Uruguay is best known these days in the United States for Eduardo Galeano’s book the Open Veins of Latin America which shot to the top of the New York Times Best Seller List after Venezuelan President Hugo Chavez famously gave a copy to President Obama at the Summit of the Americas in April of this year. But this country, which gave the world one of the best Latin American writers in history, has a lot more to offer, especially during these times of economic crisis.
In 2002, alongside Argentina, Uruguay experienced an extreme financial crisis. The crisis set the population back so much that today it is estimated more than half of youth between the ages of 14-18 cannot attend school; the majority of children 0-5 years old live in poverty. Of course, poverty is not new to Uruguay, but the crisis significantly increased the number of homeless and unemployed and led to a severe increase in the rates of poverty across all classes, hitting children especially hard.
But Uruguayans didn’t crawl under a rock and lament their woes when the crisis hit. They took to the streets demanding change. The populace learned from the horrific situation brought on by this economic disaster and pushed for the implementation of new and strengthening of old legislation to shield the population from the most adverse effects of the emergency and to reignite the economy. For example, in the 1990s, after being devastated by negative and regressive shocks created by the implementation of a neoliberal development model and a complete opening of the economy, Uruguayans repealed a privatization law and put the government back in control over some key industries (e.g. electric, telecommunications, oil refining, water, and sewage).
Today the government owns banks, insurance companies and cell phones services that compete directly with private corporations. While there is a great degree of financial freedom (Uruguay has been accused of acting as a “tax haven”), Uruguayans themselves do not seem to trust the many foreign banks operating in the country; over 70% of their deposits are in state owned banks. Uruguayans have even passed a law that makes privatizing water illegal. (How novel! A law that recognizes water as a common good!) Taken together, these mechanisms have given the Uruguayan government some control as it tries to jumpstart an economy in the throes of a financial crisis.
In 2005, a coalition of progressive and reform-oriented parties won the parliamentary and presidential elections. Their success effectively ended nearly two centuries of alternating terms in power of two long standing political parties (colloquially known as the Red and White, and largely equivalent to liberals and conservatives of other latitudes). The new government, led by Tabaré Vázquez, set in motion a number of important political changes. These adjustments led to a bettering of workers conditions and an increase in their wages, which in turn, had positive effects on the Uruguayan economy. And, according to Uruguayan unions, up to 2008 Uruguay experienced an increase in GDP concomitantly with a decrease in the unemployment rate—one of the lowest rates in the last 50 years.
The intentions of the government’s reforms were twofold: on one hand, the government wanted to provide immediate assistance to those most affected by the crisis with a special focus on children. To this end the government passed legislation that makes assistance not something based on the philosophy of charity, but rather something founded on the notion of peoples’ rights to a life free of poverty, disease, hunger, and homelessness. Simultaneously, the government concentrated its efforts on building policies and passing legislation with attempts to mitigate inequality and emphasize strong mechanisms of social integration. In short, the new reform-oriented government is putting the collective welfare above the individual.
The Uruguayan government also took to the task of expanding the welfare safety net created a century ago to include, for example, domestic workers and other sectors traditionally in the informal economy. And today, the government aims to foster a universal healthcare program, starting with health insurance for all children—policies unheard of before the crisis. Yet if the global economic crisis continues at the speed and intensity it is advancing, some fear that even Uruguay’s small gains in education and health could be diminished by larger global forces. In early 2009, some sectors of the Uruguayan economy, such as textiles, metal workers, and apparel industries already showed signs of distress.
Despite all of these advances, women and children still tend to be the most affected by the economic crisis. Yet significant advances in Uruguayan legislation geared towards domestic workers (one of the largest sectors of work for women in Latin America) have alleviated some of the harshest impacts of the crisis and allowed women some respite. Moreover, the government mandated by legislation that those who paid for the crisis—the workers—would be repaid. Salary Councils (where workers are represented by the sector in which they work) negotiate salaries and benefits for all workers, unionized or not. During the 2002 crisis in Uruguay wages diminished by 23.2%; in 2006 the councils were tasked with negotiating benefits and salaries that would lead to a 30% increase in wages every year until the 30% loss is recuperated. According to Uruguayan unions, the result (thus far) is a real increase of 19% in salaries.
The combination of these and many other measures has many of my Uruguayan colleagues saying “the effects of the global crisis are not as evident here.” When they travel outside their country they feel and see the impacts of the global financial crisis more-so. Perhaps this phenomenon is due to the fact that Uruguayans were already dealing with a crisis with its own serious setbacks. Or this result can be most attributed to the implementation of legislation and mechanisms to protect workers, national industries and services, and create a welfare safety net to better handle the global crisis at home. There is much discussion among Uruguayans about the future of the legislation they have passed; the coming presidential and legislative elections (October 2009) will certainly have an affect on these measures. It seems for now, however, that things are working and these protections have given the Uruguayan people some breathing room. Others may do well to look to this part of the world and replicate Uruguay’s response mechanism to ease the burden of their own economic woes.
August 12, 2009