Latin America's Denmark.

Democracy is in question--except in Uruguay the region's strongest welfare state.

It came as no surprise to me that a new regional survey shows support for democracy is wavering almost every-where in Latin America. The poll, which represents 480 million people in 17 nations, indicates that economic hardship, high unemployment and the widening gap between rich and poor--in part fed by privatizations and free market reforms--have left many bitterly disillusioned.

Latinobarometro found that Latin Americans still generally favor trade deals. But the survey by the respected Santiago, Chile, polling group also showed that support for democracy fell 12 points, to 48%, since a year ago. Even more shocking, half of the respondents said they would not object to a return to military rule.

Naturally, most focused on their pocketbooks. "The economic structural changes have not brought the economic goods that they were supposed to," reports Marta Lagos, Latinobarometro's director. "The drop in support for democracy is because of high expectations for economic progress.

The numbers are disheartening. Democracy fared worst in poverty-stricken Central American nations like El Salvador (to 25% support from 63%) and Nicaragua (to 43% from 64%). In South America, Colombia and Ecuador fell 14 points, followed by Argentina, down 13 points. In Brazil, the region's largest nation, just 30% of respondents are pro-democracy.

Which brings me to the Latin American nation that most supports democracy--Uruguay, with a resounding 79%--and why.

This wool-and beef-producing nation of 3.3 million people fought to stay off the globalization bandwagon and to maintain a century-old welfare system that has kept poverty at the lowest rate in Latin America. During three trips there in the 1990s, I noticed how proud Uruguayans are of their political and economic system, and how different they are from other Latin Americans.

Strong state control and job security laws are firmly rooted in Uruguay thanks largely to the remarkable cradle-to-grave welfare programs created by President Jose Batlle y Ordofiez in the early 20th century, programs which fostered a well-educated, egalitarian society. He is still regarded as a secular saint--a combination of Abraham Lincoln and Franklin Delano Roosevelt.

As a result, Uruguay is a nation where corporate executives are generally loathed; the words "big government" soothe local ears; ostentation is scorned (especially among visiting Argentines clad in mink coats and driving luxury cars); schoolteachers and owners of small, family businesses are role models; and privatization attempts face plebiscites that overwhelmingly vote it down. Current President Jorge Batlle--Batlle y Ordonez's great-nephew-lost four presidential elections until he publicly rejected privatization.

Public and private. To be sure, Uruguay has a small population and low birth rate. It also joined Mercosur, the Southern Cone trade bloc with Brazil, Argentina and Paraguay and sold off 51% of its national airline. Paying for a welfare state has meant a dearth of new industries slow salary growth and high taxes. In other Latin American countries, too, governments ruined economies before free-market reforms were enacted.

But the Uruguayan model has worked for a century, giving Uruguayans a better and longer life than their neighbors. State-run ventures are profitable; the government manages such businesses as casinos, hotels, banks, gas stations, water and sewage and telephone companies. When state firms need help, the government doles out contracts to the private sector.

As a result, profits are spent on full health-care coverage, generous pensions and the highest literacy rate in Latin America, 97.3% in 2000. Two giant neighbors of tiny Uruguay have embraced privatizations and free market policies, albeit Brazil somewhat reluctantly and Argentina in a slipshod fashion. Buffeted by the headwinds of global trade and finance, Uruguayans nevertheless remain determined to hold on to their revered system. Why, they ask, do we want to wind up with the same social problems as Mexico, Brazil and Argentina, once Latin America's wealthiest nation?

Perhaps it is time to re-examine Uruguay's mixed economy and learn how it produced an electorate whose overwhelming majority still believes in democracy.