History of Uruguay

Mother Earth Travel > Country Index > Uruguay > Map Economy History

ECONOMIC CRISIS AND DECLINE, 1959-1973

The Blanco Administrations, 1959-67

From March 1959 to February 1967, eight National Party governments ruled Uruguay. The death of Herrera (1959) aggravated divisions in the National Party and demonstrated the fragility of the electoral accords that had led to its victory. The economic crisis and social unrest that had beset Uruguay from the mid1950s continued, and the 1960s opened with gloom and sadness for the country. At the time of the 1962 elections, inflation was running at a historically high 35 percent. The Colorado Party was defeated once again, although by a much smaller margin of votes (24,000 as compared with 120,000 in 1958). The National Party split. The UBD joined a splinter faction of Herrerism, the Orthodox faction, led by Eduardo Víctor Haedo. Another faction of Herrerism, led by Martín R. Echegoyen (1959-60), kept its alliance with Nardone's Ruralists. At the same time, divisions between the List 14 faction and Unity and Reform were intensified in the Colorado Party.

Important changes also took place in the minor parties. Catholics formed the Christian Democratic Party (Partido Demócrata Cristiano--PDC). Communists formed a coalition with other minor parties, the Leftist Liberty Front (Frente Izquierda de Liberdad--Fidel). The PSU joined with intellectuals and dissidents from traditional parties and formed the Popular Union (Unión Popular).

The thin majority of the governing party, as well as its internal divisions, hindered the administration of the National Council of Government during the 1963-67 period. In 1964 the political scene was further affected by the death of two important leaders: Batlle Berres and Nardone. That same year, the workers movement formed a single centralized union, the National Convention of Workers (Convención Nacional de Trabajadores--CNT). In addition, a new political protagonist appeared. In 1962 Raúl Antonaccio Sendic, head of the sugarcane workers from the north of the country, formed, together with other leftist leaders, the National Liberation Movement-Tupamaros (Movimiento de Liberación Nacional-Tupamaros--MLN-T), a clandestine urban guerrilla movement.

Economically, the 1958 Blanco victory brought ranching and agricultural forces to power. This led to the implementation of liberal (free-market) economic policies aimed at eliminating the protectionist-interventionist model that had fostered industrial development. In 1960 Uruguay agreed to sign its first letter of intent with the IMF. The Blanco government devalued the currency and established a single, free monetary exchange market (while maintaining the interventionist role of BROU), as well as the free import and export of goods and services. The reorientation of economic policy tended to favor the agro-exporting sector. However, the model could not be applied fully, nor in an orthodox manner. Inflation increased to more than 50 percent per year between 1963 and 1967, and in 1965 an overstretched financial system and massive speculation produced a banking crisis. Labor and social conflict increased as well, and a state of siege was imposed in 1965.

To try to solve the problem of economic stagnation, the government complied with one of the principal recommendations of the Alliance for Progress (a United States program to help develop and modernize Latin American states) by preparing a tenyear development plan. However, virtually none of the plan's recommendations were ever put into practice.

During the Blanco era, sectors from both traditional parties had begun blaming the country's difficulties on the collegial constitutional arrangement of executive power. In the 1966 elections, three constitutional amendments were submitted. The approved changes, supported by Blancos and Colorados, were incorporated in the 1967 constitution, which put an end to the collegial executive, thereby returning the country to a presidential regime; granted increased powers to the executive; and extended the presidential term to five years. They also eliminated the three-and-two (coparticipation) system for appointing heads of autonomous entities and ministries and created new state agencies to modernize government: the Office of Planning and Budget; the Social Welfare Bank; and the Central Bank of Uruguay. High school education became compulsory.

Pachequism, 1967-72

Given the growing economic and social crisis, it was not surprising that the Colorado Party won the November 1966 elections. In March 1967, General Oscar Gestido (1967), a retired army general who had earned a reputation as an able and honest administrator when he ran the State Railways Administration, became president. He was supported by the Colorado and Batllist Union (Unión Colorada y Batllista--UCB), comprising List 14 and other conservative Colorados.

Between June and November of 1967, the government, with the influence of some Batllists, attempted to reverse economic and social policies implemented since 1959 and to return to the old developmentalist model. But in November, César Charlone, responsible for economic policies under Terra, became head of the Ministry of Economy and Finance. He agreed to the IMF's suggestions, again establishing a unified exchange market and drastically devaluing the currency. Inflation exceeded 100 percent in 1967, the highest in the country's history.

In December President Gestido died and was succeeded by his vice president, Jorge Pacheco Areco (1967-72). A little-known politician and former director of the newspaper El Día, Pacheco would leave an indelible mark on Uruguay. Within one week of taking office, Pacheco issued a decree banning the PSU and other leftist groups and their press, which he accused of subverting the constitutional order and advocating armed struggle. To implement the new monetarist policy adopted in 1968, Pacheco appointed Alejandro Végh Villegas as director of the Office of Planning and Budget. In a sharp policy change, Pacheco decreed a wage and price freeze in June 1968 to try to control inflation. He also created the Productivity, Prices, and Income Commission (Comisión de Productividad, Precios, e Ingresos-- Coprin) to control the price of basic food items. In 1968 real wages were the lowest in the decade, and inflation reached a maximum annual rate of 183 percent that June.

The newly created umbrella labor organization, the CNT, resisted these economic policies, and student and other social conflict intensified. The government responded by repressing strikes, work stoppages, and student demonstrations. The death of a student, Líber Arce, during a protest paralyzed Montevideo, and relations between the University of the Republic and the government further deteriorated. The prompt security measures, a limited form of a state of siege, which had been included in the constitution to deal with extraordinary disturbances of domestic order and applied in 1952 and 1965, were enforced during almost all of Pacheco's time in office. He justified his actions, which included drafting striking bank and government employees to active military service, on the basis of the growing urban guerrilla threat from the Tupamaros.

During this period, the Tupamaros had grown in strength, and their actions--robberies, denunciations, kidnappings, and, eventually, killings--shook the country and became known worldwide. The General Assembly acquiesced twice in the suspension of all civil liberties, once for twenty days following the assassination in August 1970 of Dan A. Mitrione, a United States security official, and then for forty days following the kidnapping of British ambassador Geoffrey Jackson in January 1971--both by the Tupamaros. On September 9, 1971, after the escape from prison of more than 100 Tupamaros, Pacheco put the army in charge of all counterguerrilla activity.

The November 1971 national elections were held in a relatively quiet atmosphere because of a truce declared by the Tupamaros. Uruguayan society had become polarized. Political sectors supporting Pacheco promoted his reelection to a new presidential term, as well as the corresponding constitutional amendment to legitimize it. The left was able to unite and draw supporters from traditional parties, such as the Colorado Party's List 99. The new coalition was named the Broad Front (Frente Amplio). In the National Party, a faction of Herrerists chose General Mario Aguerrondo, considered a hard-liner, as its presidential candidate. Liberal Blancos supported the reformist program of a new movement, For the Fatherland (Por la Patria-- PLP), led by Senator Wilson Ferreira Aldunate.

The constitutional amendment did not succeed, but Pacheco's handpicked successor, Juan María Bordaberry Arocena of the Colorado Party, won the controversial elections by some 10,000 votes, after a mysterious halt in the vote count. It was noteworthy, however, that Ferreira obtained a large number of votes (he was actually the candidate receiving the most votes--26 percent of the total to Bordaberry's 24 percent), and the left increased its following, receiving about 18 percent of the votes. Bipartisan politics had come to an end, replaced by a multiparty system bitterly divided by political, social, economic, and ideological differences. In economic terms, the stabilization measures taken between 1969 and 1971 by the Pacheco administration to increase wages and reduce inflation had been moderately successful. But by 1972, the situation was out of control again. Another free market, monetarist experiment would have to await the imposition of an authoritarian regime.

The Emergence of Militarism, 1972-73

In March 1972, Bordaberry was sworn in as president (1972-76). He ran as a Colorado, but he had been active in Nardone's Ruralist movement and had been elected to the Senate as a representative of the National Party. Bordaberry's narrow victory forced him to seek the support of other political parties. He found it in Mario Aguerrondo's Herrerist faction of the National Party and in the Colorado Party's Unity and Reform, led by Jorge Batlle Ibáñez, a son of Luis Batlle Berres, who had founded the faction.

Bordaberry appointed Julio María Sanguinetti Cairolo, who headed a faction of Unity and Reform, as minister of education and culture. Sanguinetti promoted education reform that brought together primary, secondary, and vocational education under the National Council for Education (Consejo Nacional de Educación-- Conae) and established secret and mandatory voting for the election of university authorities. Unity and Reform also took charge of economic policy by implementing a five-year development plan inspired by neoliberal (free market) and monetarist principles, which would slowly open the economy to greater influence from financial and commercial groups, as well as to foreign investment.

The Bordaberry administration, however, continued its predecessor's policies, giving greater budgetary priority to the military than to education and other social areas. Bordaberry also proposed legislation to eliminate university autonomy and enhance the powers of the army and police.

When the Tupamaros finally renewed their armed activities following their six-month electoral truce from October 1971 to April 1972, they faced a firmly entrenched administration backed by an increasingly well-equipped and adequately prepared military, which had a blank check to defeat them. In April 1972, after a bloody shoot-out with the Tupamaros, Bordaberry declared a state of "internal war." All civil liberties were suspended, initially for thirty days but later extended by the General Assembly until 1973. On July 10, 1972, the government enacted the draconian State Security Law. By the end of the year, the army had decisively defeated the Tupamaros, whose surviving members either were imprisoned or fled into exile. Despite their victory over the Tupamaros, the military had grown impatient with civilian rule. It was now time for the armed forces' final assault on the Uruguayan polity.

SOURCE: Country Studies/Area Handbook by the US Library of Congress

Uruguay History Contents
 

Mother Earth Travel > Country Index > Uruguay > Map Economy History