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A small country the size of the U.S. state of Missouri, Uruguay is squeezed between the two largest in South America, Brazil and Argentina—and not just geographically: they are the largest trade partners of this nation which is overwhelmingly dependent on its foreign trade. Known decades ago as the “Switzerland of Latin America” because of its solid but free-wheeling, no-questions-asked banking system, where private funds from other countries in the region found a safe haven away from prying eyes, Uruguay has also been the country of choice for political refugees from neighboring Argentina, Paraguay and Brazil.
Democracy has had a good run in Uruguay. The Colorado Party and its more conservative National Party rivals have alternated in the presidency since the 1830s, interrupted in power only by occasional upheavals, including the 1973-84 military rule. Last week a new president was installed for a five-year term, Jorge Batlle, who as the candidate of the ruling center-right Colorado Party resisted successfully in last December’s election a challenge from Tabaré Vázquez, the candidate of the leftist Broad Front. Founded in 1971, the Broad Front is a mixed-bag coalition of socialists, communists and splinter groups from the two traditional parties, which came together in 1971 as a political reaction to the government’s crackdown on the violent Tupamaros guerrilla movement. It has grown steadily since and rules in the capital city of Montevideo.
However, either way there wouldn’t have been much change in government policies. Uruguay is that rarest of welfare states, one that basically works. State-owned companies are profitable and the poverty rate, thanks to generous state programs and job security laws, is the lowest in Latin America. One in every five Uruguayans works for the state, which provides blanket health care coverage, manages casinos and hotels and even covers funeral costs for the poor.
So, while its two giant neighbors and biggest trading partners, Brazil and Argentina, have launched ambitious privatization plans and free-market reforms, Uruguayans have chosen to preserve their old, paternal state system. Voters overwhelmingly defeated two plebiscites in seven years aimed at privatizing government-owned companies. Nevertheless, Uruguay has not stood still. Foreign trade has grown substantially as it joined Argentina, Brazil and Paraguay in the Mercosur customs union. There have also been some small steps at state reform. For instance, Uruguay has sold off 51 percent of PLUNA, the national airline.
The platforms of both Vázquez and Batlle shared one key campaign promise: that in a fast-changing and globalized world Uruguayans would still have the right to their cradle-to-grave welfare state. But, while Uruguayans reject any attempt to dismantle the welfare state, they have also grown frustrated with its costs—slow salary growth, a lack of new industries, relatively higher prices for some basic services and sales taxes topping 23 percent. Apparently, Batlle was perceived as the man to make wanted changes without disturbing too much the present system, and he won with 57 percent of the vote.
“We respect the will of the people,” Vázquez said after conveying his congratulations to Batlle. But he insisted his leftist political coalition had become a transforming force in a country long dominated by only two parties.
Batlle, a senator whose great uncle, a former president, founded the welfare state, has successfully portrayed his Colorado Party as a moderate alternative to the Broad Front. Once a public supporter of privatization, Batlle, who had lost four presidential races, publicly rejected the idea of selling off state industries, and put Vázquez on the defensive by painting his party as extremist. Batlle alleged that the Broad Front was too far left for Uruguay.
Seeking support for the continuity of Colorado rule, Batlle reminded voters that, although the Uruguayan economy is slumping this year, Gross Domestic Product has grown steadily by more than 3 percent over the past 15 years and inflation remains in single digits. Vázquez, a former mayor of Montevideo, campaigned on promises to spend $300 million to create new jobs in a country where unemployment hovers stubbornly around 10 percent. He also had promised to impose a controversial personal income tax on those making more than $1,100 monthly.
After being sworn in last week, Batlle appealed for unity and signaled his desire to work with a bicameral congress in which no party will have an outright majority. “This government will have to count on the active participation of all the citizenry,” he said.
With this smooth transition in Uruguay and similar ones that have recently taken place in Argentina and Chile, where new presidents have also been chosen in free and fair elections, democracy appears to be well established in the so-called Southern Cone of South America.
Claudio Campuzano is U.S, correspondent for the Latin American newsweekly Tiempos del Mundo and editorial page editor of the New York daily Noticias del Mundo. He writes weekly for World Tribune.com