Her limbs don't stretch like they used to, but Maria Bustelo, 67, goes for it anyway. She plants her feet on the floor, puts her hands on her hips and bends backward toward a 30 degree incline. She gets to maybe 15.

Crack! sounds her back, and her eyes pop open. She's stuck there for a minute, hardly noticed by the rest of a yoga class brimming with contorting Uruguayan retirees. Struggling, she beats a hasty retreat to blessed vertical.

She pauses a minute, then goes for it again--and makes it. But straightening up is another matter.

"I do what I can and fake the rest," laughed Bustelo, a retired soap factory worker.

The class is held in one of Uruguay's 150 "grandparents clubs," state-sponsored recreational centers for the elderly. The centers are part of an array of services that has made Uruguay, the "grayest" country in Latin America, an international model for treatment of the aged.

For about $2 a month, Bustelo and other club members, some well into their nineties, enjoy all the yoga, aerobics and dance classes they want. Medical care is a few steps away at a well-stocked clinic. And, like all Uruguayan retirees, if they want a change of scenery, they can take a state-subsidized vacation at a dude ranch or beach resort.

"I'm here having fun," she said. "And that's the point."

Uruguay is known as a country of the old. Save for a few islands in the Caribbean, this South American nation of 3.1 million has the highest percentage of elderly in the hemisphere. More than 17 percent of Uruguayans are over 60 (compared with 16.5 percent in the United States). There are about as many retirees--700,000--as there are children in grade school.

What could have been a social disaster has become a source of national pride. Uruguay has become internationally recognized for its treatment of the elderly. Even the Japanese have come to study programs considered more advanced than those in many wealthier nations in the First World.

Besides financial assistance to the grandparents clubs and subsidized vacations at two government-owned resorts for the aged, the state provides psychological therapy to help its citizens adjust to retirement. Grants are offered to more than 400 retirement homes scattered around this nation that is slightly larger in area than New York state. The poorest among the elderly are given housing and low-cost access to private health care. The government also promotes "age sensitivity" classes for grammar school students.

The Uruguayan Congress is about to debate a new bill of rights for the elderly to extend benefits further. Already, the state mandates that sons or daughters take care of their aging parents or provide for them financially.

"Uruguay has become a guide for Latin America on how to treat and care for our aging populations in the future," said Jose Fiusa Lima, country director of the Pan American Health Organization.

The kindness, however, has a cost. Almost half the taxes collected here go to cover pensions and social services for the aged. Generous services have also pushed taxes in Uruguay higher than those in most of Latin America. Sales taxes alone top 23 percent.

A social security reform passed in 1995 was aimed at having future retirees depend more on private savings than help from the state. But some experts say the generous programs may become more than Uruguay can afford as the nation continues to age.

"There are people who believe we have a ticking time bomb on our hands," said Gerardo Caetano, a Montevideo-based political analyst.

But it is not merely the state that embraces the old; it is the society. Respect for the elderly here comes as naturally as it does for a fine-tuned cachila, local slang for the early model cars that grace the lazy boulevards of Montevideo.

"For us, it's cultural," said Elbio Mendez Areco, general director of Uruguay's Labor and Social Welfare Ministry. "We go beyond the Latin tradition of family closeness. For us, it is a social crime not to give the elderly the attention they deserve."

On a recent afternoon in this slow-paced city of 1.3 million, Santiago Castillanos, an 11-year-old sixth-grader, seemed mortified as he sat in his chair in a government auditorium. Wearing the typical school uniform of a large white smock with an oversized blue bow collar, he stared as an actor playing a grandfather was brusquely told by an actress playing his daughter-in-law that he was to be shipped off to a retirement home. No questions. No discussions. Just pack up your analgesics and say adios.

"But you just can't do that to a grandfather!" said Santiago, seeming genuinely scandalized after the play--part of the age sensitivity classes the government launched this year. He and four other children were discussing the plot with three volunteer retirees, and judging by the children's reactions, there wasn't much reinforcement needed.

"It's horrible, it's just horrible!" Santiago continued. "What would the grandchildren do without their grandfather around? Who would they have to talk to at home?"

Mabel Pollo Carabajul, her gray hair piled neatly above large glasses, grew misty at his reaction. The 68-year-old volunteer in the intergeneration program is a mother of one with no grandchildren. But if she did have them, she said, she'd like them to be like Santiago.

"They give me vitality and joy," she said, pointing at the children.

In other state-sponsored classes, the two generations combine forces to do arts and crafts and sing songs. In less than a year, the program has become so successful that some children have sent homemade cards to their new "adopted family" on Uruguay's Grandparents Day.

Senior citizens like Carabajul without grandchildren are common here. The low birth rate is one reason the percentage of senior citizens is so high. In a nation populated mostly by descendants of European immigrants, the separation of church and state is the strongest in Latin America, so there is little reluctance to use contraceptives on religious grounds.

Another reason was an exodus of young professionals during the military dictatorship that ruled the country between 1973 and 1985.

But perhaps the most significant reason is that Uruguayans are among the longer living people in the world. An uncrowded society supported by an old-style welfare state that has kept the poverty rate here the lowest in Latin America and provided access to health care has given Uruguayans an average life expectancy of 75 years.

CAPTION: Teacher Angelina Medina, left, assists Line Lopez, 64, in a yoga class at the state-sponsored Andorra Grandfather's Club in Montevideo, Uruguay.