Image Source: Office of the President of Argentina.
Few nations have as many similarities as Argentina and Uruguay—geographic, demographic, cultural and linguistic. Yet while Argentina in recent years has lurched from one political extreme to another and has become a watchword for economic under-performance, Uruguay, one tenth its size, seems to have found its footing, with stable center-right and center-left governments succeeding each other and steady if unspectacular economic growth.
The similarities between the two countries are well known—rich soils, leading to efficient agricultural sectors which provided the wealth to establish extensive welfare states, massive immigration, particularly from Spain and Italy, creating unique societies—“Europe in South America.” Both suffered from a slow deterioration in the terms of trade which undermined social cohesion, leading to the rise of urban terrorism in the 1960s, and then of military regimes, which in turn were followed by managed returns to democracy.
A Heritage of Power Sharing
But for all their likenesses, Uruguay and Argentina have differed in one key aspect. The search for consensus has always been part of Uruguay’s political culture. While it has sometimes gone underground, as was seen during the period of military rule and attendant human rights violations, it has always resurfaced. This phenomenon dates from the first part of the twentieth century when President José Batlle y Ordoñez, founder of the Uruguayan welfare state, created a system of Swiss-style collegial rule, in effect a permanent grand coalition which assured that not only his governing Colorado Party but the opposition National (or Blanco) Party had a share in the governance of the new social institutions he had created.
This contrasted with the “winner take all” approach which predominated in Argentina, and in which General Juan Perón, sometime elected President, sometime dictator, had such a crucial role, creating his version of the welfare state as a highly politicized, often corrupt, bureaucratic machine linked to powerful labor unions, always in the service of the hegemonic ambitions of his political party.
Two Different Kinds of Leftism
Both states returned to civilian rule in the 1980s, but followed very different paths. Uruguay saw alternation in power between presidents coming from the traditional centrist Colorado and National Parties, and when in 2005, a new coalition of leftist parties known as the Broad Front came to power, its leaders, Presidents Tabaré Vázquez and José Mujica, proved to be moderate social democrats.
Argentina took a very different course. Civilian presidents from both the centrist Radical Civic Union and the Peronists were unable to address festering economic problems. And while a serious effort was in fact made in the 1990s by Carlos Menem (who was prepared to undertake orthodox policies despite his Peronist heritage) in the face of real economic collapse, this was not sustained into his second term.
Like Uruguay, Argentina saw a shift to the left in the 2000s, but it was of a very different nature. It took place within Peronism under Nestor Kirchner, and then his wife (and later widow) Cristina Fernandez de Kirchner. Their policies and those of their protégé Alberto Fernández were marked by a reversion to statism and free spending, including reversal of Menem-era privatizations. This left-populist variant of Peronism, known as Kirchnerism, was interrupted by the one-term presidency of center-rightist Mauricio Macri. However, his reform efforts were stifled when his strategy of gradualism lost momentum in the face of Peronist opposition.
As President Alberto Fernández proved unable or unwilling to make changes—spending continued well above the economy’s capabilities, leading to skyrocketing inflation—Argentines elected the far-right, libertarian economist Javier Milei to succeed him.
Milei, with for now at least a genuine popular mandate and a divided opposition, has moved aggressively to cut spending, including on the massive, highly politicized social welfare system. Inflation has dropped drastically, but at the price of recession. He has passed legislation allowing for some privatizations and reductions in state bureaucracies. Ominously, Argentina’s currency remains significantly overvalued. As of now it is by no means clear whether Milei’s approach represents a genuine sea change in Argentina’s history or whether it is but one more swing of the pendulum.
Different Approaches Bring Different Results
Uruguay’s slow and steady approach to governance, compared with Argentina’s, has paid off. Looking at the period from 2014 to 2023, Uruguay has shown an average growth in real gross domestic product of 1.14 percent, while Argentina has posted -4.5 percent. Uruguay’s inflation rate has averaged 7.36 percent, while Argentine inflation has been 50.3 percent, rising in recent years and reaching a peak of 289.4 percent in April 2024. (It has since come down sharply in response to Milei’s budget cutting policies.) Unlike Argentina, under both the traditional parties and the leftist Broad Front, Uruguay has managed to avoid chronic deficit spending, defaults on debt, and recourse to the International Monetary Fund.
Uruguay has been able to maintain a relatively efficient, depoliticized bureaucracy which has performed better than Argentina’s. This was demonstrated during the COVID crisis when Uruguay’s health ministry moved quickly to purchase vaccines from American and Chinese suppliers. Uruguay suffered 2,192 COVID-related deaths per million during the pandemic.
Argentina by contrast suffered 2,844 deaths per million. It fumbled vaccine purchases, as the leftist-populist government opted for the unproven Russian Sputnik V vaccine for which was slow in arriving. (Ultimately Argentina procured vaccines from Pfizer.) And the country suffered a confidence-destroying scandal when it was found that political figures and well-connected individuals had jumped the line to receive the vaccine before it was provided to the public at large.
Unlike Argentina, where politics is pursued as a blood sport and is characterized by brutal levels of insult, Uruguay has pursued a different path, as politicians seem to recognize that they will lose support if they go too far in abusing their rivals. They benefit from the example shown by former presidents Sanguinetti and Mujica, who, while freely admitting their ideological differences, have appeared together and urged Uruguayans to resolve their differences in a civil fashion.
Tackling Tough Issues
Under the leadership of current president Luis Alberto Lacalle, a center-right figure from the National Party who gained Colorado support to win in the second round of the last election, Uruguay has addressed some difficult issues, while honoring its commitment to maintaining consensus. Crime, both organized and street level, has become a significant concern as it has in Argentina. After lengthy debate, legislation which Lacalle had proposed during his campaign was passed which gave the police additional powers.
The Broad Front and labor unions opposed some (although not all) elements of the legislation—with the labor confederation particularly objecting to those which imposed greater restrictions on street demonstrations. They gathered enough signatures to require that a referendum on the legislation be held. It narrowly survived the vote, and the matter has faded from public debate.
This contrasts with Argentina where it is unclear whether the Milei administration, laser-focused on economics, has the bandwidth to address the subject. It has announced a harder line approach, but given the reality of Argentina’s multiple police forces, under-paid, often corrupt, and subject to politicization, real progress will be hard, and the government has toyed with “magic bullet” solutions, such as engaging the army in law enforcement as in El Salvador under Bukele.
Similarly, Lacalle has addressed the sensitive issue of the stability of Uruguay’s pension system, passing reforms raising the age for qualification and strengthening the private pension system which runs parallel to that of the state. As the welfare system is viewed as a sacred heritage, this required careful consensus building.
Uruguay’s labor unions opposed the pension reforms, which nonetheless became law. As was the case with the anti-crime package, they have gathered enough signatures for a referendum. However, the Broad Front has not supported this effort, saying that it prefers to modify the reform via further legislation at a later date. Seemingly it senses that the pension reform, crafted after so much debate and consensus-building, enjoys majority support, and it is generally expected to survive the referendum.
Dealing with Argentina’s extensive, underfunded pension system remains on Milei’s “to do” list. In 2008, during the administration of Cristina Fernández de Kirchner, the private sector element, created under the more conservative Menem administration, was abolished and the funds contributors had put in were placed in the state sector, where they have suffered from the erratic overall economic management. For now, however, Milei’s immediate response to the burdens the system has imposed is simply to hold increases below inflation. He has faced an effort by the opposition to reverse these stop-gap measures and impose larger increases.
Very Different Political Cultures
Uruguay is not paradise by any means. Its consensus political model has meant that reform comes slowly, and economic growth, although steady, is by no means spectacular. Thus, at the current rate it appears that the country has far to go before it can ever reach developed country status. Although Uruguay has attracted some new international investment, notably from the pulp and paper industry, where Finnish firms have been active, it has yet to really get onto the screen of global business.
Still, unlike in much of Latin America, the center has held in Uruguay. Elections will take place this year. The Broad Front, which sees a chance to return to power, has nominated the more centrist of its two main figures, regional politician Yamandú Orsi, who seems in the mold of former presidents Mujica and Vázquez, and has a good chance of convincing Uruguayans that he is a non-threatening option.
The National Party has nominated Alvaro Delgado, incumbent President Lacalle’s chief of staff, who will argue that he can build on Lacalle’s success. The Colorados have named their own figure, criminal lawyer and television personality Andres Ojeda. And most likely, as in the last election, these two parties will join together in the second round. The governing coalition had until recently included a new, more hard-edged conservative party led by former army general Guido Manini. This grouping may yet support the broader non-leftist coalition but in any event, it does not appear that Uruguayans are ready to support a local version of Brazil’s Jair Bolsonaro.
By contrast, Argentine politics has little by way of consensus. Milei is a polarizing figure and his shock therapy is the opposite of the statist approach which for so long dominated governance. But he has benefited from the political bankruptcy of his Peronist opponents, who have little more to offer beyond hoping to pick up the pieces should he lose momentum. Still, the sense that the old way had comprehensively failed has sustained Milei’s popularity so far. Should he succeed, perhaps this will be the germ of a new consensus politics like that found across the Rio de la Plata. But for now, Argentines can only look with envy at their diminutive neighbor.
Richard M. Sanders is Senior Fellow, Western Hemisphere at the Center for the National Interest. A former member of the Senior Foreign Service of the U.S. State Department, he served in Uruguay, 1987-88, as desk officer for Argentina, 1997-99, and as Director of the Office of Brazilian and Southern Cone Affairs, 2010-13.
