General Máximo Tajes (1886-90), who was appointed president by the General Assembly, tried to restore the constitution and remove the military chiefs who had supported Santos. During the Tajes administration, civilian political activity resumed. At the end of the Tajes term, Julio Herrera y Obes was elected president (1890-94). Herrera y Obes belonged to the Colorado Party, had been an adviser to his predecessor, and was instrumental in the transition process that displaced the military from power. He selected his aides from among a small group of friends and was convinced that the executive had to play a leading role in elections and the makeup of the General Assembly. This policy, called the "directing influence," was resisted by a sector of the Colorado Party led by José Batlle y Ordóñez, son of the former president, Lorenzo Batlle y Grau.

In 1894, after much internal debate, the General Assembly appointed Juan Idiarte Borda (1894-97), a member of the inner circle of the departing administration, as the new president. But Herrera y Obes and Borda had succeeded in irritating the National Party, when the latter was granted control of only three of the four departments agreed on in the 1872 pact between the two rival parties.

In 1897 discontent led an armed uprising by Blanco forces. The insurrection was led by Aparicio Saravia, a caudillo from a ranching family originally from the Brazilian state of Rio Grande do Sul who was involved in military and political affairs on both sides of the border. The Saravia revolution raised the flag of electoral guarantees, the secret ballot, and proportional representation. Military action had not yet decided the situation when President Borda was assassinated. The president of the Senate (the upper house of the General Assembly), Juan Lindolfo Cuestas (1897-1903), served as provisional president until 1899, when he was elected constitutional president. Cuestas quickly signed a peace agreement with the National Party, giving it control over six of Uruguay's departments and promising all citizens their political rights. An anticlericalist, Cuestas placed restrictions on the exercise of Roman Catholicism and tried to prevent admission to the country of friars and priests.

A majority of the members of the General Assembly, who had ties to the Herrera y Obes faction, submitted another presidential candidate in 1898 for the scheduled election. Cuestas, unwilling to give up power, led a coup d'état. He included members of the opposition in his government in a rudimentary attempt at proportional representation. Late that same year, the Cuestas regime promulgated the Permanent Civil Register Law, dealing with electoral matters, and the Elections Law, formally establishing the principle of minority representation. Through this legislation, the opposition gained access to one-third of the seats if it obtained one-fourth of the total votes.

The political consensus achieved by Cuestas resulted in the unanimous support by the General Assembly for his candidacy and appointment as constitutional president in 1899. In fact, however, politicalcdf al peace was an illusion. There were, in effect, two countries, one Blanco and one Colorado. President Cuestas had to send an envoy to caudillo Saravia, near the border with Brazil, in order to coordinate government action. This precarious balance would break down in 1903 when Batlle y Ordóñez took power.

In spite of political and economic fluctuations, the flow of immigrants continued. From the 1870s to the 1910s, Uruguay's population doubled to just over 1 million inhabitants, 30 percent of whom lived in Montevideo. Montevideo also continued to experience modernization, including the installation of a telephone system (1878) and public lighting (1886). At the same time, the euphoria and speculation of the 1870s and 1880s saw a proliferation of banks and corporations and a stimulation of land sales, as well as the construction of multifamily dwellings.

The economic crisis of 1890 was a traumatic event for Uruguayan society. Bankruptcies followed one after another, and the banking system saw the collapse of a key banking institution, created by a Spanish financier, which had served the needs of the state and promoted production and construction.

The ruling elite felt the impact, and some of its more progressive sectors directed their efforts to the creation of a development model for the country. They were aware of both the need to encourage agricultural and industrial development and the need to redefine the limits of the state. The growing importance of British investment had stimulated the rise of economic nationalism and had, by 1898, provoked more active state intervention.

State intervention in the economy continued in 1896 when the electric utility company was transferred to the municipality of Montevideo and the Bank of Uruguay (Banco de la República Oriental del Uruguay--BROU) was created as an autonomous entity ( autonomous agency or state enterprise see Glossary). Moreover, under Cuestas's administration, the state undertook construction of the modern harbor of Montevideo, in reaction to the new facility in Buenos Aires, which had absorbed part of the river traffic with Paraguay and the Argentine littoral. Nevertheless, the nationalization of economic activities and the creation of state enterprises did not fully gather momentum until the administration of Batlle y Ordóñez.

Data as of December 1990