Almost a decade after the 1973 coup, Uruguay remained something of a paradox in terms of the abstract conditions favoring a transition to democracy. The regime was the most illegitimate of the southern-cone dictatorships, but it had experienced nothing like the opposition mobilization seen in Chile or the internal fragmentation that dogged Argentina. Nor had it given birth to a strong liberalizing coalition, as in Brazil. For the military, therefore, a great deal of uncertainty continued to surround the calculus of costs of toleration versus costs of repression. Only with hindsight is it easy to see that top generals were coming to feel that power was becoming a liability. So much depended on the strategy of the opposition. Nevertheless, the public pronouncements of the military remained sternly intransigent. The only solution to Uruguay's political stalemate was a negotiated “extrication,” but the military continued to demand repressive constitutional changes inspired by national-security doctrines. For that reason many commentators were pessimistic regarding the chances for any agreement.

The performance of the authoritarian regime in terms of the economy was becoming a serious concern for both the military and the business elite. On the eve of the primaries, the peso had collapsed in value, and the country was entering a slump that would cause negative growth of more than 17% over the next three years.

This chapter first outlines the growing economic crisis of the early 1980s as a symptom of seriously declining regime performance.