Uruguay has traditionally been more affluent than other countries in South America, and is known for its advanced education and social security systems and liberal social laws.
It was the first nation in Latin America to establish a welfare state, maintained through relatively high taxes on industry, and developed a democratic tradition that earned it the sobriquet “the Switzerland of South America”.
But economic and political turmoil, in particular left-wing urban guerrilla attacks in the early 1970s, led the government of the day to suspend the constitution and launch a period of repressive military rule that lasted until 1985. Uruguay is still struggling to come to terms with the legacy of those years.
Since the restoration of democratic government, successive governments have liberalised the economy. Colonial towns, beach resorts and a year-round mild climate have contributed to a growing tourist industry, and the economy has benefited from offshore banking.
But a dependence on livestock and related exports has left Uruguay vulnerable to ups and downs in world commodity prices. Recessions in Brazil and Argentina – its main export markets and sources of tourists – propelled the country into economic crisis in 2002.
Payouts from the International Monetary Fund (IMF) and a restructuring of foreign debt encouraged a fragile recovery. But the recession left many Uruguayans living in poverty and prompted thousands of younger people to leave.
Most Uruguayans are of European origin – chiefly Spanish and Italian. The country has a large middle class and is largely free of serious income inequality. But the minority who are of African or mixed European-indigenous descent form a higher proportion of its poorest people.
Read More:BBC News – Uruguay profile – Overview.