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The Twentieth Century

The Twentieth Century

The history of Uruguay since 1900 contrasts remarkably with the preceding period. Until 1875 civil conflict was the dominant theme. The modernization of Uruguay in the final decades before 1900 involved the creation of a state structure by strong governments capable of suppressing insurrections. The concentration of authority in Montevideo created conditions in which foreign capital could flourish, building an economic infrastructure that further consolidated the new state system. Yet in many respects Uruguay in 1900 still appeared primitive. Economic modernization was still restricted. The division between the main political parties, the Blancos and the Colorados, remained a threat to public order. The electorate was small, and elections were nominal.

By the 1920s, however, Uruguay was transformed. In place of anarchy and conflict, the country developed an institutional structure that was stable, innovative, and democratic. Social policy was adventurous and characterized by egalitarian and humanitarian influences that had few equals elsewhere in the world. The economic structure was developed by new export trades, an enlarged role for the public sector, and an expanding manufacturing industry promoted by the state. In its cultural life Uruguay enjoyed a diversity and richness extraordinary in so small a country. The image of Uruguay as somewhat exceptional, even utopian, in its middle-class prosperity and stability took shape in the 1920s and was widely shared inside and outside the country for much of the next half-century.

A feature of the nineteenth century that survived to the end of the twentieth was the dominance in politics of the Colorado and Blanco (or National) parties. The appearance of a two-party system, however, should not be mistaken for democratic stability, nor the parties regarded as conventional vehicles for interest aggregation and policy formulation. They originated as armed bands competing for control of the territory of Uruguay in the 1830s, and loyalty to them was entrenched long before any sense of nationhood existed. This fact is crucial to understanding the instinctive loyalty that each party still commands. Adaptation to the age of mass politics was possible only through the development of complex electoral legislation (collectively known as the ley de lemas) in the first half of this century and the system of double simultaneous voting (DSV), by which victory goes to the most voted faction of the most voted party. Each party has therefore developed its own liberal, moderate, and conservative factions, which unite under the party banner rather than with those of similar ideological convictions but with different loyalties. As in the nineteenth century, but now by other means, the party struggle is fundamentally to secure control of executive power. Uruguayans elect administrations rather than governments.

The economic and demographic dominance of Montevideo, paradoxical in a country whose economic welfare has always depended on livestock production, is also a legacy of the nineteenth century. Political pressures, exerted by an urban population rising from one-third of the total in 1900 to one-half in the 1990s, have been reflected in the social and economic policy of the twentieth century. The rural sector has provided livestock products for processing and export, while contributing financially to the development of Montevideo and the welfare of its population either by taxation or by urban investment of the rural surplus. The urban-rural tension is particularly significant because, although the high level of exports per capita has endowed Uruguayans with one of the highest standards of living of any Latin American country during this century, the rate of growth of rural output and exports over the long period has been very low. In the late 1950s Uruguay entered a period of secular economic stagnation that focused attention on the causes of poor performance in the livestock sector. For some, the problems of Uruguay in the late decades of the twentieth century are a consequence of a misplaced modernity: state-sponsored welfare prejudicing growth. Others have blamed unenterprising landowners or Uruguay's small size within the international economy. However explained, the deterioration of the economy undermined Uruguay's utopia. By the late decades of the century, the earlier self-confidence was displaced by a debilitating nostalgia for a long-gone golden age.

THE AGE OF BATLLE Y ORDÓÑEZ (1900–1930)

José Batlle y Ordóñez held office twice as president, from 1903 to 1907 and from 1911 to 1915. No other figure in Uruguayan history has had such a decisive influence on the country's development. Indeed, the phrase Batllist Uruguay, which in a strict historical sense refers to his political and social accomplishments, also defines an ideology of state-mediated negotiation and redistribution as a means of resolving social conflict that was dominant through most of the twentieth century. In the belief that it has continued to inspire in the capacity and responsibility of the state to solve the economic and social problems of the citizenry, it has formed a central and enduring part of Uruguay's political culture.

Batlle y Ordóñez himself, a commanding figure who was both a visionary and a politician of great skill, came to the presidency through the ranks of the Colorado Party within a political system that was still oligarchic and largely nonparticipatory. His first major challenge was the uprising in 1903 led by the Blanco caudillo Aparicio Saravia, who made a last attempt to stem the incursions of a unified state and commercial landownership into the traditional Uruguay in the north. With modernization, civil wars were even more costly to the developing livestock sector. The overwhelming military defeat of Saravia finally freed the sector from that threat, but lasting peace required increased political participation and concessions to the Blanco Party in Montevideo to ensure its supremacy over the caudillo faction of the interior. In 1910 the modern system of double simultaneous voting was introduced to allow a divided party to maintain its cohesiveness by aggregating the votes of its different tendencies.

The background to Batlle's administrations was one of rising prosperity based on the export of rural production. The establishment of the first meat-freezing plant (Frigorífico) in 1904 ushered in a period of rising export values based on the breeding of high-quality cattle capable of producing beef for freezing and chilling. Whatever the inefficiencies and inequities of a rural structure based in latifundismo, the political dangers were too great, and the potential gains at a time of economic expansion too limited, to make agrarian reform a priority. Arable production was encouraged, but efforts to diversify the economy were directed mainly toward Montevideo. The tentative protectionism of the 1880s was strengthened and systematized under Batlle. There were also government initiatives promoting the incorporation of new technology in arable farming and manufacturing. Finally, the participation of the public sector in the economy was extended to include banking, insurance, electricity supply, and basic chemicals.

Batlle's social reformism was even more remarkable. Legislation in defense of labor included the eight-hour day in 1915. Provision for retirement pensions, with low age and service prerequisites, was extended from the public sector to areas of the private sector in 1919. Old-age pensions, proposed in 1914, were finally granted in 1919. But if labor and social-security enactments were the central welfare provisions, the range of liberal, secular, and humanitarian legislation implemented at the time conveys the extent of Batlle's radicalism. Separation of church and state, the right of women to initiate divorce, the abolition of capital punishment and of entertainments involving cruelty to animals, full legal rights for children born out of wedlock, and increased provision of education were all achieved before 1920.

Batlle was an exceptional leader who consciously attempted to create in Uruguay a model country. At the same time, his idealism was molded to fit the challenges and tensions that Uruguay confronted, and indeed it is arguable that his radicalism had a conservative aim. Although the antagonism of the two traditional parties had in the past been destructive, Batlle had no intention of allowing such loyalties to be displaced by the more dangerous doctrines of class. The Colorados had to champion the cause of the workers if they were to maintain their dominance in Montevideo, but Batlle was no socialist or class warrior. Batlle preferred to demonstrate that the party was better able to secure workers' objectives than were trade unions or left-wing political groups. The obstacle to reform was not capital as such, and much of Batllism promoted the interests of small domestic producers. It was, rather, the costly, low-quality service provided by British companies in railways and other economic and social structures that gave Batlle a target he could share with all ranks of Uruguayans.

If Batlle's reforms were remarkable mainly for their timing or context, his proposals in 1913 to change the 1830 Constitution were unique. He saw dangers in concentrating executive powers in one person and proposed instead a nine-person collegiate executive (colegiado) that would also consolidate Colorado control of government. The 1918 constitution dispersed executive authority between a president and the nine members of the National Council of Administration until its overthrow in 1933. The new constitution, even as modified, represented the high-water mark of Batlle's reforms. To overcome Blanco opposition, the doctrine of coparticipación had to be revived, giving both parties the right to nominate the public posts. The split that resulted within the Colorado Party between Batllists and the conservative wing brought to an end the reformist era. At the start of his administration in 1916, President Feliciano Viera announced that there would be no further initiatives.

The 1920s were years of prosperity and relative quietude. After the frantic activity of the Batlle y Ordóñez administrations, political life settled into a pragmatic pattern of alliances and agreements within and between the parties. Although the end of World War I sharply cut the level of demand and prices for livestock products, growing demand in Britain for chilled beef kept the economy buoyant. Landowners increasingly complained of the burden of taxes and of the prices the foreign-owned meat-freezing plants paid for cattle. The greater threat to prosperity, however, was that, though producers continued to improve the quality of their livestock, they showed no inclination to modernize methods of production or to improve their natural pastures and thus increase the animal-supporting capacity of the land. Within the urban economy, the manufacturing industry continued to grow, though largely in the basic consumer industries established before the war; construction activity was also at a high level. During the decade about 200,000 immigrants arrived in Montevideo, with a higher proportion than previously from central Europe, but only a fraction of this number settled.

Uruguay
Population: 3,460,607 (2007 est.)
Area: 68,039 sq mi
Official language(s): Spanish
Language(s): Spanish, Portunol/Brazilero (Portuguese-Spanish mix)
National currency: Uruguayan peso (UYU)
Principal religions: Roman Catholic 66%; Protestant 2%; Jewish 1%; none or other 31%
Ethnicity: European (mostly Spanish and Italian) 88%; mestizo 8%; African 4%; Amerindians almost nonexistent
Capital: Montevideo (pop. 1,341,000, 2005 est.)
Annual rainfall: 41 in
Principal geographic features: Rivers: Uruguay, Plata
Mountains: Cuchilla de Haedo; Cuchilla Grande; Cerro Catedral (1,686 ft above sea level)
Economy: GDP per capita: $9,000 (2002 est.)
Principal products and exports: Agriculture: rice, wheat, corn, barley; livestock; fish.
Industries: food processing, electrical machinery, transportation equipment, petroleum products, textiles, chemicals, beverages
Government: Republican government, divided into three branches: executive, legislative, and judicial. Executive consists of a president and a vice president, popularly elected for a five-year term, together with a council of ministers. Uruguay has Latin America's oldest two-party system.
Armed forces: 24,000 active personnel in 2005; Army: 15,200, organized into four regional divisions; Navy (including the naval aviation arm and a naval infantry force): 5,700 members; Air Force: 3,100 personnel; 920-member paramilitary guard in two units.
Transportation: In 2004, railroads: 1,287 mi of track; roadways: 5,446 mi, of which 4,847 mi were paved; 669,700 motor vehicles (2003). Ports: Montevideo, Colonia, Nueva Palmira. Sixty-four airports (2004), of which 9 had paved runways as of 2005.
Media: As of 2001, Uruguay had 91 AM and 149 FM radio stations and 20 television stations (both private broadcasting companies and the state-run public broadcasting company, SODRE). In 2004 there were at least four major daily newspapers in Montevideo, including El Diario, with a circulation of 170,000, El País, 110,000; El Diario Espanol, 20,000; and Últimas Noticias, 19,500.
Literacy and education: Total literacy rate: 98%
Education in elementary, secondary, and technical schools and at the University of the Republic in Montevideo is free. Elementary education, which lasts six years, is compulsory. There are five major universities: the University of the Republic, the Catholic University, the University ORT Uruguay, Universidad de la Empresa, and the University of Montevideo.

Late in the 1920s, Batllist reformism resurfaced, with proposals for enlarging the public sector in meat-packing (the Frigorífico Nacional), alcohol and cement production, and the import and refining of oil (Ancap), as well as extensions to the pension program. To secure Blanco support for Ancap, factions of the two parties agreed in 1931 to what came to be called the Pacto del Chinchulín ("pork-barrel agreement"), thereby increasing Blanco participation in state patronage. But by then an era had ended. Batlle y Ordóñez died in 1929, shortly before the full force of the international depression reached the Río de la Plata.

REACTION AND NEO-BATLLISM (1930–1970)

In March 1933 President Gabriel Terra dispensed with the collegiate executive and organized an authoritarian regime based on conservative Colorado and Blanco factions, which had been excluded from the pork barrel. His coup d'etat was presented as a reform of an inefficient constitution, intended to restore probity in public life and halt the growth of the bureaucracy and public sector. The reality was rather different. Although the 1918 constitution did create an executive that was unwieldy, the origins of the coup are easier to find in the opposition of employers (organized in the Committee of Economic Vigilance) to further social reformism, the traditional mistrust of the British public-utility companies toward the Batllists (in addition to the new fears of the oil companies aroused by the Ancap proposal), and the landowners' need to negotiate a trade deal with Britain that would secure a continuing share of the British beef market. The ambitious Terra, already in office as president since 1931, was an ideal instrument with which to implement this agenda. Besides the 1934 constitution, which concentrated executive power in his hands, he had the support of an alliance of his own Colorado followers and those of Luis Alberto de Herrera in the Blanco Party; the independent Blancos and Batllist Colorados were banished to the wilderness.

However, the conservative project of those who backed the coup ran against two obstacles. First, the depression of the export trade, whose value was 40 percent lower in 1932 than in the peak year 1930, was not a consequence of unfavorable policy and therefore reversible. Although the old regime had used trade and exchange controls to limit its impact, any expectation by landowners that controls would be removed and the peso allowed to depreciate ignored the changed circumstances of the 1930s. The curtailed share of the British beef market was permanent; there was no prospect of a significant revival in demand for Uruguay's exports; and manufacturing production for a protected domestic market became increasingly profitable. Relief for the landowners was therefore modest and short-term. Second, many of the characteristics of Batllism, fundamentally the growing dependence of the urban population on state policies and provision, were rooted less in ideology than in the reality of a country whose rural food- and export-producing sector could not employ even the natural increase in the rural population. Hence, in spite of attacks on the fiscal profligacy of the previous regime, public employment grew faster under Terra than it had before 1933. The program of social and labor legislation was interrupted and trade unions severely curbed, but by the late 1930s the urban economy was growing strongly.

By the time Alfredo Baldomir, a relatively liberal Terraist, was elected to succeed Terra in 1938, constitutional change again seemed possible. Terra's regime had been illiberal rather than repressive (a dictablanda); but in basing itself exclusively on two-party factions, the new political order could only be provisional. With urban manufacturing now the dynamic sector, the conditions that had earlier made Batllism possible and even necessary were appearing once more. The international context also encouraged liberalization. Official sympathy with Italian fascism was not matched in the streets, whereas the Republican cause in the Spanish Civil War received massive popular support. World War II further isolated the Herrerist Blancos, whose official neutrality masked suspicion of the United States and contrasted with the pro-Allies (and especially pro-U.S.) sentiments of the Colorados. In 1942 the legislature was dissolved in what was termed the golpe bueno ("good coup"); under the new constitution of that year all political groups now operated without restriction.

Although the Batllist Colorados did not return to power immediately, they and organized labor were the principal beneficiaries of the new order. The growth of manufacturing in the late 1930s was checked somewhat by wartime shortages, but the national commitment to industrialization was strengthened. By 1945 almost 100,000 workers were employed in the manufacturing industry, and they were increasingly organized in mass-membership trade unions whose ideological orientations (a source of division and weakness in the labor movement before 1933) mattered less than their negotiating function. This revival of trade unionism also revived the issue of class politics as a challenge to the established parties. The issue, and the way it was resolved, was exemplified by growing public concern about working-class living standards. All parties, and at first even urban employers who wished to see their protected market extended, favored higher real wages. The mechanism to effect this, while maintaining state (i.e., party) control over relations between capital and labor, was the introduction in 1943 of tripartite wages councils. The consejos de salarios were the outcome of a corporatist tendency that had been developing in the 1930s and a populism (in place of the paternalism of Batlle y Ordóñez) that recognized the political need to harness rather than deny class consciousness.

The presidency of Juan José de Amézaga (1943–1947), the first under the new constitution, was effectively a transitional administration. It was the succession in 1947 of Luis Batlle that signaled the era of neo-Batllism and national self-esteem. Social-security legislation was extended so that by 1954 all occupations were eligible for a retirement pension, and workers' rights were further protected. Although production in the livestock sector of the economy remained stagnant, the high export prices of the wartime and postwar periods fueled the process of economic diversification through import-substituting industrialization. Traditional export activities supported subsidies to the new dynamic industries and arable agriculture through a multiple exchange-rate system and other controls. The sense of national self-sufficiency (and the size of the public sector) was enhanced by state acquisition in 1948 of the railways and other former British public-utility assets. In all these ways the aims of the first Batllist period were accomplished or extended. But it was above all with the constitution of 1952, which entirely replaced the office of president with the collegial National Council of Government (NCG), that neo-Batllism reached its high point. Accepted unenthusiastically by the electorate, the new colegiado rested on an agreement between Batllist Colorados and their arch-opponent, Luis Alberto de Herrera. For Herrera, facing the prospect of apparently endless exclusion from office, the colegiado offered coparticipation in government: representation for the minority party in the NCG and on the boards of public-sector enterprises, and thus a share in the patronage.

Midcentury marked the high point of Uruguay's achievement as a nation built on prosperity, innovation, and consensus. The 1952 constitution lasted until the indecision and delay that marked its history became insupportable; but it was the ending of economic growth in the late 1950s that undermined the colegiado, and the ensuing economic stagnation constituted the dominant theme of Uruguay's history thereafter. Restricted to a market of 2.25 million inhabitants, the manufacturing industry's growth phase was brief. Rural-sector export performance was weak in the 1950s as a result of discriminatory policy, rising domestic demand for beef, and above all the persistent failure to develop and incorporate a technology of pasture improvement appropriate to the country's natural conditions. While populist policy stimulated demand and sought to disguise the resulting distortions, the productive base of the economy was increasingly incapable of responding positively. By the end of the 1950s the annual rate of price increases had reached 40 percent, and there were severe balance-of-payments difficulties. In 1959, following recommendations by an International Monetary Fund (IMF) mission, a stabilization program of exchange and monetary reforms was attempted.

This retreat from interventionism implied a changed political complexion. Luis Batlle was not eligible for a second term as president in 1950, but he was the outstanding figure in the NCG elected in 1954, and the dominance of the Colorado Party continued. In 1958, however, an alliance of traditional Herrerists and the ruralista movement of small producers enabled the Blancos to defeat the Colorados for the first time in the twentieth century, and their victory was repeated in 1962. This historic reversal of fortunes for the parties signified little more than disillusion with the Colorados. The invitation to the IMF in 1958 was made more promptly than would have been the case with a Colorado majority, but it proved impossible to maintain the new policy orientation. The other policy initiative of the early 1960s, the creation of the Investment and Economic Development Commission (CIDE) to lay the basis for an economic plan, received general support. In other respects the interval of Blanco dominance implied little change; whichever party held a majority, the effect of the second collegial constitution was to promote the pursuit of short-term political advantage at the expense of long-term policy formulation. The electoral system (DSV and ley de lemas), encouraging the division of each party into contending factions, had the same result. As the economic crisis deepened, so the traditional disposition of Uruguayans to seek solutions from the state increased the power of the parties, which alone could open the door to employment in the bureaucracy or accelerate approval of a pension claim. Through the agency of clientelism, the impotence of the parties to halt rising inflation and unemployment had the perverse consequence of strengthening their short-term position.

Although the left-wing parties, with only 9 percent of the total vote in 1962, could make few inroads, political debate outside the institutional structure became increasingly radicalized during the 1960s. The Cuban Revolution and the frustration of CIDE's endeavors were two factors emphasizing that there were choices available to the country that the political process could not articulate. Industrial unrest increased, and in 1964 the trade-union movement achieved for the first time a unified central body, the National Congress of Workers (CNT). But constitutional reform, rather than solutions to the economic crisis, was the main issue in the 1966 elections. They were won by a right-wing faction of the Colorado Party proposing the restoration of the presidency, which (following the death of President Oscar Gestido in late 1967) was occupied until 1972 by Jorge Pacheco Areco.

The four years of Pacheco's rule were a transitional but decisive stage in the downfall of institutional government that culminated in 1973. To the long-term problem of economic decline was added the shock in 1968 of inflation for the first time exceeding 100 percent. Pacheco's response was to increase the representation of private-sector interests in his administration while suppressing dissent through the almost continuous imposition of emergency security measures. A second IMF-sponsored stabilization program was implemented and, in combination with a less orthodox wage and price freeze, was briefly effective in reducing the rate of price increases. Devaluation of the peso increased the incomes of exporters but further reduced the urban real wage. With the legislature incapable of mounting effective opposition, bitter confrontations between workers and students and the government spilled onto the streets.

By 1970, however, the greatest challenge to the authority not merely of the government but of the institutions of the state itself came from a clandestine source, the urban guerrilla National Liberation Movement (MLN-T), or Tupamaros. Although the movement had begun to organize by 1963, it was the oppressive but frequently incompetent practice of state security after 1968 that brought the MLN-T to national and international notice and strengthened its characteristically middle-class membership. Early operations to secure resources, reveal corruption, and release captives demonstrated wit and intelligence, but the incoherence and alien nature of its revolutionary ideology and the descent into personal violence (kidnappings, executions, and random attacks on military personnel) eroded public support. In 1971 the armed forces took command of antisubversive operations, and during the following year the Tupamaros as a guerrilla movement were totally defeated.

From 1971 onward, however, the main competitor of the two traditional parties was the Frente Amplio (Broad Front), an electoral coalition that adhered to the democratic path toward socialism and brought together the seceding left-wing columns of the Blancos (Rodríguez Camusso, Gutiérrez Ruiz) and the Colorados (Zelmar Michelini, Alba Roballo), the Christian Democratic Party, the Frente Izquierda de Liberación (a subcoalition led by the Communist Party), the Socialist Party, and other smaller parties, and also had the support of the main student and workers organizations.

DICTATORSHIP AND DEMOCRACY: SINCE 1973

The demise of the Tupamaros marked the beginning, not the end, of the threat to Uruguay's democratic institutions. The 1971 elections were won by Pacheco's nominee, Juan María Bordaberry, who owed his victory (with 23 percent of the vote) over the Blanco leader Wilson Ferreira Aldunate (26 percent) to the DSV system. Líber Seregni, the candidate of the Frente Amplio coalition, obtained 18 percent of the vote, and the coalition thus succeeded in becoming a third main political contender. By 1972, however, the political initiative lay with the military, which had come to regard the political elite of all parties as financially corrupt or tainted with subversion. The growth of the Frente Amplio (which mirrored Salvador Allende's Unidad Popular in Chile) was of particular concern, not only for the armed forces and the economic powers, but also for neighboring Brazil (then ruled by a dictatorship) and the United States, which sponsored and financed secret activities to prevent that growth from happening.

The military coup of 1973 occurred in stages. In February Bordaberry allowed his presidential authority to be countermanded; in June the legislature was dissolved; and in succeeding months there followed a complete repression not merely of left-wing institutions and their members but indeed of all political and intellectual activity. Pressure groups of all kinds, including those of employers, were silenced. Although the use of torture by the security services was first authoritatively denounced in 1970, the violation of civil and political rights—such as incarceration of political activists, kidnappings and forced disappearances, political assassinations, and appropriation of children born in captivity—now became systematic and coordinated with the dictatorships that ruled in Argentina, Brazil, Chile, and Paraguay (Plan Condor). Bordaberry was retained until 1976 as a nominal president in a "civilian-military" regime, but effective authority from early 1973 rested with the commanders-in-chief and the military-controlled Council of National Security (COSENA). The civilian-military de facto government adopted the ideology of the doctrine of national security—as articulated in the military academies of Brazil and the United States—and the tactics of a "dirty war" that knew no ethical or legal limits. The regime's stated mission was "the defense of the nation, democracy, and Western civilization" against "the Marxist threat."

Bordaberry's own design for a corporatist state, with Blanco and Colorado parties replaced by nominees and "currents of opinion," resulted in his downfall. The military identified the parties as authentic national institutions, whose multiclass allegiance offered the best defense against a politics based on class. The military's plan, announced in 1976–1977, deprived those who had been politically active in the previous decade of their political rights, and it set out a timetable for political reconstruction leading eventually to a controlled democracy. The first stage would be the preparation by the military of a new constitution, to be approved by the people in a referendum in 1980.

The authoritarian regime set out to reorganize the economy (by countering the redistributive policies of earlier democratic governments, lowering workers' salaries and benefits, etc.); in the process, it empowered bureaucrats, advisors (from the World Bank, the IMF, and other organizations), and a group of experts known as the Chicago Boys (followers of the neoliberal economic guru Milton Friedman), inviting their participation in economic governance. An economic plan published by the Colorado government in 1973 spelled out proposals to reshape the economy by promoting market forces and the price mechanism. In modified form the plan was adopted by the military, which shared with economic liberals a lowest common denominator of anti-Marxism; Alejandro Végh Villegas was appointed in 1974 to superintend its implementation from the Ministry of Economy and Finance. Although he resigned in 1976, as architect of the neoliberal economic model in Uruguay Végh had considerable significance. Between 1973 and 1980 the economy grew continuously, with nontraditional exports as the leading sector. Control of inflation (which had reached 100 percent once more in 1973) was a major objective but did not receive priority over a restructuring of the economy that saw real wages almost halved during the course of the regime. The greater openness of the economy and optimism among exporters after decades of protectionism were positive achievements, but at the end of 1978 the emphasis on incentives to exporters was abandoned in favor of a stabilization effort through manipulation of a preannounced but overvalued exchange rate. Cheap dollars encouraged a massive inflow of consumer goods. By the early 1980s the economy was once more in decline; when the experiment with exchange-rate policy was abandoned in 1982, both public and private sectors were burdened by huge external debts. The final years of the military regime were marked by economic decline, inflation, rising debt-service payments, unemployment, and falling real wages, but there were no new initiatives to revitalize the economy.

Although the collapse of the economic model contributed to the downfall of the regime, its political project failed at the first stage. The military's constitution perpetuating its political role was submitted to the electorate in 1980 and was rejected by 57 percent of the electorate. Opposition to the regime, which had until then been private and hazardous, now started to become public and undisguised. In 1982 internal party primaries were held, in which 77 percent of voters supported opposition party factions. Inconclusive talks between military and political leaders on the transfer of power were held in 1983. By the time they resumed in 1984, both parties to the negotiations were anxious that they should succeed, since failure would strengthen the position of the intransigents on either side. The armed forces now seemed less intent on maintaining long-term political influence than on securing a safe passage back to barracks. Their tactics to achieve this centered on weakening the prospects of the radical opposition groups in the elections of November 1984. Hence the Frente Amplio coalition of left-wing parties (but not its leader, Líber Seregni) was rehabilitated, and Ferreira Aldunate, a vociferous critic of the regime, was arrested on his return from exile. As a result, the Blancos were not party to the Naval Club Pact in August, which set the terms of the transfer and reinstated the 1966 constitution, but they agreed to respect the election result. Leaving aside that his two main contenders were prohibited from participating in the election, in March 1985 Julio María Sanguinetti was inaugurated as the first democratically accountable president since 1972.

A feature of the restored political system of 1985 was the extent to which it resembled the system overthrown in 1973. Perhaps because reform might have implied disloyalty to the country's institutions and political traditions, there was no inquest into what had gone wrong before 1973. The 1966 constitution and the voting system were restored intact. The Frente Amplio coalition raised its share of the vote in 1984 to 22 percent, but the traditional parties (and to some extent the old leaderships) continued to dominate. Sanguinetti secured a personal vote of 31 percent, more than Gestido or Bordaberry had received; but this gave him neither a personal mandate nor a majority in the legislature.

Sanguinetti's administration, billed as a government of national unity on the strength of ministries granted to minority factions or distinguished individuals, faced two central challenges: to placate the military and to resurrect the economy. The first issue was sharpened by the immediate release of those Tupamaros still in jail and the political rehabilitation of the MLN-T, which joined the Frente Amplio coalition in 1989. Tension increased over the question of an amnesty for human-rights violations committed by military personnel during the regime. In 1986 a coalition of Colorados and Blancos managed to pass an Amnesty Law (Ley de caducidad de la pretensión punitiva del estado) by which the state declined to use its legitimate powers to persecute the armed forces for human rights violations and crimes against humanity. The Amnesty Law, denounced as illegal by international human rights organizations, was challenged in a 1989 referendum (itself the product of a mass mobilization of epic proportions), but was ultimately upheld with 57 percent of votes.

Amid the euphoria of redemocratization, and with widespread calls for expansionist economic policy to revitalize the economy on the basis of domestic demand, Sanguinetti opted instead for an economic strategy that prioritized export-led growth. The wage and employment benefits were real, if modest, but the gross domestic product grew strongly in 1986–1987. Inflation was curbed but not controlled. The Sanguinetti administration succeeded in consolidating democracy, but by 1988 there was a widespread sense that it had been inadequate to secure overdue change and reform.

The mood of frustration was reflected in the 1989 elections, in which a Blanco candidate was elected president for the first time in that century. Luis Alberto Lacalle, grandson of Herrera, received only 21 percent of the vote, but this was sufficient to defeat his nearest challenger, Jorge Batlle, son of Luis and great-nephew of Batlle y Ordóñez. Less predictably, both leaders, at the head of the largest factions of the two traditional parties, proposed market-oriented economic strategies in which the privatization of state-owned assets and the reform of the social security system were prominent. In 1991 the legislature gave conditional approval to a law permitting the sale of parts of the public sector, but popular opposition forced a referendum in 1992 on the measure, which was rejected by 72 percent of voters. The size of the majority signified a remarkable reaffirmation of faith in the Batllist ideology of state provision. In another major historical turn, in 1989 the socialist Tabaré Vázquez (the Frente Amplio's candidate) was elected mayor of Montevideo, where half the nation's population resides, with 35 percent of the vote. The Frente Amplio has since won four consecutive mayoral elections in the capital: Vázquez in 1989, Mariano Arana in 1994 and 1999, and Ricardo Ehrlich in 2004.

By 1992 two things had become clear: First, the wave of privatization (in response to Washington Consensus and IMF directives) was over, at least for the time being. The referendum had established that almost three-fourths of the population preferred some form of redistributive welfare state, even if it also desired a more efficient and reformed state. Second, the Frente Amplio was ascendant. Indeed, in 1994 former president Sanguinetti was again elected to the presidency based both on his earlier opposition to privatization as well as the alliance he crafted with Hugo Batalla, a former left-leaning Colorado who came to lead the Partido por el Gobierno del Pueblo (the sector of the Frente Amplio receiving the most votes in 1989) and who was now splitting from the leftist coalition and rejoining his old party.

Sanguinetti's second administration aimed at further turning Uruguay into a commercial and financial hub (plaza financiera), a provider of services, and a tourist destination. Tax-free havens (zonas francas) had been created in 1987 during his first government, intending to attract investors, promote exports, and provide jobs for local labor. By 1999 financial activity, tourism, the public sector, and services had displaced agriculture and industry (both of which fell by half when compared to mid-1980s figures); combined, they represented more than half of the gross domestic product (GDP). In 1994 the traditional parties also succeeded in changing the constitution and establishing a two-round electoral system (ballotage), which meant the Left would need to obtain more votes than the Colorado and the Blanco combined—a nearly unthinkable result.

In 1998 the GDP reached its highest point ever, but wealth was unequally distributed and the quality of life of the common folk did not improve as expected. The elections of 1999 gave voters another chance to manifest their discontent. The election of Jorge Batlle—an archrival of Sanguinetti within the Colorado Party—was meant to serve as a punishment for both previous governments. For the first time in history, the Frente Amplio won the most votes of any party (38.5 percent), though, predictably, it lost in the run-off, when it obtained 44 percent of the vote against Batlle's 51 percent. Jorge Batlle's presidency devoted itself to finding markets for commodities (opening the U.S. and Mexican markets to Uruguayan meat and other commodities) and investors (such as the Finnish paper company Botnia). In a gesture toward the leftist segment of the public, he organized a peace commission charged with investigating the fate of the disappeared, but it was not very productive

THE CRASH OF 2002: THE END OF NEOLIBERALISM

Jorge Batlle's administration had to deal with two major crises: an outbreak of mad cow disease affecting the nation's livestock, and the crippling effects of the financial crisis in Argentina of 2001, following the crash of the Brazilian currency and market in 1999. These two events combined resulted in the near total collapse, in 2002, of Uruguay's trade, industry, and financial system. The 2002 crisis was in part a product of financial globalization and speculation, upon which the Uruguayan economy had become dangerously dependent, as well as of its dependence on the Brazilian and Argentine markets. It was also due to the unscrupulous maneuvers of bankers (who emptied out accounts and funneled deposits offshore), coupled with Batlle's attempt to refinance the bankrupt private banks and aid the public banks, where people were rushing to the counters. This resulted in the near exhaustion of national reserves, the loss of personal savings and freezing of accounts, a skyrocketing risk factor, the disruption and destruction of much of the nation's economic activity, the ruin of many industries and businesses, and an unemployment rate that reached 20 percent. It also meant a severe setback in the standard of living of the working and middle classes: 40 percent of the population went into poverty (10 percent into outright indigence), with the rate well above 50 percent among children and youths.

The price of the U.S. dollar doubled, and GDP regressed to early-1990s levels (in 2002, GDP was at US$ 9,000 per year per capita). Social indicators stagnated or fell in terms relative to other countries, as did the Uruguayan ranking in the Index of Human Development (from 31 in the mid-1990s to 43 in 2002). As wealth became further concentrated, Uruguayan society and culture became increasingly unequal, fractured, and polarized. The outgoing migratory flow that had begun in the mid-1960s reached another peak in the aftermath of the 2002 crisis. Out of a population of 3.5 million, nearly half a million Uruguayans were now living abroad. On average, 20,000 persons were leaving every year, mostly young and educated. At the worst point of the banking crisis, the Bush administration lent some quick cash to Batlle, which kept the Uruguayan economy from hitting rock bottom. Nevertheless, time was running out, and the specter of a severe political systemic crisis (like the one facing neighboring Argentina in 2001) appeared on the horizon. The general feeling was that it was about time to give the Left a chance.

THE TWENTY-FIRST CENTURY: REBUILDING THE WELFARE STATE

It came as no surprise when Tabaré Vázquez of Frente Amplio and Rodolfo Nin of Encuentro Progresista, seconded by Danilo Astori as minister of the economy (a figure inspiring trust and geared toward the business community) and the charismatic Tupamaro leader José Mujica (the candidate with the most votes), swept the elections of 2004, winning 50.5 percent in the first round. A bit more surprising was the triumph of the Frente Amplio in seven of the main departments of the interior (including Canelones, Paysandú, Salto, and Maldonado), historical bastions of the Colorado and Blanco caudillos. Still more surprising was the meager 10 percent obtained by the Colorado party as a whole.

The Vázquez administration's initial goals were to handle and possibly reverse the effects of the prolonged crisis that had only manifested itself more crudely and violently in 2002. Vázquez created a brand new ministry of social development, headed by Marina Arismendi (then secretary general of the Communist Party), to rapidly assess, address, and reduce extreme poverty and poverty (at 30 percent in 2005, and reduced to 20 percent in 2007).

Astori, for his part, managed quickly to chase away fears of economic instability that might be worsened by a dramatic change of rules and course. While honoring the debt (unlike Argentina), Astori succeeded in negotiating better conditions for repaying it while reserving some margin for public spending; paid off parts of the debt (with the IMF); crafted a clearer legal framework; created a decent climate for attracting investors; and succeeded in reinvigorating the public banking system—all of which resulted in an almost immediate growth in economic activity.

Social spending was kept within certain budget limits, but was reorganized, and therefore was far more generous and effective than in previous administrations. Spending took the form of public investments on infrastructure, transfers to public education (now, by law, at 4.5 percent of the budget), the creation of a universal health coverage system (Sistema Nacional Integrado de Salud), and the rise of workers' wages and social benefits. The expansion of the social budget, another political goal, was also made possible by a combination of savings on debt-payments; stricter tax collection; the prosecution of large debtors; the creation of a progressive income tax, which Uruguay till then had lacked; transfers of rent generated by profitable state enterprises; and the effect of the overall expansion of the economy, which grew steadily.

Other changes introduced by the Frente Amplio during the first two years include the revamping of the consejos de salarios created in the 1940s, the protection of workers' rights to form and join unions and strike as a last resort (without fearing police action), the approval by the senate of a law on sexual and reproductive health (which includes a new abortion law), the fight to stamp out under-the-table employment, and the shortening of prison sentences and the liberation of many inmates. Still other acts include refinancing or outright pardoning of small farmers' debts, providing credit for worker-run factories and small enterprises, and actively supporting antidiscrimination actions and laws against racism and sexism. For its symbolism, it is also worth pointing out that the ministry of defense and the ministry of the interior are both now headed by women (Azucena Berrutti and Daisy Tourné), as are the ministry of public health (María Julia Muñoz) and the ministry of social development (Marina Arismendi).

For the first time, because of a more active judiciary and a stricter interpretation of the Amnesty Law of 1986, most of the still-living civilians and military officers closely associated with human rights violations committed during the dictatorship have been brought to justice. The list includes former President Bordaberry, former foreign affairs minister Juan C. Blanco, Lieutenant General José Gavazzo, and Colonels Gilberto Vázquez, Jorge Silvera, Ernesto Ramas, Ricardo Arab, Ricardo Medina, Luis Maurente, Sande Lima, among others. Juan Antonio Rod-ríguez Buratti committed suicide when he was about to be detained. Colonel Manuel Cordero, who escaped to Brazil, was incarcerated and faces an extradition request. General Gregorio Álvarez—the last leader during the dictatorship—was also finally imprisoned in December 2007. Furthermore, excavations in military facilities led to the discovery of the corpses of two disappeared political prisoners (union leader Ubagesner Chávez Sosa and law professor Fernando Miranda), thus contradicting prior official accounts that denied their existence.

In the realm of foreign relations, the Vázquez administration reestablished diplomatic relations with Cuba, and closer economic ties and new forms of cooperation were developed with the United States, Chile, Venezuela, and other countries such as India, China, New Zealand, and Thailand. Meanwhile, relations with neighboring Brazil and Argentina, the two powers of the Mercosur, remain cool.

See alsoAmézaga, Juan José de; Baldomir, Alfredo; Batlle Berres, Luis Conrado; Batlle y Ordóñez, José; Batllismo; Bordaberry, Juan María; Chicago Boys; Chinchulín, Pact of; Herrera, Luis Alberto de; International Monetary Fund (IMF); Lacalle Herrera, Luis Alberto; Latifundia; Michelini, Zelmar; Neoliberalism; Pacheco Areco, Jorge; Sanguinetti, Julio María; Saravia, Aparicio; Terra, Gabriel; Uruguay, National Liberation Movement (MLN-T); Vazquez, Tabare; Viera, Feliciano.

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                                           Henry Finch

                                      Gustavo Remedi

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