Uruguay-GROWTH AND STRUCTURE OF THE ECONOMY

Bag of wool ready for export in Montevideo
Courtesy Charles Guy Gillespie

Figure 6. Gross Domestic Product (GDP) by Sector, 1988

Uruguay's recent economic history can be divided into two starkly contrasting periods. During the first, from the late 1800s until the 1950s, Uruguay achieved remarkable growth and a high standard of living. Expanding livestock exports--principally beef, mutton, and wool--accounted for this economic growth. Advanced social welfare programs, which redistributed wealth from the livestock sector to the rest of the economy, raised the standard of living for a majority of the population and contributed to social harmony. Booming livestock exports funded social programs and a state-led effort to build up new industries in Uruguay, such as domestic consumables (mainly food and beverages) and textiles. Thus, although Uruguay's economy was almost completely dependent on meat and wool exports, the strong earnings from those products helped to diversify the economy. As long as its exports continued to expand and world prices for those exports remained high, Uruguay's economic growth was ensured.

When export earnings faltered in the 1950s, however, the fabric of Uruguay's economy began to unravel. The country entered a decades-long period of economic stagnation. Export earnings first declined when world demand fell during the Great Depression of the 1930s. Prices later recovered somewhat, but a more important limitation on Uruguay's export earnings arose: livestock production reached its limits. Without room for continued expansion of traditional exports, and without a welldeveloped industrial sector, it became increasingly difficult for Uruguay to uphold the social welfare model that it had adopted in more prosperous times. The memory of those times, when livestock products earned enough to make Uruguay the "Switzerland of South America," made Uruguayans reluctant to completely reshape their economy. To understand that reluctance and its consequences, it is necessary to examine Uruguay's economic history in more detail.

Data as of December 1990