551. Despatch From the Ambassador in Uruguay (Patterson) to the Department of State1

No. 37


  • Dept’s CircrTel 12, July 11, 1956; Joint State/DOD/ICA Message2


  • Military Assistance Program Development3

Following consultation with Chief, United States Air Mission to Uruguay,4 who likewise performs MAAG functions, Embassy officers are of the opinion that the outlook for the national economy of Uruguay, with especial reference to the ability of such economy to support an expanded military program, is even less promising than in 1955.

Over the past year, the deterioration in Uruguay’s economy and finances has proceeded at an accelerated rate. Thus, the Uruguayan political-economic scene in the last two months has shown tightening of the general economic situation, increased pessimism in business circles, and growing labor and social unrest. Contributory factors included: (1) a near-paralysis of the legislative process which resulted from a split within the ranks of the Colorado Party and delayed legislative action on the proposed budget and other important economic matters; (2) the outbreak and continuation of a damaging strike in the meat packing industry; (3) dwindling supplies of imported raw materials and imported consumer goods that presaged decreased industrial production and further unemployment in some important lines; (4) still rising unemployment and weakening consumer buying power; (5) a further marked weakening of the peso; and (6) the failure of the Government to act energetically and constructively to contain the situation.

The peso has suffered a very sharp decline, the free market buying rate falling from 3.95 per dollar to 4.24, and reaching a new low.

The meat packing industry was extremely active until May 10, when workers went on strike for higher wages and other concessions. [Page 1103] The Army assumed operation of the Government-sponsored Frigorífico Nacional in order to assure meat supplies for Montevideo. In the face of workers’ refusal to do so, the Army also drove cattle to the plant from the city limits, enabling Frigorífico Nacional to process about 1,200 head daily after initiation of the strike and an estimated 30,000 head for the month. In order to fulfill a meat contract, the Uruguayan ship Tacoma was urgently chartered to carry 2,400 tons of frozen beef from Frigorífico Nacional to Western Germany and was loaded with 392 tons. Port workers thereafter refused to continue loading and threatened a general port strike if the Army was used to load. The contract had to be cancelled and German representatives reportedly claimed $180,000 in compensation. Although the workers previously had been unemployed for lack of slaughter of cattle, the strike came when adequate numbers existed and the nation urgently needed the foreign exchange that would have been provided by the German shipment.

A temporary split developed openly, primarily over the budget, between two factions of the Administration-controlling Colorado Party, thereby virtually paralyzing the Government’s legislative machinery. The budget as a result still had not been approved at the end of May which marked the termination of the three-month period provided by the Constitution for consideration by the Assembly. Negotiations, however, were proceeding between the two factions in an attempt to reach agreement. Two possible alternatives were visible. One was the continuation of the old budget, which already had demonstrated its inadequacies through an impressive string of deficits. The other was that the projected new budget would have to be pushed through with such haste that insufficient time would remain to permit adequate study and consideration. Neither of the alternatives appeared altogether satisfactory.

1956 has been marked by an increasing tempo in labor unrest sparked by the persistent rise in the cost of living. Overshadowing all other conflicts was the Frigorífico strike above mentioned. Next in importance perhaps was the unrest among National Government employees whose plea for an immediate salary increase was not included in the new budget presented to the Congress February 28. Further signs of unrest were also seen in the pressure of the railworkers, bank workers and port workers for increased wages or other benefits. As was to be expected, the Communists were trying hard to make the most of all these difficulties.

It may be added that Uruguay has not even been able or at least willing to meet its subscription obligations as member in various international organizations despite the fact that Uruguay has long been an enthusiastic supporter of the United Nations and similar bodies.

[Page 1104]

Accordingly, the Embassy is of the opinion that the Uruguayan finances and economy will not support military charges in excess of those required for maintenance of existing forces vital for the preservation of order in a situation characterized by increasing popular dissatisfaction. This dissatisfaction is rooted in rising living costs, fomented by an increasing penetration by Communist or pro-Communist leaders into the tightly knit labor organizations of Uruguay.

Attention is particularly invited to (d) and (e) of FY 58 MDA Program for Uruguay5 of MAAG’s conclusions and recommendations indicative of the danger to United States interests and to the cause of hemispheric defense in the distinct possibility that the Soviet Union will endeavor to fill any gap in Uruguay’s defenses not susceptible of provision by the Uruguayan Government or by the United States under the MDAP Program.

The Embassy confirms and supports the conclusions and recommendations of MAAG as outlined in MAAG’s report above mentioned.

Jefferson Patterson
  1. Source: Department of State, Central Files, 733.5–MSP/7–2556. Secret.
  2. Circular telegram 12, actually dated July 10, requested that the Military Assistance Advisory Group, with Embassy participation, prepare 1958 budget estimates for military assistance requirements by taking into full consideration the recipient nation’s “political-economic capabilities” as applied to defense costs. (Ibid., 700.5–MSP/7–1056)
  3. For the text of the Military Assistance Agreement of 1953 between the United States and Uruguay, see 5 UST 197.
  4. Colonel Robert O. Mitterling.
  5. Not found in Department of State files.