Uruguay: The Components of Its Success

Just a decade ago, most Latin American governments looked to the United States and Europe as examples of how to improve governance, foster sustainable economic growth and institute more just societies. But today, there are some countries in Latin America that serve as case studies worth following—one of which is Uruguay. It may be the size of Washington State and have one of the smallest populations in the region (3.3 million), but it should be truly commended for its developmental progress in recent years.

Although dwarfed by the neighboring economies of Brazil and Argentina, Uruguayans overall have a better standard of living. Uruguay’s annual per-capita income is estimated at roughly $14,000—higher than that of Brazil and Argentina. Physical security is better, too, as evidenced by known cases of families moving from Buenos Aires to Montevideo in search of a safer environment. Recent regional rankings on tourism reflect Uruguay as a desirable destination. According to the 2010 Latin Business Chronicle’s Tourism Index, Uruguay is Latin America’s tourism champion. The country receives more than 2 million tourists a year, an amount equaling roughly 60 percent of its population.

Years of economic growth and state policy promoting technology usage by citizens, government and business has made the Uruguayans some of the most tech-savvy in the region. In May 2008, former president Tabaré Vázquez (2005-10) launched a government program called La Agenda Digital Uruguay 2008-10 (Uruguay Digital Agenda 2008-10) that worked toward the consolidation of all of Uruguay’s information technology programs. Its main objective was to create a more inclusive and democratic society. It gave high priority to Plan Ceibal, known in English as One Laptop per Child, which is responsible for distributing low-cost laptops to all public primary-school students and teachers. This open-source initiative has been so successful that it was extended to secondary schools, and inspired another project to make available affordable “triple play” (Internet, phone, and television) services to low-income families. By November 2010, Uruguay’s investment agency Uruguay XXI reported that the government had distributed 380,000 laptops, trained 18,000 teachers, created 280 free Wi-Fi areas in Montevideo and gave 220,000 families their first computer.

In 2005, for the first time in its history, the left-leaning Frente Amplio coalition won the presidential elections. Concern amongst the business community quickly subsided as President Vázquez proved to be pro-social development as well as pro-business. Vázquez managed to attract foreign direct investment (FDI) and promote private participation in public works while also making a concerted effort to improve the standard of living of low-income sectors by revamping tax law, creating the first-ever collective bargaining framework and improving the lot of rural farming families.

The result has been consecutive years of economic growth, increased FDI and improved social indicators. From 2005-2009, the Uruguayan economy grew an average of 6.9 percent. It managed to avoid recession during the global financial meltdown with a GDP rise of 2.2 percent in 2009, only to be followed by a whopping 8.3 percent growth rate in 2010. While growth is expected to slow in 2011, a strong rate of over 4 percent is nonetheless expected over the next few years. The same is true for FDI—which has steadily risen since 2005. Even the current president, José Mujica, a former guerilla and labor movement strongman, has not scared off foreign investors. On the contrary; the United Nations Economic Commission for Latin America and the Caribbean forecasted total FDI in 2010 at $1.7 billion. This is higher than the $1.13 billion reported in 2009 and nearly a full return to 2008 precrisis figures of $1.79 billion. 

President Mujica, a socially- and environmentally-sensitive intellectual, sent a legislative proposal to the legislature in November 2010 to promote private-sector involvement in public works projects in order to improve the country’s infrastructure. He is continuing with his predecessor’s efforts to forge bilateral trade pacts, promote technology transfers, achieve increased energy independence and modernize Uruguay’s civil service. It will likely be an uphill battle owed to a divided congress and opposition from the left-wing factions of his governing coalition. Nevertheless, he continues along a path toward all-around sustainable development.

Uruguay is no utopia, but its government is creating state policy allowing it to compete in today’s global economy while largely holding true to the values of its people—which is not an easy task. Indeed, its economic and social models warrant emulation from its neighbors in the region.

*Janie Hulse Najenson is a contributing blogger to AQ Online. She is an analyst based in Buenos Aires, Argentina and the editor and producer of Insights from the Field, a quarterly publication promoting perspectives from within Latin America on politico-economic and security issues affecting the region.

Any opinions expressed in this piece do not necessarily reflect those of Americas Quarterly or its publishers.
Tags: Uruguay, Tabare Vazquez, José Mujica

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