When spaniards determined the territory of present-day Uruguay in 1516, they found only a rolling prairie populated by groups of Indians living in primitive conditions. When confronted by the Spaniards, the Indians fiercely defended their freedom and their independent way of life. their continued ferocious resistance to Spanish conquest, combined with the absence of gold and silver, discouraged settlement in this region during the 16th and early 17th centuries. Colonization by Spain began to increase, when Portugal showed an interest in expanding Brazil's frontiers to the Río de la Plata Estuary in the late 17th century. Indeed, the early history of Uruguay is controlled by the fight between Spain and Portugal and then between Brazil and Argentina for control of the Banda Oriental -as Uruguay was then known, the eastern side, or bank, so called because the territory lies to the east of the Río Uruguay, which forms the border with Argentina and flows into the Río de la Plata.

In 1967 the Colorados regained power, but President Jorge Pacheco Areco enforced a limited state of siege throughout most of his tenure. He applied a price- and wagefreeze policy to fight inflation, banned leftist groups, and called in the military to repress the Tupamaros, whose acts of urban terrorism posed a major national security threat. In 1972 Pacheco's successor, President Juan María Bordaberry Arocena ,supported by the military, declared a state of "internal war," closed the General Assembly, persecuted the opposition, banned unions and leftist parties, and curtailed civil liberties. The military dictatorship that he instituted also implemented a neoliberal, monetarist, economic policy that sought to reverse years of capital flight and economic stagnation by increasing exports and controlling inflation. Although it scored some economic successes, the military suffered a defeat in 1980 after submitting an authoritarian constitution to a plebiscite. From then on, civil political leaders returned to the political scene, and in 1984 the majority of the political parties and the military agreed to call for elections in November 1985, thus allowing for a transition to democracy.