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Uruguay THE CONSERVATIVE ADJUSTMENT, 1931-43
http://www.photius.com/countries/uruguay/economy/uruguay_economy_the_conservative_adj~1686.html
Sources: The Library of Congress Country Studies; CIA World Factbook
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    [JPEG]

    A rural highway near Punta del Este
    Courtesy Inter-American Development Bank

    The Terra Era, 1931-38

    Gabriel Terra (1931-38), a "heterodox" Batllist who had differed with Batlle y Ordóñez and who would soon distance himself from the latter's sons and followers, became president in March 1931. For the first time, the Batllist wing of the Colorados had a strong representation in the colegiado.

    Terra's inauguration coincided with the effects of the Great Depression and a worsening of Uruguay's economic and social situation. Prices of agricultural products plunged. In 1932 Britain, traditionally the major purchaser of Uruguayan exports, began restricting purchases of meat. Uruguay's currency was devalued, and unemployment grew rapidly.

    Batllists tried to implement their program from the colegiado. In 1931 BROU was authorized to control purchases and sales of foreign exchange and to set exchange rates, a measure that initially jeopardized cattle ranchers, exporters, and private banks. In the face of foreign exchange scarcity, foreign companies were forced to suspend remittances abroad. Limits on imports were imposed to try to reduce the balance of payments deficit and to stimulate industrialization. Furthermore, attempts were made to reduce the fiscal deficit. At the same time, a political agreement known as the Pork Barrel Pact (Pacto del Chinchulín) between the Batllists and an emerging sector of the National Party opposing Herrera made possible the expansion of state control over industry. The pact resulted in the creation of the National Administration of Fuels, Alcohol, and Portland Cement (Administración Nacional de Combustibles, Alcohol, y Portland--ANCAP), a state enterprise with a monopoly over oil refining and alcohol production, and the power to begin producing portland cement. Unfortunately, it quickly became a source of patronage for the party faithful. The State Electric Power Company was granted a monopoly over the telephone system, becoming the State Electric Power and Telephone Company (Usinas Eléctricas y Teléfonos del Estado--UTE).

    Social reform measures, such as the adoption of the forty- four-hour work week, and the growing economic crisis alarmed the most conservative sectors and affected the interests of large cattle ranchers, import merchants, foreign capital, and the population at large. The social climate became tense as a result of the lack of jobs. There were confrontations in which police and leftists died.

    Terra distanced himself from his followers and began a campaign to reform the constitution and eliminate the colegiado, which was responsible for making economic and social policy and which Terra accused of inefficiency and lack of vision to overcome the crisis. He was supported by the National Economic Inspection Committee, which was created in 1929 and encompassed most business organizations. This committee proposed restricting statism, ending implementation of social legislation, and suspending the application of new taxes.

    During the first months of 1933, when it became evident that Uruguay would have serious difficulties in paying the interest on its foreign debt, Terra obtained the support of Herrera and of Manini to organize a coup d'état. On March 31, 1933, Terra dissolved the General Assembly and the colegiado and governed by decree. Former President Brum (a Batllist) committed suicide one day after the fall of the liberal democratic regime. Another Batllist leader, Grauert, was assassinated. The Terra regime deported numerous opposition leaders and imposed press censorship.

    In June 1933, elections were held for a constituent assembly that would be responsible for reforming the constitution. In 1934 the new constitution was submitted to a plebiscite, and although reelection of the president was unconstitutional, Terra was elected to a new term. More than half of the electorate participated in these elections, distributing their preferences between parties supporting the coup and those opposing it. The constitution promulgated in 1934 formally eliminated the colegiado and transferred its powers to the president. The new constitution restricted the creation of autonomous entities by requiring approval by a two-thirds majority in each chamber of the General Assembly. It banned usury, recognized certain social rights (e.g., housing and the right to work), and established women's suffrage. The cabinet ministers and heads of autonomous enterprises were to be distributed between the two parties obtaining the most votes, in a two-thirds to one-third ratio. The Senate was to be divided in half between the two parties winning the most votes, thus ensuring control by the coup factions. The Chamber of Representatives was to be elected by proportional representation.

    In the mid-1930s, the opposition tried, unsuccessfully, to organize itself and resist the regime in the face of persecution. Military and armed civil uprisings were suppressed. In 1935 a political opponent unsuccessfully tried to assassinate Terra. An attempt to form a "popular front," including the left and dissident Colorados and Blancos, was also unsuccessful. To prevent this coalition, as well as a coalition of sectors from the traditional parties, from opposing the regime's social and economic policies, a series of electoral laws was promulgated beginning in 1934. The new Political Parties Law granted control of the Colorado and Blanco slogans, or party titles, to those who had participated in the elections and therefore supported the dictatorship.

    Support from ranchers, one of the sectors most affected by the crisis, seemed to indicate a return to the traditional agro- exporting model. However, neither the "machete dictatorship" (an ironic name given to the regime by the socialist leader and writer Emilio Frugoni, referring to Terra's use of the police during the coup) nor the "March Revolution" (as it was solemnly called by its organizers) stressed an agrarian alternative because unemployment seemed to call for a diversification of the job market. Moreover, Uruguay was already an urban country with budding industrialization.

    Terra's economic policies supported both livestock raising and industry, if unevenly. Livestock had stagnated--the 1930 livestock census showed fewer animals than the 1908 census. The problem of increasing livestock productivity remained unsolved, despite advances in breeding. Cattle ranchers were granted premiums in order to improve the quality of herds. Other benefits accorded them included tax rebates, debt-servicing alternatives, preferential exchange privileges, and the effects of the 1935 devaluation. At the same time, import limitations adopted in 1931 continued in effect, and in 1935 an industrial franchise law was passed. Industrial activities were further protected by currency depreciation and the fall in salaries caused by an abundance of labor.

    The Terra government also attempted to regulate foreign trade. BROU maintained control over the price and sale of foreign currency. In 1934 the government created the Honorary Commission for Imports and Exchange to control the allotment of import quotas and foreign exchange. The government used pesos (for value of the peso--see Glossary) to pay the reduced interest rates on the foreign debt. It also carried out, in 1937, satisfactory negotiations for a new payment schedule with the United States and, in 1939, with Britain.

    In general, the Terra government weakened or neutralized economic nationalism and social reform, the most controversial facets of the Batllist model. British public-service industries (railroads, water, gas, and tramways) and United States industries (oil, cement, refrigeration plants, and automobiles) that were established in the early 1900s received additional concessions. The government did not privatize existing state enterprises, as would have been expected from the antistatism espoused by Herrerists and Riverists. State enterprises were, however, affected in 1936 by a law that eliminated provisions granting some autonomous state enterprises the power to establish monopolies. ANCAP began constructing an oil refinery, and in 1938 it guaranteed private oil companies participation in Uruguay's market.

    Nevertheless, although the government abolished certain redistributive policies fostered by social legislation, it reinforced the public assistance role of the state. It created "emergency jobs" for the unemployed through the National Affordable Housing Institute (1937) and the Institute for the Scientific Nutrition of the People (1937). In 1934 legislation was passed that regulated child labor for minors over twelve years of age, allowed maternity leave, and extended pensions to all commercial and industrial sectors, including employers.

    The government also revamped the education system. The University of the Republic, whose structure had been transformed by the creation of new faculties (for example, engineering and architecture in 1915, chemistry and dentistry in 1929, and economics in 1932), no longer administered secondary education, which in 1935 was handed over to an autonomous agency.

    The foreign policy of the regime resulted in a substantial improvement of relations with the United States (Franklin D. Roosevelt visited Uruguay in 1936) and with Britain. Under a 1935 pact with Britain, Uruguay agreed to pay its foreign debt, to purchase British coal, and to treat British companies generously in exchange for ensuring placement of Uruguayan products. In 1935 Uruguay severed relations with the Soviet Union and in the next year, with Republican Spain. At the same time, however, it established closer relations with Benito Mussolini's Italy and Adolf Hitler's Germany. Construction of a hydroelectric dam at Paso de los Toros on the Río Negro was begun in 1937 with German capital, creating the Embalse del Río Negro, the largest artificial lake in South America.

    In 1938 general elections were held--the first in which women were allowed to vote. Terra divided his support between his son-in-law's father, Eduardo Blanco Acevedo, and his brother-in-law, General Alfredo Baldomir. These candidacies reflected a split in Terra's political faction within the Colorado Party. The PSU and PCU joined forces to vote for a common candidate, but the Colorado Party won. Baldomir (1938-43) was elected president. Once again, Batllists, Independent Nationalists, and Radical Blancos abstained from voting.

    Data as of December 1990


    NOTE: The information regarding Uruguay on this page is re-published from The Library of Congress Country Studies and the CIA World Factbook. No claims are made regarding the accuracy of Uruguay THE CONSERVATIVE ADJUSTMENT, 1931-43 information contained here. All suggestions for corrections of any errors about Uruguay THE CONSERVATIVE ADJUSTMENT, 1931-43 should be addressed to the Library of Congress and the CIA.

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Revised 09-Nov-04
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