During the decades immediately following independence, however, political instability, not livestock production techniques, limited the development of Uruguay's rural economy. Until the mid-1800s, rival factions vied for control of the countryside, obstructing commerce and confiscating or destroying cattle and other property. Foreign investment, which was to play an important role in building up Uruguay's infrastructure, was delayed. And although the rural population was small to begin with, many settlers left the countryside in search of more peaceful surroundings. Those who remained operated cattle ranches (estancias) or practiced subsistence agriculture.

Rural struggles for political control thus slowed the growth of the livestock sector. By contrast, Montevideo, Uruguay's capital, where political struggles were less strident because of the city's booming trade and bustling social and cultural life, rapidly became a hub of economic activity. Montevideo was not founded until 1726, but its superb port allowed it to gain an increasing role in regional and international trade. In the 1800s, the Uruguayan capital became an important transshipment point because European importers and exporters preferred its port to that of nearby Buenos Aires (until the latter was improved in the 1870s). However, the volume of foreign traded goods passing through Montevideo had only a minimal impact on rural Uruguay. As a result, the city's development outpaced and diverged from that of the countryside. The different economic interests in the two areas helped drive a wedge between rural elites, who had amassed large landholdings and resented foreign involvement in the economy, and urban businessmen, who adopted outward-oriented attitudes and profited from trade. Later, profits from exports would become important to rural livestock producers as well, but the contrast between urban and rural economic (and political) orientations would persist.

More about the Economy of Uruguay.

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Source: U.S. Library of Congress