Comparison Between a Developing and a Developed Country: Uruguay and Spain 

A simple walk around any city reveals the difference in the standard of living from individual to individual, difference in cars, house sizes and pastime activities. This difference is termed as economic inequality which is the main distinguisher between a developed and a developing nation alongside health, literacy, crime rate, GDP per capita, average birth and death rate, infrastructure, unemployment rate and advancements in technology. A developing nation can be categorised as a country with lower industrialisation percentage and a lower per capita income, these types of countries can further be divided into two categories moderately developed and developing countries. Moderately developed countries usually have a GDP per capita income between 1 thousand and 12 thousand US Dollars, the average per capita income of such countries is 4,000 US Dollars. These types of countries account for 4.9 Billion people. The list of moderately developed countries is growing extensively-these include Mexico, china, Thailand Uruguay and Ecuador. Developed countries are generally more industrialized and have a higher GDP per capita above 12,000 US Dollars. The average GDP per capita of developed countries is 38,000 US Dollars. As of 2010 the list of developed countries includes the United States of America, some countries in western Europe and Spain. These types of countries administer 1.3 Billion people. In general, the population of these type of countries are more stable and have a predicted growth rate of 7% over the next 40 years (Michie.J ). This essay is going to talk about the various factors that make Spain a developed and Uruguay a developing nation.

The main factor being studied in this essay is the GDP of both countries, the GDP (Gross Domestic Product), the monetary measure of the sum of the prices with respect to all the final goods being produced by the country. It is widely accepted as a measure of an economy’s output or production. The GDP is generally calculated annually, quarterly or monthly. Most commonly seen calculated by fiscal years, a period used by the government with the purpose of accounting and budgeting. Another major factor in assessing a country’s economy is inflation, it’s the true differentiator between nominal Gross Domestic Product and real Gross Domestic Product true measure of a nations progress. Inflation is the average increase in price of all the goods in a country over a period of time, which results in the cost of living for the people in the country raising substantially. The higher the inflation rate of a country the lesser the value of the currency. It’s been observed that developed countries always had a low inflation rate compared to the undeveloped countries or developing countries. Developed nation have low inflation because when there is a high inflation the average goods price would increase which subsequently decreases the exports of the country causing a decrease in Gross Domestic Product per capita and when there is extremely high inflation, the country would face unemployment-to which Zimbabwe is a perfect example.

Uruguay’s exports consist of beef, soybeans, cellulose, rice, wheat, wood, dairy products, wool which were valued at 9.812 billion US Dollars in 2012 while Spain’s export consists of vehicles, machines and engines, oil, electronic equipment, pharmaceuticals, plastics, fruits and iron, immediately noticeable as a polar opposite of what Uruguay as a country specialises in. These goods are of a massive variation-price wise to Uruguay’s goods value. Spain has a behemoth export value of 215.7 billion US Dollars as of 2009. Coming to imports we see that the monetary value of Spain’s imports dropped from 415.5 Billion US Dollars in 2008 to 293.2 Billion US Dollars in 2009, still maintaining an extremely noticeable difference from Uruguay’s peak monetary import value. Uruguay’s imports were worth 10.97 Billion US Dollars which consisted of goods such as electrical equipment, data processing machines, crude oil, automobiles, pharmaceuticals and chemical fertilizers. Vital imports for Spain on the other hand includes electrical and mechanical machines and iron and steel, with an advantage having the European union as valuable export/import partners.

Uruguay follows a Presidential Democratic Republic, the president is the head of the state and the government at the same time. The nation is a multi-party system where the president possesses executive powers the Uruguayan economy is still trying to stabilise itself from the financial crisis in 2002 which substantially shook the banking system which affected its fiscal solvency and subsequently caused the currency to be disrupted and cataclysm on itself. This was also related to the crash in Argentina’s currency. Uruguay as of now faces numerous hardships on its way to a stable growth path, the political system managed the crisis remarkably it avoided any violations as it faced the crisis. Those in power negotiated trades of debt with its bondholders. This gave a good impression upon the government as they handled the crisis with precision, responsibility and diplomacy. The main reason the banking crisis of Uruguay surfaced to begin with is due to the huge run on banks from depositors, majority of who were from Argentina led to the government freezing bank operations. This was caused by noticeable contractions in Uruguay’s currency and its over dependence on Argentina (tourism, construction boom), 33% of the country’s deposits were taken out of financial system.

Spain’s government is transforming into an increasing surplus system from an internal investment and consumption-based economy. The weightage of exports has increased to 34.1% in 2013 quarter 4 from 23.9% in 2009. Spain rose from a 10% deficit in predicted Gross Domestic Product to a considerable surplus in 2013. The cyclical current account adjustment is giving way to a structural system. This process is mainly being supported by the change in structure of the private sector. The productivity and cost gaps that developed over the first few years of the EMU has noticed a rapid decline and currently doesn’t require a high growth rate to create employment in the private sector. Debt from non-financial firms has decreased to 129.0% of Gross Domestic Product in 2013 Quarter 4 from 143.8% of Gross Domestic Product in 2010, while the household sector has also seen a healthy decline in debt from 87.4% Gross Domestic Product in 2010 to 77.1% Gross Domestic Product in 2013 Quarter 4.

The recovery to all tradable goods and services is gaining popularity which construction and other non-tradable sectors continue to drag on the employment generation and general growth. Spain’s approach to help with the Gross Domestic Product growth was to look for external investments to which Spain found a surplus of land for the purpose of sale, this resulted in the Golden Mile of Spain. The numerous investments coming from other nations would be substantial enough to create a noticeable bump up in Gross Domestic Product.

Spain’s currency- The Euro, has held great stability in the foreign exchange market with great tenacity since its inception to the European Union system in June 1989. This is a respectable testament to the remarkable dedication shown by authorities as the economy integrated and converged with other economies. Previously the monetary value has been dominated by overvaluation. This occurred post to the monetary policy which was made to weigh down on inflation which deprived the country of capital for a short term. There have been 4 devaluations in the past 15 years with a 7% depreciation in the value in September 1992 when the United Kingdom separated from the European Union system, a further 6% depreciation the subsequent month in the same year following a 8% devaluation in May 1993 and a 7% depreciation in march of 1997.

Human Development Index(HDI) is a tool used by many economists around the globe to measure the overall achievement in its social and economic dimensions and this mainly revolves around standards of the medical sector in a country, the literacy rate and the standard of living for the people in the country.

Why is the Human Development Index Important?

The main agenda of the Human Development Index is to calculate HDI in order to observe the current standard of living within a country and deduce methods to increase it. Human Development Index is calculated using 3 factors namely-income, education and health. Human Development Index score is one of the key factors which informs us regarding the level of development in the country and showing us how much-numerically, it also informs us about where a country is lacking in structure for efficient development. Many counties which have huge military assets and substantially high are surprisingly not as developed because they have a lower Human Development Index score. A perfect example of this system would be India, it ranks 4 best military power and 3rd highest Gross Domestic Product in the world but it is still considered to be a developing country due to its comparatively lower Human Development Index score of 0.69.

As mentioned before a developed country has a better healthcare system than an average developing country, it is measure in HDI (human development index). Spain's per capita GDP, as of 2016, is $34,526. Its infant mortality rate and life expectancy are excellent; fewer than four infants die per 1,000 live births, and the average Spaniard lives to be 82. Spain scored 0.87 in Human Development Index and the average literacy rate and health care system are noticeably of better standards compared to most developed countries. The Human Development index of Uruguay is comparatively lower with respect to Spain’s and numerous other developed nations. Even the Gross Domestic Product per capita differs skims the 9 12,000 US Dollar mark which shows its remarkable growth rate so far. Although Uruguay isn’t considered a Developed country as of the year 2018, it is reaching the ranks of a Developed nation and the mark is approaching Uruguay rapidly. Looking towards the future, the prospects show that Uruguay’s economy is catching up to that of Spain however Spain’s economy is also uprising but not at a rate such as Uruguay. Due to their rapid development a lot of foreign direct investment has been attracted and this has caused economic growth in the past. Spain must keep their economic growth at a higher rate in order to sustain its foreign direct investments. In order to become a producer of high valued goods Uruguay should focus on the products they are exporting. As well as their many beef factories, they should focus on goods and services which are more valued and can increase their GDP such as that of Spain and their countries production of higher valued products such as vehicles and also the financial industry. This will bring in more revenue as, these cost more and the demand for these goods and services are much more-higher than the main exports of Uruguay. 

References

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