Brazil & Southern Cone - July 2011 (ISSN 1741-4431)

On the face of it, everything is ticking along rather well in Uruguay. The economy grew by 6.8% in the first half of 2011, forcing the government to raise its GDP growth forecast for this year to 6% from 4.5%. Inflation, at 4.71% for the first six months of the year, is higher than the government would like, but it is slowing. Most presidents would be popping the champagne corks on this sort of performance – but not President José Mujica. In fact, Mujica faces the biggest political challenge since the ruling left-wing coalition Frente Amplio (FA) first got a taste of power in 2005.

The economy minister, Fernando Lorenzo, preferred to highlight the fact that inflation remains Uruguay’s biggest macroeconomic challenge, rather than the hugely impressive performance of the economy. Such modesty and reticence in an economy minister is positively suspicious. The reason for it can be traced to the fact that the serious internal tensions within the ruling FA are directly related to the government’s management of Uruguay’s economic wealth.

The radicals within the coalition, led by the Partido Comunista Uruguayo (PCU), want far more in the way of redistributive policies to push Uruguay towards developed country status. The moderates, led by Vice-president Danilo Astori and Lorenzo, his chosen successor, and backed by the Partido Socialista (PS) of former president Tabaré Vázquez (2005-2010), are more concerned about preserving economic stability and not rocking the boat.

Somewhere in the middle sits Mujica and his Movimiento Participación Popular (MPP). Mujica and the MPP favour redistribution: Mujica has clashed publicly over an extra land tax on Uruguay’s largest landowners which he favours and Astori criticises as changing the rules of the game [RBS-11-06]. But Mujica and the MPP are also alert to the need to preserve stability and attract foreign investment to achieve development: in mid July Mujica pushed through congress a public-private participation (PPP) bill to help overhaul the country’s creaking infrastructure.

Vázquez was successful at bridging the gap between the moderates and radicals in the FA through the strength of his leadership; Mujica has at times appeared slightly weak and vacillating, especially over the failed attempt to strike down the amnesty law [RBS-11-06]. In fairness to Mujica, however, the task was far easier for Vázquez. He was the first FA candidate ever to be elected to the presidency, and as such the disparate coalition was prepared to set aside its differences over policy to unite behind him. Now that they are enjoying the fruits of power for a second term in office, however, the FA’s constituent parties are becoming more demanding, especially the PCU.

The PCU dominates the country’s main trade union, Plenario Intersindical de Trabajadores-Convención Nacional de Trabajadores (PIT-CNT), which is threatening to stage a national strike on 28 July over the government’s approval of the PPP bill. The umbrella trade union argues that the bill “resembles the neo-liberal policies heroically resisted by the PIT-CNT in the 1990s”. The PCU clearly agrees – and it was at pains to demonstrate its disagreement. Congress unanimously approved the bill, which was strongly supported by the opposition Partido Nacional (Blancos) and Partido Colorado (Colorados), but a PCU deputy walked out in defiance of the FA leadership, leaving his alternate, a member of the MPP, to cast his vote instead.

Mujica and Astori were singing from the same hymn sheet over the PPP bill. They said it was essential to attract private capital for infrastructure projects, such as building roads, bridges, prison facilities and schools. The PCU argues that the bill will lead to privatisation of public sector companies by the backdoor and that it betrays the FA’s principles, as it had always maintained that the state would retain full control of “strategic sectors”. Mujica has long contended that one of the biggest obstacles to sustained development in Uruguay is deficient infrastructure. He wanted his additional tax on land to fund infrastructure improvements - a proposal enthusiastically backed by the PCU. It could be that Mujica first proposed this tax in June precisely to placate the PCU over the PPP bill, but all he appears to have achieved by it is to cause further divisions.

Mujica met Astori on 8 July, ostensibly to try to iron out their public differences over the extra land tax, but these differences were overshadowed by the divisions within the FA. Astori emerged from the meeting describing the situation facing the FA as “critical”. He said that both he and Mujica agreed that “a profound ideological discussion” was needed. Ideology is just part of it, however, what really counts is power. There is a power struggle between the PCU and the MPP, which have been holding crisis meetings to come up with ways to buttress the Mujica administration.

The PCU is convinced that Mujica is trying to keep it at arm’s length while siding with the MPP. Mujica fired his social development minister, Ana Vignoli, the PCU’s sole representative in the cabinet, in mid July. He replaced Vignoli with Daniel Olesker, the health minister and a member of the PS. Mujica was at pains to preserve the delicate balance of party representation in his cabinet: Olesker’s deputy Jorge Venegas (PCU), for instance, picked up the vacant health portfolio. But, the PCU complained that it was being targeted as Vignoli’s dismissal was the first cabinet change since Mujica took power in March 2010 (see sidebar).

Mujica strenuously denied this was the case but he strongly implied that Vignoli was not up to the job, or at least that she elevated political considerations over economic ones. He said that he did not expect his cabinet ministers to be perfect but he did expect them to “throw their soul into the job”. He also said that Olesker, an economist, was better cut out to assign finances to myriad social projects.

• Cold snap
  The opposition Blancos and Colorados were fiercely critical of Ana Vignoli and the social development ministry (Mides) for their handling of the severe cold snap in Uruguay in June, which claimed the lives of six homeless people. Parts of the Frente Amplio (FA) were equally critical. Daisy Tourné, a former interior minister and member of the Partido Socialista (PS), slammed Vignoli and the Mides for the mishandling of its response to plummeting temperatures in Uruguay.

• Presidential sale
  President Mujica announced the sale for US$2.5m of an exclusive presidential beachside house in Uruguay’s top coastal resort, Punta del Este. Mujica said the house had been sold to the state Banco de la República, which will use it for conferences. It will also function as a cultural centre. The proceeds will go towards a housing project, “Plan Juntos”, to put a roof over the heads of some of the country’s poorest members of society.