Historical Sketch

Since the arrival of the Europeans in the early 16th century, the territory north-east of the Rio de la Plata had been contented between Portuguese and Spanish colonial interests. After the Spanish-Portuguese War Spain took the upper hand, and in 1776, the then called Banda Oriental (Eastern Bank of the river Uruguay) became integrated into the Viceroyalty of Rio de la Plata. When the Argentine war of independence broke out in 1816, the territory got first annexed by neighbouring Brazil, but retaken by Rio de la Plata afterwards. The ensuing Argentine-Brazilian War ended in the Treaty of Montevideo in which both parties agreed on the independence of the Republic East of the Uruguay in 1828.

Monetary History Overview

At the time of independence, a multitude of coins were circulating in Uruguay. No currency law was passed for the time being, just the copper subsidiary coinage of neighbouring Brazil and Buenos Aires as well as the Buenos Aires paper money was demonetized in 1831. Uruguay began issuing its own copper coins in 1839. The denominations were decimal and based on the Uruguayan Real as unit of account that corresponded to an eighth of the Spanish Dollar. Otherwise, the payment transactions were made in foreign gold and silver coins. In 1854, a government commission recommended a reform of the monetary system. A currency law was passed that transformed the Real into a bimetallic currency. Three years later, the currency law was amended to make the "Peso Fuerte" of 8 Reals the base unit. Neither currency reform was realized since the government did not have the funds. The third attempt was finally successful. Beginning of 1863, the 1st Uruguayan Peso became the national currency in the bimetallic standard. No specie coins were issued initially, just subsidiary coins. Private paper money issuance had begun in 1857, state treasury notes followed in 1870. During a monetary crisis of 1875-1876 state paper money was issued in great amounts and convertibility into specie suspended. Afterwards, the state paper money was recalled, and no further issues were ever authorized. When convertibility got restored, gold issuance remained outside the reach of the government, but at least the production silver coins could be initiated. The amounts were modest so that foreign silver coins were demonetized only in 1893. In 1896, the state-controlled Bank of the Republic took over the role of a central bank. Private paper money issuance continued on a low scale until the early 20th century but most of the banks had given up or disappeared after several banking crises. The Peso's gold standard was suspended in 1914 and nominally reinstated in the late 1910s. After 1930, the Peso got pegged to the US Dollar, but the official rate soon became inoperative and several effective rates emerged until, in October 1949, it was fully abolished. Then followed a period with multiple exchange rates until 1963 when exchange rate policy changed again. During the 1960s, the Peso lost value at an increasing speed until the rate got frozen in 1968. In 1972, after a 50% devaluation, the rate was floated and lost another 80% in the next three years. In July 1975, a currency reform was carried out. Three zeros were cut, and the 2nd Uruguayan (New) Peso became the new unit. The economic situation had not changed so the value decay continued at annual rates of 30% on average. In 1991, a next currency reform was foreseen but got postponed due to the dire economic situation. In March 1993 finally, another three zeros were cut, and the 3rd Uruguayan Peso became the new unit. The currency depreciation gradually slowed down but continued at annual rates of close to 20% for almost another decade. In 2003, when 85% of its original value had gone, the Peso did finally stabilize and remained so for a decade. Since the mid-2010s, the Peso has started to depreciate again.

Uruguay joined the International Monetary Fund (IMF) on 11.03.1946.

Currency Units Timeline

Currency Institutes Timeline

Monetary History Sources