20 Centésimos – Uruguay

By 1954, Uruguay was grappling with the long-term consequences of its post-war economic model and a significant deterioration in its currency situation. The country's prosperity, historically tied to beef and wool exports, was undermined by falling global commodity prices in the early 1950s. This created a persistent balance of payments deficit, draining the nation's gold and foreign currency reserves. The government's commitment to maintaining a strong peso and a generous welfare state, without corresponding fiscal discipline, led to excessive money printing to cover deficits, fueling inflationary pressures.

The currency instability was institutionalized through a complex system of multiple exchange rates (política de cambios múltiples). The Central Bank set different peso-to-dollar rates for various export sectors, imports, and financial transactions, attempting to manage the balance of payments and subsidize essential goods. However, this system created distortions, encouraged speculation, and fostered a thriving black market for dollars (mercado libre), where the peso traded at a significant discount to the official rates. This gap reflected a lack of confidence in the managed currency and reflected the underlying economic imbalances.

President Andrés Martínez Trueba’s Consejo Nacional de Gobierno (a collective executive) struggled to address these deep-rooted issues. Attempts at stabilization were hesitant and often reversed, as the political cost of austerity was high. Consequently, 1954 saw continued inflation, a overvalued official peso, and shrinking reserves. This precarious currency situation marked a pivotal phase in Uruguay's gradual economic decline, eroding the financial stability of the Batllista welfare state and setting the stage for more severe crises in the decades to follow.