I am writing my dissertation on the divergent macroeconomic policies that Uruguay and Argentina took in the aftermath of the 2001 economic crisis. One of my hypothesis is that neoliberal reform in Uruguay was stunted from being completely hegemonic in Uruguay as it was in Argentina. I argue that was not that Uruguayan political system did not want radical neoliberal reform to happen as it did in Argentina; indeed, much of the same constellation of forces was forcing Uruguay to pass reform: the IMF, domestic capital, international capital.
However, it can be argued, that one of the key forces was absent in Uruguay that was present in Argentina under Menem was the successful articulation or interpellation of popular identities of dissatisfaction with the statist-developmentalist model. The reason I say 'successful articulation' by Menem is because Menem was elected in 1989 not as a neoliberal reformer, but as a committed Peronista--statist; ergo, the statist-developmentalist model wanted to be compounded by the majority of the citizenry in 1989, in part, due to the failed incipent neoliberal reforms under Alfonsin. Since Uruguay avoided the hyperinflationary crisis of 1989 that buffeted Argentina's economy and society, there was not the necessary crisis to delegitimize and articulate an anti-statist discourse in the 1990s. Therefore, appeals to neoliberalism took on a much less populistic and more technocratic character that certainly was not convincing to the citizenry.
When President Lacalle was in power (1990-1994) he attempted to pass legislation through the legislature by using the IMF as the stick to discipline his own party and the opposition. Lacalle was successful in his attempt to force the legislation through, as the Uruguayan legislature passed legislation allowing for the privatization of SOEs, principally ANTEL, the national telephone company. The impediment to that reform was Uruguay's deeply embedded popular-democratic, i.e. illiberal, system of referenda. The attempted privatization of Uruguay's SOEs failed because the citizenry did not see the need for it, as the firms were generally regarded as relatively efficient and also they had symbolic value for Uruguay's sense of nationalism. The political forces at play that wanted the radical reform to pass, arguably, could not convincingly make a case to privatize these firms as they could in Argentina since Uruguay, in 1989, avoided the serious economic crisis that impacted Argentina body politic so heavily.
This is not to suggest, of course, that Uruguay did not experience neoliberal reforms; it certainly did experience privatization, deindustrialization, financialization, etc. However, the depth of that reform and the effects were stunted by the active intervention by the citizenry, in a fashion unique in Latin America. I wanted to see if this can be empirically proven. So I went to the Fraser Institute to get actual statistics over the size of government owned businesses and investment as a percentage of GDP, and then I did a moving average to smooth the lines so that one can see the trends of privatization.
What this graph shows is that the intensity, or the 'shock' as Naomi Klein terms it, was noticeable in Argentina but, not in Uruguay. The reason, I argue, is that the popular-democratic institutions helped to temper the reform efforts to avoid the worst of the reforms from occurring. The IMF/WB were more than aware of the power of referendums to prevent its reforms from being passed in Uruguay. As Gordan Crawford notes:
[I]f any challenge to neo-liberal economic orthodoxy emerges, the ‘soft glove’ of participation slips off to reveal the ‘hard fist’ of coercion, as shown by the Bank’s opposition to Uruguay’s system of referenda...It comes as no surprise that the Ban is in fact hostile to such a democratic mechanism [direct democracy], given that it has held back neo-liberal economic reforms. Such direct democracy is considered as an impediment, a problem of ‘institutional design’, implying the need for constitutional reform in order to ‘rule out’ the possibility of future popular control over economy policy-making” (134-135).
Crawford then goes to make a convincing case that this notion of limited, i.e. liberal governance, ideologically, was legitimized by Hayekian notions of the state that were hegemonic within the governing International Financial Institutions (IFIs). Nevertheless, the referenda proved to be essential to the prevention of the so-called 'shock doctrine', which used crisis and lack of democratic oversight to pass radical reforms. Ergo, the greater the democratic input, the higher the chances are that pro-market reforms will not get passed tout court. Counterintuitively, it was the very prevention of neoliberalism from becoming totally hegemonic, due to popular intervention, which engendered its legitimization in the post-2001 era in Uruguay, or so I will argue. While, in Argentina the opposite occurred, and in the post-2001 era we saw the neo-structuralist/populist shift under Kirchner. Certainly, this is only one aspect, but I believe it to be the core aspect in my studies.