The History of Uruguay

Look to Uruguay's history for the secret to its success

Sometimes insights come to you in the most unexpected settings.

I sat on a comfortable sofa with a soft-as-a-cloud alpaca blanket on my lap. The sound of gently rolling surf mixed with laughter, the clinking of glasses and the crackle of multiple fires, on which calamari, shrimp and chicken were grilling. Single-malt whisky mellowed my mind. Everyone in the beachfront restaurant was happy, including the friendly staff.

So this is Uruguay, I thought to myself. The stories are true.

But why? Chronically crisis-ridden Argentina lay just a few miles to the south, across the River Plate. Turbulent Brazil lay not much further to the north. What is it about this little wedge of land between the two of them that produces a steady, peaceful and prosperous society, attracting investors from all over the world?

History Matters, But So Do Your Dinner Companions

As regular readers know, I’m a history buff. I benefit as much knowing a country’s past as I do studying its present. Odds are a reading of history will let you predict the present state of affairs before you’ve seen it yourself.

In the case of my trip to Uruguay, where I hosted The Sovereign Society’s Offshore Investment Summit, time prevented me from consuming a few solid tomes on the country’s past prior to my trip. I was flying a bit blind, as it were. I could see that Uruguay was peaceful, prosperous and welcoming to foreigners, but I couldn’t put my finger on why that should be the case.

728x170_CanYouIdentifyRock_article
728X170PRL-IOT_Article_3AdsIn1_article

Fortunately, one of my dinner companions on the beach that evening was Sancho Pando Santayana, one of our local hosts. Sancho specializes in residential real estate for North American clients. He also has a wide set of intellectual interests, including history and politics. We wandered over a range of topics, including the differences between Uruguay and Argentina, where his wife was born, and the history of Uruguay’s current ruling party, the center-left Broad Front.

Why, I asked him, has Uruguay thrived where its neighbors have not? How is it that a “leftist” government — which was once banned as a revolutionary movement — has become so popular with the Uruguayan electorate, including its more conservative elements? And why does such a government pursue such a liberty- and investment-friendly policy framework?

A Unique National Hero

Many nations have a historical figure they consider its “father” (sadly, mothers not so much). In Uruguay’s case, this was José Gervasio Artigas Arnal.

Artigas was a military officer in the early 19th century under the Spanish colonial regime in what was to become Uruguay, then joined with the territories that would become Argentina. Inspired by American Thomas Paine and Frenchman Jean-Jacques Rousseau, he became a staunch republican, and threw in with the anti-monarchist forces of the 1820s. He also broke with the proto-Argentine territories because he feared the results of a large government attempting to rule them all.

But Artigas was also a populist. He recognized that the interests of large landowners were inherently linked to those of the Spanish crown, making them enemies of republican liberty. For that reason he favored an egalitarian approach to land distribution, and the advancement of “los gauchos,” i.e. the ordinary rural dwellers who worked on the large estates as cowboys and tenant farmers. (Like most of the Southern Cone portion of South America, and unlike Brazil, Uruguay had very few slaves.)

The legacy of Artigas’ “fatherhood” of Uruguay produced three critical elements that contribute to the unique stability of the country, which Sancho identified in our discussion on the beach:

  1. Unlike many Latin countries, Uruguay has been egalitarian for a long time, and has a deep democratic culture. There is no large landowning class and no landless rural population.
  2. The population is homogenous; there are very few people who are not of European descent. This has helped Uruguay avoid the politics of racial division.
  3. The Uruguayan economy has evolved in such a way that the majority of the people benefit from economic freedom and an export orientation. Unlike Argentina, there have been no failed government-driven attempts to develop domestic industry. When the economy does well, everyone benefits.

What This Means for You

This unique combination of factors, rooted in Uruguay’s history, is ultimately what brought me and the Offshore Investment Summit attendees to the resort town of Punta del Este, in the department of Maldonado.

At one point in my conversation with Sancho Santayana, everything clicked for me. “Uruguay is like a big small town,” I said. “EXACTLY!” replied Sancho. “You’ve hit the nail on the head.”

In my speech at the Summit, I listed the factors that I thought had caused the American economic and political collapse of recent years: Increasing inequality and political favoritism toward the powerful and connected; a tendency to see economic issues through the lens of race; a government that really cares only about the needs of the top bankers and corporations, allowing it to indulge in out-of-control behavior toward the rest of us.

In other words, the opposite of Uruguay, a “big small town” … what American once was, and is no more.

Kind regards,
Ted Baumann Sovereign Investor
Ted Baumann
Offshore and Asset Protection Editor