Uruguay is situated in southeastern South America. Its capital, Montevideo, is an Atlantic port on the River Plate, lying across the river from the Argentine capital Buenos Aires. Uruguay became independent in 1828, after nearly 150 years of Spanish and Portuguese control. Decades of liberal government ended in 1973 with a military coup that was to result in 12 years of dictatorship, during which 400,000 people emigrated. Most have since returned. Almost the entire low-lying landscape is devoted to the rearing of livestock, especially cattle and sheep. Uruguay is the world's second-largest wool exporter. Tourism and offshore banking now bring in substantial foreign earnings.

Most Uruguayans are second- or third-generation European, mostly of Spanish or Italian descent. There are also some mestizos (of mixed blood) and a small minority of people descended from Africans or immigrants from Brazil, who live in or around Montevideo or near the Brazilian border. All indigenous Amerindian groups became integrated in the mestizo population by the mid-19th century. More recent immigrants include Jews, Armenians, and Lebanese. Historically, ethnic tensions have been few. The birthrate is low for Latin America.

The considerable prosperity derived from cattle ranching allowed Uruguay to become a welfare state long before any other Latin American country. In spite of Uruguay's serious economic decline since the end of the 1950s, there is still a sizable, if less prosperous, middle class. A clear sign of the country's economic and social deterioration during the years of military dictatorship was the unprecedented growth of shanty towns around Montevideo.

Although Uruguay is a Roman Catholic country, it is liberal in its attitude to religion, and all forms are tolerated. Divorce is legal. Women, who gained the vote in 1932, are regarded as equal to men.

Strengths

Substantial earnings from offshore banking. Tourism. Fertile grasslands. World's second-largest wool exporter. Beef-meat products.

Weaknesses

Few natural resources. Dependence on Brazil and Argentine markets. Modest industry. Large public sector deficit. Sluggish economic growth. Loss of investment grade status.

Profile

Traditionally an agricultural economy, three-quarters of the country is rich pasture, supporting livestock. Much of the rest is given over to crops. Farming, which formerly brought great wealth, still employs about 15% of the labor force, accounting for some 19% of GDP. Livestock and animal products, especially meat and wool, account for over one-third of export earnings. Manufacturing, accounting for some 18% of GDP, is farm-based. Tourism is increasingly important. Most economic activity – and half the population – is concentrated in Montevideo. Recently growth has been sluggish, making it difficult to achieve GDP and fiscal targets agreed with the IMF. Unions resist spending cuts, and, with public opinion hostile to major privatizations, there has been little progress in necessary structural reforms.

Uruguay is a presidential multiparty democracy.

Profile

The elections of 1984 marked a return to democracy. Since then the main Colorado (PC) and Blanco (PN) parties have monopolized power, either alone or in coalitions, despite being traditional opponents. The left-wing Broad Front has been the effective opposition, frequently in alliance with trade unions fighting austerity measures and reform of the social security system. Despite the crowded electoral calendar in 1999, and in-fighting among Blanco factions, there was broad political consensus on the need for continuing economic reform. In the 1999 elections, Colorado candidate Jorge Batlle won the presidency in the face of an unusually strong left-wing challenge.

Main Political Issues

Economic crisis

Recession has left the Batlle government little room for maneuver. The unions oppose tough fiscal targets agreed with the IMF. The currency came under pressure in 2002 due to the turmoil in Uruguay's main export market, Argentina, coming on top of a foot-and-mouth outbreak which hit beef exports.

The disappeared

An official inquiry into the fate of 160 people who "disappeared" under military rule (1973–1985) aims to give Uruguay a "moral and ethical answer."

Regional integration is a major focus, but President Batlle's determination to clinch a bilateral trade deal with the USA risked a row with the Brazilian government, which said that it contravened the official policy of Mercosur to negotiate trade agreements as a bloc. Argentina also took exception to plans to impose protective tariffs to cushion Uruguayan industry from the effects of Argentine devaluation. Such difficulties threatened diplomatic moves to strengthen Mercosur as a negotiating bloc in upcoming talks to establish a Free Trade Area of the Americas (FTAA).

Uruguay and the USA have agreed a legal assistance treaty to allow easier access to bank accounts of those suspected of laundering the proceeds from narcotics trafficking.

The military withdrew from power in 1985 and has since respected civilian rule. "Lodges" operate within the army to promote officers' interests and have displayed opposition to the government's replacements and promotions within the military hierarchy. A 1986 law virtually blocked investigations into killings, torture, and "disappearances" during the dictatorship, but there is still pressure to bring guilty officers to justice. A presidential decree in 1997 granted amnesty to officers punished for political offenses under military rule. The defense budget is modest; most equipment is bought from the USA.

Most of Uruguay is farmland, much of it given over to cattle and sheep. Rice is the country's only other significant export. There are no known oil or natural gas resources. Considerable potential is believed to exist for the mining sector, but only small quantities of building materials and jewelry-quality agate and amethysts are so far extracted. Gold deposits are currently being developed. Hydropower generates most of the electricity.

Pollution of the main Uruguay and Plate rivers is a concern, as is traffic density in Montevideo.

The government has sold off its share in the national bus industry – there are extensive internal and international coach and bus services – and has closed down all passenger railroad services. In 1998 the Senate gave the go-ahead for a $1 billion, 45-km (30-mile) road bridge across the River Plate from Colonia to Buenos Aires. Raising international finance for the project will be difficult.

Most Uruguayans have easy access to health services. Average life expectancy is high. Public services provide for 40% of the population, while the private sector caters for the remaining 60%. Despite opposition, the government has privatized some of the state medical establishments.

Health spending has in recent years been a victim of the budget cuts and social welfare reforms aimed at controlling the fiscal deficit.

Education, inspired by the French lycée system, is state-funded for 12 years up to secondary level and is compulsory for all children between the ages of six and 14. Both state and private schools follow the same curriculum; private schools are monitored by the government. Facilities are rudimentary in rural areas. Uruguay has two state-funded universities. The children of wealthy Uruguayans tend to complete their studies in the USA. Resistance to tax increases and pressure to reduce the fiscal deficit have both placed serious constraints on spending on education. Secondary school students continue to stage protests against the resulting effects on the system.

Crime levels in Uruguay are low, particularly compared with its neighbors Brazil and Argentina. Domestic theft is the main problem. Bribery is not common.

Uruguay possesses the social mobility which is typical of countries created through decades of large-scale immigration. Many professionals come from modest backgrounds. A 1999 report by the IDB exempted Uruguay (along with Costa Rica and Jamaica) from the regional trend of serious income inequality.

The wealthy tend either to be landowners or are employed in the financial sector. They have traditionally looked toward Europe, rather than the USA, for luxury goods.

The most deprived sections of Uruguayan society are the urban poor of Montevideo, a large proportion of whom are of mixed African and European descent, and the rural poor, who own little or no land.

Sandy beaches near the River Plate estuary are a major attraction. The old Spanish fortifications of Montevideo have been destroyed, but the city retains a colonial atmosphere. Punta del Este, 138 km (86 miles) east of the capital, is the main beach resort. Argentines account for the majority of visitors.

The Spaniards were the first to colonize the area north of the River Plate. In 1680, the Portuguese also founded a colony there, at Colonia del Sacramento, so starting 150 years of rivalry between the colonial powers for control of the territory.

• 1726 Spaniards found Montevideo. By end of the century, whole country is divided into large cattle ranches.
• 1808 Montevideo declares independence from Buenos Aires.
• 1811 Patriotic rancher and local caudillo, José Gervasio Artigas, fends off Brazilian attack.
• 1812–1820 Uruguayans, known as Orientales ("Easterners," from the eastern side of the River Plate), fight wars against Argentinian and Brazilian invaders. Brazil finally takes Montevideo.
• 1827 Gen. Lavalleja defeats Brazilians with Argentine help.
• 1828 Seeing trade benefits that an independent Uruguay would bring as a buffer state between Argentina and Brazil, Britain mediates and secures Uruguayan independence.
• 1836 Start of large-scale European immigration.
• 1838–1865 La Guerra Grande civil war between Blancos (Whites, future conservative party) and Colorados (Reds, future liberals).
• 1865–1870 Colorado President Gen. Venancio Flores takes Uruguay into War of the Triple Alliance against Paraguay.
• 1872 Peace under military rule. Blancos strong in country, Colorados in cities.
• 1890s Violent strikes by immigrant trade unionists against landed elite enriched by massive European investment in ranching.
• 1903–1907 Reformist Colorado, José Batllé y Ordóñez, president.
• 1911–1915 Batllé serves second term in office. Batllismo creates the only welfare state in Latin America with pensions, social security, and free education and health service; also nationalizations, disestablishment of Church, abolition of death penalty.
• 1933 Military coup. Opposition groups excluded from politics.
• 1942 President Alfredo Baldomir dismisses government and tries to bring back proper representation.
• 1939–1945 Neutral in World War II.
• 1951 New constitution replaces president with nine-member council. Decade of great prosperity follows until world agricultural prices plummet. Sharp drop in foreign investment.
• 1958 Blancos win elections for first time in 93 years.
• 1962 Tupamaros urban guerrillas founded. Its guerrilla campaign lasts until 1973.
• 1966 Presidency reinstated. Colorados back in power.
• 1967 Jorge Pacheco president. Tries to stifle opposition to tough anti-inflation policies.
• 1973 Military coup. Promises to encourage foreign investment counteracted by denial of political freedom and brutal repression of the left; 400,000 emigrate.
• 1984–1985 Military step down. Elections. Julio Sanguinetti (Colorado) president.
• 1986 Those guilty of human rights abuse granted amnesty.
• 1989 Referendum endorses amnesty in interests of stability. Elections won by Lacalle Herrera and Blancos.
• 1994–1995 Sanguinetti reelected, forms coalition government. Mercosur membership.
• 1999 October, presidential election won by Colorado Jorge Batlle.
• 2002 Uruguay loses investment grade status due to impact of Argentine crisis.