The four important lessons that Uruguay can teach the rest of Latin America

Post available in: English Español

The region’s strongest democracy offers many lessons, including the value of a robust social safety net.

It was a scene that inspired admiration, and not a little envy, throughout Latin America. At the inauguration of the president of Brazil on January 1st, 2023, Luiz Inácio Lula da Silva, not one, but three presidents of Uruguay were present: the current president, Luis Lacalle Pouas, well as the former presidents Jose “Pepe” Mujica (2010-2015) and Julio Maria Sanguinetti (1985-1990; 1995-2000), historical rivals in Uruguayan politics, one from the left, the other from the centre-right, smiling and patting each other on the back while the cameras rolled.

In another era, such a scene might have been considered banal. But in this time of extreme polarization and social upheaval throughout Latin America, the unity show was treated as nothing less than a revelation on Twitter and elsewhere. “Uruguayans are always so civilized that I don’t know how they put up with us as neighbours,” joked Bruno Bimbi, an Argentine journalist. “That is why Uruguay is Uruguay, and it is the democracy with the best quality in the region and one of the best in the world“, wrote Daniel Zovato, a prominent political scientist in Panama. Brazilian newspapers jealously pointed out the contrast with their own country; Lula’s predecessor, Jair Bolsonaro, did not attend the inauguration after losing the election, instead flying to Orlando, Florida.

Frankly, it was not the first time that Uruguay seemed to be a separate reality. The country has the highest per capita income in Latin America (about $17,000), the lowest poverty rate (7%), and one of the lowest levels of inequality. Uruguay’s energy matrix is the greenest in the region, and its economy is expected to grow a healthy 3.6% in 2023, more than double the Latin American average.

International studies frequently place Uruguay as the least corrupt country in the region; The Economist Intelligence Unit classified it as the 13th strongest democracy in the world, ahead of the United Kingdom (18), Spain (24) and the United States (26), and well ahead of countries in the region such as Brazil (47), Colombia (59) or Mexico (86).

This success has not gone unnoticed elsewhere in the region or the world. Last May, a conference entitled “The Uruguayan case: a possible model? Focused on how it has combined economic growth with a strong social safety net.

Uruguay is attracting record numbers of expatriates not only from Argentina, as is often the case in times of crisis, but also from Brazil, Chile, Venezuela and other countries. The resort city of Punta del Este became a magnet for foreign workers during the pandemic, fueling a real estate boom estimated at $6 billion in new investment in the past three years alone.

The idea of Uruguay is becoming a kind of Singapore for South America, a relative oasis for business and commerce. In a troubled continent, it has attracted the attention of global companies and great powers alike; the conservative government of Lacalle Pou recently began negotiations to close trade agreements with China and Turkey.

Tim Kaine, a Democrat on the US Senate Foreign Relations Committee, recently called Uruguay a “model in many ways” and wondered why the US isn’t investing more or pushing its own trade agenda in this country.

Given all this interest, I travelled to Montevideo in November, hoping to answer the question: What can we learn from Uruguay? What are the secrets of its relative success? Over a week, I interviewed prominent politicians, analysts, business leaders, and ordinary people to understand Uruguay’s strengths and weaknesses and how other countries in the Americas, including the United States, could learn from them. I attended a political rally; I walked along the boulevard of the capital; I ate a chivito , the unofficial national dish consisting of meat with ham, bacon, cheese, and a fried egg. Well, I ate two.

Despite these delights, one of the most prominent takeaways from my visit was this: Uruguay is not a paradise. It is a country that had its heyday more than a century ago, when agricultural exports briefly made it, along with Argentina, one of the ten richest countries in the world. Since then, there have been long periods in which the economy barely grew. Today, economists say it is performing well below its potential, with an average annual growth rate of just 1% in the five years before the pandemic. Montevideo can seem like a drier, less dynamic version of Buenos Aires; even in affluent neighbourhoods, almost everything could use a lick of paint.

Today’s Uruguay is facing a truly terrifying crime wave, with a homicide rate nearly double that of Argentina or Chile, caused in part by the expansion of criminal gangs from elsewhere in the region. Only 40% of students finish high school, one of the lowest rates in Latin America, although test scores are high compared to the region.

In late 2022, a corruption scandal involving the Lacalle Pou administration erupted, calling into question the country’s carefully cultivated reputation for a non-corrupt government.

Similarly, it is reasonable to ask to what extent Uruguay’s success is replicable elsewhere in Latin America.

Many Brazilians and Argentines roll their eyes, claiming that Uruguay’s small population of about 3.4 million makes it much easier to govern. (This ignores the fact that, for example, Honduras and El Salvador are also small.)

Others say that the history of European immigration has made Uruguay a “homogeneous” and, therefore, prosperous place. (This is patently false and racist, but I’ve heard it many times.) Others whisper that Uruguay may have some merits but has mostly benefited from the mistakes of Argentina and Brazil, in keeping with its history as a buffer state subject to the cycles of its much larger neighbours.

But it is also true that the history of Uruguay is closer… well, closer… than many suppose. Today’s thriving democracy was a dictatorship in 1985, plagued by the same divisions and human rights violations seen elsewhere on the continent. That enviable 7% poverty rate? Only 20 years ago, it reached 40%, during a severe economic crisis in Uruguay, exported thousands of skilled workers instead of receiving them.

According to Sanguinetti, one of the two ex-presidents who inspired so much admiration, even the political bonhomie on display at Lula’s inauguration was hard to build and is in danger of fading away.

“If people think that Uruguay has always been like this, they are wrong,” Sanguinetti, 87, told me with a laugh. “Nothing is easy. I’m sure there are lessons we can humbly offer to others.”

In fact, there are many. But based on my travels and research, I would highlight four aspects that help explain Uruguay’s flawed success story:

1) A social safety net reinforces democracy

Mujica, the other former president who travelled to Lula’s inauguration, built a following around the world in the 2010s as a kind of oracle of anti-consumerism, continuing to drive his 1987 Volkswagen Beetle back and forth to his humble farm in the outskirts of Montevideo every day while in office, instead of living in the presidential palace, and also by donating 90% of his salary to charity.

And while Mujica was never as popular at home as abroad, one of his most famous phrases undoubtedly captures the Uruguayan ethos: “No one is more than anyone.”

That egalitarian philosophy stands out in Latin America, where the world’s most significant gap between rich and poor has fueled countless social conflicts. And while it remains more ideal than a reality, it has sustained what is, in some respects, the oldest and most generous welfare state in the region.

Currently, around 90% of the Uruguayan population over the age of 65 is covered by the pension system, one of the highest rates in the region. The State provides unemployment insurance, cash transfers to low-income families, resources for child and elderly care, and a public health system.

Paying for all this is not cheap, of course. Uruguay collects around 27% of its GDP in taxes, above the Latin American average (22%). However, less than Brazil (32%) and Argentina (29%), and well below the OECD average ( 34%), a club made up mostly of developed European countries. In general, the government plays a vital role in the Uruguayan economy: state-owned companies dominate the oil sector, mortgage lending, and even internet data transmission. According to the World Bank, about one in five workers is employed by the public sector.

Javier de Haedo, an economist linked to the Uruguayan centre-right, says the economy has been affected by a long-term cycle of growing social demands, tax increases and periodic debt restructuring. “That is the history of Uruguay,” he told me. “The only solution is to grow more” .

Lacalle Pou came to office with a pro-business reform program after 15 years of rule by the leftist Broad Front (FA). But by a stroke of fate, he was invested on March 1, 2020, 12 days before the first case of Covid-19 appeared in Uruguay. He has spent much of his tenure managing the pandemic rather than passing laws.

But even Lacalle Pou and his allies are more focused on introducing adjustments to the current system – for example, raising the minimum retirement age – than on tearing it down completely.

Very little is heard in Uruguay about the heated rhetoric about socialism or neoliberalism that dominates politics elsewhere in Latin America. “It almost doesn’t matter who is in power; there is a kind of social-democratic consensus that does not fundamentally change, ”says Nicolás Saldías, Uruguayan analyst for Latin America at The Economist Intelligence Unit. “What you hear are debates about tax rates rather than the tax itself,” he adds.

De Haedo, the critical economist, acknowledged that there have been “spectacular examples” of good administration by the public sector.

The Uruguayan model may not be for everyone. But at a time when demands for greater social rights and services have swept across Latin America, sparking violent protests and serious instability in countries like Chile, Ecuador, Peru and others, it’s hard not to notice that Uruguay is… pretty quiet. . Even after the pandemic, Uruguayans generally considered that their basic needs were covered.

In a survey published in May 2022 by the United Nations, 37% of Uruguayans said that their socioeconomic situation was good, 48% considered it neither good nor bad, and only 14% described it as bad. Given the relative contentment with the status quo, it seems no coincidence that Uruguay has never elected a true ideologically left or right-wing populist, while the fundamental pillars of a stable market-based economy are also widely accepted.

I spoke to a group of young activists from Lacalle Pou’s centre-right National Party, and they, too, seemed to appreciate the balance. “People in Uruguay feel protected,” says María Ángela Rosario, 27. “I don’t know anyone who wants to fundamentally change that.”

2) The race is won slowly and steadily

Doing something the Uruguayan way means doing it slowly, gradually and deliberately. It is a famous aspect of local culture, as Uruguayan as drinking mate or watching the sunset over the Río de la Plata (both things, not coincidentally, should be done the Uruguayan way).

And, like so much else here, it can be a double-edged sword.

When new legislation is proposed, politicians say it is often debated, debated, and then debated again. Reforms are often not considered final until they are approved through plebiscites or popular referendums., which can take years to organize. They have been used since the 1990s to vote on the privatization of public services, amnesty laws, anti-crime policies, water rights and other issues.

Sometimes when the change takes effect, the world has already changed. “I have seen Uruguay lose a lot of opportunities because we couldn’t act on time,” a lawyer who works with international investors told me, citing deep-water ports, data centres and more.

In fact, even in Montevideo, the pace of everything – commerce, politics and daily life – can feel a bit strange for those used to Buenos Aires, Lima or Mexico City. One morning I committed the capital sin of the journalist: I ran out of space in my notebook.

It was 11:30 on a Wednesday, and I was in the middle of the city. I found a stationery store two blocks away; the keys were in the front door, which I opened slowly, and I waited a few minutes until an older man, mate in hand, appeared at the back of the store. “Good morning!” he chirped. “We don’t open until, I don’t know, 12:45 or 13. try crossing the street”. That’s how I did it: “Oh, I don’t have any notebooks left”, the seller told me. “Come back on Monday or Tuesday. Or you can try across the street.” In the end, I gave up and borrowed one from an Uruguayan journalist. Other ex-pats shared similar stories about a country that rarely seems to be in a rush. A friend of Sen Paulo told me: “Every day I want to scream.”

But taking life easy has its advantages, especially in politics. Reform can take a long time to pass and then survive a referendum. But once you do, the change is legitimate and established, and people usually move on. “We have a political culture of making decisions and then accepting them,” says Yamandú Orsi, mayor of Canelones, a city north of Montevideo, and a possible presidential candidate in the 2024 elections. “What may seem slow from the outside is often a democratic search for dialogue and consensus”.

As a result, Uruguay has seen little of the extreme politics elsewhere in Latin America and in the United States and Europe, where governments come to power determined to undo the gains of their predecessors. This stability has given investors certainty, a sense of long-term direction generally lacking in the rest of the region. “Boring is good. God, I wish Argentina and Brazil were this boring,” an investor told me. As with many other things in Uruguay, I wondered if it was possible to separate the positive from the negative.

3) Institutions matter, above all, when they are accessible to the public

While I was in the country, a major scandal broke out over a scheme in which government officials allegedly sold dozens, and perhaps hundreds, of fake passports to foreigners, including Russians fleeing their country after the invasion of Ukraine.

As prosecutors investigated the case, they also found indications that Lacalle Pou’s presidential bodyguard tried to sell software that could be used to track opposition leaders. (The president, his bodyguard and other officials have denied wrongdoing.)

Despite everything, the prosecutors did their job usually, without political interference, as is customary in Uruguay. “The strong republican sense makes the average Uruguayan understand that neither of the powers of the State can step on the other. Above all, the judicial system is a safeguard,” said Agustín Mayer, a lawyer from the Ferrere law firm. And while the scandal was clearly embarrassing and a blow to the country’s reputation, some saw an opportunity to further strengthen Uruguayan democracy.

“What I see is society debating this, processing it, trying to understand what happened,” said Adolfo Garcé, a political analyst. “That’s what we do. This is a democracy with a tremendous capacity for learning.”

Something that distinguishes Uruguayan institutions is how open and integrated they are into society. Almost everyone seems to be part of something: a political party, a union, a neighbourhood club, which in turn has ties, or at least some connectivity, with the state. “Active social movements have been the engine of Uruguayan politics and democracy,” Carolina Cosse, the mayor of Montevideo and another possible presidential hopeful, told me.

In his opinion, practically “all” the social reforms of recent years began from the bases, and he mentioned universal healthcare, equal marriage and a new university in the interior of the country as causes that politicians assumed as their own. Cosse and others highlighted the great importance of political parties: The same three parties have dominated Uruguayan politics for decades, have espoused generally consistent ideologies rather than serve as personalist vehicles, and count thousands of ordinary people among their members.

All this mix of common people and elected officials also demystify politics a bit, and at this point, okay, the size of the country can have a lot to do with it. Four people showed me selfies with Lacalle Pou , taken in ice cream parlours, restaurants and on the street. This can also contribute to Uruguay’s culture of transparency.

“If a politician buys an expensive new car, everyone knows about it. We live next to each other. We see each other in the supermarket”, affirms Martín Aguirre, director of the newspaper El País. As proof of this, when going out to eat (kid, naturally), we ran into his aunt. They chatted for 15 minutes; as we left, he smiled and shrugged. “Little country!”

4) Civility is difficult, but it is worth it

It would be tempting to conclude that the emphasis on civility in Uruguayan politics is also a result of people living side by side. But this was not always the case, especially in the 1960s and 1970s when Uruguay fell into the same spiral of guerrilla violence and brutal repression that ravaged much of the region.

In our conversation, Sanguinetti told me that he and Mujica used to be ” not just adversaries, but enemies,” noting that Mujica was a leader of the Tupamaro rebel group who did not fully rejoin political life until democracy returned in the 1980s.

Healing those divisions took time and effort. Mujica, who spent 13 years in prison, has spoken movingly about his own path. “I have my fair share of defects, I am passionate, but in my garden, I have not cultivated hatred for decades,” said Mujica upon retiring from daily politics in 2020. “I learned a hard lesson that life imposed on me, that hate ends up dumbing down. It makes us lose objectivity”.

These sentiments seem to have permeated society as a whole. Orsi spoke of the importance of “unwritten rules” in Uruguayan politics, specifically respect for the opposition by the government in power, and pointed out that Lacalle Pou attended his inauguration as mayor despite being from rival parties. “That is something I will never forget,” Orsi said.

Orsi is 55, and the president is 49, suggesting that these traditions are being passed on to a new generation of leaders. However, other Uruguayans I spoke to expressed the feeling that these traditions are under threat from social media and the pressures affecting the rest of Latin America after the pandemic. Some noted with concern that a populist-leaning party came fourth in the 2019 election. Chile is an example of how even the region’s most vaunted success stories can unravel quickly and without warning.

And that is why Sanguinetti and Mujica, even at 87, continue to showcase their relationship, to the point of recently writing a book together. “We continue to disagree on many fundamental things,” Sanguinetti said. “But hey, these old men try to show the new generations that they can disagree without losing civility.”

“I think others can do this too,” he added. “ Uruguay has nothing special ”.

Font: This column was originally published in Americas Quarterly. The author is its general editor and vice president of the Americas Society and Council of the Americas.

(Visited 184 times, 1 visits today)

About Gateway to South America

Established in 2006, Gateway to South America began as a single office in Buenos Aires. Since then, it has grown into a vibrant regional network, providing professional real estate marketing services to clients in Argentina, Brazil, Chile, Paraguay, Peru, and Uruguay. If you enjoy reading our news site, please share it on your social media!

Want an edge on investing in Latin America? Get our Investment News first: Join 39,400 subscribers without cost to our English, Spanish or Portuguese posts for the latest real estate news in LATAM useful for new and experienced investors. Please note, this subscription is for Investment News only, not properties for sale.

Post available in: English Español

Comments are disabled
Real Estate and Investment News from South America
Visit us on LinkedInVisit us on FacebookVisit us on TwitterVisit us on Pinterest