Uruguay’s left-wing party faces its toughest election in 15 years

Uruguayans head to the polls on Sunday, with slowing growth jeopardising the prospect of a fourth mandate for the Frente Amplio ("Broad Front").

The left-wing party faces its toughest electoral contest since it won the presidency and a majority in Congress in 2004, which it used to revive a wide-ranging -- but costly -- welfare state. While the party still enjoys impressive levels of support, more than half a dozen parties from the far left to the hard right will seek to tap into Uruguayans’ discontent over a stagnant economy, high unemployment and crime.

“The Broad Front will probably lose its congressional majority and that will make negotiations more difficult,” said Rafael Porzecanski, a director at pollster Opción Consultores. “No party will have a majority and at the same time there will be more parties to negotiate with.”

Uruguay has enjoyed relatively stable politics in the past two decades at a time when its two larger neighbours, Brazil and Argentina, swayed between pro-market and more interventionist governments. The election also coincides with a crucial vote across the River Plate, where Argentines are expected to turn back to the left after four years of rule marked by recession and inflation under the pro-business presidency of Mauricio Macri.

With no consecutive presidential re-election, Daniel Martínez, a former governor of Montevideo, is running for the Broad Front. His promises include retraining 400,000 people and creating jobs by supporting key sectors where Uruguay can compete in the global economy.

His closest rival, ex-senator Luis Lacalle Pou of the centre-right National Party, has pitched potentially unpopular plans to cut superfluous government spending to restore public finances and investor confidence.

Polls show Martínez receiving the most votes Sunday, but falling short of the absolute majority of 50 percent plus one needed to avoid a runoff November 24 that will likely pit him against Lacalle Pou.

Heavy Investment

Uruguay has avoided the financial crises and recessions that have gripped neighbouring Argentina and Brazil. The economy hasn’t stopped growing since 2003, allowing the government to invest heavily in social programs, pensions and health care.

However, Uruguay’s enviable poverty and inequality ratios have come at the cost of unsustainable deficits that threaten its access to cheap credit. The overall deficit reached 4.8 percent of GDP by the end of August, according to finance ministry data, up from 0.9 percent in 2005.

Meanwhile, growth this year looks set to come in at a miserly 0.5 percent. The unemployment rate reached 9.1 percent at the end of August, up from around 7.1 percent when the Broad Front’s Tabaré Vázquez started his second presidential term in 2015.

The Broad Front has also struggled to address rising crime with the murder rate climbing to 11.8 per 100,000 last year, more than double that of the U.S. Only 43 percent of Uruguayans finish high school.

Unusually for a Latin American election, pledges to cut the deficit have played an outsized role in the presidential campaign, with opposition candidates making the issue one of their top priorities. Even the Broad Front has promised to reduce the non-financial public sector deficit by 2 percentage points.

The balance of power in Congress -- where all 30 Senate seats and 99 Lower House seats will be assigned on a proportional basis -- will influence the runoff and Lacalle Pou’s stated goal of building a governing coalition with other opposition parties.

“If the Broad Front gets close to 45 percent it has a good chance of winning the second round,” said Diego Luján, a political scientist at the University of the Republic in Montevideo. That should also mean it obtains “a majority at least in the lower house or in the senate due to the fragmentation of the rest of the political system,” he added.

Voting is obligatory for Uruguay’s 2.7 million registered voters. Voting stations open from 7am to 6,30pm EDT with the Electoral Court expected to publish the preliminary results later that evening.

– Bloomberg