Uruguay Changes in a state-friendly society Andrés Prieto Uruguayans are clearly the most statist people in Latin America. A new, self-styled progressive government could be expec- ted to implement policies that expand the quality and coverage of social services in response to citizen demands. But recent hints of a change in the traditional relationship between the state and society raise doubts about the future of public ser- vices in the country. Various studies have found that Uruguayans have a high There are several reasons for this preference for pub- degree of preference for state-run services (Barrán and lic ownership and management. Some of the key ele- Nahum, 1984; Panizza, 1990; Moreira, 1997; Bergara, ments have to do with the functioning of the political 2005). According to Latinobarómetro (a series of public system and its main characteristics throughout the coun- opinion polls taken in various Latin American coun- try’s history, the size and dynamics of the Uruguayan tries), the approval rating for the free market in Uruguay economy, and the social foundations of processes of is by far the lowest in Latin America. In the entire region, nationalisation (or de-nationalisation) throughout histo- only Argentineans have a more negative view of privati- ry. Nevertheless, certain changes are now apparent in the sation than Uruguayans. What is strange about this is relationships that citizens have historically maintained that specific examples of privatisation in Uruguay – with the state as manager of public services, which could specifically the sale of state assets to private companies – indicate shifts that are more or less favourable to the end- have been few and insignificant. ing of public monopolies and the promotion of public- This Uruguayan statism has been seen explicitly at private partnerships in this area. least three times in recent history. The first was in 1992, when a referendum overturned a law which paved the Historical clues way for the privatisation of the principal state-run com- panies and services. The second was in 2003, when State intervention in Uruguayan society and the econo- another grassroots initiative overturned a law that would my has gone through two major phases with different have made it possible for ANCAP (the national petrole- characteristics and orientations. The first phase, marked um company) to establish joint ventures with private by the expansion of the state and direct intervention, companies. The third came in 2004, when voters occurred between about 1876 and 1955. Until 1903, the approved a constitutional amendment establishing that expansion of the state’s role in the economy and in socie- providing water and sanitation services is exclusively a ty had a ‘conservative’ bent that sought to consolidate the state responsibility. capitalist model in the country through the construction PUBLIC SERVICES YEARBOOK 2005/6 and modernisation of a coactive apparatus. This style of proposed to Parliament a law to privatise the principal intervention sought to provide guarantees to businesses state-run companies. With support from the other con- involved in raising livestock for export. Most public serv- servative party (Partido Colorado), this proposal gar- ices were in the hands of foreign monopolies. The state nered the votes needed for approval. In response, the limited itself to providing education, with the aim of country’s main grassroots organisations – labour unions, ensuring universal primary schooling as a free, secular the federation of mutual aid housing co-operatives and and mandatory service. university students – along with the centre-left Frente The batllista period, so called because of the influence Amplio (Broad Front) political coalition, demanded a ref- of the ideas of President José Batlle y Ordóñez, began in erendum that overturned the law. The initiative to defend 1903 (Barrán and Nahum, 1984). It marked the begin- public enterprises was supported by 55 percent of the ning of a substantial increase in government intervention voters, closing the door on the possibility of selling state in various strategic areas. The government took over assets to the private sector. management of certain public services that had been in Nevertheless, the outcome of the referendum did not the hands of foreign capital: electricity, ports, railroads, eliminate the possibility of moving towards a model of water service and urban public transportation. In 1931, greater private sector intervention in public services. the public oil-processing company ANCAP was estab- Since 1992, conservative parties have tried to implement lished. In all of these cases, the state holds a monopoly on forms of privatisation other than the outright sale of the provision of these services. state-run companies. The national government first The various sectors of private enterprise in the coun- began to promote a covert and relatively invisible process try lacked a policy for opposing the government’s within the main state-run companies. The nature of these takeover of these services. On the contrary, those sectors companies gradually shifted from one of state-owned understood that the services provided by private foreign providers of services to one of management according to companies were expensive and inefficient, and that the the criteria used by private businesses (see the analysis of government could provide them at lower cost with the processes of mercantilisation and corporatisation of greater quality and quantity. This historical phase also public management by McDonald and Ruiters in this saw the expansion of a series of benefits for workers: the volume). eight-hour work day, state-financed pensions and free One strategic change introduced in the operation of secondary education. state-run businesses was the identification of ‘shortcom- The second phase began in the mid-fifties and was ings’ in public administration. This redefinition of man- characterised by economic stagnation. Amid this crisis, agement paved the way for the contracting of private political clientelism led to higher costs associated with companies. In many cases, the people who took on the the increase in the size of the state, resulting in problems new management responsibilities were the same workers maintaining the national budget. The same sectors that who, after receiving incentives to leave their jobs at the had once supported the government takeover of princi- state-run company, were then hired as contractors. This pal services raised their voices in protest against the management model implied transferring to the private growth of the state and its ‘inefficiencies.’ Thereafter the sector responsibilities that had once been the exclusive state began a slow contraction that also affected the pro- responsibility of the state. This trend cam be seen not vision of public services. The Uruguayan government only in the large state electricity, water, telecommunica- currently intervenes less in the economy, indicating that tions and fuel companies, but also in services operated by the liberal reform has been slow and gradual but persist- local governments and other state agencies that provide ent since the early seventies. public services, such as the National Public Education Administration, the Ministry of Public Health and the The principal reforms Universidad de la República. The overall economic model has had a clear liberal bent Reforms in the energy sector since the late forties, but it was during the nineties that Uruguay’s energy sector has been characterised by strong efforts were made to expand liberalising reforms. In par- state participation in both the business and regulatory ticular, the Partido Nacional government (1990-1994) spheres. The provision of energy from principal sources 172 PART III: Chapter 18 - Uruguay PART (electricity, gas and fuels derived from petroleum) was in Education reform the hands of a single public company in each segment, as The national education system had always been organ- a monopoly. ised as a free, state-run public subsystem, and a private It is particularly important to analyse the case of elec- system that received no state subsidies, but whose regu- tricity. The state-run UTE company, established with the lation by education authorities was minimal. nationalisation of a foreign company in 1912, had a When the country returned to democracy in 1985 monopoly in all segments of the sector – generation, after twelve years of dictatorship, public education, which transmission and distribution – until 1980. With the con- had once been the national pride (Uruguayan literacy struction and operation of Salto Grande, a large hydro- indexes are still comparable to those of industrialised electric dam on the Uruguay River, a Bi-national nations), was widely considered to be in a state of crisis. Technical Committee was formed that year, under the Wages were low, teacher training had deteriorated, infra- Ministries of Foreign Affairs of Uruguay and Argentina. structure was inadequate, schools were overcrowded and After that, the bi-national committee and UTE shared the curriculum was under fire, with some critics saying it the generation of electricity for Uruguay, while UTE con- was too far removed from the needs of the market and tinued to provide the transmission and distribution serv- others saying it was too ‘disciplinarian’ and did not pro- ices. vide a holistic education. In June 1997, the Regulatory Framework Act for the After the Partido Colorado won the 1996 elections, electricity