About Uruguay

A small, agricultural country

Uruguay is a small country, two-thirds the size of New Zealand, situated on the northern bank of the River Plate on the south-eastern coast of South America. Its northern neighbour is Brazil, while to the west, across the river, it borders Argentina.

Its 3.5 million population, which is growing at 0.3% pa, is very largely of European descent. Uruguayans are Spanish speaking . Literacy, at 97%, is very high and life expectancy is long. Their Government is democratically elected and the country has a long history of respect for private property rights.

Like New Zealanders, the majority of Uruguayans live in urban areas. Montevideo is the only large city, with a population of 1.4 million.

Uruguay's economy is dependent upon agriculture. Agricultural production directly accounts for only 10% of GDP, but together with an industrial sector (23% of GDP) which is based on the transformation of agricultural products, makes up more than half of the country's exports. Leading economic sectors include meat processing, agribusiness, wood, wool, leather production and apparel, textiles, and chemicals.

Early days and colonisation by Spain

The only inhabitants of Uruguay before European colonisation of the area were the Charrua Indians, a small tribe driven south by the Guarani Indians of Paraguay. The Spanish discovered the territory of present-day Uruguay in 1516, but the Indians’ fierce resistance to conquest, combined with the absence of gold and silver, limited settlement in the region during the 16th and 17th centuries. The Spanish introduced cattle, which became a source of wealth in the region. Spanish colonisation increased as Spain sought to limit Portugal's expansion of Brazil's frontiers.

Montevideo was founded by the Spanish in the early 18th century as a military stronghold; its natural harbour soon developed into a commercial centre competing with Argentina's capital, Buenos Aires. Uruguay's early 19th century history was shaped by ongoing conflicts between the British, Spanish, Portuguese, and colonial forces for dominance in the Argentina-Brazil-Uruguay region. In 1811, Jose Gervasio Artigas, who became Uruguay´s national hero, launched a successful revolt against Spain. In 1821, the Provincia Oriental del Rio de la Plata, present-day Uruguay, was annexed to Brazil by Portugal. The Provincia declared independence from Brazil in August 25, 1825 (after numerous revolts in 1821, 1823, and 1825) but decided to adhere to a regional federation with Argentina.

An independent nation

The regional federation defeated Brazil after a 3-year war. The 1828 Treaty of Montevideo, fostered by the United Kingdom, gave birth to Uruguay as an independent state. The nation's first constitution was adopted in 1830. The remainder of the 19th century, under a series of elected and appointed presidents, saw interventions by neighbouring states, political and economic fluctuations, and large inflows of immigrants, mostly from Europe. Jose Batlle y Ordoñez, president from 1903 to 1907 and again from 1911 to 1915, set the pattern for Uruguay's modern political development. He established widespread political, social, and economic reforms such as a welfare program, government participation in many facets of the economy, and a plural executive. Some of these reforms were continued by his successors.

Politics of the last 40 years

Economic, political, and social difficulties led to constitutional amendments, and the adoption of a new constitution in 1967. In 1973, amid increasing economic and political turmoil, the armed forces closed the Congress and established a civilian-military regime, characterised by repression and widespread human rights abuses. A new constitution drafted by the military was rejected in a November 1980 plebiscite. Following the plebiscite, the armed forces announced a plan for return to civilian rule. National elections were held in 1984. Colorado Party leader Julio Maria Sanguinetti won the presidency and served from 1985 to 1990. The first Sanguinetti administration implemented economic reforms and consolidated democracy following the country's years under military rule.

Sanguinetti's economic reforms, focusing on the attraction of foreign trade and capital, achieved some success and stabilised the economy.

The National Party's Luis Alberto Lacalle won the 1989 presidential election and served from 1990 to 1995. Lacalle executed major structural economic reforms and pursued further liberalisation of the trade regime. Uruguay became a founding member of MERCOSUR in 1991 (the Southern Cone Common Market, which includes Argentina, Brazil and Paraguay). Despite economic growth during Lacalle's term, adjustment and privatisation efforts provoked political opposition, and some reforms were overturned by referendum.

In the 1994 elections, former President Sanguinetti won a new term, which ran from 1995 until March 2000. As no single party had a majority in the General Assembly, the National Party joined with Sanguinetti's Colorado Party in a coalition government. The Sanguinetti government continued Uruguay's economic reforms and integration into MERCOSUR. Other important reforms were aimed at improving the electoral system, social security, education, and public safety. The economy grew steadily for most of Sanguinetti's term, until low commodity prices and economic difficulties in its main export markets caused a recession in 1999, which continued into 2003.

The 1999 national elections were held under a new electoral system established by constitutional amendment. Primaries in April decided single presidential candidates for each party, and national elections on October 31 determined representation in the legislature. As no presidential candidate received a majority in the October election, a runoff was held in November. In the runoff, Colorado Party candidate Jorge Batlle, aided by the support of the National Party, defeated Frente Amplio candidate Tabaré Vázquez.

The legislative coalition of the Colorado and National parties that held during most of Batlle´s administration ended in November 2002, when the Blancos withdrew their ministers from the cabinet. Throughout most of his administration, President Batlle had to handle Uruguay´s largest economic crisis in recent history, which impacted on poverty and led to increased emigration. Aside from successfully addressing the crisis, Batlle increased international trade, attracted foreign investment and tried to resolve issues related to Uruguayans who disappeared during the period of military government.

On June 27, 2004 the parties held primary elections to select their candidates for the national elections to be held on October 31. The Frente Amplio had already determined that Vázquez would be its candidate, the Colorados settled on former Interior Minister Guillermo Stirling, and the Blanco Party chose Jorge Larranaga, a former state governor and senator. Vázquez won the national election in the first round with a majority of the popular vote (50.7%) and was sworn in as President on March 1, 2005 (and will continue until 2010).

Government

Uruguay's 1967 constitution institutionalises a strong presidency, subject to legislative and judicial checks. The president's term is 5 years. Thirteen cabinet ministers appointed by the president head executive departments. The constitution provides for a bicameral General Assembly responsible for enacting laws and regulating the administration of justice. The General Assembly consists of a 30-member Senate, presided over by the vice president of the republic, and a 99-member Chamber of Deputies.

The highest court is the Supreme Court; below it are appellate and lower courts and justices of the peace. In addition, there are electoral and administrative courts, an accounts court, and a military judicial system.

The armed forces are constitutionally subordinate to the president through the minister of defence. By offering early retirement incentives, the government has trimmed the armed forces to about 14,500 for the army, 6,000 for the navy, and 3,000 for the air force. As of February 2003, Uruguay had 1,754 soldiers deployed in 11 UN peacekeeping missions. The largest groups were in the Congo, where 1,549 Uruguayan troops controlled one sector of the country, and the Sinai, where 60 troops were stationed.

Foreign relations

Uruguay traditionally has had strong political and cultural links with its neighbours and Europe. With globalisation and regional economic problems, its links to North America have strengthened. Uruguay is a strong advocate of constitutional democracy, political pluralism, and individual liberties. Its international relations historically have been guided by the principles of non-intervention, multilateralism, respect for national sovereignty, and reliance on the rule of law to settle disputes. Uruguay's international relations also reflect its drive to seek export markets and foreign investment. It is a founding member of MERCOSUR.

Uruguay is a member of the Rio Group, an association of Latin American states that deals with multilateral security issues (under the Inter-American Treaty of Reciprocal Assistance). Uruguay's location between Argentina and Brazil makes close relations with these two larger neighbours and MERCOSUR associate members Chile and Bolivia particularly important. Usually considered a neutral country and blessed with a professional diplomatic corps, Uruguay is often called on to preside over international bodies. Uruguay is a member of the Latin American Integration Association (ALADI), a trade association based in Montevideo that includes 10 South American countries plus Mexico and Cuba.

Over recent years, relations with the U.S. have become increasingly important. In 2002, Uruguay and the U.S. created a Joint Commission on Trade and Investment (JCTI) to exchange ideas on a variety of economic topics. In March 2003, the JCTI identified six areas of concentration until the eventual signing of the Free Trade Area of the Americas (FTAA) in 2005: customs issues, intellectual property protection, investment, labour, environment, and trade in goods. In 2005, Uruguay and the U.S. signed a Bilateral Investment Treaty and ratified an Open Skies Agreement. In 2007 a TIFA (Trade and Investment Framework Agreement) between Uruguay and US was signed.

Uruguay cooperates with the U.S. on law enforcement matters such as regional efforts to fight drug trafficking.

Recovery from crisis

In some respects, Uruguay is reminiscent of New Zealand emerging from its economic and financial crisis of 20 years ago. Then, New Zealand was dependent on a single export market and, when that had to change, came close to defaulting on an unsustainable level of foreign debt. Similarly, until recent years Uruguay was highly dependent on exports to its larger neighbours, Brazil and Argentina, and paid a heavy price for that dependence when their economies ran into trouble. Devaluation in Brazil in 1999 made Uruguayan goods less competitive; an outbreak of foot and mouth disease in 2001 curtailed beef exports to North America, and in late 2001, an economic crisis in Argentina dramatically reduced exports and tourist receipts (the white sands of Punta del Este are a popular holiday destination for Argentinians). A financial crisis developed in mid-2002 when Argentine withdrawals from Uruguayan banks started a bank run that was overcome by major borrowing from international financial institutions. This, in turn, led to serious debt sustainability problems. Multi-party consensus was achieved to address the issues through a package of measures endorsed and supported by the IMF which included floating the peso. A surge in inflation (25.9% in 2002) and a sharp devaluation of the currency created short-term pain but confidence was restored. Uruguay’s economy resumed growth in 2003, with a 2.5% rise in GDP. GDP grew about 12% in 2004, around 6.6% in 2005, 7% in 2006 and 7.4% in 2007. Inflation has dropped back to around the 7% level, closing 9.2% in 2008.

Uruguay’s spectacular recovery over the past couple of years has been fuelled by increased exports, especially to North America. The U.S. became Uruguay’s largest export market in 2004, thanks in large part to meat exports,and remains as a very important market up to date (in 2007 was the second export market), and the country is now far less dependent on the vicissitudes of its large South American neighbours. The impressive manner in which the 2003 crisis was addressed effectively through democratic processes, together with Uruguay’s positive investment climate, strong legal system, open financial markets and equal treatment of national and overseas investors inspire confidence for the future.

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