Uruguay presidential candidate warns pension reform would 'blow up' economic stability

By Lucinda Elliott

MONTEVIDEO (Reuters) - A Uruguayan pension reform plan that seeks to lower the retirement age to 60 and will be put to citizens in a referendum on Sunday would "blow up" the South American country's stable economic model if it went ahead, conservative presidential candidate Alvaro Delgado told Reuters.

The plebiscite, the same day as the first round of the presidential election on Oct. 27, would - if approved - scrap private pension schemes and increase state payouts - a move that many politicians and investors fear may cripple the country's finances and dent markets.

"If the plebiscite is approved, everything would change. The model of economic stability and social protection that we Uruguayans have given ourselves will be blown up," Delgado, 55, said in his first interview with foreign media ahead of the vote.

"It is clear that all our plans would have to be reconsidered," he added, speaking from his National Party's campaign trail in the country's rural interior.

The small but relatively affluent country of 3.4 million people has long been seen as a bastion of free markets and private enterprise in the region, which has attracted tech and finance firms, and fast development along its beach fronts.

But the next government will also need to deal with heavy fiscal deficits. Delgado said a tax hike was not on the cards, with spending cuts a likelier avenue to balance state finances.

"We are totally convinced there is no room for new taxes here," he said. "If it were necessary to take measures to consolidate public finances, I think no one has any doubt that we would do it on the side of public spending."

Center-left opposition candidate Yamandu Orsi, the frontrunner in polls, has said he also wants to avoid tax hikes or deeper structural reforms.

Delgado, the continuity candidate of current President Luis Lacalle Pou's coalition, would stick with plans to push forward free-trade deals, including with China, that have caused tension within the regional Mercosur trade bloc.

"The case of China is one we are promoting," he said. China is a key buyer of Uruguay's beef, wood-pulp and soybeans.

"But we are also doing everything possible to close the EU-Mercosur treaty, asking to join the CPTPP (Trans-Pacific Partnership), trying to strengthen ties with the United States and analyzing a free-trade agreement with Turkey."

(Reporting by Lucinda Elliott; Editing by Adam Jourdan and Rosalba O'Brien)