Reinventing Uruguay

Carlos Alberto Montaner

For some months now, violent groups of Argentine ''picketeers'' have impeded or hindered land travel to Uruguay. They are orchestrated by the government and disguise themselves as ecologists. The purported reason is the construction of two cellulose plants near a river that acts a border between the two countries. The real reason is that the law means increasingly less in Argentina, while the permanent blackmail of the mobs expands with the complicity of a government that subsidizes and encourages them.

The International Tribunal at The Hague has found in favor of Uruguay, but that ruling means very little to the bullies. At issue is an investment of more than $1 billion, maybe the largest investment in the history of that small country and a source of jobs for hundreds of Uruguayan workers -- but that means nothing to the Argentine neighbors, just as the Brazilians cared nothing when they devalued their currency a few years ago and plunged the Uruguayans into an awful economic crisis.

The three (plus Paraguay and, more recently, the Venezuelan loony bin) constitute Mercosur and enjoy the superstition that they're building a fraternal and all-encompassing Latin American homeland, but that's false. In the long run, Uruguay will have to revise its vision as a nation. The bitter truth is that it lives between two gigantic neighbors that don't take into account its interests and needs. It will have to reinvent itself.

Until the mid-1950s, it was said that Uruguay was the Switzerland of the Americas. There was some truth in that statement. It was a tranquil, democratic, educated and very prosperous country, for the standards of the times. From the early 20th century, it had followed a social-democratic path with a high level of state intervention, a route that produced good results. To look more like Switzerland, the Uruguayans even imitated that country's collegiate presidency -- governed by an executive council with a rotating chairmanship.

However, for diverse reasons -- among them state intervention and a clumsy bureaucracy -- the economy began to lose steam, and the Switzerland of the Americas became Latin-Americanized in the worst sense of the word: inflation, unemployment, communist terrorism, left- and right-wing assassins and putschist generals. Fortunately, in the mid-1980s the country recovered democracy but emerged from the adventure badly battered. Nobody dared to speak of the Switzerland of the Americas anymore.

The secret of Switzerland's success is not its political model. To copy the Swiss administrative structure or Constitution is useless. Switzerland's secret is its immense civic capital and the functioning of institutions that stimulate a spontaneous growth of private-sector enterprises.

Nestle or the Swiss banks, or the nation's chemical and pharmaceutical industries exist because Swiss society has created very hospitable conditions for the generation of wealth. It is paradise for the capitalist economy, and therefore the indexes of inequality are lower than in the rhetorical universe of Latin America's allegedly egalitarian populism. Gini index: Switzerland, 33.1; Uruguay, 44.6; Brazil, 59.7. The lower the Gini index, the less social inequality.

Switzerland, on the other hand, doesn't waste much time trying to join blocs in a search for major economies. That's another myth. Like Chile, Switzerland negotiates bilateral free-trade agreements. If there are powerful, well-managed companies that produce fine goods and services at competitive prices, they'll undoubtedly get ahead. Private commercial networks do not need costly bureaucracies managed with political criteria.

That's the Switzerland that Uruguay must take as its model. The only thing that will save the Uruguayans from Argentina's madness or Brazil's uncontrollable lurching is to develop a modern entrepreneurial structure within the private sector, based on technical and scientific development, so production values are very high and workers earn high wages. Today, Uruguay's purchasing power parity, per capita, is $10,000. Switzerland's is $33,000. A long road lies ahead.

December 26, 2006

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