Montevideo, founded by the Spanish in 1726 as a military stronghold, soon took advantage of its natural harbor to become an important commercial center. Annexed by Brazil as a separate province in 1821, Uruguay declared its independence four years later and secured its freedom in 1828 after a three-year struggle. The administrations of President BATLLE in the early 20th century established widespread political, social, and economic reforms. A violent Marxist urban guerrilla movement named the Tupamaros, launched in the late 1960s, led Uruguay's president to agree to military control of his administration in 1973. By yearend, the rebels had been crushed, but the military continued to expand its hold throughout the government. Civilian rule was not restored until 1985. In 2004, the left-of-center EP-FA Coalition won national elections that effectively ended 170 years of political control previously held by the Colorado and Blanco parties. Uruguay's political and labor conditions are among the freest on the continent.

Uruguay Country Profile

Uruguay's well-to-do economy is characterized by an export-oriented agricultural sector, a well-educated work force, and high levels of social spending. After averaging growth of 5% annually during 1996-98, in 1999-2002 the economy suffered a major downturn, stemming largely from the spillover effects of the economic problems of its large neighbors, Argentina and Brazil. For instance, in 2001-02 Argentina made massive withdrawals of dollars deposited in Uruguayan banks, which led to a plunge in the Uruguayan peso and a massive rise in unemployment. Total GDP in these four years dropped by nearly 20%, with 2002 the worst year due to the banking crisis. The unemployment rate rose to nearly 20% in 2002, inflation surged, and the burden of external debt doubled. Cooperation with the IMF helped stem the damage. A debt swap with private-sector creditors in 2003 extended the maturity dates on nearly half of Uruguay's then $11.3 billion of public debt and helped restore public confidence. The economy grew about 10% in 2004 as a result of high commodity prices for Uruguayan exports, a competitive peso, growth in the region, and low international interest rates, but slowed to 6.1% in 2005.

Uruguayan natural resources include arable land, hydropower, minor minerals, fisheries

second-smallest South American country (after Suriname); most of the low-lying landscape (three-quarters of the country) is grassland, ideal for cattle and sheep raising

Uruguayan religion is Roman Catholic 66% (less than half of the adult population attends church regularly), Protestant 2%, Jewish 1%, nonprofessing or other 31%.

Natural hazards in Uruguay include seasonally high winds (the pampero is a chilly and occasional violent wind that blows north from the Argentine pampas), droughts, floods; because of the absence of mountains, which act as weather barriers, all locations are particularly vulnerable to rapid changes from weather fronts.