Uruguayans vote for their next president on Sunday, but the election is set to be eclipsed by another ballot: a pension plebiscite that analysts have warned could cripple the nation’s finances.

Along with choosing a new president, 30 senators and 99 deputies, the electorate will also vote on two referendums. The first – which comes in response to rising fears over organised crime and public safety – would allow nighttime police raids on homes. But it is the second that is dominating headlines: a pension referendum that would overturn recent reforms, lower the retirement age by five years, tie pensions to the minimum wage and scrap private pension fund managers.

Supporters say it would redistribute wealth and make pensions more generous, but analysts fear the move could cripple the nation’s finances, and have dubbed it the country’s “Brexit moment”.

“This is a presidential election with an unnamed candidate and the plebiscite on pension reform,” said Nicolás Saldías, a senior analyst at the Economist Intelligence Unit. “It’s high stakes.”

Uruguay is known among its neighbours for its relative affluence, high per capita income and large middle class. Its commitment to free markets and private enterprise has attracted finance and tech firms alike: Google recently started building a datacentre in the south.

Some estimates suggest the pension reforms in the fast-ageing country would increase its deficit by $1.5bn and lead to years of litigation over the end of the private pension system, which holds more than $20bn in savings. The prospect of the reform passing has led the Uruguayan peso to weaken over 10% against the dollar since April.

Saldías, and other economists, have warned the measure would also “seriously risk” Uruguay’s investment-grade status. “Uruguay doesn’t have copper or lithium – it only has its word. If the country does not stick to that, then we’re in the oven,” he said, adding that it would be Uruguay’s “Brexit moment” by “hobbling the next government” as it manages the fallout.

The referendum, which has been called by the unions and is binding, is opposed by most political parties. The current president, Luis Lacalle Pou, described it as “dangerous and harmful”; the leading candidate, Yamandú Orsi, of the left-wing Frente Amplio, has spoken against it; while Álvaro Delgado, from the incumbent centre-right coalition, said it would “blow up” economic stability.

Unions argue that the changes would give workers more dignity in retirement by increasing payments. “We have meagre pensions in Uruguay. Retirees in this country are poor,” 68-year-old educator Jose Luis Correa told Reuters. “If they can cut out private pension fund managers, there’ll be more for us and future retirees.” The typical minimum monthly pension as of January 1 was 18,840 pesos, approximately $450.

The pension plebiscite has also been criticised for overshadowing other issues in Uruguay, in particular child poverty and poor education rates. One in five children live in poverty. Meanwhile, only about half of students finish secondary school, one of the lowest rates in Latin America.

“Structural issues like pensions do need to be discussed, but also we need to look at more urgent issues like poverty,” said Sylvia Ibarguren, a member of the chamber of representatives of Uruguay, of the leftist Broad Front party.

Uruguay has long been known as a bastion of democracy, ranked 14th globally by the Economist Intelligence Unit in 2023, ahead of the UK at 18, and the US at 29. Plebiscites have been used since the 1990s to vote on topics including the privatisation of public services, amnesty laws, anti-crime policies and water rights.

On Sunday the electorate will also vote on whether to allow nighttime police raids on homes, spurred by growing concerns about organised crime and public safety.

It comes as surging gang violence – in part fuelled by shifting cocaine smuggling routes – has shaken the proudly peaceful nation. Uruguay, which is home to 3.4 million people, suffered a record 426 murders in 2018, and violence has remained high ever since, as low-level gangs vie for control. Earlier this month, a baby was killed after being shot three times during a turf battle, while in September six people died after a fire was intentionally set in a prison.

Uruguay’s homicide rate currently sits at 11 per 100,000, more than double the rate of neighbouring Argentina and nearby Chile.

“Uruguayans see their country as a stable and peaceful place,” said John Walsh, the director of drug policy at the Washington Office on Latin America. “By and large that has remained true for a long time – and now Uruguyans are understandably alarmed. They have a sense that their security is slipping.”

For the presidential election itself, voters say insecurity, unemployment and drug trafficking are their top concerns. Yet, generally, analysts say there is a lack of interest from the public about the vote. “It’s not mobilising people,” said Saldías. “Uruguay has overall been doing OK, so they think, why change that?”

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