The Martínez administration in the first half of the 1950s, however, was one of economic decline. At the end of the Korean War (1950-53), during which Uruguay had exported wool for coldweather uniforms, Uruguay experienced a reduction in exports, a drop in the price of agricultural and livestock products, labor unrest, and unemployment. Livestock production, which had basically stagnated since the 1920s, was not capable of providing the foreign exchange needed to further implement the import-substitution industrialization model. Starting in 1955, the industrial sector stagnated and inflation rose. At the same time, Uruguay had difficulties with the United States regarding wool exports and suffered the negative effects of both restrictive United States trade policies and competition from the foreign sales of United States agricultural surpluses.

In 1951 a faction opposing the more radical leadership of the General Union of Workers (Unión General de Trabajadores--UGT established in 1942) founded the General Confederation of Labor. Nevertheless, strikes and stoppages continued. In 1952, in the face of labor unrest, the National Council of Government invoked the emergency provision of the constitution known as the medidas prontas de seguridad (prompt security measures). From 1956 to 1972, the gross national product ( GNP--see Glossary) fell 12 percent, and in the decade from 1957 to 1967 real wages for public employees fell 40 percent. In 1958 the General Assembly approved strike insurance and maternity leave. In addition, worker and student mobilization pressured the General Assembly into approving the Organic University Law, whereby the government recognized the autonomy of the University of the Republic and the right of professors, alumni, and students to govern it. Nevertheless, labor unrest increased.

At first, dramatic political events masked the economic crisis. In the 1958 elections, the Independent Nationalists, who had joined the Democratic Blanco Union (Unión Blanca Democrática- -UBD), agreed to include their votes under the traditional National Party of the Herrerists. Thus, for the first time in decades, the National Party voted as one party. In addition, Herrera joined forces with Nardone and his LFAR, transforming it from a union into a political movement. Aided by the LFAR and a weakening economy, the National Party won, and the Colorado Party lost control of the executive for the first time in ninety-four years.

Data as of December 1990