1942: Uruguay

On matters of hemisphere solidarity and continental defense the traditionally liberal country of Uruguay is always in the lead. On Jan. 24, 1942, it severed all relations with the Axis powers. It has been quick to uproot powerful Nazi organizations and imprison their leaders, and Congressional investigation of Axis sympathizers has been intensified. Close control has been exercised over Axis funds. On Feb. 5 Uruguay accorded Great Britain the privileges of a non-belligerent, a status granted to the United States immediately after the attack on Pearl Harbor. German submarine activity directed against Uruguayan shipping resulted not only in retaliatory action, such as the seizure of the German ship, Tacoma, which was interned in Uruguayan waters, but to a suggestion to other Latin American nations for 'united action' as 'more energetic than mere protest.' Bitter anti-Axis demonstrations followed the torpedoing of Uruguayan vessels. A new conscription system has been introduced and Uruguay's war strength is being greatly increased as a result of a lend-lease agreement with the United States. Progress has been slow on the construction of naval and air bases, but lend-lease funds have been advanced for such bases at Carrasco and Laguna Negra, which are the more essential since Uruguay has been the only South American country without a landing field suitable even for Pan American Airways planes.

An Emergency Advisory Committee for Political Defense, consisting of delegates from seven of the American Republics, has been functioning in Montevideo since April 15. The purpose of the Committee is to coordinate the efforts of all American nations to curb dangerous foreign activities; to investigate and control Axis propaganda; and to do on an international scale what national investigating committees, like that of Raúl Damonte-Taborda in Argentina, have been doing locally.

After long negotiation a trade pact was signed with the United States late in July, which granted concessions to the United States on a long list of agricultural and industrial products; in return, the United States will reduce the tariff on flaxseed, canned beef, hides and skins, and coarse wool. The primary importance of the treaty lies in its postwar effects. Unlike most Latin American countries, Uruguay's 1942 trade balance with the United States has declined, due to unshipped wool surpluses. These the United States has undertaken to purchase, under a contract signed Nov. 23, which will yield some $25,000,000 in dollar exchange. Industrial activity, on the other hand, has been much increased, the capital invested in manufacturing industries in 1941 totalling 309,000,000 pesos, as compared with an estimated investment in the livestock industry, the backbone of the national economy, of 488,000,000 pesos. Work on the Rio Negro hydroelectric plant, suspended because of Germany's inability to supply machinery and equipment according to the contract signed in 1937, will be resumed, though on a reduced basis, as the result of a $12,000,000 Export-Import Bank credit announced July 22 and a new contract substituting North American for German contractors. Completion was scheduled for 1943.

The Baldomir Government effected a coup d'état on Feb. 21 when it dissolved Congress in order to eliminate the influence on the Government of the Herrerista opposition. Elections scheduled for March 29 were postponed. The President then set up a Council of State to act in a legislative capacity, to advise him on all matters of administration, and especially to prepare for the national plebiscite on the new Constitution. The plebiscite held at the Nov. 29 elections resulted in approval of the Baldomir Constitution by a large majority. Presidential and Congressional elections held at the same time were a sweeping victory for the liberal forces, as well as for the pro-United Nations elements in the country. Sr. Juan José de Amezaga, the principal Colorado party candidate, was elected President; Foreign Minister Alberto Guani, candidate of the Baldomir wing of the party, Vice-President. For the first time in Uruguayan history women will sit in the new Congress.

1941: Uruguay

The withdrawal, in March, of the three Cabinet members to which the minority Nationalist (or official Blanco) party is constitutionally entitled, created a tense political situation. The central political issue in Uruguay is constitutional reform, which the Baldomir Government, representing the liberal Colorado party, is determined to secure and the opposing party of Senator Luis Alberto Herrera is as intent on preventing. Unable to get constitutional change through the Senate, in which, by the Constitution, the Nationalists have one-half the seats although the party represents only one-sixth of the electorate, the administration has decided to submit the proposed reforms to plebiscite next March, when elections for Congress and President are due. A motion was introduced into the Senate in the fall to make possible the reelection of President Alfredo Baldomir. In November the National Herrerista party presented a motion asking for the suspension of the law making military training compulsory in 1942.

Whether or not Senator Herrera is as strong a Nazi sympathizer as his anti-United States attitude would indicate, he has been willing to make political capital of problems of inter-American cooperation and hemisphere defense. The administration party has swung the country so far as foreign policy is concerned, however, and Uruguay has taken the initiative in a number of measures designed to assist the democratic cause. First of these was the question of bases. Taking the position that River Plate defense was directly linked with continental defense, a $17,500,000 loan has been obtained from the United States, one-half reported to be an outright gift, for the construction of a naval air base at Laguna Negra, commanding the entrance to the River Plate. The base will be under Uruguayan sovereignty but available to the United States in the event of war. Again Uruguay took the initiative, in June, when it proposed to provide 'positive implementation of the policy of hemisphere solidarity' by changing the 1939 neutrality regulation adopted at Panama (see 1939 Revision) to grant nonbelligerent status to any American nation forced into war with a non-American power 'in defense of its own rights.' By September only 4 of the Latin American states had rejected the proposal — Argentina, Colombia, Peru and Chile. The entry of the United States into the War, following the Japanese attack at Pearl Harbor, brought this question out of the realm of the academic, however, and Argentina and Chile have since fallen in line and will grant North American vessels in their ports all the facilities accorded to nations at peace. The Colorado party, on Dec. 9, announced that it would ask the Government to declare war on Japan but no such action has been taken.

The immediate transfer to active service of idle Axis vessels, with adequate compensation, which was recommended, in August, by the Inter-American Financial and Economic Advisory Committee, was originally suggested by Uruguay. Accordingly, the Republic has requisitioned a number of Italian, Dutch and Danish ships.

The permanent Congressional committee to study subversive activities created in October has had its authority extended to cover government departments, the Army and the police. Its quiet investigations have resulted in findings which led a member of the committee to declare the Nazi threat greater even than in June 1940, when an alleged plot to seize the country was uncovered. Eight leaders implicated in that plot are still being held for trial. The large Italian population — 100,000 out of a total population of slightly over two million — lends significance to a military Fascist organization uncovered by a raid of the committee on its headquarters Dec. 30. Student demonstrations broke out in June against a new pro-Nazi paper, La Libertad, edited by a Nationalist Deputy, which the news vendors boycotted. The Minister of the Interior, in August, recommended the closing of the Fundación Española, thought to be the tool of the Falange, which has been violently anti-United States.

A River Plate Regional Economic Conference opened in Montevideo Jan. 27. In addition to the five countries directly concerned — Argentina, Bolivia, Brazil, Uruguay and Paraguay — Chile, Peru and the United States were represented by official observers. The chief action was a convention recommending that Argentina, Brazil and Uruguay renounce most-favored-nation treatment for themselves during the next ten years in order to promote the fortunes of land locked Bolivia and Paraguay. Conventions were also adopted providing for reciprocal preferential treatment of each other's products; guarantees of freedom of transit; a regional parcel post system; and facilities for the interchange of banking operations. A regional customs union between the River Plate countries, suggested by Argentina, was the subject of a special recommendation. A permanent office, with headquarters in Buenos Aires, was established. In spite of its unconditional most-favored-nation commercial policy, the United States recognized the need, in the present world situation, of bilateral accords and regional agreements in the interests of increased inter-American trade.

The year 1941 was marked by improved commercial relations between Uruguay and the United States, a fact of great importance in view of the loss of European markets. A more lenient exchange policy towards the United States has gone hand-in-hand with a notable increase in North American purchase of Uruguayan products, especially wool, which increased nearly tenfold, the United States absorbing nearly 90 per cent of the exports of a commodity on which over 80 per cent of Uruguay's external purchasing power is based. For the first half of 1941 shipments to the United States were four times as large as in the corresponding 1940 period and Uruguay had a favorable trade balance with the United States of $21,345,000, as compared with only $3,553,000 in the first half of 1940. Negotiations for a reciprocal trade agreement with the United States, which broke down in 1939, have reached the final stage. Hearings on it were held in the United States in June and July, simultaneously with hearings on the agreement concluded with Argentina.

The highly satisfactory trend in foreign trade in 1941 may account for the failure to use the Export-Import Bank loan of $7,500,000 granted late in 1940. This credit, available to the end of 1942, was probably a contributing factor in the recovery in value of the peso. Lend-lease credits of undisclosed amount have been extended by the United States for the purchase of military and naval supplies. Revenue from newly enacted taxes will service the new internal bonds issued during the year to consolidate floating indebtedness. The entire funded debt of the Republic on June 30 was P. 419,635,000; the external funded debt totaled P. 142,027,000. The budget for 1941 anticipated a deficit of P. 6,643,200, but the actual deficit may exceed P. 22,000,000. See also PAN-AMERICAN AFFAIRS.

1940: Uruguay

The defense policy of the Baldomir administration outlined to the Chamber of Deputies on Nov. 17 was unanimously endorsed by the Cabinet on the closing day of the year, and full support was given to agreements concluded with Argentina for the construction of Plata River bases and the pooling of the defense forces of the two countries. The withdrawal of opposition followed an unusually acrid debate attended with violence. This marks the beginning of a political truce between the government and the Nationalist or Blanco Herrerista Party, led by Luis Alberto Herrera. The Herreristas, taking an isolationist position in the Senate and in Sr. Herrera's newspaper, had caused three Cabinet crises in recent months over the question of establishing Pan American naval and air bases on Uruguayan soil, but the President stood firm in his policy of cooperation on continental defense. On Dec. 29 the government published a decree creating a military commission to draw up plans for and supervise the construction of an air base, for which a preliminary appropriation of about $1,000,000 was made in September. This is the first base to be undertaken by any South American country as a result of defense conversations begun by the United States Government in June. The Uruguayan Congress has also passed a bill providing for compulsory military service. This measure is contrary to President Alfredo Baldomir's campaign promise, but the world situation has changed the prevailing attitude towards conscription. The incident of the Graf Spec has brought the European War nearer to Uruguay than to any other Latin American country.

Whether or not the alleged Fascist leanings of Sr. Herrera are true, the controversy over bases determined the President to hasten a revision of the Constitution, which creates an unworkable deadlock between the Executive and a hostile or uncooperative legislature. According to the 1934 basic law, the Senate, composed of thirty members, derives half of its number from each of the two parties polling most votes in the presidential elections. This gives the opposition the same representation as the administration party, even though in this case it controlled only one-third of the nation's votes in the last election. Moreover, the three Cabinet members to which the opposition is constitutionally entitled are directly responsible to the Herrerista bloc in Congress. Naturally the Blanco Herreristas are opposed to constitutional reform, and final reconciliation with the government over the 'bases' question may spell compromise on this matter.

On the charge of a military plot to seize Uruguay and turn it into an agricultural colony of the Reich, twelve Nazis were arrested in June, following a Congressional investigation of Nazi activities in the Republic, especially in the provinces close to Brazil. During the course of this investigation the National Socialist organization and the German Labor Front in Uruguay were voluntarily dissolved. In September, eight of the Nazis, who had been released under German pressure, were reindicted, to be tried before the Supreme Court, and a long denunciation of the National Socialist Party in Uruguay was published. The joint stand taken at Havana (see CVBA) against 'subversive activities' has strengthened the hand of the government in its anti-Nazi policy. A reaffirmation of faith in democracy was stressed in the celebration Aug. 25 of Uruguay's 115th anniversary of independence.

The Republic's trade problems and its commercial and financial relations with the United States parallel closely those of Argentina (see ARGENTINA). Its products, agricultural and pastoral, are largely competitive with those of the United States, which accounts for the failure to negotiate a reciprocal trade pact. President Baldomir has pointed out that though bilateralism in international trade is unsatisfactory, Uruguay's trade has, of necessity, been on the bilateral basis forced on it by its best customers in Europe, since the United States does not buy enough to create the dollar exchange needed to cover Uruguayan imports from the United States. Although the loss of the German market has greatly affected the Republic's trade position, this has been offset by higher prices and a greater demand for Uruguayan goods on the part of Great Britain, the United States and Japan, so that figures for the first seven months of 1940 showed a satisfactory trend regarding dollar exchange and export surplus. (Total exports indicated an increase of 7.9 per cent in value over the corresponding period in 1939. The share of the United States in the country's imports was 11 per cent; shipments to the United States represented 13 per cent of total exports). On Dec. 11 announcement was made of a loan of $7,500,000 from the Export-Import Bank, which includes an earlier credit of $4,000,000, to be used to finance purchase of war materials and government loans to private enterprise. Ratification of a trade treaty with Japan, signed in 1934 but not ratified earlier because of the internal situation in Uruguay, was announced by the Japanese government in May. At the same time that an agreement was reached with Argentina regarding Plata River bases, accord was reached on commercial relations, which is expected to lay the foundation for a future economic agreement similar to that concluded between Argentina and Brazil.

A regional conference of the Plata River countries (Brazil, Bolivia, Paraguay, Argentina and Uruguay), scheduled for August, is to be held in Montevideo on Jan. 15, 1941. The Bolivian Foreign Minister has been most instrumental in organizing this conference, possibly with an eye to getting Colonia (in Uruguay, directly across the Plata River from Buenos Aires) established as a free port, a move which would be a great advantage to both Bolivia and Paraguay. See also FASCISM.

1939: Uruguay

Uruguay became the focal point of active concern with the European War in the Western Hemisphere when the battle between the German pocket battleship Admiral Graf Spee and three British cruisers took place Dec. 13 in the estuary of the Plata River, well within the 300-mile neutrality belt set up by the Panama Conference (see PANAMA for the Declaration of Panama, and the joint protest against its violation). In accord with the Hague Convention of 1907, Uruguay ordered the Graf Spee to leave the port of Montevideo, where it had taken refuge, which resulted in its being scuttled. Its crew was interned in Argentina. Because of its assistance to the Admiral Graf Spee, the German freighter Tacoma, as an auxiliary naval vessel, was interned by Uruguay. To prevent the repetition of this situation, Uruguay and Argentina are considering legislation similar to Brazil's neutrality law, which provides for the immediate internment of any belligerent warship seeking refuge in a neutral port. (See also INTERNATIONAL LAW.)

It was Uruguay's initiative which gave rise to the Argentine proposal and united Latin-American demand that Russia be expelled from the League of Nations because of its invasion of Finland. Fear of communist agitation at home has possibly motivated the expulsion proposal, in part at least. The League of Nations has steadily lost ground and membership in South America. Chile, Peru and Venezuela have filed formal notice of withdrawal; and in December the Uruguayan Senate voted a bill to resign, which had been introduced before the Russian incident arose. The League's subsequent project of effective aid to Finland has modified anti-League sentiment in Uruguay, and late in December the Republic sent a cable to Geneva pledging Uruguayan support of this move. If Uruguay should resign, its retirement would leave only Argentina, Bolivia, Colombia and Ecuador as member-states of the League in South America.

Informal talks between the United States and Uruguay regarding a reciprocal trade treaty began on Nov. 16, but were suspended, together with the Argentine negotiations, early in 1940. It was thought that the outbreak of the war in Europe might provide Uruguay a chance to extricate herself from her barter arrangements with the totalitarian states. On the other hand, she is committed to a policy of bilateralism and rigid trade control, which accounts for the heavy discrimination against North American goods resulting from higher exchange rates and higher customs duties. Here, as in Argentina, the chief products for export are in direct competition with products of the United States. A further obstacle to a multilateral trade treaty is the loss of Government revenue from exchange control arrangements that would result. Through these arrangements the Government derives, on an average, a 25 per cent profit on all import trade. Exchange control has meant, since November 1937, a surcharge of 40 to 50 per cent on all imports from the United States, a situation corrected, in part, by the grant in December of a fund to free a certain portion of North American imports from this adverse discrimination. Uruguayan trade figures show that 42 per cent of the country's trade has been with the European belligerents and only 6.75 per cent of it with the United States.

An International Congress of American Democracies in Montevideo in March was short-lived, owing to severe local police restrictions. Ten out of the twenty-one American republics were represented, but principally by political 'outs' (all of Peru's delegates were 'Apristas'). Plans were made to organize anti-Fascist groups in each republic. Resolutions were passed in favor of equal rights for women and of unrestricted liberty of action for all labor movements. The Congress went on record as approving a declaration of democratic faith and solidarity.

Delegates of six South American republics met in Montevideo on July 18 to celebrate the signing in 1889 of the Treaty of Montevideo, in which was codified Pan-American international law; and to revise that pact, particularly with respect to copyright and the right of asylum. Final action on the proposed modifications is to be taken in February 1940.

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.