Too Much of a Good Thing

Unlike neighboring Brazil and Argentina, tiny Uruguay is a fat and tolerant country where almost anyone can enjoy the good life. Its 2,700,000 people are among Latin America's best fed, best dressed, best paid, best educated and most pampered. Fully one in every four workers is employed by the government, which gives them 44 holidays a year and retirement at full pay as early as 55. Theaters in cosmopolitan Montevideo offer such lively fare as Peter Shaffer's Black Comedy and Strindberg's Miss Julia; in the city's quiet little tearooms, a cup of coffee brings free pastries, potato salad, sausages, octopus, pickled cauliflower and caramel pies. At the pleasant seaside resort of Punte del Este, thousands of high-living tourists spread money around like so many beach blankets. In fact, Uruguay's main problem is that it has too much of a good thing.

Flipping Mattresses. Because of massive welfare spending and strike-happy labor unions that demand ever higher wages, Uruguay constantly skirts the edge of bankruptcy. This year, partly as a result of unusually poor production of wool and beef, its two biggest foreign-exchange earners, the country has gone into hock abroad to the tune of $438 million, and gold reserves have tumbled to $146 million. Since January, the cost of living has leaped 92%.

Last week Uruguay's economic troubles reached such a sad state that President Oscar Gestido declared his fourth devaluation of the peso since taking office last March. This time he used strong medicine: he cut the exchange rate to 102%, for the first time setting it at a realistic level in hopes of expanding trade and restoring confidence in the peso. Sure enough, Uruguayans began flipping their mattresses over and taking their hoarded supply of dollars to the banks to switch them for pesos.

With his devaluation, Gestido finally did what the International Monetary Fund has been urging him to do for months. In the past, Gestido's economic policy stressed self-help over foreign loans, since help from abroad almost always demands austerity measures. Then last March, he made his first shift in policy and appealed to the IMF for help, austerity or not. "The road of isolationism and internal effort," he said in a televised speech, "is too long, painful and perhaps sterile in today's world." Five of Gestido's eleven Cabinet ministers quickly resigned, and when insults began flying, Gestido even challenged his former Finance Minister to a duel--though it was later called off.

Noisy Demonstrators. Uruguay's labor unions reacted so strongly to Gestido's austerity program, going on a series of strikes, that Gestido declared a modified state of siege, prohibiting all calls to strike. Dominated by Communists and encouraged by the huge Soviet embassy in Montevideo--Russia's biggest in Latin America--the 250,000-member National Confederation of Workers last week threatened more strikes. As a starter, 145,000 students, teachers and administrative school personnel went on strike, and 18,000 persons poured into downtown Montevideo for a noisy, anti-government demonstration. If matters get out of hand, Gestido stands ready to declare another temporary state of emergency.

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