1938: Uruguay

Presidential elections on March 27 resulted in the victory of General Alfredo Baldomir, former Minister of War, who was inaugurated President, for a four year term, on June 19. His election resulted in a great popular demonstration, as in his campaign he had promised to restore democracy and to fight Fascism. The new President is son-in-law of the outgoing Chief Executive, Gabriel Terra, who ruled Uruguay for seven years. Though his election may be considered in some measure a triumph for democratic methods, it is not expected to lead to any important changes in internal or foreign policies. Uruguay, in the last generation, has become famous for its social reforms and progressive laws, and President Baldomir intends to keep this large body of social legislation in force. A law enacted in 1938 exempts small farmers, worth not more than 5,000 pesos, from all tax levies.

In its trade relations Uruguay follows bilateralism rather than reciprocity or the unconditional most-favored-nation principle. The bilateral, or 'best customer' form of commercial agreement has been used extensively in the last few years in Latin America, though less than the other type in 1937. This agreement, through a system of exchange control and import quotas, provides that purchases abroad shall conform strictly to foreign purchases of the country's goods. The bilateral or compensation type of agreement tends to have a disruptive effect on international trade through diverting it from its normal channels. Uruguay's unfavorable trade balance with the United States, causing a lack of dollar exchange, has turned Uruguay to the trade-barter countries of Europe. A trade agreement with Italy approved Dec. 17 provides that Italy shall buy 180,000,000 lire of Uruguayan products in 1939, three times the amount purchased in 1938.

A considerable reduction in service obligations on its external debt, which totals $52,947,500, is provided by the Republic's offer, open to Dec. 31, 1938, to exchange bonds of the dollar debt bearing rates of 5, 6 and 8 per cent for new readjustment bonds bearing amortization and interest rates of from 3½ to 4½ per cent. These, however, offer reasonable increases over interest rates recently paid on the original issues and provide for regular amortization of the principal.

No budget figures for 1938 are available. A probable surplus of 1,500,000 pesos from the financial operations of 1937 has been indicated.