URUGUAY

Oriental Republic of Uruguay

República Oriental del Uruguay

COUNTRY OVERVIEW

LOCATION AND SIZE.

Uruguay is located in the southern region of South America. It is bordered by Argentina on the west and Brazil on the north and east. Its southern coastline of 660 kilometers (410 miles) is formed by the Rio de la Plata, which separates Uruguay from Argentina and opens into the Atlantic Ocean. The nation's total area is 176,220 square kilometers (68,038 square miles), including 2,600 square kilometers (1,004 square miles) of water. The country is slightly smaller than the state of Washington. The nation's capital, Montevideo, is located on the southern coast, where the Rio de la Plata meets the Atlantic Ocean. The capital is also the nation's largest city, with a population of 1.4 million.

POPULATION.

The population of Uruguay was estimated at 3,334,074 in July 2000. The country has a very stable population, with a low growth rate of 0.77 percent. By 2010, the population is expected to be 3.6 million. Uruguay's birth rate is 17.42 per 1,000 people; its fertility rate is 2.37 births per woman. The infant mortality rate is 15.14 deaths per 1,000 live births. This rate is high when compared with nations such as Canada (which has a rate of 5.08 deaths per 1,000 live births), but is average when compared with most Latin American countries. The nation's overall mortality rate is 17.42 deaths per 1,000. Uruguay loses a small portion of its population to emigration (0.63 emigrants for every 1,000 people). Since 1980, about 500,000 Uruguayans, mostly younger people, have emigrated, mainly to Argentina and Brazil. The life expectancy is 71.9 years for males and 78.75 years for females. The elderly population is small, with only 13 percent of Uruguayans over the age of 65. This segment of the population is growing rapidly and is expected to increase by 40 percent by 2010.

The majority of the Uruguayan population is urban. Almost 80 percent live in towns or cities. About half of the population lives in the greater Montevideo urban area and the rest of the urban population is concentrated in about 20 towns. Population density is 19 people per square kilometer, one of the lowest rates in the Western Hemisphere. (By comparison, U.S. density is 29 per square kilometer and Mexico's is 50.) However, the high urban concentration makes the figure misleading, since density in major urban areas is 55 per square kilometer.

Uruguayans are generally well-educated, and the nation's literacy rate is 97.3 percent. While Spanish is the official language, a mixture of Portuguese and Spanish known as Portunol or Brazilero, is commonly spoken in the border regions between Uruguay and Brazil. Some 88 percent of the population is white and of Spanish or other European descent. Mestizos (people of mixed ethnic backgrounds, mainly Spanish and Native American) make up 8 percent of the population, and blacks make up 4 percent. During the colonial period, the Native American population was nearly eradicated. Although 66 percent of the nation professes to be Roman Catholic, only about half the population attends church. About 2 percent of Uruguayans are Protestant, and another 2 percent are Jewish. About 30 percent have no religious affiliation.

OVERVIEW OF ECONOMY

Uruguay has a strong domestic economy which provides a high standard of living and moderately high GDP per capita of US$8,500. The country is small, with limited markets, and geographical and historical factors have made Uruguay dependent on trade with its larger neighbors, Argentina and Brazil. These trade linkages were formalized in 1991 through the creation of the MERCOSUR free-trade area that links Uruguay, Argentina, Brazil, and Paraguay (Chile and Bolivia are associate members). Montevideo is the administrative capital of MERCOSUR.

While MERCOSUR has lowered tariffs and increased trade, it has also furthered the dependence of Uruguay on its trade partners. Almost half of the nation's imports and exports are with other members of the group. Hence, when Argentina and Brazil underwent economic downturns in 1998 (including the devaluation of the Brazilian currency), the impact was significant in Uruguay. In 1999, after 8 years of positive growth, the Uruguayan economy declined by 3.4 percent. In 2000, the economy continued its stagnation with a decline in GDP of 0.5 percent. This decline is significant because it marked the end of the longest, sustained period of economic growth since the 1970s. In 1999, exports declined by 20 percent and imports dropped by 12 percent. The economic slowdown led to an increase in unemployment, from 10.1 percent in 1998 to 11.2 percent in 1999. In August of 2000, it reached its highest level in 15 years, a peak of 12.4 percent.

During the 1970s, the nation underwent a period of dramatic economic reform. In response to a deep recession and declining economic performance, the government began to restructure the economy by reducing inflation and decreasing government's role in business. However, after the peso declined in value against the U.S. dollar by 140 percent, the nation's GDP fell by 16 percent. This led to another recession in 1982-83. Although there was positive economic growth for the rest of the 1980s, inflation continued to be a problem. By lifting price controls and privatizing government-controlled companies, Uruguay was eventually able to reduce inflation from 130 percent in 1990 to 44.1 percent in 1995 and to 4 percent in 1999.

By 1995, the government had privatized numerous companies and sectors, including the national airline, the national gas company, all seaport services, the insurance industry, and home-mortgage services. At the same time, the size of the civil service was drastically reduced, as was government spending. Even so, the government still plays a major role in the economy and continues to operate the nation's telecommunications services, electric-power industry, and railway freight services.

Uruguay has a prosperous and developed economy that includes agriculture, industry, and a diversified service sector. While agriculture accounts for only 7 percent of the country's GDP, it continues to dominate the economy in several ways. Agriculture is responsible for more than half of exports, and many of the country's industries and services are related to or dependent on the agricultural sector. The main industries include meat processing, leather production (including footwear, accessories, and apparel), and textiles. Services are a growing part of the nation's economy, but efforts to improve the financial-services sector have yet to succeed since foreign investment remains low.

In an effort to attract more foreign companies and investment, successive governments have established a number of free-trade zones in the country. In these areas, foreign firms are offered tax incentives and reduced tariffs in exchange for locating new factories and businesses there and employing a workforce that is at least 75 percent Uruguayan. The nation benefits from foreign direct investments totaling US$5.4 billion. The United States is the single largest investor, contributing 32 percent (US$1.72 billion) of the total.

Despite recent economic problems, the Uruguayan economy is recognized as one of the most solid in Latin America. Uruguay is the only nation in MERCOSUR and one of only two countries in all of Latin America to have investment-grade status. This means that major international financial registries, such as Standard & Poor's or Moody's, recommend the country's government bonds to financiers. Following a slight decline in 2000, GDP growth is expected to resume in 2001.

Uruguay's economic stability is based in part on the high usage of the U.S. dollar in financial transactions. More than 90 percent of private savings in Uruguay is dollar-denominated, as is more than 81 percent of credit granted to the private sector . Many consumers use dollars for their purchases of expensive products.

Beginning in 1988, successive governments worked to lower the nation's debt as a percentage of GDP. The economic downturn in 1998 reversed this trend, and the debt-to-GDP ratio increased by 5 percent to 15 percent of GDP, or US$3.1 billion for the year. About 90 percent of the total debt ($8 billion in U.S. dollars) is owned by private investors. Uruguay receives no formal foreign aid, although the European Union (EU) and the United States do help underwrite specific economic projects. In 1996, the EU provided 6.68 million euros for vocational-training centers and 147,000 euros for the development of tourist programs. In 1997, the United States provided US$8 million in aid to train the military for peacekeeping missions and purchase equipment for such missions.

POLITICS, GOVERNMENT, AND TAXATION

Uruguay become independent from Spain after a revolt that began in 1811, but the nation then joined a federation with Argentina. In 1821, Brazil annexed Uruguay, but the country achieved full independence in 1828 after an Argentine-backed revolt. In the early 20th century, President José Batlle Y Ordonez led the creation of the first welfare state in Latin America, with broad government participation in the economy and the social system. This tradition continues to influence Uruguay.

Political turmoil led to a new constitution in 1967, and in 1973, the military took control of the government, remaining in power until 1984, when Maria Sanguinetti was elected president. Under the Sanguinetti administration, the government carried out reforms that stabilized the economy and reinforced democracy. Luis Alberto Lacalle succeeded Sanguinetti in 1989. It was he who negotiated inclusion of Uruguay in MERCOSUR and began efforts to curb inflation and cut government involvement in the economy. His economic reform efforts were curtailed in 1992, when voters rejected a plan to privatize ANTEL, the national telephone company. Sanguinetti was reelected in 1994 and oversaw constitutional changes in 1996. In 1999, Jorge Batlle was elected president on a platform that promised to increase international trade and expand economic reforms, including reducing the size and scope of government.

Uruguay is a constitutional democracy with a political system similar to that of the United States. Elected for a 5-year term, the president is the head of state and chief of the government. If no presidential candidate receives an absolute majority of 51 percent of the vote, there is a runoff election in which only the top 2 candidates compete. The president chooses the cabinet and generally sets government policy, subject to oversight from the nation's legislature. The legislative branch of government is the bicameral (2-chamber) General Assembly. The upper house, the Chamber of Senators, has 30 members who serve 5-year terms. The lower house, the Chamber of Representatives, has 99 members who also serve 5-year terms. The judicial branch of government is headed by a national Supreme Court. The country is organized into 19 regional departments or states, each headed by an elected governor.

All of Uruguay's major political parties support economic reforms and free trade. There are 3 main political parties. The Colorado Party, which traditionally represented the urban areas and the working class, is led by President Batlle and ex-President Sanguinetti. In the 1990s, this party increased its support for smaller government and less state control. The National Party, or Blanco, is the main party of rural voters, and is generally regarded as the most conservative of the nation's parties and a staunch supporter of free enterprise. Ex-President Lacalle belonged to Blanco. Encuentro Progresista-Frente Amplio (EP-FA) is a leftist coalition that supports limited free trade and private enterprise, but favors the implementation of an income tax as a means to redistribute wealth and increase social spending.

In 1998, the government's budget amounted to US$4.6 billion, while its revenues were US$4.4 billion. Because of the economic downturn in 1999, government revenues fell and the nation's deficit increased 4-fold to 3.9 percent of GDP. The government projects a reduction of the deficit to 1 percent by the end of 2001. Uruguay has made commitments to the International Monetary Fund (IMF) not to raise taxes in its effort to reduce the deficit and to pay down the debt in exchange for a short-term credit line of US$200 million to be used in fighting inflation. Uruguay has one of the proportionally lowest defense budgets of all of the Latin American nations, spending just US$172 million, or 0.9 percent of GDP, on defense.

Since the late 1980s, successive administrations have tried to reduce the role of government in the economy by privatizing government-owned businesses, such as PLUNA, the national airline, Montevideo Gas Company, and most port services. Government-owned enterprises account for 18 percent of GDP and the same percentage of total employment. The government continues to own a variety of businesses, including those engaged in insurance, water supply, telecommunications, electricity, railways, banking, and petroleum refining. The nation's social security system, which prior to 1996 had a deficit equal to 6 percent of GDP, was successfully privatized. By allowing individuals to join private pension plans, privatization has reduced the social security deficit to 1 percent of GDP. Nationwide, 550,000 people, one-third of the workforce, have opted for the private plans that now manage $700 million.

INFRASTRUCTURE, POWER, AND COMMUNICATIONS

Uruguay is situated in the middle of a corridor that connects the Atlantic and Pacific oceans and is the gateway to the Panama-Paraguay River transportation system. The corridor is inhabited by 40 million people and covers an area of 3.1 million square kilometers (1.2 million square miles). To take full advantage of its geographic position, Uruguay needs to make significant improvement to its transportation infrastructure . This would reduce Uruguay's freight costs, which are among the highest in South America.

The nation has 8,983 kilometers (5,582 miles) of roads, almost all paved. There are plans to build a combination passenger railway and underground subway system for Montevideo and its suburbs. Uruguay and Argentina are constructing a 35-kilometer (22-mile) bridge between Buenos Aires, Argentina, and Colonia, Uruguay. This bridge, the longest of its kind in the world, will greatly expand direct trade between the 2 nations. Uruguay has 2,073 kilometers (1,288 miles) of railways and 1,600 kilometers (994 miles) of navigable waterways, many of which are used to transport small quantities of goods. Uruguay, Paraguay, Argentina, Bolivia, and Brazil have announced plans to develop the 4,022 kilometer (2,500 miles) Panama-Paraguay-Uruguay rivers in order to transport goods to ports on the Atlantic Ocean. The plans call for a combination of construction, dredging, and port development that will ultimately cost US$935 million. Uruguay's main port is Montevideo; other ports include Fray Bentos, Nueva Palmira, Paysandu, Punta del Este, Colonia, and Piriapolis. The nation's merchant marine consists of only 1 ship, a petroleum tanker.

Uruguay has 65 airports, but only 15 have paved runways, served by 10 international airlines and the national carrier, PLUNA. Carrasco International Airport in Montevideo is the nation's main international airport. It is undergoing a $60 million renovation that will significantly expand capacity. The nation is also building a $40 million airport at the resort town of Punta del Este.

There are 27 telephones per 100 people in Uruguay. Plans to privatize the telecommunications industry may dramatically lower costs and expand service, especially in the mobile phone market. In 1998, there were 100,000 mobile phones in the country, and 5 Internet service providers for the 12 percent of the population with access.

Uruguay has no fossil-fuel resources. More than 50 percent of its energy needs are met through imported oil (an average of 38,000 barrels per day). While natural gas currently does not contribute to the nation's energy needs, an $8 million, 19-kilometer (12-mile) pipeline was constructed in 1998 to provide natural gas from Argentina. A more substantial 213-kilometer (133-mile) pipeline is being constructed by British Gas and Pan American Energy (a joint venture between BP, Amoco, and ANCAP). These pipelines will eventually supply natural gas to over 70 Uruguayan towns and cities. In 1998, the nation's

power plants produced 9.474 billion kilowatt-hours (kWh) of electricity, 95.62 percent of which was provided by water power. In 1998, electricity consumption in Uruguay was 6.526 billion kWh. The nation has one of the highest rates of electrification, 96 percent, in the Western Hemisphere.

ECONOMIC SECTORS

While agriculture accounted for only 4 percent of the nation's workforce, it provided 10 percent of Uruguay's GDP and more than half of the country's exports. More significantly, agricultural products provided the main raw materials for the nation's largest industries. Among the main agricultural products are beef, wool, grains, fruits, and vegetables. Agriculture is also one of the few areas of the economy in which there is little government interference. A late 1990s devaluation of the Brazilian currency hurt Uruguayan agriculture by making Brazilian products cheaper and Uruguayan goods more expensive. As a result, agricultural output declined by 8 percent in 1999. For the 3-year period prior to 1999, agriculture experienced little or no growth.

Industry accounts for 28 percent of the nation's GDP and 30 percent of the workforce. The nation's main industries include food processing, construction, and leather production. In the late 1990s, Uruguayan industry has had mixed performance. In 1999, manufacturing fell by 8.4 percent, but construction grew by 6 percent.

Services make up the largest segment of the Uruguayan economy, accounting for 62 percent of GDP (1999) and 66 percent of the workforce. While much of the Uruguayan economy declined in 1999, services experienced 2 percent growth (even though general commerce, including the retail trade, declined by 3 percent). The major elements of the service sector include banking and financial services, tourism, and commerce.

AGRICULTURE

The geography of Uruguay makes the nation well-suited to pastoral agriculture, including raising cattle and sheep. As a result, much of the countryside (90 percent) is used for such agriculture. After experiencing a period of substantial growth in the 1990s, Uruguay's agricultural sector experienced a period of stagnation in the late 1990s. In 1996, the last year of significant growth, agricultural production grew by 8.6 percent. In 1997, agricultural production declined by 1.3 percent, and continued to decline, by 1 percent in 1998 and 8 percent in 1999. These declines resulted from increased competition in foreign markets and contractions in the economies of Uruguay's main trade partners, Argentina and Brazil. In 1998, the total value of agricultural exports was $1.49 billion, but the nation also imported $458.2 million in agricultural goods. Employment in agriculture has remained relatively constant since the mid-1990s, at approximately 50,000.

While the overall agricultural sector has been stagnant, crop production has increased. After 2 years of decline, in 1999 crop harvests grew by 10.5 percent and total output was 2.4 million tons. The main food crops are rice, wheat, corn, potatoes, barley, sugarcane, and soybeans. Production of rice in 1999 was 1.3 million tons, wheat 377,200 tons, and corn 242,500 tons. Barley harvests dropped significantly as a result of reduced demand, falling from 340,000 tons in 1996 to 111,000 in 1999.

Total livestock exports were worth US$1 billion in 2000. The primary livestock products are beef, veal, horse, chicken, duck, goose, lamb, pork, and turkey. There were 10.5 million head of cattle in Uruguay in 1999, and 14.4 million sheep. An outbreak of foot-and-mouth disease in 1999 led several nations to ban the import of Uruguayan beef and lamb, but efforts to eradicate the disease were successful and in 2000 there were record exports. Beef, the main livestock export, accounted for 58.6 percent of exports in 2000, followed by lamb (4.12 percent) and horsemeat (1.4 percent). Mixed meat byproducts accounted for 30.8 percent of exports. Israel was the number-one market for Uruguayan beef, taking 25.09 percent of exports, although the North American Free Trade Agreement (NAFTA) countries—the United States, Canada and Mexico—were the main overall market with 33.4 percent of exports. MERCOSUR accounted for 16 percent of livestock exports and the EU 10.8 percent.

The fishing sector employs about 12,000 people. Uruguay has substantial stocks of a variety of fish species, but fishing accounts for only 0.1 percent of GDP. Pollution from Uruguayan ports, such as the 1997 oil spill by the Argentine ship San Jorge off the coastal resort of Punta del Este, has significantly impacted fish stocks. This spill affected 20 miles of Uruguayan coastline and did significant damage to a variety of species ranging from sea lions to croaker. Currently, hake accounts for about 70 percent of catches, followed by croaker (14 percent) and striped weakfish (5 percent). There are increasing efforts to develop the industry to catch deep-water species such as swordfish, squid, and anchovy. In 1998, swordfish catches surpassed 930 tons and the nation exceeded its quota under international fishing regulations. The United States is the major destination for fish exports.

INDUSTRY

Manufacturing and refining employ some 250,000 people in Uruguay. Much of the country's industrial sector is linked to agriculture. About half of all industrial production is based on food processing or the refining of agricultural products such as leather. Food and beverage production are the largest single manufacturing sectors, with food processing accounting for 25 percent of production and beverages accounting for 11 percent. Exports of processed foods were valued at US$1.06 billion in 1997, or 40 percent of all exports. Prepared rice, chocolate, meat, cookies, and pasta were the main exports, although frozen foods have been growing steadily in value. This sector of industry has been the recipient of almost 50 percent of all new foreign investment in Uruguay. The main markets for processed foods and beverages are Uruguay's MERCOSUR partners. The nation's principal food processing plants are concentrated in the towns of Fray Bentos and Paysanduu.

Since 1997, most other industries in Uruguay have experienced declines in production and value. Industries such as textiles, clothing, chemicals, and metallic products have suffered the largest declines, with mining and oil refining the main exceptions. After 3 years with annual growth of more than 6.5 percent, mining grew by 2.6 percent in 1999. It still accounted for only 0.2 percent of GDP and employed about 2,000 people. Gold is the major mineral produced by the mining sector; in 1998, 2000 kilograms were mined from the nation's proven gold reserves of 5.06 metric tons. Marble, stone, granite, and bauxite are also produced. The nation's crude-oil imports are refined at the La Teja refinery in Montevideo. The refinery is owned by the state-owned oil company, ANCAP, and has a capacity of 37,000 barrels per day.

The construction industry, which employs about 80,000 people, has also continued to grow, although the growth rate has slowed, especially in private construction. The average growth rate for the sector has been 4.6 percent since 1996. Government infrastructure programs and the construction of tourist-related facilities have been leading segments in the construction industry.

SERVICES

Services in Uruguay account for the highest level of GDP and the greatest employment, with almost 80,000 Uruguayans working in some segment of the service sector. Financial services and tourism are among the best performing sectors of the economy, and services also account for a significant proportion of foreign investment.

FINANCIAL SERVICES AND BANKING.

The financial sector employs about 60,000 Uruguayans. The country's private banking sector has 21 banks, 9 financial institutions, and 10 savings and loan organizations. There are also 11 offshore banks . These banks and institutions account for about 50 percent of the financial sector. Major foreign-owned banks include American Express Bank, Citibank, Bankboston, and Republic National Bank. The rest of the financial sector is controlled by 3 government-owned banks, including the Central Bank. The largest bank is the government-owned Banco de la Republica Oriental del Uruguay, which has 30 percent of the nation's total savings. Total banking assets in Uruguay were US$7.1 billion in 1999 (including US$600 million from foreign sources). In 1996, the government deregulated the insurance and mortgage sectors and opened them to private investment. The government-owned Banco Hipotecario del Uruguay (BHU) remains the largest mortgage lender. The nation has 2 small stock markets, but both are under-valued. U.S. investment in Uruguayan financial services totals US$37 million.

COMMERCE AND TRADE.

Hotels, restaurants, retail, and wholesale trade employ 200,000 Uruguayans. The franchising of stores and restaurants has produced dramatic growth in many areas of Latin America, but in Uruguay there are only a limited number of food, hotel, car-rental, and some clothing outlets. This is mainly the result of the small size of Uruguay's domestic market. Increased Internet use and the potential deregulation of the telecommunications industry have fueled growth in the sale of electronic equipment, though most of these products have to be imported.

TOURISM.

Tourism has become the main source of foreign currency earnings for Uruguay and the third-largest component of GDP. It provides an average of $800 million per year to the economy. Since 1998, the number of foreign visitors has declined by 5 percent because of contractions in the Brazilian and Argentine economies that have reduced the number of tourists from these countries. Since 1997, the average number of tourists has been 2.3 million per year. Argentina is the number-one source of foreign visitors (78 percent in 1998). American hotel chains, such as Sheraton, Radisson, Holiday Inn, and

Days Inn, have a presence in Uruguay. The main tourist destination is the coastal resort area of Punta del Este.

INTERNATIONAL TRADE

Uruguay is a member of a variety of international organizations that promote free trade. In addition to membership in MERCOSUR, Uruguay also belongs to the World Trade Organization (WTO) and the Latin American Integration Association (ALADI). Membership in these organizations has dramatically lowered the tariffs Uruguay places on imported goods. Tariffs on raw materials have been reduced to 2-6 percent of the value of the imports and now average 8-10 percent on all goods. MERCOSUR rules still allow for tariff rates as high as 23 percent on certain goods, and tariffs of 20 percent are common on some consumer goods .

Uruguay has also sought to develop bilateral (oneon-one) free trade agreements, such as the one signed with Mexico in 1999, with major European and Asian nations. Uruguay does not have such a treaty with the United States, although the United States is a major trading partner and the largest foreign investor in Uruguay (with 32 percent of all foreign investment).

The government actively seeks to attract foreign companies to Uruguay. In 1999, there were 756 foreign companies operating in Uruguay. Foreign investment in Uruguay was US$5.6 billion in 1999. There are no restrictions on foreign ownership of businesses, and the government offers certain tax breaks and other incentives to foreign companies that relocate to Uruguay. In the government-sponsored free-trade zones, companies may be exempt from all taxes except social-security taxes . Goods can be shipped to and from these zones without any tariffs or export duties .

In 2000, Uruguay imported US$3.4 billion in goods and services and exported US$2.1 billion. Uruguay's main export markets are its MERCOSUR partners (45 percent of exports), the EU (20 percent) and the United States (7 percent). The main import providers are the

MERCOSUR nations (43 percent), the EU (20 percent), and the United States (11 percent).

MONEY

The Uruguayan peso has declined in value since the 1990s, mainly due to inflation. In 1994, 5.0439 pesos equaled US$1; by 1999 the peso had declined to 11.3393 per dollar. In an effort to maintain the value of the peso, the Uruguayan Central Bank uses its reserves to purchase dollars.

Monetary policy is overseen by the nation's Central Bank, which also issues currency. The Central Bank is not independent, but is subject to control and influence by the government. Almost 90 percent of bank deposits and transactions in Uruguay are done in U.S. dollars. Uruguay's financial reserves declined in 1999 by US$13 million as a result of the government's deficit. In 2000, the reserves totaled US$2.4 billion, or enough to service the nation's debt for at least 2 years.

POVERTY AND WEALTH

Uruguay has one of the most equal distributions of income and wealth in the world. Since 1986, taxation and social services have been used to redistribute income from the nation's wealthiest 10 percent to the less affluent members of society. The wealthiest 10 percent of Uruguay's population controls about 25 percent of the nation's

wealth, which is still low by regional standards: comparable figures for the amount of wealth controlled by the richest 10 percent are 41.9 percent in Brazil, 39 percent in the United States, and 34.3 percent in Argentina.

In 2000, 8 percent of the population of Uruguay was considered to be living in poverty, not having enough income to pay for basic needs, including food, housing, and health care. In an effort to reduce poverty further, the government is engaged in a long-term program to improve education. Since the mid-1990s, it has spent an additional 0.1 percent of GDP on improvements to the educational system, including classroom renovations, teacher training, and programs to keep youths in school. The main impetus for these programs is the fact that 40 percent of all Uruguayan children under the age of 5 live in the poorest 20 percent of households.

WORKING CONDITIONS

The Uruguayan workforce is highly skilled and educated. The nation's literacy rate, 97 percent, is the highest in Latin America and comparable to that of the United States. There is some evidence of racial and gender disparity. The nation's blacks have an unemployment rate 1.5 times higher than that of the general population, and their average pay is 20 percent lower than their white counterparts in the same occupations. While women have full equality under the law, they face discrimination in hiring, promotion, and wages. A government study in 1999 found that women receive only 65 percent of the pay men receive in similar occupations.

There is little legislation concerning unions in Uruguay, although workers have the right to strike and to collective bargaining. About 15 percent of the work-force is unionized, mainly those employed in construction, industry, and banking. Union membership in the public sector is almost 80 percent, but the rate for private companies is 5 percent. All employees, including those who work for the government, may join unions. The government has the legal power to end a strike if it poses a threat to public welfare. Although workers may organize in the nation's free-trade zones, there are no unions in these areas. Foreign workers have the same rights and legal protections as Uruguayans.

The nation's minimum wage is equivalent to US$93 per month, not enough to support a family, though the overwhelming majority of workers earn more than the minimum. Uruguay's standard work week is 48 hours in industry and 44 hours in commerce. In both sectors, workers must have a minimum 36-hour rest period per week and they receive overtime pay for excess hours worked. All workers are entitled to a minimum of 20 days paid vacation per year. The national retirement age is 60. Because of the country's extensive social security system, employers must pay taxes that equal 50 percent of each worker's pay.

The government forbids forced labor and child labor under the age of 14. Children 16 and older may work if they have completed 9 years of compulsory education. Some children drop out of school and work illegally on the streets as vendors or beggars. The nation has started a program to pay parents $83 a month in exchange for taking these children off the streets and returning them to school. In order to encourage employers to hire more youths, the government provides tax reductions of 12-18

percent on social security taxes for these employees. Unemployment in 2000 was 12 percent and about 0.5 to 2 percent higher in Montevideo and other urban areas. GDP per capita in Uruguay is equivalent to US$8,500.

COUNTRY HISTORY AND ECONOMIC DEVELOPMENT

10,000-20,000 B.C. Uruguay is settled by Native Americans.

1516. An indigenous tribe, the Charrua, kill the Spanish explorer Juan Diaz de Solis and members of his party as they explore the coast of Uruguay.

1600s. The Charrua develop trade relations with the Spanish.

1680. The Portuguese establish a settlement at Colonia on the Rio de la Plata in order to counterbalance the Spanish colony of Buenos Aires.

1811. Jose Gervasio Artigas launches a revolution against Spain that ultimately results in independence and a regional federation with Argentina.

1821. Uruguay is annexed to Brazil by Portugal.

1825. Rebels initiate an independence movement against Brazil.

1828. Uruguay becomes independent.

1830. The nation's first constitution is adopted.

1838-51. Supporters of a federal union with Argentina conduct a war against nationalist forces. The 2 groups ultimately form Uruguay's main political factions, the liberal Colorados and the conservative Blancos.

1903. Jose Batlle y Ordonez is elected president; during his 2 terms (1903-07 and 1911-15), he initiates a series of reforms that give Uruguay one of the most advanced social welfare systems in the hemisphere.

1960s. The nation's prosperity declines as state-owned companies become inefficient and corrupt and the nation's industries cannot compete on the world market.

1967. An urban guerrilla movement, the Tupamaros, initiates an armed struggle against the government. A new constitution is put in place.

1971. Because of the armed insurrection, the military is invited to join the government. As a result, the Tupamaros are effectively destroyed.

1973. Congress is suspended by the military.

1978. In an effort to control inflation, the government initiates a program of currency devaluation.

1982-84. Uruguay experiences a severe economic recession.

1984. After national elections, the military relinquishes power to a new civilian government.

1985. After a lengthy period of economic stagnation, Uruguay begin a modest period of recovery.

1991. Uruguay joins MERCOSUR.

1992. Voters reject a government proposal to privatize ANTEL, the nation's telecommunications company.

1999. Uruguay undergoes a significant recession.

FUTURE TRENDS

Continuing economic problems in Argentina and Brazil will limit the Uruguayan economy since the majority of the nation's trade is with these countries. The country's continuing recession has made it less attractive to foreign investment. The inability of the government to enact further privatizations also reduces the attractiveness of the nation to foreign investors and prevents competition in certain sectors. The high level of unemployment has caused increased government spending that has itself led to increases in the government's operating deficit and the nation's total debt.

The nation's high standard of living and the high level of education and skill continue to make it attractive to foreign businesses. This is especially true as the Uruguayan government expands its system of free-trade areas. While the economic downturns in Argentina and Brazil have harmed Uruguayan trade, these conditions have also increased the flow of investments from these nations into Uruguay as investors have sought to protect their money. Uruguayan membership in international trade organizations will continue to expand trade as tariffs are reduced. As such, Uruguay has been a strong supporter of the establishment of a Free Trade Area of the Americas.

Uruguay's plans to continue economic liberalization will help the economy become more efficient and productive. The main goals of the government in the economic sphere are directed toward reductions in unemployment, inflation, and deficit spending. Programs to improve the nation's infrastructure, including renovations to airports and transport systems, are also designed to enhance the economic base. The government plans to continue privatization of state-owned industries and to reduce the size of government and the government's share of the nation's GDP.

DEPENDENCIES

Uruguay has no territories or colonies.

BIBLIOGRAPHY

República Oriental del Uruguay. <http://www.presidencia.gub.uy>. Accessed July 2001.

Uruguay, The Uruguayan Economy. <http://www.embassy.org/uruguay/econ/economy.htm>. Accessed March 2001.

U.S. Central Intelligence Agency. The World Factbook, 2000. <http://www.cia.gov/cia/publications/factbook>. Accessed January 2001.

U.S. Department of State. FY 2001 Country Commercial Guide: Uruguay. <http://www.state.gov/www/about_state/business/com_guides/index.html>. Accessed March 2001.

U.S. Department of State. 1998 Country Report on Economic Policy and Trade Practices: Uruguay. <http://www.tradeport.org/ts/countries/uruguay/ecopol.html>. Accessed July 2001.

World Bank. Uruguay: The Private Sector. Washington, D.C.: World Bank, 1994.

—Tom Lansford

CAPITAL:

Montevideo.

MONETARY UNIT:

Uruguayan peso (UP). One peso equals 100 centésimos. There are notes of 50, 100, 500, 1,000, 5,000, and 10,000 pesos and coins of 1, 2, 5, and 10 pesos.

CHIEF EXPORTS:

Meat, rice, leather products, vehicles, dairy products, wool, and electricity.

CHIEF IMPORTS:

Road vehicles, electrical machinery, metal products, heavy industrial machinery, and crude petroleum.

GROSS DOMESTIC PRODUCT:

US$28 billion (1999 est.).

BALANCE OF TRADE:

Exports: US$2.1 billion (1999 est.). Imports: US$3.4 billion (1999 est.).