Central Bank of Uruguay President Guillermo Tolosa reviewed how greater stability in prices and economic activity has reduced risks for households and businesses at a working lunch hosted by the Uruguayan Association of Marketing Executives. His assessment linked lower exposure to extreme shocks to better conditions for investment and financing, while highlighting that perceptions of risk can lag improvements in economic fundamentals.
Greater diversification of markets, energy sources and investors has reduced vulnerabilities, while accumulated reserves, liquidity and capital provide buffers against shocks. Fiscal rules, inflation targets and a floating exchange rate have also supported stability, alongside stronger institutions and financial supervision. Stability does not eliminate shocks, but reduces the likelihood of abrupt changes in prices and economic activity that disrupt household incomes, business costs, sales or financing conditions.
A lower probability of extreme losses can improve a project's return after adjusting for risk even when its expected profitability remains unchanged. Greater predictability also supports longer planning horizons and more favorable financing conditions. However, past crises leave lasting effects on expectations and behavior, while gradual improvements in stability receive less attention than episodes of crisis.