Uruguay: Currency & Financial System

Uruguay's currency, the Uruguayan peso (UYU), was introduced on March 1, 1993, replacing the nuevo peso at a rate of one new peso for every 1,000 old units. The nuevo peso had itself replaced the earlier peso in 1975, also at a 1,000-to-1 ratio, reflecting decades of high inflation that steadily eroded the currency's value. The peso is formally divided into 100 centesimos, though centesimo coins are no longer in circulation; today's banknotes range from 20 to 2,000 pesos. The peso was allowed to float freely in 2002 following a severe banking crisis, during which it lost nearly half its value within a few weeks.

Monetary policy is set by the Banco Central del Uruguay (BCU), established in 1967 as an autonomous entity under the national constitution, taking over currency issuance and banking supervision from the Banco de la Republica. Under its charter, the BCU issues the country's notes and coins, manages monetary and credit policy, administers state reserves, and regulates and supervises financial institutions. It also acts as the government's banker and financial agent.

Uruguay's banking sector has long been one of the country's strongest service industries, and the country was once informally dubbed "the Switzerland of America" for its banking secrecy and financial stability. The state-owned Banco de la Republica (BROU) is the country's largest bank, alongside the state mortgage bank Banco Hipotecario, while roughly twenty private banks, most of them branches of international institutions, also operate in the country. A notable feature of Uruguay's financial system is its longstanding partial dollarization, in which many bank loans and a share of personal savings are held in U.S. dollars rather than pesos, even though the peso remains the currency of everyday transactions.