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'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.

GDP (purchasing power parity): $54.58 billion (2005 est.)

GDP (official exchange rate): $17.03 billion (2005 est.)

GDP - real growth rate: 6.1% (2005 est.)

GDP - per capita (PPP): $16,000 (2005 est.)

GDP - composition by sector:
agriculture: 7.1%
industry: 27.7%
services: 65.2% (2005 est.)

Labor force: 1.52 million (2005 est.)

Labor force - by occupation: agriculture 14%, industry 16%, services 70%

Unemployment rate: 12.5% (2005 est.)

Population below poverty line: 22% of households (2004)

Household income or consumption by percentage share:
lowest 10%: 3.7% highest 10%: 25.8% (1997)

Distribution of family income - Gini index: 44.6 (2000)

Inflation rate (consumer prices): 4.9% (2005 est.)

Investment (gross fixed): 12.2% of GDP (2005 est.)

Budget:
revenues: $4.468 billion
expenditures: $4.845 billion; including capital expenditures of $193 million (2005 est.)

Public debt: 793.4% of GDP (June 2005 est.)

Agriculture - products: rice, wheat, corn, barley; livestock; fish

Industries:
food processing, electrical machinery, transportation equipment, petroleum products, textiles, chemicals, beverages

Industrial production growth rate: 5.1% (2005 est.)

Electricity - production: 8.611 billion kWh (2003)

Electricity - consumption: 7.762 billion kWh (2003)

Electricity - exports: 900 million kWh (2003)

Electricity - imports: 654 million kWh (2003)

Oil - production: 435 bbl/day (2003 est.)

Oil - consumption: 38,000 bbl/day (2003 est.)

Oil - exports: NA bbl/day

Oil - imports: NA bbl/day

Natural gas - production: 0 cu m (2003 est.)

Natural gas - consumption: 60 million cu m (2003 est.)

Natural gas - exports: 0 cu m (2003 est.)

Natural gas - imports: 65 million cu m (2003 est.)

Current account balance: -$19 million (2005 est.)

Exports: $3.55 billion f.o.b. (2005 est.)

Exports - commodities: meat, rice, leather products, wool, fish, dairy products

Exports - partners:
US 17.4%, Brazil 16.1%, Germany 6.3%, Argentina 6.2%, Mexico 4.2% (2004)

Imports: $3.54 billion f.o.b. (2005 est.)

Imports - commodities: machinery, chemicals, road vehicles, crude petroleum

Imports - partners:
Argentina 19.4%, Brazil 19%, Paraguay 12.9%, US 9.2%, China 6% (2004)

Reserves of foreign exchange and gold: $2.654 billion (2005 est.)

Debt - external: $11.22 billion (June 2005 est.)

Economic aid - recipient: $NA

Currency (code): Uruguayan peso (UYU)

Exchange rates:
Uruguayan pesos per US dollar - 24.479 (2005), 28.704 (2004), 28.209 (2003), 21.257 (2002), 13.319 (2001)

Fiscal year: calendar year

OIL
Uruguay has no proven oil reserves.

Uruguay has no proven oil reserves, so the country must rely upon imports for its oil consumption, which reached 35,700 barrels per day (bbl/d) in 2005. The country has a single oil refinery, the 50,000-bbl/d La Teja facility, near Montevideo. State-owned Administración Nacional de Combustibles, Alcohol y Portland (ANCAP) controls Uruguay. s entire oil sector.

In recent months, Uruguay has increasingly looked towards Venezuela as the principle source of its oil imports. In August 2005, Venezuela agreed to supply Uruguay with up to 43,600 bbl/d of crude oil on preferential financing terms, allowing the country to pay in either cash or barter and delay payment on 25 percent of the crude oil for up to 25 years. In September 2005, ANCAP formed a joint committee with Venezuela. s state-ownend oil company, PdVSA, to consider a $500 million plan to double the capacity of the La Teja refinery. The plan would also upgrade the facilities at the refinery so that it could handle heavier Venezuelan crude varieties.

Natural Gas
Uruguay has no proven natural gas reserves.

Uruguay has no proven natural gas reserves. In an attempt to diversify its energy usage away from oil and hydroelectricity, Uruguay began importing natural gas from Argentina in 1998. Since then, the country. s natural gas consumption has reached 3.94 billion cubic feet (Bcf) in 2004, according to Uruguay. s National Energy Directorate (DNETN). The industrial sector consumes the largest amount of this total.

Sector Organization
Gaseba and Conecta are responsible for distributing natural gas in Uruguay. Gaseba distributed natural gas in Montevideo, whereas Conecta controls distribution in the rest of the country. Gaz de France owns a majority stake in Gaseba. Brazil. s Petrobras has controlled Conecta, since it purchased a majority stake in the country from Spain. s Union Fenosa in 2005.

Import Pipelines
There are two natural gas pipelines connecting Uruguay to Argentina. The first, the CR. Federico Slinger (also know as Gasoducto del Litoral), runs 12 miles from Colon, Argentina to Paysandu, in western Uruguay. The pipeline, constructed and operated by ANCAP, began operations in November 1998 and has an operating capacity of 4.9 million cubic feet per day (Mmcf/d).

In 2002, a consortium led by British Gas completed construction of the Gasoducto Cruz del Sur (GCDS), also known as the Southern Cross Pipeline. The GCDS extends 130 miles from Argentina. s natural gas grid to Montevideo, with a capacity of 180 Mmcf/d. The GCDS project also holds a concession for a possible, 540-mile extension of the pipeline to Porto Alegre, Brazil.

Issues Concerning Imports
Due to natural gas shortages, Argentina has recently begun interrupting its natural gas exports to Uruguay and Chile. This has raised concerns in Uruguay about the future security of its natural gas supply and jeopardized plans to increase domestic natural gas consumption. Uruguay has negotiated with Bolivia about building a natural gas pipeline between the two countries as an alternative to Argentine imports.

Electricity
Uruguay depends upon hydropower for almost all of its electricity generation.

According to DNETN, Uruguay had 2.1 gigawatts of installed electricity generating capacity at the end of 2004. During 2004, DNETN reported that the country had gross electricity generation of 5.8 billion kilowatthours (Bkwh) and electricity consumption of 6.2 Bkwh. To make up for this shortfall, Uruguay imported electricity from Argentina and Brazil.

Sector Organization
The Administracion Nacional de Usinas y Transmisiones Electricas (UTE) is responsible for transmission and distribution activities in Uruguay, as well as most power generation. The Unidad Reguladora de la Energía y Agua (URSEA) has principle regulatory oversight of the sector. In 1997, Uruguay changed its electricity laws to permit independent producers to generate power, introducing competition to the sector. However, UTE has the option of taking 40 percent stakes in any new power plants built by private developers.

Generation Facilities
Four hydroelectric facilities provided the bulk of Uruguay. s electricity generation in 2004: Terra (0.53 Bkwh), Baygorria (0.40 Bkwh), Palmar (0.98 Bkwh), and Salto Grande (2.85 Bkwh). The remainder of the country. s electricity generation comes from thermal power plants, which UTE only calls upon during peak demand, or when weather conditions suppress output from its hydroelectric facilities.

Under normal weather conditions, Uruguay's hydroelectric plants cover the country. s electricity demand. However, seasonal variations can leave Uruguay at a severe power deficit, forcing the country to rely upon imports or costly oil- and diesel-fired generators. In 2001, UTE announced a tender for a new, 400-megawatt (MW), natural gas-fired power plant that would help diversify the country. s electricity supply. However, a combination of factors forced Uruguay to withdraw the tender in early 2005, including the election of a new president in early 2005, questions regarding the future of natural gas imports from Argentina, the cost of the facility ($200 million), and the construction time (26 months) of the project. Instead, UTE offered a substitute tender for the construction of two small, 100-MW turbines capable of consuming either natural gas or fuel oil. UTE awarded this tender to General Electric (GE) in August 2005, with GE committing to build the first plant within 180 days of finalizing the contract.