Uruguay's military opens a way back toward democracy

Uruguay, once famed as the ''Switzerland of Latin America'' because of its democratic traditions and attractiveness to foreign bankers, has been plunged into a period of political uncertainty and economic gloom.

It is hard to imagine how anything very dramatic could ever happen here. Uruguay is the smallest of Latin American countries, with a population of about 2.8 million. The old colonial capital of Montevideo, with its old fords and street vendors, gazes rather sleepily across the River Plate toward a hectic and aggressive Argentina.

Yet Uruguay in the late 1960s was the scene for one of Latin America's most organized and, for a time, most successful guerrilla movements, the Tupamaros. Their actions provoked a period of bloody military intervention and in 1973 assumption of power of a president supported by the armed forces.

More recently, according to a local anecdote, a sign was pasted up in Montevideo's international airport with the inscription, ''The last one out of the country please switch off the light'' - a reference to the estimated 12 percent of the population that were forced to leave the country because of repression.

Now it seems the armed forces are prepared to hand back power to the civilians, although they are divided on when this should occur and what method of transfer is best. In November 1980, the military drafted a constitution that proposed extending most of its power indefinitely. The proposed constitution's resounding defeat in a referendum left many generals with the reluctant conclusion that their popular support was not what they had imagined it to be.

The military's latest proposals for political change are contained in an as-yet-unpublished statute. If approved by the executive, the nation's two main traditional parties, the conservative Blancos and the more populist Colorados will be allowed to resume political activity.

''I think the military will bring out the statute by April. Once they do that , it will be all systems go,'' is the confident prediction of outlawed Colorado Sen. Manuel Flores Mora. He believes that although there may not be full democratic elections for at least another two years - the statute will exclude left wing parties - it is about as much as the Uruguayans can hope for in the present circumstances.

The signs of Uruguay's political liberalization are all too visible in Montevideo, with a recent outpouring of new publications criticizing the government and the gradual release of political prisoners. There are an estimated 1,500 persons in Uruguayan jails compared to a over 7,000 three years ago.

The military, however, is still acutely conscious of the past of the guerrilla organization Tupamaros and still tend to equate democracy with political and social chaos.

Political change is taking place against a background of growing tension on the economic front. The military has been pursuing the orthodox economic policies of the ''Chicago school,'' - strict conservatism. In Uruguay this has meant relative success in reducing inflation - down to 29.4 percent in 1981 from 42.8 percent in 1980 - but major problems for the rest of the economy.

Because it has few natural resources and only a small population, Uruguay is highly dependent on its meat exports from the grazing grounds that cover most of the country. Yet because of falling international meat prices, high domestic interest rates, and an overvalued local currency, Uruguayan farmers are going through the worst crisis in their history. Most of them are bankrupt owing large outstanding debts to banks.