The government's protectionist policies--in the form of tariffs on imported manufactured goods, first imposed during the late 1800s--encouraged these light industries. However, it was Uruguay's most significant political figure, José Batlle y Ordóñez (1903-07, 1911-15), who devised an overarching government strategy that took into account the growing urban population and set the tone for the nation's economic development for much of the 1900s.

Two aspects of Batlle y Ordóñez's sophisticated political program were most relevant for the long-term development of the economy. First, the social components of Batllism raised the standing of the average laborer. The government enacted legislation that was unprecedented in Latin America: a minimum wage, a day of rest after six workdays, workmen's compensation, and old-age pensions. Second, and more significant over the long term, however, were Batlle y Ordóñez's efforts to give the state a multifaceted role in the economy. The state was to regulate the economy, perform key activities, protect laborers from unfair working conditions, and minimize the influence that foreign-owned companies would have in Uruguay.

Under Batlle y Ordóñez's leadership, the state created or nationalized a wide range of service enterprises, officially known as autonomous entities ( autonomous agencies or state enterprises), including an insurance company, public utilities, and mortgage banks. Later, the government became deeply involved in the production of goods, operating over twenty state enterprises, including the giant National Administration of Fuels, Alcohol, and Portland Cement (Administración Nacional de Combustibles, Alcohol, y Portland-- ANCAP). By 1931 these state enterprises employed 9 percent of the nation's work force, including 16 percent of the workers in Montevideo.

Uruguay's novel economic policies bore fruit. Incomes rose on the strength of impressive export earnings. The value of exports doubled between 1900 and the onset of World War I, when beef exports, for example, reached 130,000 tons per year. Between 1926 and 1930, beef shipments continued to increase at a rapid rate, averaging 206,000 tons per year, a record that has not been equaled since then. During the same period, the Batlle y Ordóñez initiatives improved the lot of the worker, helped create a large middle class, and added to the productive capacity of the economy. The fact that all three developments--increased export earnings, improved conditions for labor, and successful state enterprises--occurred simultaneously helped Uruguayans to associate state intervention with prosperity.

The success of the export model, because of rising world demand and prices, was seen as the success of Batllism. However, as many observers have pointed out, the restructuring of the economy that occurred under Batlle y Ordóñez and his successors did not extend to the roots of that economy, the livestock sector. Because his political base did not reach beyond Montevideo into the countryside, and because he believed that market forces and property taxes would lead livestock producers to become more efficient, Batlle y Ordóñez essentially left the rural sector to its own devices. In doing so, he limited the extent to which his own bold reforms could transform the economy.

More about the Economy of Uruguay.

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Source: U.S. Library of Congress