Hydroelectricity and imported petroleum were the primary sources of energy in Uruguay. During the 1980s, the nation reduced its dependence on imported crude oil and increased its hydroelectric capacity. At the beginning of the decade, threefourths of Uruguay's energy came from imported oil by 1987 less than half did. This trend toward hydroelectric power was interrupted during 1988 and 1989 because of a severe drought. Oil-burning power stations had to be brought on-line temporarily, increasing energy costs. In addition, rotating power outages were instituted in Montevideo and other cities. Partly because of such conservation measures, total consumption of energy actually decreased during the late 1980s. Real growth in the utilities sector declined by 12.2 percent in 1989.

The single largest source of hydroelectricity was the Salto Grande Dam on the Río Uruguay, built and operated in cooperation with Argentina. The US$1 billion dam was completed in 1982 and supplied 1.8 million megawatt-hours of energy to Uruguay in 1987 (before the drought), or 40 percent of Uruguay's electricity. In 1989 the huge project was reported to be facing serious financial difficulties. The Uruguayan and Argentine state-owned power companies were US$45 million and US$250 million behind in payments, respectively, to banks and foreign creditors, and absorption of the debts by the two nations' central banks was expected.

Three other hydroelectric power sources were located on the Río Negro. Of these, the El Palmar Dam (located at Palmar), built and operated jointly with Brazil, was the largest and newest (in full operation since 1983) in 1988 it supplied 330 megawatts to Uruguay. The Baygorria Dam and the Gabriel Terra Dam (the latter in operation since 1948) supplied 108 megawatts and 128 megawatts, respectively, in 1988.

The Sanguinetti administration's policy was to improve the existing hydroelectric facilities rather than embark on new projects. Emphasis was placed on extending the electrical distribution network in rural areas. In 1988 the rural electrical network spanned 1,400 kilometers, more than double the 630 kilometers in 1984. The government approved a total of US$139 million in investments in 1988-89 by UTE, mostly in the distribution program.

Uruguay had no domestic oil resources, despite several exploration efforts. The nation imported mostly crude oil, which was then refined by ANCAP and a few small plants (see External Sector , this ch.). In 1985 ANCAP had a refining capacity of 40,000 barrels per day its facilities were upgraded during the late 1980s.

Data as of December 1990