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Uruguay The Sanguinetti Government
The civilian government that entered office in 1985
inherited
an economy whose fundamental elements had not changed a
great
deal for many years. The economy was still based on
agriculture.
In 1988, midway through the Sanguinetti government's term
of
office, livestock, crop production, and fishing generated
only 13
percent of GDP directly. But the largest industries in
Uruguay--
food processing and textiles--depended on agricultural
inputs.
Thus, the link between agriculture and industry, which
generated
33 percent of GDP in 1988, was strong. Another inescapable
feature of the economy was the central role of government.
Uruguayan national statistics included the government,
which
comprised not only agencies such as the Ministry of
National
Defense and the postal service but also, within the
service
sector, a large commercial bank and several insurance
companies.
The entire service sector, including activities such as
private
banking, transportation, and tourism, accounted for 42
percent of
GDP. The external sector, i.e., activities involving
foreign
trade, generated the remaining 12 percent of GDP
(see
fig. 6).
The record of the Sanguinetti government was moderately
successful. The administration entered office facing an
economy
just beginning to recover from a severe recession. That
recovery
continued, as real GDP growth averaged over 5 percent per
year
during the administration's first two full years in office
(see
table 9, Appendix). During 1988 and 1989, however, real
GDP
growth nearly ceased. In other areas, the record was
similar.
Unemployment fell from 13 percent in 1985 to 9 percent in
1987
but was reduced no further. Inflation fell at first, then
increased again.
The lack of sustained economic progress during the late
1980s
was not simply a result of the Sanguinetti government's
policies,
however. The government and the private sector inherited
many
serious difficulties in the mid-1980s: the growing
external debt,
a large government bureaucracy in deficit, a burdensome
social
security system, and a weakened currency. Because they
could not
immediately change these features, the government and the
private
sector chose to begin a cautious policy of readjustment.
Fundamental restructuring was again delayed.
Data as of December 1990
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