Vaca Muerta crude silently rewires Uruguay's energy dependence as growth forecasts crumble.

Vaca Muerta crude is reshaping Uruguay's energy supply architecture — and that shift, combined with an intensifying fiscal debate and deteriorating growth projections, sketches a country now searching urgently for levers to reignite its economy.

The consolidation of Argentine crude as a key input for ANCAP is perhaps the most concrete and strategically consequential story emerging today. According to El Observador, oil from the Vaca Muerta formation is steadily gaining ground in the sourcing mix of Uruguay's state-run refinery, in what amounts to a quiet but significant reconfiguration of the country's energy dependencies. For Uruguay, which has historically imported crude from distant suppliers, access to a competitive and expanding regional supply offers logistical and price advantages that are hard to ignore, particularly at a moment when Economy Minister Gabriel Oddone has warned of the effects of the war in the Middle East as a "negative shock" pressuring energy prices. The geopolitical irony is not lost: while Washington pressures Montevideo to scale back ties with China — Oddone has acknowledged that pressure as "daily," according to MercoPress — Uruguay is deepening its energy integration with Argentina, a neighbor whose macroeconomic stability is, by its very nature, volatile.

That search for external anchors for growth coexists with a domestic reality the government itself acknowledges as fragile. The Consejo Fiscal Autónomo warned Parliament of an "overestimation" in the growth projections presented by the MEF in the Rendición de Cuentas, an institutional signal that cannot be dismissed as merely technical: in Uruguay, where fiscal credibility is an asset built over decades, a discrepancy between the oversight body and the Ministry carries real political weight. Oddone, for his part, replied that "projection errors are a common occurrence" and defended the government's figures, while conceding to La Diaria that "there is a fairly high probability that we will revise downward the growth forecast for 2026." That simultaneity — defending projections while announcing they will likely be cut — captures well the uncomfortable position of the Frente Amplio's economic team in its first months in office.

The quantitative context offers little help. The economy grew a mere 1.8% in 2025, below both official and IMF forecasts, and the first quarter of 2026 showed an expansion of between 0.8% and 0.9% depending on the source, including data from the Banco Central and private estimates. The Ceres Leading Index, which anticipates future activity, has shown mixed signals: a decline reinforcing the weakening trend, followed by a marginal 0.2% rebound in April, insufficient to reverse the deceleration narrative. Private analysts have consolidated downward revisions to their 2026 GDP forecasts, with some estimates suggesting growth could come in below 1%. The World Bank has already trimmed its projections for Uruguay to 1.6% this year and 1.7% for 2027, labeling the country a "superstar" that has lost momentum.

Faced with that diagnosis, the government is betting on private investment as the engine. El Observador details that the Executive is counting on a bundle of megaprojects — green hydrogen, data centers, and pulp — to sustain its growth projection in a global environment that Oddone himself describes as "challenging and uncertain." The Ministry of Economy also consulted Argentine economist Federico Sturzenegger while drafting its competitiveness bill, signaling both the ambition of the reform and its debt to the regional debate on deregulation. At the same time, the MEF doubled its issuance of peso-denominated Treasury Notes after receiving offers for nearly 9.7 billion pesos, a signal that the local market retains appetite for sovereign debt in domestic currency — no small asset for a government seeking to advance the pesification of the economy.

The political front adds another layer of complexity. The PIT-CNT met with Oddone to discuss changes to social security, and former Partido Colorado leader and senator Gustavo Abdala warned the government that "agreements are meant to be honored," referring to commitments made during the negotiation of the previous pension reform. The government confirmed it will push for "a set of transformations" in the AFAP regime, though Oddone rejected the term "nationalization" and assured there would be "no confiscation." In parallel, the government agreed to a 2.5% increase in minimum pensions from the BPS, the Caja Policial and the Caja Militar, in a limited signal of social easing. The Coalición Republicana, meanwhile, refused to vote in favor of the Rendición de Cuentas, leaving the Minister in permanent negotiator mode: "I will not give up on negotiating," Oddone declared.

What to watch in the coming weeks is whether the competitiveness bill the government will introduce in Parliament can generate enough investor confidence to lift growth expectations, or whether the combination of inherited fiscal constraints, external pressures and a fragmented political environment continues to compress the economic team's room for maneuver. Approval of the Rendición de Cuentas and the evolution of the May activity index will be the first concrete thermometers.

**ANCAP (state-owned, not publicly traded)** — Uruguay's state refinery is deepening its integration with crude from Vaca Muerta, consolidating Argentina as a key strategic supplier amid global energy volatility. The move reduces exposure to Middle Eastern suppliers but increases reliance on the political and production stability of its neighbor.

**UPM (NYSE: UPM, also listed in Helsinki)** — The Uruguayan government includes the pulp industry among the large-scale private projects on which it is pinning its economic reactivation hopes to meet its 2026 growth targets, reinforcing the structural importance of Finnish forestry-industrial investment in the national GDP.