISING IN CONNECTION WITH THIS PRESENTATION. 2#3Organization of the Presentation I. Recent developments and outlook II. Macroeconomic challenges and policy responses III. Debt-management strategies and financing plans for 2018 3#4I. Uruguay is on track to complete its 15th year of uninterrupted economic growth 8 Real GDP Growth (Annual Change, in %) 7 18.000 16.000 CO 6 14.000 Avg. 2005-2017: 4.5% 12.000 5 4 3 2 1 10.000 8.000 3.0 3.0 6.000 4.000 2.000 GDP per Capita compared to LATAM (2017, in current USD) 0 0 2005 2007 2009 2011 2013 2015 2017 2018P BOL Source: Central Bank of Uruguay for historical data; projections from Ministry of Economy and Finance 17,250 PAR COL PERU MEX BRA ARG CHILE PAN URU EĽ Source: International Monetary Fund (WEO October 2017) 4#500 6 The economy bounced back during 2017 Real GDP Change of Uruguay (Year-over-year, in %) Real GDP Change compared to LATAM (2017Q1-Q3 over same period of 2016, in %) 5 LO 4 3 2 1 0 -1 IT -2 2012Q3 2013Q3 2014Q3 2015Q3 2016Q3 2017Q3 3.1 3 Source: Central Bank of Uruguay and official statistical institutions from LATAM countries 1 URU ARG PER MEX CHI COL BRA LO#6After enduring regional downturn, Uruguay faces improving growth prospects of its neighbours Cumulative Real GDP Growth (Index, Base 100=2011) 116 114 Uruguay 112 110 108 Brazil 106 104 102 100 98 Argentina Real GDP Change in Argentina and Brazil during 2017 (Q1, Q2 and Q3 of 2017, respectively, over same period last year, in %) 4,5 3,5 Cumulative Difference 2,5 1,5 0,5 96 96 -0,5 2011 2012 2013 2014 2015 2016 2017Q3 ARGENTINA BRAZIL Sources: Central Bank of Uruguay (BCU); Central Bank of Brazil (BCB); National Institute of Statistics and Censuses (INDEC) CO 6#73 2 1 -1 Marked improvement of external accounts Current Account Balance of Uruguay (Last 12 months, in % of GDP) -2 -3 -4 120 Terms of Trade for Goods compared to LATAM (Average 2011=100) Uruguay 110 2.3 100 -5 2012 2013 2014 2015 2016 2017Q3 Source: Central Bank of Uruguay 90 90 80 60 70 70 60 2011 2012 2013 2014 2015 2016 2017(*) • Colombia Mexico Brazil Peru Chile ---Uruguay Source: International Monetary Fund. (*) Estimated for 2017 7#8Comfortable external liquidity position International Reserves 18.000 In USD million 15.000 in % of GDP (right axis) 12.000 9.000 6.000 3.000 0 2005 35 30 30 27.5 25 20 20 15 10 5 0 2007 2009 2011 2013 2015 2017 Source: Central Bank of Uruguay 8#9Uruguay remains a bastion of institutional stability in the region Ranking position in LATAM Democracy Index (The EIU 2016) Rule of Law 1st (World Justice Project 2016) Political Stability and Absence of Violence/Terrorism (Worldwide Governance Indicators, WB 2016) Global Peace Index (Institute for Economics & Peace 2017) Note: Ranking position in LATAM and Worldwide, respectively 1st 1st 1st 1st 2nd 3rd 3rd Corruption Perception Index (Transparency International 2016) Prosperity Index (Legatum Institute 2017) Press Freedom Index (Reporters Without Frontier 2017) Economic Freedom Index (Heritage Foundation 2017) 9#1012 11 II. Inflation has fallen significantly and is back within the target band 10 9 8 7 CO 6 LO 5 4 3 Inflation (annual, in %) Inflation Target Band 12 11 10 9 8 7 6.55 6 Tradable and Non-Tradable Inflation (annual, in %) 7.6 5.7 5 Non Tradable Sector 4 Tradable Sector 3 2 2 Dec-14 Dec-15 Dec-16 Dec-17 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Source: National Bureau of Statistic & Central Bank of Uruguay 10#11Policy priority is to shore-up public finances to meet 5-year budget target of 2.5% of GDP by 2019 Consolidated Public Sector Balance (in % of GDP) General Government Public Enterprises Central Bank -Consolidated Fiscal Result -0.7 -1.3 -1.8 -2.4 -0.9 -2.8 -2.7 -1.1 -3.4 -2.3 -2.7 -3.3 -3.5 -3.6 -3.9 2010 2011 2012 2013 2014 2015 2016 Source: Ministry of Economy and Finance November, 2017 (last 12 months) 11#12III. Debt management strategy over the last decade: reduce FX and roll-over risk 100 0 Central Government Debt (in % of GDP, end-period) 90 80 70 60 60 Gross Debt Net Debt 50 47.8 40 40 30 20 20 10 42,0 Currency and Maturity Composition of Debt (end-period) Debt in Foreign Currency (in % of total) -Average time to maturity (in years) 13.7 49 49 0 2005 2007 2009 2011 2013 2015 2017Q3 2005 2007 2009 2011 2013 2015 2016 2017Q3 Source: Debt Management Unit, Ministry of Economy and Finance 12#13LO 5 4 3 2 Active pre-funding policy has build-up central government's liquidity reserves Financial Buffers and Debt Service Obligations (in USD billions, as of December 2017)(*) Credit Lines with Multilaterals USD2.4bn Large liquidity buffers: ➤ Underpin the credit quality of the sovereign Liquid Assets USD2.2bn Debt Service in 2018 USD2.9bn(**) Provide flexibility when deciding timing, strategy and format of capital market transaction (*) preliminary data (**) Amortization plus interest payments Source: Debt Management Unit, Ministry of Economy and Finance 13#14Government has reached an investment agreement with Finnish company UPM to build a second pulp mill in the country • Largest private investment in history. • Would lead to massive increase in transport infrastructure. . In an economy of the size of Uruguay, this sort of investment, if it comes to pass, could have a material positive impact on GDP growth, employment and the Balance of Payments. Conversation with Government of Uruguay Development of Infrastructure Pre-engineering Tendering and Permitting est. 1.5-2 years UPM Investment Decision Investment Project Development of Infrastructure est. 2.5 years Phase I Phase II Source: UPM (http://assets.upm.com/Investors/2016/Investor%20Presentation%20-%20September%202016.pdf) Phase III UPM 14#15Credit rating actions during 2017 pointed to continued resilience and improved outlook Evolution of Uruguay Sovereign Credit Ratings Credit Rating Updates in 2017 A3/A-/A- Baa1/BBB+/BBB+ Baa2/BBB/BBB Investment Grade Baa3/BBB-/BBB- Ba1/BB+/BB+ Ba2/BB/BB Ba3/BB-/BB- B1/B+/B+ B2/B/B 2006 2007 2008 2009 2010 2011 2012 Moody's Sources: Moody's, S&P,R&I, DBRS and Fitch 2013 2014 2015 2016 2017 S&P Fitch Fitch Ratings 09/2017. Affirmed Uruguay's rating at "BBB-" with Stable outlook. MOODY'S INVESTORS SERVICE STANDARD & POOR'S RATINGS SERVICES MCGRAW HILL FINANCIAL 07/2017. Outlook raised to Stable from Negative and affirmed "BBB" rating. 05/2017. Outlook improved to Stable from Negative and affirmed "BBB" rating. DBRS 05/2017. Affirmed Uruguay's rating at "BBB(Low)" with Stable Outlook. 15#16Financing strategies in global markets during 2017: "second-generation" dedollarization Objectives Increase Reliance in Local Currency Funding and Diversify Investor Base Reduce exposure to currency risk in the government debt portfolio Expand the sources of funding and improve financing terms 16#17"Second-generation" dedollarization of government debt Objectives Strategy Increase Reliance in Local Currency Funding and Diversify Investor Base Develop the Local Currency, Nominal Fixed-Rate Bond Market Reduce exposure to currency risk in the government debt portfolio Expand the sources of funding and improve financing terms Enhance market depth, liquidity and duration in sovereign bonds Establish a government bond yield curve that provides pricing benchmarks for local currency instruments and reduce financial dollarization 17#18"Second-generation" de-dollarization of government debt Objectives Strategy Implementation Increase Reliance in Local Currency Funding and Diversify Investor Base Reduce exposure to currency risk in the government debt portfolio Expand the sources of funding and improve financing terms Develop the Local Currency, Nominal Fixed-Rate Bond Market Enhance market depth, liquidity and duration in sovereign bonds Establish a government bond yield curve that provides pricing benchmarks for local currency instruments and reduce financial dollarization Issuance of global peso bonds in nominal fixed-rate, with benchmark size and intermediate maturities Reach the broadest pool of international investors and increase market competition Meet the criteria to potentially be included in the benchmark GBI-EM bond index 18#19Landmark 5-year international issuance in nominal fixed- rate peso met large and diversified investor demand Global UYU due 2022 (in USD million equivalent) 6000 ■ Exchange 5000 New Money 4000 4.9 x 3000 2000 1000 1,250 6,250 June 2017: 0 Allocation Demand First-ever nominal fixed-rate global peso issuance. • 5-Year maturity for USD 1.25bn-equivalent, 10% yield. Key role played by the Central Bank in implementing the local leg of the concurrent LM operation. 19#20Strong rally in bond price, particularly after inclusion in Emerging Markets Government benchmark index Global UYU due 2022 (in USD million equivalent) 6000 ■ Exchange 5000 New Money 4000 Global UYU 2022 Yield evolution, since issuance (in %) 10,5 6,250 10,0 10.0 9,5 4.9 x 9,0 3000 2000 1,250 1000 8,5 8,0 Announcement of Index Inclusion 7.95 0 7,5 Allocation Demand 12-Jun 23-Jun 5-Jul 17-Jul 31-Jul 10-Aug 22-Aug 4-Sep Source: Bloomberg 20 20#21Impact of bond's inclusion in the GBI-EM was similar to the case of Colombia 5-Year Yield on Nominal Fixed Rate in Local Currency (change in bps, around moment T=0) 50 50 Announcement of Index Inclusion 10 -30 -70 -110 -150 -15 -10 -5 Source: Bloomberg 5 10 15 20 20 Days since index inclusion announcement COLOMBIA URUGUAY 25 30 21 21#22Followed through three months later, by extending duration with a 10-year UYU global issuance Global UYU due 2028 (in USD million equivalent) 5000 ■Exchange 4000 ■New Money 3000 4.0 x 2000 1,100 1000 4,400 0 Allocation Demand September 2017: Longest-ever nominal fixed-rate peso issuance. ➤ 10-Year maturity for USD 1.1bn-equivalent, 8,625% yield. ➤LM operation focused on international bonds (local currency and US dollar). 22 22#23Compression in Rates and Shape of Yield Curve Portend Lower Long-term Inflation Expectations Nominal Peso Yield Curve (Par value, in %) 15 14.35 One year ago 14 13 12 11 10 6 January 11th, 2018 8.86 8.88 EM Currencies Performance vs USD (Spot change in 2017, in %) South African Rand Malaysian Ringgit Chilean Peso Chinese Renminbi Indian Rupee Russian Ruble Mexican Peso Peruvian Sol Uruguayan Peso Colombian Peso Indonesian Rupiah Depreciation against USD Appreciation against USD 1.7% 8 Brazilian Real Turkish Lira Argentine Peso 7 6M 1 2 3 4 5 Years 6789 10 -15 -10 -505 10 15 Source: Bolsa Electronica de Valores del Uruguay (BEVSA) Source: Bloomberg 23 23#24Yield-curve arbitrage in local currency bonds portrend a reduction in long-term inflation expectations Nominal Peso Yield Curve (Par value, in %) 15 13 11 6 One year ago January 8.86 11th, 2018 9 LO 5 4 CPI-linked Yield Curve 3 (Par value, in %) 2.63 7 1 6M 1 2 3 4 5 67 8 9 10 1 5 10 15 20 20 Years Source: Bolsa Electronica de Valores del Uruguay (BEVSA) Annual average breakeven inflation of 6.23% over a 5-year horizon Years One year ago 25 January 11th, 2018 30 30 24 24#25Despite significant compression, Uruguay's nominal yield remain relatively high among IG countries in EM Yield of 5-Year Local Currency Sovereign Bond (Nominal Fixed Rate) (mid-yield to maturity, in %) 6 6 3 8.79 7.54 7.24 7.00 5.76 5.65 4.53 3.89 0.92 URUGUAY MEXICO INDIA RUSSIA INDONESIA COLOMBIA PHILLIPINES PERU HUNGARY Source: Bloomberg 25 25#26Milestones of Uruguay's debt management in 2017 ➤ First-ever issuances in pesos at nominal fixed rate on a global scale Index inclusion in GBI-EM: a further step towards international financial integration Both local and international capital market funding was fully done in Local Currency 26 26#27Central government funding needs and sources Indicative Uses and Sources of Funds (in USD million) 2017 2018 USES (*) 3,470 3,055 Interest Payments 1,558 1,672 Amortization 1,862 1,523 Primary Deficit 50 -140 SOURCES (*) 3,470 3,055 Multilateral Disbursements 146 500 Total Bond Issuance (**) 3,057 2,700 Others 91 185 Use of Assets (***) 177 -329 (*) Preliminary data (**) Includes domestic and external issuances (***) Positive value indicates a reduction in Central Government's assets Source: Ministry of Economy and Finance. 27 27#28Upcoming maturities continue to be highly concentrated in local currency Government Debt Redemption Profile during 2018, by Currency (in USD million) 500 ■Foreign ■Local 400 300 200 100 More than 80% of total redemptions are denominated in LC 0 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Source: Ministry of Economy and Finance 28 28#29Intended debt management strategies for 2018 1) Continue developing the local currency bond market by: Extend duration in nominal peso yield curve through issuance of longer-dated global bonds and liability management operations. Continue to target index-eligibility in primary issuances to enhance liquidity, while ensuing the right incentives for banks to increase trading in secondary markets and dollar/peso hedging. instruments. Increasing share of peso debt through dollar/peso cross- currency swaps. Aligning custody and settlement process in domestic markets to international standards. 29 29#302500 2000 1500 1000 500 Government debt redemption profile Total Government Debt Amortizations, by Currency (in USD million) Foreign Local 0 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 Source: Ministry of Economy and Finance 30 30#31Uruguay's sovereign risk premium performance has been below better-rated peers JP Morgan EMBI Index (in bps) 440 390 340 290 240 190 140 -Colombia Mexico Peru Uruguay Panama 136 90 ene-16 mar-16 may-16 jul-16 sep-16 nov-16 ene-17 mar-17 may-17 jul-17 sep-17 nov-17 ene-18 Source: Bloomberg 31#32Intended debt management strategies for 2018 2) Returning to the international dollar bond market: ➤ Our deepest and more efficient source of funding. ➤ US dollar bond market gives the Republic more flexibility regarding the maturity of issuances. Update and refresh of USD Global Curve after being out of the market for more than one and a half year. ➤ Continue diversifying investor base. 32 32#33Mid-Yield (in %) 5,00 Uruguay's Global USD curve Uruguay's US Dollar Curve (*) (bond size in USD) 4.41% 2036 2045 2050 3.9bn 4,00 2033 1.1bn 0.7bn 0.8bn 4.06% 4.05% 2027 3.92% 2.1bn 3,00 2024 1.5bn 3.32% 2.86% 2,00 1,00 0,00 0 5 10 (*) For bonds with outstanding above USD 500mn Source: Bloomberg 15 20 Average time to maturity (in years) 25 25 30 35 33#34Key Highlights of the Uruguayan Economy Robust macroeconomic performance and investment grade country Solid institutional foundations Decelerating inflation and fiscal consolidation underway Resilient government debt profile and large and liquid buffers Ambitious infrastructure agenda underpinning medium term outlook 34