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Uruguay
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Montevideo, founded by the Spanish in 1726 as a military
stronghold, soon took advantage of its natural harbor
to become an important commercial center. Claimed by Argentina
but annexed by Brazil in 1821, Uruguay declared its independence
four years later and secured its freedom in 1828 after
a three-year struggle. The administrations of President
Jose BATLLE in the early 20th century established widespread
political, social, and economic reforms that established
a statist tradition. A violent Marxist urban guerrilla
movement named the Tupamaros, launched in the late 1960s,
led Uruguay's president to cede control of the government
to the military in 1973. By yearend, the rebels had been
crushed, but the military continued to expand its hold
over the government. Civilian rule was not restored until
1985. In 2004, the left-of-center Frente Amplio Coalition
won national elections that effectively ended 170 years
of political control previously held by the Colorado and
Blanco parties. Uruguay's political and labor conditions
are among the freest on the continent.
Uruguay's economy is characterized by an export-oriented
agricultural sector, a well-educated work force, and high
levels of social spending. After averaging growth of 5%
annually during 1996-98, in 1999-2002 the economy suffered
a major downturn, stemming largely from the spillover
effects of the economic problems of its large neighbors,
Argentina and Brazil. In 2001-02 Argentine citizens made
massive withdrawals of dollars deposited in Uruguayan
banks after bank deposits in Argentina were frozen, which
led to a plunge in the Uruguayan peso, a banking crisis,
and a sharp economic contraction. Real GDP fell in four
years by nearly 20%, with 2002 the worst year. The unemployment
rate rose, inflation surged, and the burden of external
debt doubled. Financial assistance from the IMF helped
stem the damage. Uruguay restructured its external debt
in 2003 without asking creditors to accept a reduction
on the principal. Economic growth for Uruguay resumed,
and averaged 8% annually during the period 2004-08.
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