For a country of only 3.5 million people, tiny Uruguay — wedged in between relative giants Brazil and Argentina — has been punching way above its weight for years.

Enrique V. Iglesias, who led the Inter-American Development Bank from 1988 to 2005, is Uruguayan. So is Luis Almagro, secretary-general of the Organization of American States (OAS), whose criticism of the Maduro government and Venezuela’s descent into chaos has earned him both respect and contempt throughout the hemisphere. Adding to its global clout, in 2016 and 2017, Uruguay represents Latin America and the Caribbean for a two-year rotating slot as one of 10 non-permanent members of the U.N. Security Council.

The small country also took on big tobacco — and came out on top, winning a landmark lawsuit last year against Philip Morris International that paves the way for nations to aggressively crack down on cigarette smoking. At the same time, it became the world’s first nation to completely legalize marijuana for sale at state-regulated pharmacies. By consistently bucking convention, Uruguay — which marks its 192^nd anniversary of independence Aug. 25 — has firmly established itself as a beacon of liberalism on a continent where some countries only recently allowed divorce.

“We rank near the top of every index when it comes to transparency, prosperity, rule of law and press freedom, and I believe this is because we have a longstanding democratic tradition,” said Carlos Gianelli, Uruguay’s ambassador to the United States. “We are one of the oldest democracies in the world — born at the same time as America — with only 13 years of military dictatorship in the last two centuries.”

Gianelli is Uruguay’s top envoy here — again. He first held that post from 2005 to 2012, but was sent back to Washington two years ago by President Tabaré Vázquez, a member of the leftist Frente Amplio coalition.

“I have served under three different American presidents,” Gianelli told us during a recent interview at the Uruguayan Embassy. “We had a great relationship with George W. Bush; we signed all the instruments creating the base of our bilateral relationship during his administration. We also had excellent relations with President Obama, who supported multilateralism. In President Trump’s case, his administration is just starting out. We don’t know exactly what his policies toward Latin America will be, but we can guess that Mexico will be his first priority.”

He added: “We don’t have many elements to assess what’s going to be his relationship with Latin America. But we have more than $500 million of exports to the U.S. annually, and we are really trying to manage this relationship.”

Gianelli, 69, has had a long and varied diplomatic career. A native of Montevideo, Uruguay’s capital and home to nearly half its inhabitants, he joined the Uruguayan Foreign Ministry in 1976, serving at the United Nations from 1987 to 1991. He became ambassador to Saudi Arabia in 1991 — at the tail end of the Gulf War — and was also Uruguay’s top envoy to the Netherlands and Mexico before arriving in Washington for his first ambassadorial posting here in 2005.

In addition, Gianelli has served as director-general of political affairs (1993-96) and director-general of economic affairs (2000-03) at the Foreign Ministry. He also advised his government during the lawsuit against Philip Morris and worked on a legal dispute between Argentina and Uruguay over the building of pulp mills along the Uruguay River.

As ambassador, Gianelli heads a staff of 25 people. Besides Washington, Uruguay maintains consulates in Chicago, Los Angeles, Miami and New York, as well as honorary consulates in a dozen other cities from Minneapolis to San Juan, Puerto Rico.

“We are a middle-class country with very well-educated people, and we are quite committed to the multilateral system,” he said. “We’ve been part of the U.N. since the very beginning. The World Trade Organization was created during the Uruguay Round in 1995 and is quite important for us.”

Trade has always been crucial to Uruguay, which last year exported $9 billion in goods and $3 billion in services, according to Gianelli. Uruguay is a founding member of the Southern Common Market (Mercosur), which also includes Argentina, Brazil and Paraguay. Despite the fact that Uruguay ranks as Mercosur’s smallest member state, the customs union’s secretariat is permanently headquartered in Montevideo, though these days, it’s more symbolic than substantive.

“Unfortunately, Mercosur is not performing as we expected. It was frozen for a long time, but we are confident we can revive it,” he explained. “Venezuela was also a part of Mercosur but was suspended because it didn’t comply with the commitments.”

Agriculture still dominates Uruguay’s economy, with meat comprising 28 percent of the country’s exports by value, followed by cellulose and soybeans. But the country is now making a push in so-called “smart services” like the export of global services and information technology, particularly software.

The software export sector is worth around $3 billion, though for now, the U.S. market represents only a $140 million slice of that. Gianelli said his government began negotiating a free trade agreement with the United States in 2006 to boost trade in general. After a year or two, the talks fell through because of domestic opposition — and these days, there seems to be little appetite in Washington for new free trade agreements with anyone.

Nevertheless, the Uruguayan economy is humming along, registering an average annual growth rate of nearly 5 percent between 2006 and 2015, according to the World Bank. The bank also notes that during the same timeframe, moderate poverty was slashed from 32.5 percent to 9.7 percent, while extreme poverty is virtually nonexistent in the country that, in relative terms, boasts the largest middle class in Latin America.

Uruguay’s economy, with expected growth of 2 percent in 2017, is doing much better than that of its huge neighbor, Brazil, whose troubled economy — plagued by political scandal and stagnating foreign investment — has essentially flat-lined.

“In the last three to five years, there’s been an explosion of interest in the software and IT sectors,” Gianelli told The Washington Diplomat. “Uruguay has 500 companies in this sector, including around 10 American companies like McDonald’s.”

Internet connectivity has skyrocketed, with 65 percent of Uruguayans now online. Mobile penetration is among the highest in Latin America, and a fiber-optic cable is now being laid that will soon stretch from Miami to Maldonado, a department of Uruguay that includes the world-famous Punta del Este resort on the Atlantic.

While Uruguay has been a democracy for most of its nearly two centuries of existence, the Colorado and Blanco parties had dominated its political life for 170 years. That ended on Oct. 31, 2004, when the Frente Amplio (Broad Front) left-wing coalition of Tabaré Vázquez — then an oncologist and former mayor of Montevideo — easily defeated two other candidates for the presidency. Vázquez led Uruguay from 2005 to 2010 and returned as president in 2015 for another five-year term following the maverick presidency of José Mujica, a fellow Frente Amplio member.

A former guerilla who was imprisoned by the military dictatorship, Mujica became internationally renowned for his humble lifestyle — famously eschewing the presidential palace for a modest home on the outskirts of the capital, driving a 1987 Volkswagen Beetle and donating 90 percent of his salary to charity. He also garnered headlines for his progressive policies. Among other things, he legalized marijuana consumption, abortion and same-sex marriage, signing a marriage equality law in 2013 that made Uruguay the 12^th country in the world to recognize gay marriage.

While some of Mujica’s accomplishments remain highly controversial at home — including abortion rights and his experiment creating a government-regulated market for marijuana — Uruguayans have generally supported Frente Amplio’s record of economic stability and social inclusion.

But Uruguay’s reputation as a pioneer in social welfare predates Vázquez and Mujica. The country’s literacy rate of 96 percent is the highest in Spanish-speaking Latin America, a consequence of Uruguay’s strong educational system. Access to education and other basic services such as electricity and health care is considered part of the social contract.

Likewise, the country has developed a reputation as one of the least corrupt, most equal societies in Latin America. In fact, of 199 countries and territories surveyed in the Freedom House 2017 Press Freedom Index, Uruguay ranked 38^th — right behind the United States and ahead of the United Kingdom, France and Japan.

“The whole country is quite liberal. Between the right, the center and the left, there’s not much space,” Gianelli said. “We have no radical political sectors any more.”

With its own painful memories of mass incarceration, torture and forced disappearances that endured from the 1973 military coup until the 1985 restoration of democracy, Uruguay is quite outspoken on the subject of human rights — especially in Venezuela, where what little democracy remains appears to be quickly collapsing.

While Gianelli wouldn’t come out and call Venezuelan President Nicolás Maduro a dictator, he did say the country was “leaning toward authoritarianism” under Maduro’s leadership — and that Uruguay is clearly worried, and so is the OAS under Almagro, Uruguay’s former foreign minister.

Elected to head the Washington-based body in 2015, Almagro — once an admirer of Venezuela’s populist policies under the late Hugo Chávez — has now become one of Venezuela’s fiercest critics. After Almagro threatened to expel the country unless it holds general elections “as quickly as possible,” Maduro announced in late April that Venezuela would withdraw from the OAS, which it calls a U.S. puppet organization.

“Almagro was nominated by the current government of Uruguay. He now represents 34 countries. He has his agenda, and Uruguay’s position is not always identical to that of the OAS,” Gianelli said. “But we agree that Venezuela has problems, democracy is eroding there and human rights is a challenge. A lot of people have died. Uruguay is very moderate, and we’d like to see the opposition and government immediately engage in peace talks.”

Yet the big story in Uruguay isn’t Maduro, but marijuana.

In 2013, Uruguay became the first country in the world to completely legalize the consumption of marijuana (citizens could cultivate a certain amount for personal use or through membership clubs). The culmination of this three-year legalization process came this past July, when sales of marijuana were scheduled to begin at 16 pharmacies throughout the country to about 6,000 people who have registered as consumers.

The government will heavily regulate the process. According to Reuters, pharmacies will have a total of 400 kilograms at their disposal, an amount that could increase depending on demand, said Juan Roballo, head of the National Drug Board. They must sell the substance in 5-gram containers at $1.30 per gram.

In addition, interested Uruguayans 18 or older must enroll in a government registry complete with a digital thumb scan, and may only purchase 40 grams per month. Smoking on the job or while driving remain illegal, and only citizens — not foreign tourists — will be able to purchase the drug.

The verdict on legalizing cannabis is still out — Canada is considering joining Uruguay in legalizing the consumption of marijuana, and many other nations allow it to be prescribed for medical purposes or stopped prosecuting it as a crime. Various studies have shown that marijuana is not the “gateway” drug its critics often paint it out to be, although its long-term health effects are unknown — nor is it known whether government attempts to regulate its sale will decrease illegal narco-trafficking. And a significant portion of Uruguayans aren’t thrilled that their nation has become the poster child in the global marijuana experiment.

Interestingly, while Uruguay is allowing its citizens to smoke weed, it strongly discourages them from smoking cigarettes. In a classic David vs. Goliath story, Uruguay won a lengthy legal battle against tobacco giant Philip Morris, which sued the government for, among other things, ordering cigarette makers to cover their packs with grisly warnings about the dangers of smoking.

So why is it OK for Uruguayans to light up in certain circumstances and not in others? The government argues that both cannabis and tobacco will be heavily regulated. The potency and genetic makeup of marijuana plants will be closely monitored and commercial marketing is strictly prohibited. The goal, as The Washington Post’s Nick Miroff wrote on July 7, is to make marijuana “as boring as possible” and ultimately decrease consumption. The government also points out that tobacco causes a litany of costly health problems and that black-market marijuana funds a dangerous, illicit drug trade that fuels crime and violence. (A portion of the marijuana sales will go to a fund for addiction treatment and public health campaigns.)

“As a former cigarette smoker, I was involved in Uruguay’s lawsuit against Philip Morris, when they sued us for $20 million at the World Bank regarding tobacco regulations,” the ambassador explained. “We spent six years defending ourselves before the bank’s Settlement Dispute Mechanism. In the end, the final award was in our favor, and the tribunal decided that Philip Morris had to pay Uruguay $7 million plus court costs.

“But cannabis is different. President Mujica pushed this in order to try to reduce demand as well as illegal trafficking,” Gianelli continued, although he cautioned that he himself does not necessarily support the legalization of marijuana. “The majority of people supported it, but I am against it because I’m a former smoker and cigarettes are very dangerous. I quit because I started having problems with my throat.”

He added that “outside Uruguay, there was a lot of criticism about our decision,” although others supported the move, including Ernesto Zedillo, the former president of Mexico, and Colombia’s former president, César Gaviría.

These two countries provide ample ammunition of exactly why Uruguay’s new law makes sense, argues Eduardo Blasina, director of Montevideo’s recently inaugurated Cannabis Museum.

“The law gives consumers access to certified, unadulterated marijuana,” Blasina told The Guardian’s Uki Goñi in a recent interview. “South America’s war against drugs has been absurd, with catastrophic results no matter which indicators you consider, including consumption. If Uruguay’s experience turns out positive, it will be easier for other countries such as Colombia or Mexico, mired in huge problems with powerful narcos, to find a better solution than the disastrous one implemented so far.” 

About the Author

Larry Luxner is the Tel Aviv-based news editor of The Washington Diplomat.