Economic Crisis and Decline
From March 1959 to February 1967, eight National Party governments ruled Uruguay. The death of Herrera (1959) aggravated divisions in the National Party and demonstrated the fragility of the electoral accords that had led to its victory. The economic crisis and social unrest that had beset Uruguay from the mid1950s continued, and the 1960s opened with gloom and sadness for the country. At the time of the 1962 elections, inflation was running at a historically high 35 percent. The Colorado Party was defeated once again, although by a much smaller margin of votes (24,000 as compared with 120,000 in 1958). The National Party split. The UBD joined a splinter faction of Herrerism, the Orthodox faction, led by Eduardo Víctor Haedo. Another faction of Herrerism, led by Martín R. Echegoyen (1959-60), kept its alliance with Nardone's Ruralists. At the same time, divisions between the List 14 faction and Unity and Reform were intensified in the Colorado Party.
Important changes also took place in the minor parties. Catholics formed the Christian Democratic Party (Partido Demócrata Cristiano--PDC). Communists formed a coalition with other minor parties, the Leftist Liberty Front (Frente Izquierda de Liberdad--Fidel). The PSU joined with intellectuals and dissidents from traditional parties and formed the Popular Union (Unión Popular).
The thin majority of the governing party, as well as its internal divisions, hindered the administration of the National Council of Government during the 1963-67 period. In 1964 the political scene was further affected by the death of two important leaders: Batlle Berres and Nardone. That same year, the workers movement formed a single centralized union, the National Convention of Workers (Convención Nacional de Trabajadores--CNT). In addition, a new political protagonist appeared. In 1962 Raúl Antonaccio Sendic, head of the sugarcane workers from the north of the country, formed, together with other leftist leaders, the National Liberation Movement-Tupamaros (Movimiento de Liberación Nacional-Tupamaros--MLN-T), a clandestine urban guerrilla movement.
Economically, the 1958 Blanco victory brought ranching and agricultural forces to power. This led to the implementation of liberal (free-market) economic policies aimed at eliminating the protectionist-interventionist model that had fostered industrial development. In 1960 Uruguay agreed to sign its first letter of intent with the IMF. The Blanco government devalued the currency and established a single, free monetary exchange market (while maintaining the interventionist role of BROU), as well as the free import and export of goods and services. The reorientation of economic policy tended to favor the agro-exporting sector. However, the model could not be applied fully, nor in an orthodox manner. Inflation increased to more than 50 percent per year between 1963 and 1967, and in 1965 an overstretched financial system and massive speculation produced a banking crisis. Labor and social conflict increased as well, and a state of siege was imposed in 1965.
To try to solve the problem of economic stagnation, the government complied with one of the principal recommendations of the Alliance for Progress (a United States program to help develop and modernize Latin American states) by preparing a tenyear development plan. However, virtually none of the plan's recommendations were ever put into practice.
During the Blanco era, sectors from both traditional parties had begun blaming the country's difficulties on the collegial constitutional arrangement of executive power. In the 1966 elections, three constitutional amendments were submitted. The approved changes, supported by Blancos and Colorados, were incorporated in the 1967 constitution, which put an end to the collegial executive, thereby returning the country to a presidential regime; granted increased powers to the executive; and extended the presidential term to five years. They also eliminated the three-and-two (coparticipation) system for appointing heads of autonomous entities and ministries and created new state agencies to modernize government: the Office of Planning and Budget; the Social Welfare Bank; and the Central Bank of Uruguay. High school education became compulsory.
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