Today, rural areas of Mercedes/Soriano in western Uruguay are facing changes related to rural-urban migration and the development of industrial agriculture. As a result of rural migration, economic crises, labor issues, and other critical problems, the outskirts of Mercedes began to be appropriated by squatters. In the last few years different strategic plans and policies carried out by governments at multiple levels have attempted to regularize and relocate some of the informal settlements. Using Lefebvre’s (1991) theory of space, this study explores how plans under the rational paradigm have transformed the spatial practice of informal settlements in Mercedes, Uruguay. Rationality embodies the contradictions between planning theory or research and current practice. Secondary data and resulting analytical maps are utilized to understand recent changes produced in the urban-rural space of Mercedes. Regional and local plans and policies are discussed through informal conversations with staff from local and national governments. Results show that interactions between plans, policies, and social mobility have transformed public spaces and existing neighborhoods, emphasizing the social-spatial fragmentation between the inner city and the periphery and/or informal settlements. Recommendations center on how governmental institutions can develop new policies and regulations to improve and change critical aspects of Mercedes’ growth.