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Uruguay has long been recognised as one of Latin America’s strongest democracies and most prosperous economies, despite its population of just 3 million people. With a per capita GDP of over US$22,000, an economy that grows relatively slowly, but steadily and a political stability rare for Latin America, Uruguay is an exception in a region often seen as challenging for international observers and investors.
Following the 1980s democratic restoration, Uruguay strengthened its institutions and saw economic success with a market-oriented economy and strong welfare system. The early 21st century was dominated by the centre-left Frente Amplio [Broad Front, FA], which governed for three consecutive terms from 2005 to 2020.
In 2019, politics shifted when centre-right candidate Luis Lacalle Pou of the Partido Nacional [National Party, PN; also known as the Partido Blanco (White Party)] was elected. As Uruguay nears the October 27th elections, Lacalle Pou, who cannot seek immediate re-election, ends a relatively successful term with about 50% approval. However, polls suggest the FA leads in voting intentions and is likely to win.
Despite the potential transition to a centre-left administration, the elections seem to be largely overlooked by international observers. Why is it that elections in South America’s most prosperous country receive so little attention?
The elections will determine president Lacalle Pou’s successor as well as the lawmakers for the 2025-2030 period. Most polls indicate that the FA, represented by Yamandú Orsi, leads in voting intention with over 44%; followed by the incumbent PN, with Álvaro Delgado as its candidate, with around 25%. The Partido Colorado (PC), under Andrés Ojeda, has seen some late growth in polling, but is unlikely to pass the first round. If no party secures more than 50% of the votes in October, a runoff will take place in November, which polling suggests is likely.
Excluding the possibility of a first-round victory for the FA, two scenarios emerge. The first is a FA win in October with a legislative majority, facing the PN in a runoff. This would require about 48% of the vote. However, polls have indicated that an FA win without a legislative majority is more likely.
Securing 45% in October would almost guarantee a November victory. In 2009 and 2014, FA won the runoff after getting around 47% in the first round, but lost in 2019 despite 39% in the first round. Monitoring FA’s polling near 47% is key for predicting first-round victory.
Despite these potential outcomes, the election has received very little international coverage in a year marked by disruptive elections worldwide. According to Fitch, the reasons for this are that they are expected to be competitive, and that the robust institutional framework as well as recent history of stability make a radical shift in policies towards a more hostile business environment highly unlikely, as not even a FA victory would pose such a threat.
This perception of stability is the main reason why the Uruguayan elections have passed largely unnoticed by international observers, which is reasonable if it is compared to the serious risks posed by other elections in the region, from Venezuela to Mexico.
However, the presidential and legislative elections are not the only reason why Uruguayans will head to the polls in October. Voters will have to decide on two plebiscites, one of them related to public security, and another one, critical to this analysis, on a social security system reform proposal.
One of Lacalle Pou’s most significant victories in his terms was the pension reform implemented in 2023, aimed at making the system more sustainable. Retirement age was raised from 60 to 65, among other changes, facing strong opposition from diverse sectors. In early 2024, labour union PIT-CNT called for a plebiscite on a social security system reform, to be held simultaneously with the general elections.
The proposal consists of three key elements: the restoration of the retirement age to 60, pegging the pension to the minimum wage; and eliminating private pension funds. If the ‘Yes’ option gets more than 50% of the casted ballots, the reform will be implemented, radically changing the social security system.
While the PN is the strongest opposer to the plebiscite, the FA candidate, Orsi, has also expressed opposition to it, although some minority factions within his party support it. In this regard, the FA has allowed its members to vote freely on the issue.
If neither of the two leading candidates supports the plebiscite, why is it important to analyse its potential implications? Recently, opinion polls have shown surprising support for the plebiscite, raising the possibility that the proposal could pass.
Its approval would have severe implications for Uruguay’s public finances, leading to an instant rise in public spending due to higher pension payouts and triggering legal challenges by members of the private pension system.
This would seriously damage Uruguay's reputation as a stable regulatory country, threatening its investment grade. While the outcome is uncertain, JP Morgan warns that economic risks could arise even if the plebiscite fails. The bank's analysts note that a strong ‘Yes’ vote, even under 50%, could increase the risk of social unrest.
Some foreign investors are already selling local securities to reduce exposure. Amid this, the recent decline in support for the ‘Yes’ option offers some relief.
The Uruguayan elections highlight some of the country’s core strengths: a strong democracy, a less polarised society than others in the region and the absence of relevant political parties with radical economic programmes.
Nonetheless, the election process should not be ignored by international observers. The potential ramifications of the plebiscite’s approval make it essential for stakeholders to closely monitor its developments, even more so than the election itself.
Fernando is the Director at London Politica’s Latin America Programme. He specialises in political and regulatory risk in Latin America, with a special interest in Southern Cone countries. He has experience advising and consulting on regional issues for clients from diverse backgrounds, including multinational companies, investors, and government agencies.
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