Uruguay

Uruguay A Latin American country which gained independence in 1828 as a compromise between Argentinian and Brazilian claims over the territory. A model of democratic and economic stability in the early twentieth century, its political life was dominated by the Colorado Party, representing commercial interests, and the Blancos, representing landowners. The Colorado President José Batlle y Ordóñez (1903–7, 1911–15) laid the foundations for Latin America's first welfare state, and subsequently wide-ranging social legislation was introduced, including the eight-hour working day, minimum wages for farm labourers, and pensions. In addition, public works reduced unemployment and created a good infrastructure, while public monopolies were established out of nationalized, previously foreign-owned companies.

At Batlle y Ordóñez's instigation, the social harmony thus created was institutionalized in a constitutional revision of 1919, whereby the President ruled in conjunction with a National Council of Administration which contained a guaranteed minority from opposition parties. These advances were made possible by its economic prosperity, deriving principally from flourishing agricultural exports. The weakness of this over-reliance on exports was exposed by the Great Depression during the 1930s. President Gabriel Terra took on special powers to rule as a virtual dictator in 1933, while his elected successor from 1938, General Alfredo Baldomir, restored full democracy in 1942, albeit with some hesitation. Meanwhile, the country industrialized relatively successfully to make it less dependent on world trade. Many were given work in an expanded state administration, which reduced social tension and attracted employees' support for the state.

After the last great export boom stimulated by the Korean War in the early 1950s, the economy entered a long period of decline. This was accelerated by social expenditure which the country could no longer afford, and a bloated state administration which took up 35 per cent of all state spending. In the late 1960s social unrest emerged, which was exacerbated by the activities of the Tupamaros. Following his election in 1971, President Bordaberry gradually assumed dictatorial powers, with the consent of the military and leading elites. Parliament was dissolved in 1973, and civilian institutions were placed under military control. The economy was radically transformed, through (1) liberalization (reduction of import tariffs), (2) privatization, (3) promotion of domestic industry, (4) promotion of foreign investment. However, living standards continued to fall, while the regime's brutal suppression of opponents made the dictatorship increasingly untenable.

A new constitution to prepare for a return to democracy was rejected in a plebiscite in November 1980, so that new elections were not held until 1984. They were won by Sanguinetti, who returned to the Presidency in 1995 after the defeat of the Blancos under Luis Alberto Lacalle de Herrera (President 1990–5). While foreign debts and inflation remained high, the most important priorities remained a reduction in the number of state employees (20 per cent of the total workforce) and pension reform, as the number of pensioners amounted to half of the total active working population. Throughout the 1990s the economy grew steadily at an average of 3–4 per cent each year, though inflation declined only gradually. From the late 1990s, however, its economy was badly affected from the economic difficulties of neighbouring Brazil, and the economic collapse of its other neighbour, Argentina, in 2001. In the first three months of 2002, the economy contracted by 10 per cent as economic uncertainty spread to Uruguay's other neighbour, Brazil. In July 2002 the country–s banks were in a state of near-collapse until they were rescued by a $1.5bn. loan from the IMF. This was largely a response to the political stabilization of recent years. From 1995 to 2000 the erstwhile political enemies, the Blancos and Colorados, formed a governmental coalition. In 2000 they united their support in the second round behind a common candidate, Jorge Batlle Ibáñez, who was duly elected to the Presidency against the candidate of the left, Tabaré Ramón Vásquez Rosas.