The Formation of Modern URUGUAY, C. 1870-1930 : Traditional Uruguay: Cattle A N D Caudillos

13
THE FORMATION OF MODERN

URUGUAY, c. 1870-1930*
TRADITIONAL URUGUAY: CATTLE AND CAUDILLOS

During the decade of the 1860s Uruguay was a nation of no more than
300,000 inhabitants, of whom more than a quarter lived in the principal
port, Montevideo, which was also the political capital. The proportion of
foreigners was amongst the highest of any Latin American nation.
According to the 1860 census one in three inhabitants (and one in two in
Montevideo) was foreign: mainly Italian, Spanish, Brazilian, French,
Argentinian or British (probably in that order). Uruguay's one railway
line, inaugurated in 1869, was only 20 kilometres long. The nation's
transport system in fact consisted of little more than primitive tracks;
luckily the society's principal product, cattle, had the virtue of being
mobile. For the transport of people, carts were used in the east and centre
of the country, whereas in the west the use of sailboats and steamships on
the Uruguay river gave this region much better communication with the
capital. In spite of the small size of the country - about 180,000 square
kilometres - travel in the interior was slow, especially in winter when the
swollen rivers and streams blocked land routes. At such times central
government, landowners and traders alike seemed more to be living in a
medieval backwater rather than in a nation of the modern world, in the
second half of the century of the steam engine.
The economy was based on the extensive exploitation of native {criollo)
cattle. Their heavy hides were shipped to Europe, while part of their thin
flesh, after salting and drying in the saladeros (meat-salting establish-
ments) to become tasajo (jerked beef), was consumed by the slave
populations of Cuba and Brazil. For this reason, as in the colonial period,
* Translated from the Spanish by Dr Richard Southern; translation revised by Dr Henry Finch. The
Editor wishes to thank Dr Finch for his help in the final preparation of this chapter.
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454 The River Plate Republics
the value of an animal was determined by the weight of its hide rather
than its yield of meat. The slaughter of these cattle was not yet a capital
offence, and the free provision of food from this source on the estancias
was by no means economically irrational. Two typical aspects of the
political and social life of the period, the endemic civil wars and the
paternalism of the caW/V/o-landowner towards the rural poor, are in part
explained by these characteristics of the economy.
The importance of trade to this raw material and food-producing
country was somewhat unusual. The location of the port of Montevideo
on the Rio de la Plata, and its natural advantages over Buenos Aires and
the ports of Rio Grande do Sul, made it a commercial centre of the first
importance. It developed as a major distribution point for European
merchandise destined for the Argentine provinces of Entre Rios,
Corrientes and Santa Fe, for Rio Grande do Sul, and even for Paraguay.
Wealthy merchants engaged in both export and import trades, as well
as the large landowners, constituted the backbone of the Uruguayan
upper classes. In 1857 they had founded the first nationally owned bank,
the Banco Comercial. The middle classes, extremely weak in the interior,
grew rather more strongly in Montevideo on the basis of commerce and
the beginnings of manufacturing activity. The saladero industry had
created a small urban working class, but the bulk of the lower orders
consisted of those who were dependent on the livestock owners and
who, as peons and casual workers, lived in dispersed settlements on the
vast estates. In the north there was still a hidden slave labour force,
imported by wealthy Brazilian landowners from Rio Grande do Sul.
Such a society and such an economy, however, did not generate
inequalities and social tensions. On the contrary, in some respects
Uruguay stood out within a Latin America characterized in the
nineteenth century by sharply differentiated social classes. In the interior,
food supply was not yet the monopoly of those who owned cattle and
land, and therefore to be a wage-earner was to some extent a matter of
choice rather than necessity. The economic distance between individuals
was recent in origin and not magnified by racial differences as in Mexico,
Peru or Brazil, and therefore might be relatively easily changed.
Moreover, as a new country populated by immigrants, upward social
mobility in Uruguay was not difficult. In 1847 a member of the social elite
complained bitterly, and with good reason, that in Uruguay 'everyone
with a white face thinks he has equal rights'.
Civil strife was endemic. From Independence (in 1826) to 1870 many a
The formation of modern Uruguay 455
president faced rebellions and was obliged to leave office before his legal
term of four years was concluded. The struggles between blancos (or
Nationalists) and colorados, the two traditional parties, were fuelled by a
variety of factors. Central government was unable to impose its authority
on a society of cattlemen. Not only did rival centres of power — the rural
caudillos - emerge, but the use of violence and weapons was an integral
part of livestock production. Hence, the economy did not punish chaos
but rather, because the ownership of land was still in dispute, conflict was
promoted. Moreover the lack of a clearly defined sense of nation,
coupled with the ambitions of the dominant classes in Uruguay's
powerful neighbours, Brazil and Argentina, encouraged uprisings
against central government in Montevideo by those who did not wish
to see it strong.
However, already in the 1860s most of these characteristics of the
country had begun to change. And by 1870 traditional Uruguay,
described by the Brazilian entrepreneur, the barao de Maua, as
'politically, economically and financially a corpse', was in the process of
breaking up. The merchants, mainly foreign in origin, had increased
their influence as a result of prosperity achieved during the Triple
Alliance War with Paraguay (1865-70). They now demanded a guarantee
for the maintenance of their wealth and prominence: strong government
and internal peace. The landowners no longer restricted themselves to
criollo cattle; sheep production had grown during the 1860s. Even the
struggle for land was about to end, because a group of very large
landowners had emerged, a class which did not require the support of the
caudillo system for confirmation of its rights. Rebellions which had
previously caused the destruction of cattle, a commodity of little value,
now did damage to relatively well-equipped estancias with pedigree
breeding rams. These establishments needed to introduce wire fencing,
but were unable to do so while political violence threatened. To kill a
steer when the market for tasajo was depressed was of comparatively little
importance. To kill a sheep which annually yielded a fleece attracting a
good price in a keen world market was a crime. Wool production,
moreover, helped to strengthen the position of a rural middle class since
less land of lower quality was required for sheep. Thus an additional
element made for social and political stability in what had previously
been such a turbulent society.
The modernization of Montevideo, now with nearly 100,000 inhabi-
tants, had begun. The British traveller, Thomas Hutchinson, who in
1861 noted the 'Moorish architecture of its flat-roofed houses', would
have found it difficult to imagine the feverish expansion of the following
years. Although the Cerro (the hill overlooking the harbour) and the
cathedral — the two mountains of the New Troy described by Alexandre
Dumas - still dominated a distant view of the pale city ringed by small
farms and saladeros, the opening up of new streets and the construction of
two-storey buildings indicated the rapid growth of the city. It had
expanded beyond its old colonial walls and was now developing along
the main street, 18 de Julio, towards the humble dwellings of the eastern
suburbs, and the luxurious residences of the wealthy on the banks of the
Miguelete stream.
The process of foreign investment, mainly by Britain, had also begun.
Loans to the state, land purchases by companies with directorates in
London, the installation of Liebig's Extract of Meat Company at Fray
Bentos (1863): these were the precursors of what was to develop after
1870, when the British brought railways and water and gas companies.
The minimum condition of such investment was of course the
maintenance of order.
Finally, the country was integrated more and more closely into the
world economy through the growing ease and cheapness with which
men and commodities could be transported to and from Europe.
Improvements in sailing ships, but above all the triumph of steam power
on ocean routes, brought Uruguay into close touch with the needs, the
capital, the immigrants, the culture and the fashions of the other side of
the Atlantic. Montevideo's contacts with London, Marseilles and Le
Havre began to be dependable and regular. The import and export trades
became established and their volume increased, while freight rates fell.
The umbilical cord which joined the nation with Europe could not now
be broken; time would only strengthen it.
MODERNIZATION AND THE WORLD MARKET, 1 8 7 O - I 9 O 4
In 1865, on the eve of the war with Paraguay, a bianco government was
overthrown by Colorado forces led by Venancio Flores and aided by both
Argentina and Brazil. In 1870, at the end of the Paraguayan War, the
rebellion of the caudillo Timoteo Aparicio, a bianco, led to the 'War of the
Lances', an attempt to secure at least a share of the power monopolized
throughout the war by the colorados. The violent conflict lasted two years,
and huge losses were sustained, especially by the large landowners.
When a negotiated peace was arranged in April 1872, a new political
group separated itself from the traditional parties and condemned them
for their role in the political chaos. This group — the principistas —
consisted of young intellectuals, sons of the oldest but no longer the
wealthiest families in Uruguay. Committed to an extreme doctrinaire
liberalism, the.principistas were ardent defenders of a legal order based on
European ideas and models in which distrust of the state and a
wholehearted belief in the rights of the individual were fundamental.
Such principles, and the principistas' total commitment to the constitu-
tion, did not fit in with the aspiration of the upper classes to secure strong
government. The traditional factions of the parties triumphed in the
elections of 1872, but this did not prevent the entry of the principista
leaders to the legislature, which was to be under their influence until
1875. Moreover, Jose Ellauri, a descendant of the aristocracy of the
colonial period, was elected president at the beginning of 1873 following
an electoral agreement and, lacking strong party support, his government
was neutral and weak. The legislature undertook in 1873a programme of
administrative, judicial and electoral reforms which were basically
directed towards strengthening individual rights in opposition to the
power of the state. Representatives of economic interests — landowners
and merchants - promptly rejected this institutional arrangement, seeing
it as a legal framework which could only postpone the achievement of an
economic order which would make their investments safer and more
profitable. The losses being suffered in the livestock sector, for example,
were evident. And although a bank had been established in 1857, credit
facilities failed to meet even the most basic needs of producers. Short-
term commercial loans and speculation in property values or public debt
issues restricted the availability of credit to Montevideo, and thus denied
such facilities to the rural economy in the interior. This distortion,
prejudicial to the interests of the livestock economy, was particularly
marked during the unstable years from 1868 to 1875. Moreover, it was
during this period that the wire fencing of pasture and the investment
required by the first signs of technical progress in the sector increased its
credit requirements. To the discontent of this group was added a more
widespread feeling of dissatisfaction when, in 1874, the first symptoms of
financial crisis became apparent. Isolated from public opinion, since they
had no support outside their own circle, deprived of economic resources,
and insufficiently supported by an indecisive executive, the principistas
were removed from power by a group of army officers intent on ending
the impasse created by the crisis and the fruitless efforts of the
government to overcome it.
With the imposition of military rule in 1876 and the removal of the
principistas, the dictatorship of Colonel Lorenzo Latorre met the essential
requirements of the propertied classes. Latorre carried out the policy that
traders, rural producers and foreign investors all needed during a period
of favourable trends in export markets. The influence of rural caudillos
was temporarily nullified by strong centralized government. This regime
permitted the extension of the capitalist order to the rural economy,
applying a rough and ready justice. Under it, criminals were equated with
the rural unemployed, a population marginalized by the fencing of
pastures and the new status of the estancia as business enterprise. To
enable it to function as such, especially during a period of rapid
modernization, the landowner's rights to property were consolidated.
Internal stability was confirmed through the strengthening of the army
(and therefore of the power of the state) by improved weaponry. Central
authority was now equipped with sophisticated armaments of the
nineteenth century — the repeating rifle and Krupp artillery — and in this
way government slowly but inexorably secured a monopoly of physical
force over the inhabitants of the country. For this achievement the large
landowners composing the Rural Association (founded in 1871) never
ceased to give thanks.
Following the unexpected resignation of Latorre in 1880, General
Maximo Santos governed the country until 1886. Santos strengthened the
structure of the colorados, of which he was now head. In addition, the
party began to receive the open support of the army, a new and
significant factor. Thereafter, and for almost a century, the armed forces
and the colorados maintained a tacit alliance. This political pact, with all
the advantages and safeguards which it offered to the armed forces,
neutralized any possible aspirations on their part to a more direct form of
political participation; along with other factors, this helped to ensure
subsequent political stability, and in the long run effectively guaranteed
the institutional order. The evolution of militarism in Uruguay, its rapid
decline after 1886 and submission (or perhaps consent) to civil authority
have to be seen in these terms.
Santos was not the mere executive arm of the economic oligarchies but
was also — and this was new to Uruguay — the representative of a military
order which possessed an embryonic officer caste. This group displayed
its ambition and cultivated a showy life style, surrounded by a modest
court of relatives and hangers-on who rose rapidly on the social scale. It
was a time of parades and ceremonies, but also of shady business deals
and concessions that undermined the prestige of the system established
by Latorre. For the military it was their belle e'poaue, a time of euphoria.
The emergence of an opposition front composed of the 'legalist'
factions of the blancos and colorados produced an authoritarian response
from Santos which led him down a cul-de-sac of escalating repression.
An abortive popular rising was followed by an attack on his life; finally
an attempt at conciliation brought an end to his rule. The Santos years
witnessed the disintegration of formal militarism. The accusations of
nepotism and venality made by the opposition against the government
were exaggerated but not unfounded. The initial tacit consent of the
rural upper class to a regime which would give stability, now that its
modernization project was almost complete, changed to open disillusion
once the faults in the system began to outweigh its limited advantages. In
November 1886 Santos left for Europe and was succeeded by one of his
followers, General Tajes, an inoffensive figure under whom militarism
was finally eliminated. Even in favourable conditions its leaders had
demonstrated an inability to maintain a rigid authoritarian model.
Although under Latorre a modernizing dictatorship had benefited the
propertied classes, under Santos militarism was unable to survive the
prosperity which it had decisively helped to create.
Militarism succeeded in consolidating not only an internal peace
which temporarily eliminated the anarchy of the caudillos, but also an
external dependence based, as many enthusiastic diplomatic reports
reveal, on closer ties with the imperialist powers. This development
implied not only a growth of production but also changes in its
composition. While the export of hides increased by 30 per cent during
1876—86, wool exports grew by 40 per cent. Indeed in 1884 the value of
wool exceeded that of cattle products for the first time. The pastures
were rapidly being fenced — 60 per cent of estancias invested in wire
during the five years after 1877 — and the surplus labour force was
abandoned by the capitalist-landowner who now replaced the caudillo-
landowner, especially in the west and south of the country. Export
markets diversified. To the traditional buyers of cattle products (Great
Britain, United States, Brazil and Cuba) were added the purchasers of
fine merino wools: France, Belgium and Germany.
The British presence in Uruguay grew, encouraged by strong
government but also by guarantees of minimum rates of return on its
investments. The growth was particularly marked in public debt issues
and public services. The Economist reckoned the volume of British
investment in government bonds in 1884 at £3.5 million, with a further
£3 million in enterprises. Amongst the latter, the rapid increase in the
railway network was especially marked, growing from 474 kilometres in
1882 to 1,571 kilometres in 1892.
This period of comparative prosperity was accompanied by a rapid
growth of population in thefinalquarter of the century, largely as a result
of immigration. According to the earliest figures, in 1873 Uruguay had
4 5 0,000 inhabitants, of whom 1 o 3,000 were foreigners. After 1875, when
as many as 24,000 immigrants landed in a single year, the financial crisis
and collapse of institutional government ushered in a decade of very
limited immigration to Uruguay, while vast numbers were drawn to
Argentina and southern Brazil. Not until after 1882 did a new wave of
immigrants arrive. They were predominantly Italians, and had a decisive
effect on the growth of Montevideo. Comparing the censuses of 1884
and 1889, it is clear that while the Italian population was growing
rapidly, the number from Spain was stationary while the French had
almost disappeared. During 1887—9, w hen immigration reached its
highest level in the nineteenth century, net immigration probably
exceeded 45,000, reflecting the demand for labour generated by the
period of economic growth preceding the crisis of 1890.
Although stability and prosperity were in some measure the products
of strong government, old problems concerning the economy, society
and political system soon reappeared, and were joined by new ones. The
restoration of civilian rule was the work of the colorados, who benefited
from what remained of Santos's government after the political bases of
military power had been dismantled. The transition was effected by the
new minister of government, Julio Herrera y Obes (who had been a major
figure amongst the principistas ousted in 1875). From this office to the
presidency (in 1890) was only a short step for a skilful politician who
channelled the accumulated resentments against Santos to his favour.
The electoral machine developed at the ministry of government during
the administration of General Tajes enabled Herrera y Obes to establish a
power base closely linked to the oligarchy, which in turn proclaimed his
infallibility and the weight of his opinion against that of the majority of
the colorados. His enlightened despotism proclaimed the need, with a
frankness bordering on cynicism, of a 'guiding influence' in the choice of
candidates, and this aroused great antagonism within both parties.
It soon became clear that the return to civilian rule was in fact the
instrument of a new oppression — that of presidential power — legitimized
by a facade of democracy. With the influence of the caudillos in abeyance
and the army back in barracks, the government had considerable power
for its exercise of political coercion. The technical instruments — railway,
telegraph and modern armament — had been further improved since the
time of Latorre. At the political level, the interior was tightly controlled
through the authority of the politicalyV/^r, who were directly dependent
on the orders of the executive. Such devices consolidated the authority of
the president, but at the same time it was dissipated by the growing
distance between that office and the country at large and the new social
forces within it. The popular mass of the colorados, organized by Jose
Batlle y Ordonez, began to seek a party organization more in keeping
with the interests of the new sectors of society, those arising from both
external and internal migration. For its part the Partido Blanco decided
in 1893 to abstain from the electoral process, and it prepared once more
for armed struggle. The merchant class, bankers, businessmen, and the
majority of rural producers all showed in various ways their dissatisfac-
tion with Herrera y Obes. In addition, the onset of economic crisis in
1890 increased the opposition of the capitalist class to a president who
was increasingly less representative of their interests, and who confined
himself to defending the last privileges of an impoverished and
anachronistic aristocracy.
The crisis of 1890 had complex origins. Following the fall of Santos,
the favourable international situation stimulated an influx of Argentine
capital which, in the hands of more adventurous financiers attracted by
the advantages of the Uruguayan market, served to increase the
availability of credit. In this context, the foundation in 1887 of the Banco
Nacional by foreign capitalists with the nominal participation of the
government contributed to a surge in prices which produced a boom and
resulting crash. However, the crisis of 1890 cannot be explained merely
as a result of domestic speculative activity, but must be seen also in terms
of more fundamental factors. The collapse of the Banco Nacional in
1891, and the refusal of the market to accept its banknotes, implied as in
1875 a defeat for the government. It implied also a triumph for those -
traders and foreign investors — whose interests were linked to gold, and
who wanted no other monetary base than the gold which they already
held. The victory of thisfinancialoligarchy secured for it a monopoly in
the supply of credit for the next five years, a monopoly built on the ruins
of the crisis which restored conditions of usury to loans to the rural
sector, as in times long past. The establishment of the Banco de la
Republica in 1896 ended the monopoly, but this success by its opponents
- landowners, small traders, the impoverished aristocracy and the
popular masses - was partial. It only succeeded in making credit formally
available to those groups who until then had been almost completely
excluded from its benefits. It was an important step, but the tradition of a
convertible gold-based currency, to which the new official institution
was committed, remained intact.
The foundation of the Banco de la Republica represented a major
intervention by the state in the economy. In the same year, the Electric
Light Company was transferred to the city administration of
Montevideo by its owners who were in debt to the state, and in 1901 the
construction of the port of Montevideo was begun. These three
economic initiatives by the state marked, as the work of Jose Pedro
Barran and Benjamin Nahum has shown, the abandonment by the
political elite of primitive liberalism and paved the way for the dominant
ideology of the post-1904 period, batllismo. It should be noted, however,
that at this stage the state was either meeting the requirements of
particular sectors of domestic or foreign capital, or simply making good
its shortcomings. There was no confrontation with capital, as would
occur later during the presidencies of Jose Batlle y Ordonez.
The presidential election for the successor to Herrera y Obes, at the
beginning of 1894, demonstrated both the growing strength of
opposition and the stubborn efforts of government supporters to hold
on to power. It took 40 votes and 21 days of fruitless sessions in
parliament to reach agreement. When a candidate, Juan Idiarte Borda,
finally emerged from this process, the country began to move closer to
civil war. Political minorities were left without representation. An
agreement of 1872 which had in effect sanctioned the co-participation of
the blancos in government, giving it control of four of the thirteen
departments in the interior, was being undermined. This was the result
not just of the usual mechanisms of duress and deception, but also of an
increase in the number of departments to nineteen and the reduction
since 1893 in the number to be controlled by the blancos to three.
Combined with this was the growing dissatisfaction of the dominant
classes with the government, so that it only needed a spark, a pretext
even, to set off armed conflict. A defiant display of military force by the
caudillo Aparicio Saravia on the eve of legislative elections late in 1896
was the prelude to a rebellion the following year.
The rebellion was a protest by the blancos at their exclusion from
power, but it is important to bear in mind the social background to the
revolt. Since the 1870s and the accelerated modernization of the
traditional estancias, technical change had left the rural working class
defenceless. Wire fencing, mechanization and improved transport
resulted in growing unemployment, in addition to which the crisis of
1890 dealt the livestock sector a severe blow. In 1891, in the livestock-
producing departments, the labour—land ratio was one peon per
thousand hectares. Unemployment, vagrancy, pauperization, exodus
from the rural areas, falling real wages, hunger and beggary all reduced
the rural labourers to conditions of misery. The presence of the rural
poor in Saravia's army was one response to this situation. Military
recruitment by the government also absorbed a considerable part of the
unemployed rural labour force. In all about 15 ,ooo men were mobilized,
one-third of them by the bianco rebels.
The intransigence of the government and the inconclusive nature of
the war itself proved damaging for the landowning class. The loss of
horses and livestock, appropriated during the military campaign either
by rebels or by government forces, added to problems associated with an
acute shortage of labour for sheep-shearing or the agricultural harvest.
The Montevideo press echoed the protests of the propertied classes, and
the resulting campaign in favour of concluding a peace was directed
against President Borda himself, a stubborn opponent of any peace
formula. The assassination of Borda in August 1897 removed this
impediment. The war was ended with the La Cruz agreement the
following month, by which a balance was achieved between the two
political parties in a de facto division of the government of the country.
The new co-participation agreement gave six of the nineteen depart-
ments to the blancos, and in doing so called into question once more the
political unity of the country and the sovereignty of the executive power
of the state.
Not until the death of Aparicio Sara via in 1904, following renewed
demands by the blancos and the resumption of civil war, was the authority
of central government decisively established and a modern state
structure consolidated. This final civil conflict of 1904 - bloody,
immensely destructive, extending through nine long months, and
occurring at a time when wars between the political parties were
regarded as a thing of the past - captured the attention of both
contemporaries and historians. In effect the struggle was between two
Uruguays. The one, mainly bianco, demanded electoral freedom and a
complete political democracy, but also had the support of the traditional
Uruguay of criollo cattle, the saladero, and the paternalism of the caudillo
landowners (some of whom still survived) towards their peons. The
other, principally Colorado, defended the principle of a unified govern-
ment, but also represented the new Uruguay of sheep, improved cattle
bred for the meat-freezing plant (Jrigorificd) and the British market, and
the landowner as capitalist businessman. For Batlle, elected to the
presidency in 1903, the war of 1904 was final proof that extensive
livestock production and its corollary, the unproductive latifundios on
which the bianco caudillos had their last refuge, had to be eliminated and a
reform of land-ownership implemented. The intention could never be
realized, however, in part because of the enormous opposition it would
have aroused within both Uruguays.
By the end of the nineteenth century, the incorporation of Uruguay
into the world economy on the basis of its rural sector exports was
complete. The price paid for this degree of integration and prosperity
was economic instability. Wool, the most important single export item
after 1884, was adversely affected by declining stocks and falling world
prices during 1890-1. Tinned meat and meat extract fluctuated severely
in European markets; Liebig's extract of meat experienced rising prices
up to 1890, but a sharp decline thereafter, while tinned meat encountered
declining markets after 1886 and production therefore fell. Other
traditional livestock products such as hides also lost importance.'Exports
of tasajo had dropped sharply in 1875 but then experienced sustained
growth until the end of the century; nonetheless there were considerable
fluctuations in the price that tasajo could command, and the cattle
economy suffered conditions of overproduction in this period. From the
1870s onward, therefore, the economy of Uruguay was increasingly
subject to fluctuations in the exports of its primary products. Such
dependence implied a high degree of vulnerability to external economic
changes, which had marked and contradictory effects on the stability of
the country.
REFORMISM AND THE EXPORT ECONOMY, I 9 0 4 — 1 8
From the time of his first election in 1903 until his death in 1929, Jose
Batlle y Ordonez dominated the political life of Uruguay. Twice
president (1903-7 and 1911-15), his command of the country was due in
large part to his ability to give expression both to its urge to modernize
and to the new social forces which were emerging in what was no longer
a society dominated by the elite. Son of a president and grandson of a
merchant who had belonged to the colonial aristocracy, journalist and
founder of the newspaper ElDia in 1886, Batlle had worked since 1890
for the normalization of institutions and for economic independence for
Uruguay from the claims of European capital. In addition he adopted the
early demands of the middle and working classes (especially of
Montevideo) against the autocratic labour regimes both of national
employers and of foreign investors in Uruguay.
Batlle was elected to his first presidency in 1903 by the old Colorado
oligarchy. The military victory of his government over Saravia in 1904
enabled Batlle to consolidate his position as party leader and at the same
time ensured the political and administrative unity of the country. The
installation of a government of one party, rather than the shared
government of the co-participation agreements, was in line with Batlle's
personal convictions as well as with the requirements of his programme.
He needed the support of large majorities, hence the electoral reforms of
1904 which further strengthened the representation of the ruling Partido
Colorado. Judged by the degree of participation, however, the targets
were far from being met; scarcely 5 per cent of the total population of one
million exercised the right to vote. To change this situation Batlle
proposed to do away with the old oligarchic structure of the party by
achieving a more direct representation of the electorate from all levels.
The district political club was the best instrument for this, and it brought
to the constituencies of the interior as well as to those of the city the day-
to-day practice of an active internal democracy. Party assemblies also
brought the people into closer contact with public life, where previously
issues had been discussed in closed circles. Both institutions were used to
give effect to the ideal of a broadened political participation, within the
framework of one-party government elected by the people.
In spite of the persistent dissatisfaction of the blancos, the pacification
of the country was a fact after 1904. It is symbolic that that year also saw
the installation of the first frigorifico in Montevideo. Financial stability
and increasing levels of exportable production enabled Batlle to embark
on a wide-ranging programme of reforms in line with the changes
occurring in Uruguayan society. Immigration still had an impact on the
demographic structure. According to the 1908 census, 17 per cent of the
total population —181,000 persons — had not been born in Uruguay. Half
of this foreign population lived in Montevideo, which accounted for
about one-third of the total population of just over a million. But the
significance of this population inflow was not merely quantitative.
Particularly in the urban areas, immigrants were associated with the rise
of a strong middle class to which access was relatively easy; and they
contributed an ideological foundation to the urban proletariat, especially
in the early stages of trade union development.
Batlle's reforms considerably broadened the base for the moderniza-
tion of the country. The state was strengthened through an increase in
the number of ministries and the creation of the High Court of Justice in
1907. At the same time the influence of the church was diminished by the
progressive limitation of its prerogatives, and by the passage of liberal
divorce laws in 1907 and 1913 — the latter making divorce available at the
will of the wife and without statement of cause. The benefits of education
were extended through the creation of departmental secondary schools
in 1912 and free access to secondary and higher education in 1916. In
labour matters, the state took the role of conciliator between classes,
intervening on behalf of the weakest wage-earners either through
protective legislation or with effective guarantees of trade union rights.
The most outrageous piece of such legislation (in the eyes of the
employers) was the approval in 1915 of the eight-hour working day for
all urban workers.
In addition to these social welfare measures, the state also undertook
the promotion of a pattern of economic development with a strong
nationalist emphasis. The introduction of a co-ordinated protectionist
policy in 1912 gave a stimulus to the expansion of manufacturing
industry. Batlle also tried to limit the extent of foreign (especially British)
penetration in the economy. Foreign capital took the form of loans to the
Uruguayan government and direct investments. In both, the position of
Britain was dominant. By 1910 loans placed in London totalled £26.5
million, and constituted one of the highest per capita foreign debts in
Latin America. Thereafter the proportion of British debt declined as
loans were placed with New York banks. In the public utility sector,
British investment in railways, trams, telephones, water and gas grew
rapidly during 190 5-13. Batlle regarded the presence of these companies,
and the concessions under which they operated, with great misgiving.
Their excessively high tariffs and deficient services were widely
acknowledged, and the government sought to enlist the support of US
investment (before 1914 largely restricted to the frigorifico industry) to
The formation oj modern Uruguay 467
challenge their position, but with little success. However, certain state
enterprises were established to ensure or challenge control of certain
sectors of the economy traditionally dominated by European capital,
such as insurance, railways, telephones and the distillation of alcohol.
The state also moved into the financial sector, nationalizing completely
the capital of the Banco de la Republica in 1911 to create a state bank, and
bringing the Mortgage Bank into state ownership the following year.
These reforms undertaken by Batlle were based fundamentally on a
particular conception of the role of the state as a political catalyst
designed to give effect to changes made necessary by the dynamics of
Uruguayan society. This conception led Batlle to emphasize the dangers
implicit in the powers traditionally held by the president. In his view, the
increasing complexity of the state entailed the delegation to one office
(and one man) of extraordinary powers, the abuse of which had
constituted the political history of Uruguay during much of the
nineteenth century. Basing his argument on these risks, and on the need
to ensure continuity in government policy, Batlle proposed in 1913 a
reform of the constitution. In essence, his proposal envisaged the
replacement of the presidential executive by a collegiate executive
composed of nine members of the majority party. Two were to be
appointed by the General Assembly for a period of six years; the other
seven would be elected by popular vote with one seat changing annually.
This was an audacious proposal. On the one hand it challenged an inter-
party consensus that had lasted almost a century. On the other it revealed
an attempt to perpetuate the role of the Partido Colorado in power, since
it would have to lose five successive elections to be ousted from control
of the new executive.
The Partido Blanco, still suffering from the setbacks caused by the end
of co-participation in 1904, penalized by subsequent electoral legislation
which reduced the representation of minorities in parliament, and led by
a directorate mostly drawn from the conservative classes, was a
predictable and determined opponent of the proposed new system of
government. Clearly the causes of its opposition were not only political
but also had to do with the character of Batlle's social reforms. Thus an
opposition front emerged which allied the directorate of the blancos with
an important conservative group, the riveristas, who had split off from
the co lorados in March 1913. They, like all the other groups who
subsequently broke with the Batllistas, sought to establish their identity
in terms of the traditions of the old Partido Colorado, and accused the
Batllistas with their 'socialist' sympathies of betrayal of those traditions.
Within both party groups, the narrow class interest that united the large
landowners with the bankers, merchants and foreign investors caused
them to register distrust and subsequently alarm at the activities of the
Colorado government, and this became a polemical issue which divided the
country into two irreconcilable camps. The social classes which proudly
proclaimed themselves 'conservative' began to identify themselves
irrespective of party with the defence of a threatened social order. The
debate on the collegiate constitution was not merely a disagreement
about the presidential system, but in fact implied support of or
opposition to the entire reform programme since 1903.
The elections for the Constitutional Assembly which was to study the
proposal, in July 1916, gave a clear victory to its opponents. Batlle's
successor as president, Feliciano Viera, presumably influenced by this
result, announced that the programme of social reform would be
discontinued. Coming from the same party as Batlle, whose ideas he had
previously accepted without reservation, Viera's attitude opened a
dangerous rift within the ranks of Batlle's followers. The associations of
employers communicated to the president their satisfaction at this shift
to conservatism. The dispute with Viera, added to the one with Manini
Rios at the head of the riveristas, revealed the multi-class character of the
colorados.
Shortly afterwards, the parliamentary elections of 1917 were a second
and decisive test of the collegiate proposal, and this time its supporters
were victorious. The way was thus opened for the new constitution,
which came into force in March 1919. The composition of the executive -
the ostensible cause of the long controversy - reflected two unresolved
views. The constitution established a two-headed executive power, in
which the authority of the president of the Republic was shared with a
nine-member National Council of Administration. The former retained
certain traditional powers in internal security, foreign affairs and as head
of the armed forces, which Batlle had hoped to take away. The latter,
restricted to the administrative functions of the state, revealed the
weaknesses of an institution that lacked effective support of its own, and
was therefore entirely subordinate to the power of the president.
During the period 1904—18, the nature of the economy was deter-
mined by parallel processes of modernization and dependence. The
consolidation of the state and the complexity of its functions transformed
it into an effective agent of economic development, but this made the
contradictions of 'outward-directed development' more evident. The
continued expansion of agricultural exports demonstrated the
dependence of the basic productive sectors (overwhelmingly that of
livestock) on overseas consumer markets. The new frigorifico industry
produced one of the most characteristic changes of the period, the
gradual displacement oitasajo by frozen beef as the principal meat export.
But the most important single export continued to be wool, accounting
for 40 per cent of exports during 1906—10, compared with 25 per cent for
hides and 16 per cent for meat and extracts. The expansion of the rural
sector continued throughout the first decade of the century and most of
the second, apart from the brief interruption caused by thefinancialcrisis
of 1913. The first world war accelerated the abandonment oitasajo, as
European demand grew strongly for wool and frozen and processed
meat.
The development of transport and communications underwent a
decisive phase during the prewar decade. The port of Montevideo, under
construction since the beginning of the decade, was opened in 1909.
With the arrival of the motor car in 1904 and the electrification of the
tramways in 1907, the city of Montevideo expanded to incorporate more
distant suburbs. Railways crossed the country from north to south, the
network reflecting the requirements of an export-orientated develop-
ment which also fitted in with British commercial interests. From 1,964
kilometres in 1902, the length of track reached 2,668 kilometres ^1919.
In the manufacturing sector, a growing number of establishments in
textiles, household chemicals, tobacco and beverages, metalworking,
paper, and so on was matched by the growth of industrial employment,
from 30,000 in 1889 to 41,000 in 1908 and 50,000 in 1920. More
significant than these quantitative estimates of the size of the labour
force, however, is the nature of its demands. Almost invariably they
involved improved living standards (higher wages, shorter hours), and
strikes became frequent from the beginning of the century when
Montevideo became a refuge for 'agitators' expelled from Argentina.
This was the beginning of a working-class tradition in which a number of
institutions played key roles: the Socialist Workers' Centre, founded in
1896, the International Centre for Social Studies (1898), and the Karl
Marx Centre (1904). But above all, the organization of the working class,
47° The River Plate Republics
and perhaps also the particular nature of its struggles, was attributable to
the undisguised support given it by Batlle.
THE L I M I T S TO R E F O R M I S M , I918-3O
The first world war brought prosperity to the Uruguayan economy as a

result of the high level of demand in Europe for agricultural products. At
the same time domestic industry grew substantially on the basis of home
demand. The census of 1920 recorded no fewer than 3,704 establish-
ments engaged in manufacturing and 401 industrial enterprises. But the
end of the war also ended this period of prosperity and it was succeeded
by a period of economic difficulty. Between 1919 and 1922 exports
declined sharply, largely because of adverse trends in the demand for
meat. Instability in the European market resulted in a period of sharp
fluctuations. Meanwhile, North American capital began a vigorous
offensive in the Rio de la Plata region, stimulated both by the prosperity
of the US economy in the 1920s as well as by the obsolescence of British
industry and the declining competitiveness of its products on world
markets. After the war both the US government and private sector made
more systematic efforts to secure an economic supremacy in the region.
Regular shipping services were established or consolidated and direct
cable services from New York began. At the same time US news agencies
began to supply the Uruguayan press.
The trade of the United States with Uruguay was not based on
reciprocity. All of Uruguay's exportable primary products had to
compete against similar production in the US. The only products
actually to be exported to the US, wool and hides, were subject to
considerable instability in that market, and depended largely on
favourable changes in US protectionist legislation. Uruguay's imports
from the US, on the other hand, grew to such an extent that by 1916 the
United Kingdom had ceased to be the principal source of imported
goods. The US maintained its supremacy after the crisis of 1920-2 until
the depression. The US supplied oil and motor vehicles as well as a
variety of agricultural machinery and equipment, but it was really in the
export of new manufactures, particularly the range of household
electrical appliances, that US producers succeeded in breaking the
traditional commercial hegemony of Britain. In addition, the sale of
vehicles and the various ancillary investments in the production of tyres
and cement, as well as the assembly of vehicles, undermined a principal
bastion of British influence in the region, the railway. During the 1920s
the inflow of capital kept pace with the growth of sales to Uruguay; as
vehicle sales increased, so Wall Street provided financial assistance for
the construction or improvement of roads, or for ambitious programmes
of public works. In 1923, when there were over 10,000 vehicles in the
country, nearly 300 kilometres of roads existed. By 1929, a further 550
kilometres had been built.
Nevertheless the British presence was still decisive. Although during
the first world war British investment in Uruguay had virtually ceased,
and such additions as there were during the 1920s did not reverse a
downward trend, at the end of the 1920s the volume of British capital still
exceeded £41 million. As in the nineteenth century, government loans
and railways continued to be the main sectors of accumulated British
capital. Loans amounted to approximately £20 million, even though no
new loan had been placed in London since 1919; in spite of its generally
higher interest rates, New York now attracted this business. Among
direct investments (accounting for a further £20 million in total) were
the public utilities and a meat-freezing plant. The railway system, owned
by the Central Uruguay Railway and other smaller British companies,
was entering a stage of decline. Afflicted by a shortage of capital which
became worse after the war, with ancient rolling stock, high fares and
freight rates, and a lack of new development, the railways justified their
reputation as an expensive and obsolete form of transport. Competition
from road vehicles came in the context of a road development policy
promoted by the government and supported (as we have seen) by US
capital.
The position of Britain in Uruguay's foreign trade at the end of the
decade was ambiguous. It was still the most important market for meat,
but it was no longer capable of sustaining its traditional hegemony. As in
the rest of Latin America, the failure of British exports to grow
significantly in the years of prosperity before the crisis of 1929 was clear
evidence that their competitiveness was considerably weakened. British
manufactures and trades continued to offer the same commodities as
they had sold half a century earlier, at prices and credit terms which were
easily improved on by the more enterprising and imaginative salesmen
from the United States.
Immigration, which had virtually ceased during the first world war,
47 2 The River Plate Republics
resumed in the 1920s. Between ic)i9and 1930 almost 200,000 immigrants
entered the country, though probably three-quarters of that number re-
emigrated to Brazil or Argentina during the course of the decade. The
new arrivals were composed of a wide variety of nationalities, a
consequence of the political dislocations and economic hardship in
postwar Europe. Apart from the traditional influx of Spaniards and
Italians, there were also Poles, Rumanians, Baits, Serbs and Croatians,
Germans and Austro-Hungarians, Syrians and Armenians, all of whom
contributed to a process of cultural and religious diversification. Jews
came in significant numbers; achieving rapid economic advance through
skill and industry, they formed a tightly knit community. The
occupational distribution of the new arrivals was dictated by the pattern
of demand for labour. The frigorifico industry, engineering workshops
and textile factories, but above all the distributive trades, absorbed this
new labour and the small volume of savings they brought with them.
Invariably they settled by preference in Montevideo, and had an
important influence on the process of urbanization. In 1930 Montevideo
had 65 5,000 inhabitants, almost 3 5 per cent of the total population of the
country. In that year Julio Martinez Lamas published a major treatise,
Kique^ay pobre^a del Uruguay, whose central theme was that the capital
functioned as a suction-pump to the detriment of rural Uruguay.
Within the meat industry, two long-term interconnected trends were
drawing to a close: the growth ofthefrigorifico industry and the increased
importance of chilled as opposed to frozen meat, and the final decline of
the saladeros which by now accounted for only 5 per cent of cattle
slaughter. The integration of the frigorificos with the world meat market
after the war had as its counterpart the virtual disappearance of the trade
in tasajo dating from colonial times, and the generalized adoption of
improved cattle breeds producing meat of the quality now demanded.
Thefrigorifico industry, however, was dominated by foreign (mostly US)
capital, which owned the main plants and controlled cattle purchases at
Tablada. The policy of agreed prices, and the successive pool agreements
by which they divided up the Uruguayan market, gave these inter-
national companies an effective monopoly which was intolerable
particularly for medium and small cattle producers. This was the context
in which proposals for state participation in the sector were voiced,
resulting in the creation of the Frigorifico Nacional in 1928. However,
the results of its early operations were unsatisfactory, and the problems
which led to its creation were left unresolved.
The formation of modern Uruguay All
The five years preceding the 1929 crisis were marked by another
export boom, as world trade recovered. Livestock products still
accounted for 95 per cent of exports, and wool and chilled beef were the
leading commodities. High export values and a restricted rate of growth
of demand for imports allowed the peso to appreciate during the 1920s,
and gave an impression of relative stability which was regarded
favourably by investors. Nonetheless the balance of payments did
contain some disturbing items, notably the level of foreign debt which
revealed the vulnerability of the apparent prosperity; in 1929 Uruguay
remitted abroad some £3.7 million in debt service payments. The first
symptoms of the crisis reached the country during 1929 with adverse
trade balances, the export of gold, and the depreciation of the peso.
These setbacks emphasized the limitations of an economic structure
based on the rural sector, in view of its pronounced dependence on an
unstable international market.
The truce which the two traditional parties had tacitly agreed upon
when the collegiate constitution of 1919 was accepted rested on a series
of complex political agreements. For the blancos, this framework offered
the advantage of preventing the return of Batlle as president. It also
implied (as it did equally for the colorados) the acceptance of an inter-party
agreement as an unavoidable condition of government. For fifteen years
a succession of such understandings ensured a fragile institutional
stability. The presidency was held by threefiguresfrom different factions
of the colorados: Baltasar Brum (1919—23), an orthodox Batllista and
architect of the new system of inter-American diplomacy; Jose Serrato
(1923—7), an engineer and entrepreneur, and a Colorado but without close
links with any of the major groups; and Juan Campisteguy (1927—31), a
lawyer and a prominent member of the dissident riverista faction.
This system of co-participation implicit in the 1919 constitution
tended to aggravate the internal splits in both political movements.
Amongst the blancos, and despite conflicting trends, the figure of Luis
Alberto de Herrera, who was closely identified with the most conserva-
tive rural sectors, rose to prominence. In the Partido Colorado, a series of
schisms from 1913 onwards threatened to cause its disintegration, but
this was always prevented by the powerful and unquestionable influence
of Batlle. His death, at the end of 1929, gave rise to a period of
uncertainty. The power vacuum created by his loss proved to be a severe
test in the following years of the stability of the institutions whose
installation he had inspired and which subsequently depended no less
decisively on the weight of his authority. The lack of a leader of his
stature - in part attributable to Batlle's own reluctance to groom a
successor - and the inevitable struggle over his political legacy,
heightened still further the tensions among the colorados. The presidential
elections of 1930, won by Gabriel Terra, revealed the extent to which the
co-existence of conflicting tendencies amongst the Batllistas had
depended on the qualities of Batlle himself.
Nonetheless, in the final years of Batllista dominance there was a
further wave of reformist measures. The intervention of the state in the
cattle market through the creation of the Frigorifico Nacional, with the
support of the landowning class, has been mentioned already. In 1931, in
a major addition to the state's directly productive activities, the
Administration Nacional de Combustibles, Alcohol y Portland
(ANCAP) was created. The new organization was to manufacture
alcohol and cement; in addition it had a monopoly in the exploitation of
those oil deposits which it was hoped to find, and the more significant
monopoly of the import and refining of crude oil, powers which brought
it into conflict with Standard Oil and Shell. The 'socialist curse', as
foreign investors and domestic capitalists saw it, was further intensified
at the end of the 1920s with minimum wage proposals for trade and
industry, and a pension scheme for company employees to befinancedin
part by the employer.
It was in this context, in which domestic political tensions were further
enhanced by the internal repercussions of the world economic crisis, that
the coup of 193 3 was prepared. The coup brought to an end that political
modus vivendi, based on pragmatic deals and opportunistic agreements
between antagonistic social and political groupings, for which the
economic prosperity of the pre-1929 years had been so necessary.

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13

THE FORMATION OF MODERN

TRADITIONAL URUGUAY: CATTLE AND CAUDILLOS

MODERNIZATION AND THE WORLD MARKET, 1 8 7 O - I 9 O 4

REFORMISM AND THE EXPORT ECONOMY, I 9 0 4 — 1 8

The first world war brought prosperity to the Uruguayan economy as a

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