Born in Montevideo to a wealthy family, he graduated from the University of Uruguay in 1895, and subsequently joined the faculty.

After being selected to lead the country by the congress in 1930, he came to power in 1931. On March 1, 1931 he assumed the Presidency of the Republic for the period 1931-1938. From the beginning, he opposed the Constitution of 1918. On March 31, 1933, with the support of the police, (led by his brother-in-law, Alfredo Baldomir) the Army, and the majority sector of the National Party (led by Luis Alberto de Herrera) he brought about a coup d’etat. The Parliament was dissolved, and he disbanded the National Council of Administration, a special body set up in 1919 to provide checks and balances. This was soon followed by the total abolition of the constitution, the censorship of the press, and the merger of state powers with the presidency. He set up a government of conservative, authoritarian and illiberal character, in opposition to Batllismo and to the left. He produced a new constitution in 1934 and he put himself up for election, and was elected under a shroud of suspicion.The period opened by the coup is called the Terra Dictatorship.

Particularly after 1933, Terra was tellingly closer politically to his nominal National Party (Uruguay) opponent Dr. Luis Alberto de Herrera than he was to many of his Colorado Party (Uruguay) colleagues. Terra predominantly ruled harshly and by diktat, but continued most of the socialist reforms begun by his predecessor.

During 1934 and 1935 there were many moments of political tension, with attempts at rebellion that failed, such as the Revolutionary Putsch of 1935. The main confrontation of this event was the Paso Morlan Skirmish, on February 28, 1935, which was quickly suppressed by the police forces. Paso Morlan was followed by the arrest, exile and confinement of 70 political prisoners on the Isla de Flores, including the Socialist Emilio Frugoni, nationalist Gustavo Gallinal, the batllista Luis Batlle Berres, the writer Francisco “Paco” Espinola and veterinary researcher Miguel C. Rubino. They were arrested, imprisoned or lost their public office, those university graduates who did not sign a letter expressing allegiance to Terra’s regime. Many had to escape to Argentina to avoid being arrested and interned on the Isla de Flores. Another victim of the Terra Dictatorship was Doctor Julio Caesar Grauert, who was shot by police upon returning from a political event on October 26, 1933, and was left without medical attention and died of gangrene.

Terra’s interior minister was Alberto Demicheli, who much later was himself to become President of Uruguay as an interim measure in 1976. Demichelli’s wife, Sofía Álvarez Vignoli de Demicheli, was noted for her diplomatic activity during Terra’s Presidency.