Political Risk Latin America Blog @PolRiskLatam

Uruguay: The Pearl of the West

Posted in News and Articles, Political Risk by politicalrisklatam on October 15, 2010

by Walter T. Molano for Latin Business Chronicle, October 15th, 2010.

Uruguay’s economy is booming, partly helped by foreign direct investment. 

The Pearl of the East is the moniker that is used to describe oriental city-states, such as Hong Kong and Singapore. These small enclaves sit astride important waterways that provide access to strategic markets. Although much larger in size, Uruguay is a small country which was artificially concocted by European and local powers to ensure access to the lucrative markets that lie beyond the estuary of the River Plate.

Most countries at the start of the 19th century were actively pursuing mercantalistic policies. The population pools that resided along the Parana, Paraguay and Uruguay Rivers often paid in bullion for the manufactured goods offered by foreign traders. These markets became particularly important for Britain during the Napoleonic Wars, when continental Europe was closed off to its merchants. Given the chaotic wars of independence in Latin America, during the same time period, British merchantmen shifted their attention to the South Atlantic.

However, the independence of Argentina in 1816 allowed the new government to regain control of its waterways. This effectively closed off the River Plate, and it eventually led to an invasion of the eastern shore by Brazil. The invasion was repelled by Argentina during a 500-day war, but it produced a bitter stalemate which brought the two sides to the negotiating table. Through the skilful intervention of Lord John Ponsonby, the British diplomat convinced the two sides to remove the possibility of future conflicts by granting independence to a new buffer state. (continue reading… )


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