Swanky Uruguay resort clouded by credit crunch

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iol travel feb 15 Uruguay AFP View of the beach of Punta del Este, Maldonado.

Punta del Este, Uruguay - Every summer, Argentines flock to Uruguay's glamorous Punta del Este beach resort to get tanned and be seen. But this season, currency controls in Argentina are keeping some visitors away and forcing others to tighten their belts.

Dollars are widely accepted in Uruguay and tourists tend to pay cash for holiday rentals. Argentina's virtual ban on foreign currency purchases has sent the black-market rate for dollars soaring, however, making a trip to “Punta” doubly expensive.

Prices in Uruguay are also being pushed higher by the country's strong currency and stubbornly high inflation.

The glitzy nightlife in Punta del Este and nearby resorts is noticeably tamer this year and fewer cars cruise the streets. Some beach vendors say sales have sunk and complain about penny-pinching visitors.

“It's very, very expensive. Extremely expensive,” said Marcelo, 38, a vacationing Argentine merchant. “The same sunscreen we pay 69 pesos (about R150) for in Buenos Aires, costs more than 200 Argentine pesos here.”

“We're cooking everything and eating lots of pasta,” he said. “Uruguay is beautiful but these prices are taking a toll.”

The number of tourists visiting Uruguay dropped 11 percent in January from a year earlier, government data shows. January is normally the Southern Hemisphere summer's busiest month.

Tourism has been booming in the last five years in Uruguay, a laid-back country of about 3.2 million squeezed between Argentina and Brazil that boasts rolling pastures and well-kept beaches. Argentines accounted for 58 percent of visitors in 2011.

The industry has become one of the biggest segments of the economy, displacing traditional activities like cattle-ranching and dairy farms.

But rising prices in dollars are making it a less competitive destination, compounding the impact of economic woes in rich nations. Plus, Uruguay's flagship Pluna airline was forced to close in July, hurting access by air.

“(Visitors) are spending less because our country's costs are truly high and the dollar is weak,” said Luis Borsari, head of the Uruguayan Tourism Chamber. “This is happening with Argentines, certainly, but also with Brazilians.”

In Argentina, the cost of buying greenbacks on the black market shot up last week to nearly 8 pesos per dollar - versus about 5 pesos per dollar on the official market .

In theory, Argentines are allowed to buy foreign currency at the official rate when they travel abroad. But in practice, there are limits on how much they can purchase and many requests are rejected.

Last year, the government also began charging a 15 percent tax on credit card purchases abroad.

These tough rules have riled many middle-class voters and helped sink President Cristina Fernandez's popularity.

They have also stoked anger at officials who travel overseas despite the restrictions. A week ago, some ferry passengers heckled Deputy Economy Minister Axel Kicillof when he and his family returned from a trip to Uruguay, calling him a hypocrite.

Uruguay has taken several measures to try to ease costs for tourists, including a rebate of the 22 percent Value-Added Tax on hotel and restaurant expenses. But cash transactions do not benefit from the tax break.

Hotel operators estimate occupancy in Punta del Este is down by as much as 15 percent from 2012.

Government officials recognise that this summer is off last year's record-high influx of tourists. With Mardi Gras carnival celebrations falling in February, however, they expect the season to end in line with 2011 and 2010.

Not everyone is so optimistic, though.

“Not even in (the crisis of) 2002 were things as bad as they are now,” said Fabian Nieves, a 42-year-old vendor who peddles clothing on the beach. “Sales this season have fallen in half.” - Reuters

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