URUGUAY HANDBOOK

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00891A000700030001-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 48
• Document Creation Date: December 16, 2016
• Document Release Date: April 5, 2005
• Sequence Number: 1
• Publication Date: November 1, 1970
• Content Type: REPORT

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Uru
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Secret
N2 10?
No. 0591
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WAR NING
This document contains inf ),, oration affecting the national
defense of the United States;, within the meaning of Title
18, sections 793 and 794. of. the US Code, as amended.
Its transmission or revelation of its contents to or re-
ceipt by an unauthorized person is prohibited by law.
Gi )P
Errl d a4? ma?i:l
d xa~ d (i
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TABLE OF CONTENTS
INTRODUCTION
Page
1. GEOGRAPHY
Location and area . . . . . . . . . . . . . . . . . . . . . 1
Topography . . . . . . . . . . . . . . . . . . . . . . 1
Climate . . . . . . . . . . . . . . . . . . . . . . . . . 1
Natural resources . . . . . . . . . . . . . . . . . . . . . 2
Human resources . . . . . . . . . . . . . . . . . ? ? ? 2
II. ECONOMIC BACKGROUND
Growth rates and trends . . . . . . . . . . . . . . . . . . 1
Government economic policies . . . . . . . . . . . . . . . 1
Income distribution . . . . . . . . . . . . . . . . . . . . 2
Sectors of the economy . . . ? ? ? ? ? ? . ? ? ? ? ? . . . 3
Transportation and telecommunications . . . . . . . . . . . 5
Foreign trade . . . . . . . . . . . . . . . . . . . . . . . 6
Balance of payments . . . . . . . . . . . . . . . . . . . . 7
III. POLITICAL SITUATION AND TRENDS
Historical summary . . . . . . . . . . . . . . . . . . . . . 1
Structure and functioning of governmental system . . . . . . . 2
Political dynamics . . . . . . . . . . . . . . . . . . . . . 4
Security system . . . . . . . . . . . . . . . . . . . . . 6
25X1
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Defense organization and manpower . . . . . . . . . . . . . 1
Military budget . . . . . . . . . . . . . . . . . . . . . . 1
Major weapons systems . . . . . . . . . . . . . . . . . . 1
VII. FOREIGN RELATIONS
VIII. US INTERESTS
IX. CHRONOLOGY AND TABULAR DATA
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Uruguay is the smallest of the independent countries in South America
and among the least populous. In the early 20th century it introduced social
reforms on such a scale that it became known as Latin America's first
welfare state. Its outstanding record of political stability and devotion to
liberal and democratic principles began to suffer in the late 1950s, however,
because of mounting economic problems and ineffective government under a
plural executive. Although this system was finally replaced in March 1967 by
a single president, many of the attitudes and political structures of the era of
collegiate government remain, and presidents have encountered opposition
to their economic recovery programs and other efforts to exercise power.
In addition, Uruguay has been plagued in recent years by strikes and
student agitation. Since 1969, a small but fanatical band of Marxist ex-
tremists called the Tupamaros have subjected Montevideo to a terrorist
campaign, including robberies, kidnapings, bombings, and assassinations,
unprecedented in Uruguayan history. Should the President continue to be
hampered by the inefficiency of the system and urban violence, an uncon-
stitutional seizure of power is possible.
Uruguay is an agricultural nation, with flat:, fertile land and a temperate
climate as its only important natural resources. Wool, meat, and hides
provide most of its export earnings. Although self-sufficient in most con-
sumer products, it imports capital goods and many industrial materials.
The population of about 2.9 million has an annual growth rate of only
1.3% and is one of the most homogeneous in Latin America. It is almost all
white, of European descent, Spanish-speaking, and predominantly Roman
Catholic. By Latin American standards, differences in wealth are moderate,
class conflict is not sharp, and the middle class is well developed. There is,
however, a considerable contrast between the capital, Montevideo, with
nearly half the population, and the rest of the country. Rural underdevelop-
ment has caused much migration to the cities, creating the highest urban
ratio in Latin America.
The change from the collegiate to the single presidency was induced by
pressing economic problems. Until 1955 the country had long enjoyed
prosperity and financial stability and had attracted foreign capital. Then, a
drop in export earnings, followed by unrestrained expansion of private credit
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and later by growing budgetary deficits, created an inflationary spiral, with a
cumulative increase in the cost of living of mcre than 1,700% between 1956
and 1966. Related problems included bank closures, a massive flight of
capital abroad, severe unemployment and underemployment, and much
labor unrest. The legal Communist Party of Uruguay, with an estimated
30,000 members, has exploited this situation to become the strongest force
in the labor movement. It has inspired many strikes and stoppages.
The administrations of President Oscar Gestido, who died nine months
after taking office in 1967, and of his successor, Jorge Pacheco, have
regarded inflation, the need to increase production, and internal security as
the most urgent problems facing the nation. The burden of heavy debt
repayments is also a serious problem. Although momentum toward eco-
nomic recovery has been attained, much remEins to be done in administra-
tive and economic reform, as well as in agrarian and industrial development.
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Uruguay is located on the southeastern coast of South America, ap-
proximately 2,800 nautical miles from the Panama Canal and about 3,700
nautical miles from the southern tip of Florida. It is the smallest in-
dependent country in South America, covering only about one percent of
the continent. The total area is approximately 72,200 square miles, roughly
the size of North Dakota. The maximum dimensions are about 320 miles
north-south and 290 miles east-west.
The perimeter of Uruguay totals approximately 1,250 miles, all of
which is unfortified. The coastline, 410 miles long, is low, slightly irregular,
and predominantly sandy. A large part of the coast is inaccessible because of
shallow nearshore approaches and numerous nearshore shoals, rocks, and
islets.
Topography
The terrain of Uruguay, a transition between the flat pampas of
Argentina and the uplands of Brazil, consists of extensive plains interrupted
by scattered areas of hills. Most of the plains are flat to rolling and are less
than 650 feet above sea level. Elevations increase inland in areas of mod-
erately to severely dissected plains and rugged hills, mainly in the east and
north. The country is drained by numerous, evenly distributed streams that
originate mainly in the areas of dissected plains and hills. There are many
lakes and lagoons in the southeast and two large reservoirs on the Rio Negro,
the largest tributary of the Uruguay River. Most streams are perennial, are
less than 3.5 feet deep and between 250 and 500 feet wide in all or most of
their courses, and flow between low banks.
The climate is characterized by hot summers (early December through
February) and by mild winters (early June through August). The seasonal
variations of most elements are not excessive. Annual precipitation, ranging
from 40 to 60 inches, is fairly evenly distributed throughout Uruguay, and
seasonal variations are relatively small. Mean daily maximum temperatures
are mostly in the 80s during summer and in the high 50s and low 60s during
the winter. Mean relative humidity is highest in late autumn and winter,
ranging between 70% and 85%, and lowest in summer, usually in the 60s.
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Cloudiness has only a slight seasonal variation-usually between 50% and
60% from May through October and between 40% and 50% the rest of the
year.
Natural resources
Uruguay's only important natural resources are its flat and fertile land
and its temperate climate. The natural fertility of Uruguayan pastures
permits a high ratio of livestock per hectare. One third of the land area
contains some trees, including eucalyptus, willows, poplars, and acacias.
Most of the wild animals native to the land have long since become extinct.
Seals, however, congregate off the Isla de Lobos, an island near Punta del
Este, which is South America's best preserve of seals.
Human resources
The estimated population of Uruguay as of 1 July 1970 was 2,886,000.
The average annual rate of growth is about 1.3%, the lowest in Latin
America. The government is opposed to family planning, but there are two
or three abortions for every live birth. The inhabitants of Uruguay are almost
wholly of European descent. Between 85% and 90% are white; only about
5% to 10% are mestizos (mixed white and Indian), and they are concentrated
in the northern rural areas. About 5% are Negroes, most of whom are
thought to be descendants of Brazilian immigrants.
Although Uruguay has one of the highest population densities in South
America, the country as a whole is underpopulated, considering that
practically all of its land area can be effectively used. The government,
however, has taken no action in recent years to encourage immigration and,
with the rise in unemployment, does not appear likely to alter its views. The
exodus from rural areas is causing great concern.
Uruguay is one of the most homogeneous countries of Latin America in
terms of race, language, and religion. The country, however, is divided into
two contrasting social structures: the city of Montevideo and the rest of the
country. Montevideo society closely resembles that of a modern Western
European nation. Social reforms introduced in the early part of this century
reduced urban social inequalities and increased economic security. In recent
years social conditions have worsened with a decline in the general standard
of living, although it is still higher than in most other Latin American
countries. There are many more social welfare and recreational facilities in
Montevideo than in the interior, and the city reflects cosmopolitan in-
fluences in both style and architecture. The opportunity to rise socially and
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economically is greater in the city than in rural areas. In rural society 19th
century modes of life generally prevail. The large landholding unit, the
estancia, is the center of country life, and the landowner often has semi-
feudal authority. There are great differences in wealth; class lines tend to be
rigid, and there is much less social mobility than in Montevideo. The rural
worker has not benefited to any extent from the social reforms and welfare
systems enjoyed by the city dweller, and his level of living is consequently
much lower. More than 40% of the population now lives in Montevideo.
Educational and literacy levels are among the highest in Latin America.
(About 90% of the population 15 years and older are literate). The labor
force is estimated as slightly over one million. The estimated labor union
membership is 300,000.
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The Uruguayan economy recently began to show some improvement
after more than a decade of stagnation and hyperinflation, but formidable
problems remain. In 1969 the inflation rate was held to 15% compared with
66% in 1968, while real gross domestic product (GDP) rose by 5 1/2%-the
greatest increase since 1954. Export earnings were the highest since 1965,
and foreign exchange reserves rose by 9%. Economic trends in 1970 also
appear to be generally favorable. Recent economic gains reflect both the
recovery of agricultural output from the poor weather of 1967-68 and the
austerity program initiated by the government in late 1968.
Uruguay enjoyed a long period of prosperity and financial stability and
was a haven for foreign capital. Beginning in 1955, however, falling export
earnings required cuts in imports of industrial materials as well as consumer
goods. Moreover, unrestrained expansion of credit to the private sector, and
later to the government to cover its deficits, created an inflationary spiral
that continued through 1965.
The rise in the cost of living exceeded 2,000% from 1961 to 1968 and
peaked at an annual rate of 183% in June of 1968. A stabilization program
had considerably reduced the inflation rate in 1966, but late that year, after
crippling strikes, the government eased controls and rapid inflation soon
resumed. I n late 1968 the Pacheco government instituted a far more drastic
stabilization program, which has had encouraging results. During the 1960s
real GDP stagnated and per capita GDP declined by about 10%. Nevertheless,
the estimated per capita GDP of $980 in 1969 was still the third highest in
Latin America. Fixed investment, which had averaged 19% of GDP for more
than a decade after World War 11, has amounted to only about 12% of GDP
in recent years.
In contrast to most other Latin American countries, Uruguay has no
subsistence sector; the entire population is integrated into the market
economy. The labor force is homogeneous, heavily urbanized, and the best
educated in Latin America. Although labor productivity has declined in
recent years, it remains among the highest in Latin America.
Government economic policies
The keystone of the government's financial stabilization effort is the
wage and price freeze promulgated in 1968. Unlike previous wage and price
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controls, this measure has been rigidly enforced for most goods and services.
During the first month it administered the price control program, for
example, the National Subsistence Council closed 60 retail establishments
and fined 30 others for raising prices. Wage and price control subsequently
was made the responsibility of the newly formed Productivity, Price, and
Income Commission, which has been even more effective than its predeces-
sor. The government also has fought inflation by reducing its budget deficits
in some recent years and by restricting private sector credit expansion.
The government has been trying to stimulate output through various
measures. Realizing that export expansion is crucial in spurring increased
production, it decreed two large currency devaluations in late 1967 and early
1968. In addition, it has relied less on export retention taxes and has relaxed
import restrictions on raw materials and capital goods. Although budget
limitations have prevented substantially increased investment spending, some
programs have been initiated to increase agricultural productivity. The gov-
ernment also has been trying to utilize foreign aid funds more rapidly,
channel credit into the most productive fields, and encourage industrial and
agricultural output by broadening price supports and subsidies.
Although the government exercises fairly extensive control over the
private sector through welfare regulations, credit distribution, and wage and
price controls, government ownership of enterprises is more limited than in
many other Latin American countries. The principal state enterprises are the
Railroad Administration, the General Administration of State Electric Power
and Telephones, the Uruguayan National Airline, the Oceanographic and
Fishing Service, and the National Meatpacking Plant. Except for the railroads
and telephone system, the government does riot have a monopoly in any
field. At present, the trend appears to be toward less state ownership.
Uruguay has long devoted a larger share of its resources to health,
education, and social welfare than most other Latin American countries. As
a result, Uruguayans on the average have a better education, longer life
expectancy, and a more equitable share of national income than do most
Latin Americans. Distortions caused by rapid inflation, however, have
brought a drop in real wages, pensions, and other benefits for the lower-
income groups in recent years. The government, which still relies heavily on
foreign trade taxes, has made little effort to redistribute income through
progressive forms of taxation.
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Sectors of the economy
Although agriculture contributes only 12% of GDP and employs only
one person in five, it is the source of most raw materials for industry and
96% of exports. Agricultural production, which fluctuates considerably,
showed only a moderate upward trend during the 1960s. With the return of
favorable weather in 1969, following two years of drought and floods,
output jumped by 15%. Even so, it was little greater in 1969 than in 1956.
Sluggish agricultural growth has impeded progress throughout the economy.
Although Uruguay is no longer self-sufficient in major foodstuffs, the
population still has the best diet in Latin America. The average daily food
intake of 2,970 calories per capita is the region's highest, and protein
content of the diet is one of the highest in the world.
The principal domestic crops are wheat, corn, sunflower seeds,
potatoes, oats, and barley. The production trend of most of these crops has
been downward during the past decade. Planted areas for most domestic
crops decreased in the 1960s because price rises did not fully cover increases
in production costs. Crop yields, which are low by US standards but
somewhat above average for Latin America, vary greatly from year to year
depending upon weather conditions.
Livestock raising accounts for about 80% of agricultural output. The
principal livestock products are wool and beef. Wool is produced almost
exclusively for export; a little more than half of the clip is exported as raw
wool and most of the rest as semi-finished products. About 25% of the beef
and veal output and small amounts of eggs and mutton are also exported,
but all milk and pork are consumed domestically. Uruguay has one of the
highest rates of beet consumption in the world-an average of about 198
pounds per capita annually during 1961-65 compared with about 88 pounds
in the United States. Since 1965 the government has attempted, with little
success, to restrict meat consumption by establishing several, "meatless" days
each week.
Except for hydroelectric power, Uruguay has few energy resources. No
coal, oil, or gas has been found. Firewood is still an important fuel for homes
and for.small industrial establishments in the interior. Fuel imports make up
about 15% of total imports.
Although Uruguay is usually a net importer of electric power, the
industry can meet consumer demands under ideal conditions. In early 1970
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the nominal installed capacity was 578,000 kilowatts, but effective capacity
frequently is reduced by equipment failures and low water levels in reser-
voirs.
Uruguay possesses few known mineral resources and has a relatively
small mining output. The principal products are marble and granite, some of
which is exported. Half of the industry's labor force of about 4,000 is
engaged in stone quarrying and processing.
Known iron ore reserves, located for the most part in north central
Uruguay, are estimated at about 100 million metric tons. About 2,000 tons
of this high-cost ore are mined each year for use in domestic industry.
Uranium ore deposits were discovered along the Rio Negro in 1965, but are
not yet exploited.
Manufacturing expanded very rapidly in the first decade after World
War 11, aided by high protective tariffs and worldwide shortages of consumer
goods. Although output has stagnated since the mid-1950s, manufacturing
still accounts for about 25% of GDP and employment.
Food processing, which makes up about 20% of output, is by far the
most important branch of manufacturing. Meatpacking, flour milling, sugar
refining (partly of imported raw sugar), and oil processing are the main
activities. Meatpacking, the dominant industry, grew at an average annual
rate of only 1 1/2% during the 1960s because exchange-rate policies and
cost increases made competition abroad difficult.
Textile production, the second most irrportant industry, grew fairly
rapidly in the mid-1960s but recently cost increases, overvaluation of the
peso, and worldwide competition from synthetic fibers have had an adverse
effect.
Construction output, stagnant during 1956-60, has declined to about
75% of its 1961 level. In 1968, however, the sector still accounted for about
5% of GDP. Residential construction has been at a low level since the early
1950s, when numerous apartment buildings were constructed. Because of
that building boom and the low rate of population growth, demand for
housing has not been particularly strong. Montevideo remains one of the few
large Latin American cities without an extensive slum area.
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Transportation and telecommunications
Uruguay has one of the best networks of rail lines and highways of any
South American country. The highway mileage density is one of the highest
in Latin America, and very few areas are more than 30 miles from a rail line.
Despite some deficiencies, particularly in regional highways, transportation
and telecommunications systems are adequate for present needs. Most
systems are oriented to Montevideo and from there fan out to serve nearly
all populated areas.
The transportation systems have been developed to serve the needs of
agriculture and livestock raising. Highways are the most widely used trans-
port medium. The best roads, like most of the population, are concentrated
in the south and southwest. The well-distributed rail net has a significant role
in Uruguayan communications, even though the rail lines generally parallel
highway routes and road competition has taken a sizable volume of traffic
away from the railroads. The inland waterways, made up largely of the Rio
de la Plata system, complement the rail and highway nets and offer them
little serious competition. The same is true of civil air activities, which are on
a small scale domestically but play an important role in providing interna-
tional air services. About 90% of the seaborne commerce is handled by the
port of Montevideo, but only about 25% of all seaborne commerce is carried
by Uruguay's merchant marine. There are no significant pipelines in the
country. The telephone network is the most important telecommunication
system.
Most transportation facilities are government-owned. Various govern-
ment agencies administer the activities of individual modes of transportation.
Civil air and merchant marine activities are controlled by agencies under the
Ministry of National Defense; all other administrative agencies are under the
authority of the Ministry of Public Works. Several autonomous agencies
either own or control the telecommunication networks.
Government efforts to improve and develop transportation are included
in a 10-year development plan (1965-74). Investment in the transport sector
of the plan is set at the equivalent of US $386.9 million. General objectives
are to meet internal transport needs, to promote wide participation in the
international transport market, and to obtain maximum efficiency in the
transportation systems at lowest cost. Most activities have so far been
devoted to highway projects, but the plan also calls for improvements in the
rail lines and the telecommunication system.
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Foreign trade
Because of its small size, lack of most industrial raw materials, and
near-absence of basic industry, Uruguay is heavily dependent upon foreign
trade. In the early 1900s it mainly exported unprocessed agricultural
products in exchange for consumer goods. With the growth of light industry
during the last three decades, however, imports of consumer goods have
dropped and imports of raw materials have increased rapidly. Industrial
exports, however, have risen very little. Although industrialization has not
saved much foreign exchange, it has generated employment for a large part
of the labor force. Agricultural exports are the main source of the foreign
exchange needed to pay for essential industrial inputs.
Uruguayan exports declined substantially in the late 1950s-from an
annual average of $230 million in 1950-56 to $130 million in 1957-59-be-
cause of slackening demand for agricultural products after the Korean War
and government measures that discriminated against agriculture. Exports
rose sharply from 1959 through 1961 and thereafter more slowly. In 1969
their value was about double that of 1959, although still considerably below
the average of the early 1950s. Generally rising prices for most animal
products sparked the export performance of the 1960s. The export decline
of the late 1950s resulted in stringent government limitations of imports,
which were later relaxed somewhat as export performance improved. The
combination of reviving exports and restricting imports allowed trade sur-
pluses in 1965-66 and 1968-the first since 1953.
Uruguay substantially reduced its dependence on wool exports during
the 1960s. Largely in response to changing relative prices, meat and meat
products rose from one fourth to one third of total exports, while wool
dropped from about one half to less than two fifths of the total. Other
agricultural products-mostly fats and oils-rose from 5% to 13% of exports.
Although manufactured exports declined, there was a tendency towards
greater processing of agricultural products. For example, whereas wool tops
made up only 33% of wool exports in 1960, they made up 42% of such
exports in 1969.
Since the US was displaced as the leading market for Uruguayan
exports in 1966, the United Kingdom has become Uruguay's most important
trading partner. Other important export markets are Italy, Spain, and various
other continental West European countries. Exports to other Latin American
countries have increased from 8 1/2% of the total in 1965 to 11% in 1968.
Exports to Eastern Europe, mostly hides, meat, and wool, fluctuated be-
tween 7% and 17% of the total in the early 1960s but have declined sharply
in recent years.
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The US, which is the largest single source of Uruguayan imports,
supplies the country mainly with food, machinery, and chemicals. The value
of imports from the US varies sharply from year to year depending upon
Uruguay's food needs. The United Kingdom and the members of the Euro-
pean Economic Community-most importantly West Germany-supply a
wide range of chemicals, iron and steel, and manufactured goods. More than
a fifth of Uruguay's imports consist of raw materials and food from other
Latin American nations. Imports from Eastern Europe are usually less than
1% of total imports.
Uruguay maintains extensive controls over both imports and exports.
All imports must be registered with the monetary authorities prior to placing
orders abroad and are subject to import duties ranging from 1 1/2% to 15%
of the c.i.f. value. In addition to these duties, import surcharges ranging up
to 300%, depending on the importance of the commodity imported, are
levied. Many of these surcharges are reduced for products from Latin
American Free Trade Association countries. The proceeds pf most exports
are subject to retention taxes, which are withheld by the monetary authori-
ties and range from 0.01% to 50% of their peso value.
Balance of payments
After several years of deficits, the balance of payments began to show
surpluses in 1966, mainly as a result of improved trade balances. Although
net earnings from travel have risen in recent years, reaching $30 million (or
16% of commodity exports) in 1969, these receipts were largely offset by
increased outflows for services and transfers.
Uruguay has not had substantial net inflows of capital since the early
1960s--in large part because poor economic conditions and discouraging
prospects have frequently promoted capital flight. Direct investment re-
mained very small during the 1960s. Drawings on long-term loans rose from
an average of $9 million, in 1960-67 to $37 million in 1968-69, when
Uruguay succeeded in obtaining large loans-mostly for imports under PL
480-to compensate for small grain harvests. This gain was largely offset,
however, by a loss of short-term capital. Short-term capital outflows and
other negative items totaling about $300 million since 1961 have outweighed
the net long-term capital inflows and improvement in the current account
balance. As a result, net reserves declined by $140 million during 1962-69.
At the end of 1969, Uruguay's long-term foreign debt (including
undisbursed loans) amounted to $450 million, of which about $100 million
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is due by the end of 1971. Much of the debt probably will have to be
rescheduled, as was done in 1965. Official long-term debt to international
development institutions is a small proportion of the total by Latin Ameri-
can standards because of Uruguay's failure to develop public sector invest-
ment programs that could qualify for foreign financing.
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Historical summary
Uruguay was discovered in 1516 by the Spanish explorer Juan de Diaz
Solis, and the first permanent European settlement was begun in 1527. For
nearly three centuries the territory that is now Uruguay was the object of
rivalry between the Portuguese in Brazil and the Spanish centered in Buenos
Aires, across the Rio de la Plata from Montevideo. In 1807 the British
occupied Montevideo for six months, but the city again reverted to Spanish
control. Jose Artigas, a Uruguayan gaucho and the father of Uruguayan
independence, led the revolution against colonial rule beginning in 1811, but
Uruguayan independence-from Spain, Buenos Aires, and Portugal-was not
finally recognized until 1828. A constitution was drawn in 1830 that lasted
until 1919-no mean achievement in Latin America.
By 1836, Uruguay's two historic political parties-the conservative
Blancos and the liberal Colorados-had been formed. Civil war plagued
Uruguay throughout the 19th century, but the period from 1843 to 1851 is
considered the time of "the Great War." Colorados controlled Montevideo,
which was besieged by Blanco and Argentine forces for eight and one-half
years. This war developed into a struggle between the urban capital and the
rural countryside, a division that persists today.
In 1903 the presidency was won by the Colorado leader Jose Batlle y
Ordonez. Batlle, considered to be the founder of modern Uruguay, was
instrumental in instituting the plural executive and the welfare system, both
of which molded Uruguayan history in the 20th century. During his first
presidential term from 1903 to 1907, he obtained a considerable amount of
social reform legislation. He fought for the eight-hour working day and
began to establish the government corporations that play such an important
part in the present economic structure.
When his term expired in 1907, he went to Switzerland where he spent
the next four years. He was very impressed wi-:h the plural executive system,
and, when he was re-elected in 1911, he began to press for its establishment
in Uruguay. Because of Batlle's immense prestige, he was able finally to have
the constitution redrawn, and in 1919 a charter providing for divided
responsibility between a President and a National Council was approved. The
President retained under his authority the ministries of foreign relations,
war, and interior; the National Council was responsible for the ministries of
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education, industry, etc. This system worked fairly well during the 1920s,
but the economic crisis of the 1930s was mirrored on the political scene. In
1933, President Gabriel Terra, with the support of the armed forces, re-
moved the Council from office because of its ineffectiveness. This was only a
temporary measure, however, and constitutions that were written in 1934
and 1942 continued the divided system.
In 1952 still another constitution was drafted. This one did away
completely with the separate office of the president. Instead, the council had
six members of the majority party and three of the minority. The presidency
of the council, and of the country, rotated among the six majority members
on an annual basis. Like the constitution o-- 1919, that of 1952 proved
inadequate in time of economic crisis. In the early 1960s the country
suffered from serious inflation, combined with successive devaluations of the
peso. At the November 1966 elections the voters, disillusioned by their
experience with the plural executive, opted for a single president, with
increased powers, to take office in March 1967.
At the same time that the new constitution was approved, the voters
selected a Colorado, General (retired) Oscar Gestido, as the first president
under the new system. Both his administration and that of Jorge Pacheco,
who succeeded upon Gestido's death in December 1967, regarded inflation,
the need to increase production, and internal security as the most urgent
problems facing the nation. The burden of heavy debt repayments is also a
serious problem. Although some momentum toward economic recovery has
been attained, many administrative and economic reforms, as well as much
agrarian and industrial development, are required to get the country moving
again. During the past several years, moreover, there has been increasing
discontent evidenced in labor and student agitation and strikes. Leftist
extremists have carried off dramatic incidents of urban terrorism. Should the
presidential system prove ineffective in coming to grips with the country's
economic problems or fail to curb extreme leftist terrorists, the possibility
exists of an unconstitutional seizure of power by the incumbent President.
Structure and functioning of governmental system
Uruguay is a constitutional, centralized republic with legislative, execu-
tive, and judicial branches. The most important feature of the constitution,
which went into effect on 15 February 1967, is that it places Uruguay again
under presidential government and in various ways strengthens the executive.
The terms of all popularly elected officials are lengthened from four years to
five years, to be concurrent with that of the President. The constitution
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retains the traditional guarantees of civil liberties that Uruguay has preserved
throughout the 20th century.
The legislative branch is the General Assembly composed of two cham-
bers: a Senate and a Chamber of Deputies. Usually each functions separately,
but at times they operate jointly. Both chambers are in session from 15
March through 15 December, except in an election year, when the sessions
terminate on 15 October and new sessions then begin on the following 15th
of February. When the Assembly is not in session, a Permanent Commission
assumes its powers.
There are 30 Senators, elected by proportional representation from a
nationwide constituency. The 99 Deputies also are elected by proportional
representation. The number of deputies alotted to each of the 19 depart-
ments is determined by the number of votes cast in the previous election
plus new registrants, instead of by population figures.
The executive branch is headed by a president who, together with a vice
president running on the same ticket, is popularly elected for a five-year
term under a system that provides that the leading faction within the leading
party is the winner. The 1967 constitution increased the number of min-
istries from nine to eleven and redistributed some Cabinet functions.
The Uruguayan bureaucracy is swollen and inefficient. Many Uruguay-
ans appear to believe that they have a moral right to government employ-
ment. The largest sector (21%) of the active working force is made up of
government employees at all levels. Both major political parties offer govern-
ment jobs for patronage purposes, and in order to provide more such jobs,
positions and functions are multiplied, resulting in a welter of red tape and
duplication of effort.
The structure of the judicial branch-a tightly knit centralist system-
reflects Uruguay's Spanish heritage. Judgments are rendered in the tradition
of civil rather than common law. Custom is not a source of law, and judicial
precedence is given little weight because "judge-made law" is regarded as an
invasion of the legislative province. The jury system has been abolished.
Judicial power is exercised by a Supreme Court of Justice and by other
tribunals and courts. The Supreme Court is composed of five members
elected for 10-year terms by a two-thirds vo1:e of the General Assembly.
Justices may be re-elected only after a lapse of five years. The Supreme
Court has original jurisdiction in cases involving violations of the con-
stitution and in cases in international and admiralty law. It is the highest
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court of appeal in both civil and criminal matters. It has the power of
judicial review and may declare laws unconstitutional. The Supreme Court
appoints the judges of all lower courts, with Senate approval.
Uruguay is divided into 19 departments, which resemble large US
counties rather than states. The departments have only limited autonomy;
the central government retains control over the public security system and
over certain aspects of local revenue and budgetary activities. Each depart-
ment has a popularly elected government consisting of a departmental board
of 31 members with legislative functions and a single executive officer. The
tradition of the central government's control over the smaller communities is
so strong that there is little more than token decentralization at either the
departmental or local level.
Political dynamics
Uruguayan politics are dominated by the two major parties-the
Blancos and the Colorados-that have been in existence for more than a
century. A sophisticated political system has developed, with the result that
Uruguay has been able to achieve a high degree of political stability,
compared to most other Latin American nations, and to maintain demo-
cratic institutions. On the other hand, the system has led to an absence of
clear-cut programs by the parties and to indecisive, inefficient government.
The most distinctive feature of the Uruguayan political system is the
complex national electoral law, expressly designed to safeguard the existence
of the two major parties by enabling them to maintain a certain degree of
unity in spite of internal discord. This is the lerna law (Ley de Lema), under
which any party may run any number of lists of candidates. At election time
the voter votes not only for the party of his choice but also for the factional
candidates of his choice within that party. The votes for the lists are then
combined to determine the total vote for the party. This system, in effect,
combines a primary with a general election. In addition, the law provides not
only for the proportional representation of political parties in the legislature,
but also for proportional representation of the factions within each party on
the basis of their share of the party vote.
The lema law has encouraged political fragmentation and has permitted
politicians representing the entire range of political opinions to run under
the banner of either major party. This system has preserved the widely
divergent factions within the major parties, but it has also virtually institu-
tionalized factional cleavages. Alliances between factions are formed at
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election time, but cooperation rarely outlasts the election. The division of
official responsibility between the two major parties extends from the
legislature into the legislative branch of the departmental and municipal
governments. Until the 1967 constitution was adopted, divisions of responsi-
bility extended even into the directing boards of the government autono-
mous enterprises, on which the minority parity was guaranteed two out of
the five seats. One reason this complicated system has managed to function
so long has been that each party has respected previously agreed-upon
patronage privilege pacts. Corruption is widespread, as each party uses its
offices to create jobs for party hacks.
The political system, by favoring the two major parties, has restrained
the growth of splinter parties and has hampered the Communists, Socialists,
Christian Democrats, and other minority political groupings. By encouraging
compromise within and between the two major parties, it has also stifled the
development of clear-cut programs and has made for governmental inef-
ficiency. In short, it is a system that serves well the short-range interests of
politicians and those to whom they distribute patronage but has not pro-
duced governments capable of dealing effectively with national problems.
This situation was increasingly evident after March 1952, when even execu-
tive responsibility was divided between the two major parties in the nine-
member National Council of Government. Although the electorate in No-
vember 1966 rejected by a wide margin the plural executive in favor of a
single president, the lema law has been retained, and the strengths of the two
major parties are fairly evenly balanced. The passage of important legislation
nearly always requires extensive political logrolling. It has been extremely
difficult to secure passage of any measure that runs counter to the interests
of any one of the principal party factions.
The Colorado Party was the dominant national party for 93 years, until
the Blancos won the 1958 elections; the 1966 elections returned the Colo-
rados to power. During most of the 20th century the Colorados have
represented urban middle-class and labor interests. The party has no one
recognized leader. It is a loose agglomeration of factions that are, in effect,
smaller parties. The factions center around personalities rather than prin-
ciples; they form and break off alliances opportunistically, and their mem-
bers shift allegiance or form subfactions fairly frequently.
As the 1970 Congress opened, the Colorado Party consisted of seven
principal factions, of which President Pacheco';3 was only the second largest.
Although the party has only a slim majority in congress, Pacheco has exerted
practically no effort to unify the disparate and disoriented elements of the
party.
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The other major national party, the Blanc:os, has generally represented
upper-class and agricultural interests. Like the Colorados, it is divided into a
number of fragile factions, reflecting personal allegiances more than sub-
stantive differences on political issues.
Security system
The security forces include those under the Ministry of National De-
fense (the Army, Navy, Air Force, and General Maritime Prefecture), and
those under the Ministry of Interior (the National Police and the National
Firemen's Corps).
In matters of internal security, the police forces form the first line of
defense. Elements under the Ministry of Interior, along with the General
Maritime Prefecture under the Ministry of National Defense, are responsible
for the control and suppression of riots and terrorism. They are also
responsible for preventing criminal acts that could contribute to an insurgent
effort such as smuggling and illegal entry of persons. The armed forces
become involved when the situation grows sufficiently grave for the govern-
ment to declare emergency security measures. These equate to a limited state
of siege in other Latin American countries or to a very mild form of martial
law in the United States.
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The Ministry of Interior has primary responsibility for public safety
throughout Uruguay. With a total force of about 17,000 men in the
Uruguayan Police, plus 1,200 in the National Firemen's Corps, the Ministry
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Defense organization and manpower
The President is the nominal commander of the armed forces, but he
usually delegates control to the minister of national defense. The minister,
usually a retired military officer, is assisted by the National Defense Council.
This council, a consultative body, is composed of the three service com-
manders, their chiefs of staff, and five members appointed by the president.
The minister of national defense exercises direct control over the army,
navy, and air force commanders in chief.
Th army. 1,875 in the navy, and 1,360 in the _~p 10.500 men in the air force
11 personnel of the Uruguayan armed forces are
volunteers ana, , there are more applicants than available spaces.
Few enlisted men make a career of military service, however, and there is a
high turnover rate and a shortage of skilled technicians and noncom-
missioned officers.
Military budget
Military budgets are prepared by the minister of national defense on a
four-year basis. He must then review and adjusl the budget annually, justify-
ing his defense estimates to the Ministry of Finance, the President, and the
legislature, all of whom have some latitude in adjusting funds among the
services before approval of the budget. In 1969 the military budget was
about $24.3 million. This amounted to 7.0% of the national budget.
Major weapons systems
The army is a lightly armed force, primarily infantry and cavalry, with a
few armored vehicles. It is equipped with a hel:erogeneous collection of US
and European materiel, most of which is obsolete by US standards. The
army is trying to upgrade its internal security and counterinsurgency capa-
bility.
The navy's principal combatant ships are two destroyer escorts, trans-
ferred from the US in 1951. Both are in good condition. In addition, the
navy has four patrol vessels, one minesweepe,, two auxiliaries, and seven
service craft. Naval aviation has a total of 22 prop aircraft.
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The aircraft inventory of the air force includes seven F-80 jet fighters,
14 C-47 transports, one OH-13G and two OH-23E helicopters, six T-33 (jet),
four PT-19 and two T-6 trainers, and 23 miscellaneous utility aircraft.
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Uruguay, which during the 19th century often suffered from inter-
ference by Argentina and Brazil, is one of the most vigorous exponents in
Latin America of the principle of nonintervention. It plays a very active role
in international affairs, affords a haven for political exiles-especially from
Argentina, Brazil, and Paraguay-and hosts many international meetings,
including the 1967 meeting of OAS chiefs of state.
ruguay's relations with its two large
neighbors are reasonably good, although its ties to Brazil were strained in the
summer of 1970 when a Brazilian diplomat was kidnaped.
A longstanding dispute with Argentina regarding the exact demarcation
of the Uruguay River boundary between the two countries crops up from
time to time to disrupt relations. The latest in a series of agreements to
smooth over the problem was reached in May 1969, but by early 1970 the
issue was once again being disputed. Friendly talks between President
Pacheco and Argentine President Ongania in March 1970 held the promise of
a viable settlement of the boundary problem, as well as increased economic
cooperation between the two countries. A cordial meeting between President
Pacheco and Brazilian President Medici in May 1970 also foreshadowed
closer economic cooperation and the sale of Brazilian military equipment to
Uruguay. Among Uruguayan leaders, Brazil is considered the more benign
power, more friendly, more reasonable, and more ready to support Uruguay
against Argentine domination.
Except from 1935-43, Uruguay has had diplomatic relations with the
Soviet Union since 1926. The Soviets maintain an embassy staff of 47
Uruguay
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Diplomatic relations exist between Uruguay and all Eastern European
countries except East Germany and Albania. The Soviets have pushed for
recognition of East Germany, but the Uruguayans have flatly refused.
Uruguay broke relations with Cuba in September 1964 after prolonged
discussion, which occasioned numerous Communist-inspired demonstrations.
The Cubans still operate a Prensa Latina office in Montevideo, with a
Uruguayan as correspondent, and also a binational center, but there are no
political or economic relations between the two countries. No inclination to
change the government's official policy toward 'Cuba has recently been
evident. Foreign Ministry officials indicated, however, that the Cuban situa-
tion should be watched to detect any sign that the Castro regime had ceased
sponsoring revolutionary activities in Latin America. There are no restric-
tions regarding travel to and from Cuba. The Chinese Communists maintain a
New China News Agency correspondent in Montevideo (a Uruguayan) and
have sought for several years to open a trade office or to hold a trade
exhibition.
Uruguay's role in international organizations has been out of proportion
to its size and power. Jose Balle y Ordonez at the Hague Conference in 1907
proposed an "alliance" for the compulsory use of international arbitration.
Uruguay was an original member of the League of Nations and was par-
ticularly active in its humanitarian and cultural activities. It has been active
in the United Nations also. Uruguay is a member of the Organization of
American States (OAS) and the Latin American Free Trade Association
(LAFTA). Its attitude toward LAFTA, which has its headquarters in
Montevideo, has been one of relative indifference, however. Mainly because
of continuing large deficits in its trade within the LAFTA zone, Uruguay
believes that it has not yet received reciprocity from other members in tariff
concessions.
The Uruguayan Government has a somewhat ambivalent view of the
Special Coordinating Committee for Latin American (CECLA), an organiza-
tion established in 1969 to bring about a common Latin American position
in dealing with the US. Although Uruguay prides itself on its significant role
in inter-American affairs, it is interested in avoiding any suggestion of a Latin
American confrontation with the US.
On 3 December 1969, Uruguay issued a decree extending its territorial
waters from 12 miles to 200 miles. The decree guarantees to foreign
countries free passage for surface navigation and overflight rights. The
extension is aimed primarily at protecting fish stocks and underseas re-
sources. In May 1970, Uruguay hosted a nine-nation conference attended by
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those Latin American countries favoring the 200-mile limit. The conference
issued a declaration upholding all countries' rights to establish their own sea
limits and control their coastal natural resources.
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The primary US interest in Uruguay is to see this practitioner of
democracy achieve economic recovery and development within its demo-
cratic traditions and institutions.
US military commitments to Uruguay are those covered by the inter-
American agreements, including the Rio de Janeiro Pact of 1947.
In 1969 private US investment in Uruguay was about $101 million,
with 68% in manufacturing. Largest US investors are United Merchants and
Manufacturers of New York, the Lone Star Cement Company of New York,
General Motors, and General Electric.
The US portion of Uruguayan imports amounted to about $24 million,
or 14% of total imports in 1967. Exports to the US in 1967 were $12
million, or about 8% of Uruguay's total exports. Other major trading
partners are the United Kingdom, the Netherlands, West Germany, and
Brazil.
Total US economic assistance to Uruguay between 1946 and 1969
amounted to $120.8 million. More than 30% of this amount came in 1968,
when $34.5 million in loans and $2.8 million in grants were made available
to Uruguay. The total assistance provided in 1969 dropped to $3.7 million.
US military assistance to Uruguay amounted to $41.3 million between 1946
and 1969; military assistance for 1969 came to $1.7 million.
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Chronology of Key Events
1943 Relations with USSR re-established; had been broken in 1935
when Uruguay discovered the Soviets were using their mis-
sions as a propaganda center for South America.
1951 (July) The constitution is changed to provide for a collegiate
system of government with a nine-member executive council
with a rotating presidency.
1958 (30 November) The Blanco Party, in coalition with smaller
parties, wins national election for first time in 93 years.
1962 (25 November) Blanco coalition wins national election, but
by a smaller margin than in 1958.
1966 (27 November) Colorado Party coalition wins national elec-
tions; basic constitutional refo-m, changing to single presi-
dent, approved.
1967 (1 March) Gestido is inaugurated President.
(April) Conference of chiefs of state of OAS countries meets
at Punta del Este.
(6 December) Gestido dies, and Jorge Pacheco Areco is
installed as President.
(13 June) Pacheco declares a limited state of siege to halt labor
agitation and a series of crippling strikes.
1969 (9 September) Prominent banker kidnaped by Tupamaros;
released more than two months later after associates pay the
ransom demanded.
1970 (July-August) US and Brazilian officials kidnaped by
Tupamaros; one US official is murdered; widespread searches
fail to locate other victims.
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Holidays and Significant Dates
1 January
Feb or March (Mori and Tues)
Easter Week (Thurs, Fri, Sat)
1 May
19 June
18 July
25 August
12 October
1 November
25 December
1 March (every five years)
New Year
Carnival
Week of Tourists
Labor Day
Birth of Artigas
Constitution Day
Independence Day (1825)
Discovery of America
All Souls' Day
Christmas
Inauguration Day
LAND
72,172 sq. mi; 86% arable (12% cultivated), 11% desert or waste, 3%
forested
Limits of territorial waters: 200 n. mi.
Population: 2,886,000; males 15-49, 721,000; 565,000 fit for military
service
Ethnic divisions: 85%-90% white, 5% Negro, 5%-10% mestizo
Religion: 66% Roman Catholic (less than -ialf adult population attends
church regularly)
Language: Spanish
Literacy: 90.5% for those 15 years of age or older; Universities and
secondary schcols in session March-December
Labor force: 1,015,000
Organized labor: about 25% of labor force
Time zone: EST plus 2 (GMT -3)
Type of government: unitary republic
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Branches of government: executive, headed by President; bicameral
legislature (30 Senators plus vice president who presides and has voice and
vote, and 99-member Chamber of Deputies) elected by popular vote under a
complicated system using proportional representation; national judiciary
headed by Supreme Court
President: Jorge Pacheco Areco (term expires in 1971)
Presidential succession: Pacheco would be succeeded by Vice President
Alberto Abdala
Capital: Montevideo
Political subdivisions: 19 departments with limited autonomy
Principal political parties and chief officials: National (Blanco) Party,
President of Party Directorate Alberto Heber Usher, main factions include
Martin Echegoyen's "Alianza" faction, List 400 (Washington Beltran),
Rocha Movement (Alberto Gallinal), Orthodox Herreristas (Alberto Heber
Usher), Por La Patria (Wilson Ferreira Aldunate) and the Movimiento
Popular Blanco y Progresista (Francisco Rodriguez Camusso); Colorado
Party, main factions include Colorado and Batllista Union (Jorge Pacheco
Areco), List 15 (Jorge Batlle), List 315 (Amilcar Vasconcellos), List 99
(Zelmar Michelini), and the Pregon faction (Alba Roballo); Leftist Libera-
tion Front (FIDEL), Communist Front
Suffrage: universal over age 18
Voting strength (1966 elections) : 49.3% Colorado, 40.3% Blanco, 5.7%
F I DE L, 3% Christian Democrat, 0.9% Socialists, 0.8% Other
Communists: 18,000-20,000; Communist youth group, 6,000-8,000
Other political or pressure groups: Communist Party (PCU), Rodney
Arismendi; Christian Democratic Party (PDC); Socialist Party of Uruguay
(PSU) banned in 1967; Movement of the Revolutionary Left (MIR), pro-
Chinese Communist Party banned in 1967; Revolutionary Movement of
Uruguay (MRO) pro-Cuban Communist Party banned in 1967; National
Liberation Movement (MLN-Tupamaros) Marxist revolutionary terrorist
group
Elections: every 5 years; next in 1971
Member: IAEA, IBRD, ICAO, ILO, IMF, LAFTA, OAS, UN
GNP: $2.8 billion (purchasing power parity estimate, 1969); $970 per
capita; 74% private consumption, 12% public consumption, 14% gross invest-
ment; real growth rate 1969, 51/2%
Agriculture: large areas devoted to extensive livestock grazing (23
million sheep, 8 million cattle); main crops-wheat, rice, corn; self-sufficient
in most basic foodstuffs; caloric intake, 3,000 calories per day per capita
with high protein content
Uruguay I X - 3
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Approved For Release 2005/09liE-RJ, DP79-00891A000700030001-3
 Approved For Release 200 o0 1 g ssRDP79-00891A000700030001-3
m
Major industries: meat processing, wool and hides, textiles, footwear,
cement, petroleum refining
Crude steel: 24,000 metric tons produced (1966), 10 kilograms per
capita
Electric power: 578,000 kw. capacity (1970); 1.88 billion kw.-hr.
produced (1968); 653 kw.-hr. per capita (19681
Exports: $195.0 million (f.o.b., 1969); beef, wool, hides
Imports: $191.6 million (c.i.f., 1969); fuels, metals, capital goods,
machinery, transportation equipment
Major trade partners: exports-EEC 27%, UK 25%, US 12%, LAFTA
11%; imports-LAFTA 26%, US 22%, UK 14%, EEC 13% (1968); trade with
Communist countries exports 4%; imports less than 1%
Foreign aid: economic-extensions from US (FY46-69), loans $105.4
million, grants $20.0 million; from international organizations, IBRD $102.2
million, IDB $36.7 million; $10 million credit from Hungary (1967), $20
million credit from USSR (1969); military-US grants $41.2 million (FY46-
69), $.4 million credits
Exchange rate: 250 pesos=US$1
Fiscal year: Calendar year
Railroads: 1,850 mi., all standard gage and government owned
Highways: 23,480 mi.; 970 rrii. paved; 4,160 mi. otherwise surfaced;
350 mi. improved earth; 18,000 mi. earth tracks
Inland waterways: 1,068 mi.; used by coastal and shallow-draft river
Freight carried: highways 80% of total cargo traffic, rail 15%, water-
ways 5%
Ports: 1 principal (Montevideo), 3 secondary, 6 minor
Merchant marine: 19 ships (1,000 GRT or over) totaling 134,800 GRT,
208,000 DWT; includes 13 cargo, 5 tanker (including one naval tanker
sometimes used commercially), 1 bulk
Civil air: 18 major transport aircraft
Airfields: 85 total, 60 usable; 5 with permanent-surface runways; 1
with runway 8,000-11,999 ft.; 7 with runways 4,000-7,999 ft.; 2 seaplane
stations
Telecommunications: ten-year plan developed to improve telecom
facilities underway; most modern facilities concentrated in Montevideo;
205,000 telephones; 1 million radio and 235,000 TV receivers; 62 AM, 2
FM, and 10 TV stations; 9 submarine cables
Uruguay I X - 4
No Foreign Dissem
Approved For Release 2005/0$A~fll&iTRDP79-00891A000700030001-3
 Approved For Release 2005 YJi RDP79-00891A000700030001-3
0 oreign issem
Personnel: army 13,680, navy 2,846 (including 266 in naval air arm),
air force 1,699 (including 244 pilots)
Loyalty to government: loyal, apolitical
Major ground units: 14 regiments (4 infantry, 8 horse cavalry, 2
merchanized cavalry), 9 separate combat battalions (4 field artillery, 1
armored infantry, 4 engineer) and 1 engineer communications battalion
Ships: 2 destroyer escorts, 2 patrol, 2 minesweepers, 6 auxiliary, 6
service craft
Aircraft: 84 (12 jet), including 14 in naval air, 70 (12 jet) in air force
Supply: dependent on US for current supplies, with few exceptions
Military budget: for fiscal year ending 31 December 1969, $24.3
million; 7.0% of central government budget
Uruguay I X - 5
No Foreign Dissem
Approved For Release 2005/O YV rr -kDP79-00891A000700030001-3
 Approved For Release 2005/04/12 : CIA-RDP79-00891A000700030001-3
Approved For Release 2005/04/12 : CIA-RDP79-00891A000700030001-3
 Approved For Release 2005/04/12 : CIA-RDP79-00891A000700030001-3
Secret
No Foreign Dissem
Secret
Approved For Release 2005/04/12 : CIA-RDP79-00891A000700030001-3