MONTEVIDEO – In a region almost defined by populism, Uruguayans have resisted the temptation of electing a populist president, one who undermines established democratic institutions on the basis of a claim to represent the popular will. The reasons include a robust party system, a stable economy, an independent and respected judiciary, and relatively low levels of inequality and poverty. But recent political developments in the country demonstrate that populist policies can still be implemented without having a populist in power.
Backers of three initiatives are seeking to collect at least 10% of the electorate’s signatures to call for constitutional reform via plebiscite, which would happen on the same day as the next presidential election. Their goals couldn’t be more different, but together, they reaffirm the robustness and integrity of Uruguay’s democratic system, albeit with sizable risks involved. Petitions must be submitted by April to be considered by the electoral court for inclusion in the vote scheduled for October 27, 2024.
The first and most serious attempt is led by Uruguay’s all-encompassing union federation, the PIT-CNT (Plenario Intersindical de Trabajadores (PIT) and Convención Nacional de Trabajadores (CNT). The unions narrowly voted to proceed with a proposed constitutional reform that would reverse key elements of the pension reform approved in April by the five-party center-right coalition led by the president, Luis Lacalle Pou. The second initiative is led by right-wing populist group Cabildo Abierto, which seeks to pass a constitutional reform to boost the government’s role in credit markets. Cabildo Abierto began its signature collection campaign as it failed to get support from the other parties in the governing coalition. The third attempt is being led by a little-known group, Movimiento Uruguay Soberano, to make large-scale investments harder.
What makes these initiatives populist is that they circumvent normal congressional means to enact reform and threaten to turn the constitution into a wish list. By presenting a binary choice to voters, these proposals simplify complex policy trade-offs and do not provide voters with the information they would need to make an informed decision; instead, proponents will make powerful emotional and moral appeals to push through ill-thought-out reforms. Even if voters are unlikely to ratify these changes in a plebiscite, using the referendum to reform the magna carta for partisan ends poses a significant and growing risk to Uruguayan democracy and its reputation as a stable and safe place to do business.
Vox Populi, Vox Dei
The Lacalle Pou administration’s most significant legislative accomplishment so far has been to pass a wide-ranging pension reform. Although the need for pension reform was evident, as the country has one of the oldest populations in the region and is rapidly aging, it was not popular with the public. The reform process began in 2020 following the passage of the government’s omnibus reform bill. The law created a council of social security experts (CESS), which brought experts together with representatives from political parties and social movements to discuss how to reform the system. The negotiations were complicated, and eventually, a well-substantiated pension reform was approved, with the left-wing opposition Frente Amplio opposing it.
The passage was a defeat for the Uruguayan left, but campaigning against the pension reform was seen as a potential political win for Frente Amplio ahead of the upcoming presidential election. However, radical unions in the PIT-CNT were anxious and successfully pushed for the union movement to launch a signature collection campaign to undo key elements of the reform. The union’s proposal would not only reverse the unpopular increase in the retirement age but also force the minimum pension to be tied to the minimum salary and, controversially, undo the market reforms in the 1990s that led to the creation of private pension funds (AFAPs).
More moderate unions and economists close to the union movement have criticized the move. In particular, the proposal to force the closure of the AFAPs could have a significant economic impact on the country. The proposal does not say how over $17 billion (20.5% of the nation’s gross domestic product) in private pension accounts would be redistributed. They only propose that the AFAPs must be wound down within 24 months after the reform is approved, leaving the details of how to do this to the next government. Not only could this trigger lengthy legal challenges, but it would deprive the state of a significant source of low-cost local financing, which could lead to higher and more expensive external borrowing.
The reaction from the leaders of the Frente Amplio has been lukewarm. Former President José Mujica argued that the approach may be legally and politically questionable, while the presidential hopeful for the party, Yamandú Orsi, will not support the measure. Even the organization’s president has said that he supports allowing party factions to decide regarding the referendum but that the party will not “lead the effort.” He also admitted that the referendum increases the risk that the Frente Amplio may lose next year’s election. The elimination of the AFAPs could seriously hamper the ability of the party to appeal to the median citizen and even left-wing voters, many of whom have retirement savings accounts. On the other hand, not supporting the move could also alienate its base of supporters in what promises to be a closely fought election.
Uruguayans are traditionally conservative-minded with an aversion to radical change. Strong, well-institutionalized parties usually ensure that moderate candidates are favored to be their standard-bearers. Although this keeps populism at bay at the presidential level, Uruguay’s direct democracy mechanisms often open the door for outsiders and populists to shake up the political system to achieve policy goals they cannot accomplish through traditional means. The risk is that if Uruguay were to face a crisis, ill-thought-out and radical proposals to either undo laws passed in Congress through a referendum or a plebiscite to reform the Constitution to approve niche reforms could pass. That is a scenario that, without doubt, would harm Uruguay’s hard-fought reputation for policy stability.
Saldías is a Latin America and Caribbean senior analyst at the Economist Intelligence Unit and received his PhD in political science from the University of Toronto