Editing Import substitution industrialization (section)

== Latin America ==
Import substitution policies were adopted by most nations in [[Latin America]] from the 1930s to the late 1980s. The initial date is largely attributed to the impact of the [[Great Depression]] of the 1930s, when Latin American countries, which exported primary products and imported almost all of the industrialized goods that they consumed, were prevented from importing because of a sharp decline in their foreign sales, which served as an incentive for the domestic production of the goods that they needed. The end date being the 1980s is largely due the emerging debt crisis that was occurring at the time, and through solving the crisis they turned away from import substitution and toward neoliberalism.<ref>{{Cite book |last=Brands |first=Hal |url=http://www.jstor.org/stable/10.2307/j.ctvjk2vjz |title=Latin America’s Cold War |date=2012-03-05 |publisher=Harvard University Press |isbn=978-0-674-05843-9 |doi=10.2307/j.ctvjk2vjz}}</ref>

The first steps in import substitution were less theoretical and more pragmatic choices on how to face the limitations imposed by recession even though the governments in Argentina ([[Juan Domingo Perón]]) and Brazil ([[Getúlio Vargas]]) had the precedent of [[Kingdom of Italy#Fascist regime (1922–1943)|Fascist Italy]] (and, to some extent, the [[Soviet Union]]) as inspirations of state-induced industrialization. [[Positivist]] thinking, which sought a strong government to modernize society, played a major influence on Latin American military thinking in the 20th century. The officials, many of whom rose to power, like Perón and Vargas, considered industrialization (especially steel production) to be synonymous with "progress" and naturally placed as a priority.

ISI gained a theoretical foundation only in the 1950s, when the [[Argentina|Argentine]] [[economist]] and [[UNECLAC]] leader [[Raúl Prebisch]] was a visible proponent of the idea, as well as the [[Brazil|Brazilian]] economist [[Celso Furtado]].

Prebisch had experience running his country's central bank and started to question the model of export-led growth.<ref name="auto">{{Cite book|title=The world transformed : 1945 to the present|last=Hunt|first=Michael H.|isbn=978-0-19-937102-0|pages=227–228|oclc=907585907|date = 2015-06-26|publisher=Oxford University Press }}</ref> Prebisch came to the conclusion that the participants in the free-trade regime had unequal power and that the central economies (particularly, Britain and the United States) that manufactured industrial goods could control the price of their exports.<ref name="auto" /> The unequal powers were taking the wealth from developing countries, leaving them with no way to prosper.<ref name="auto"/> He believed that [[developing countries]] needed to create local vertical linkages and that they could not succeed except by creating industries that used the primary products already being produced domestically. [[Tariffs]] were designed to allow domestic [[infant industry argument|infant industries]] to prosper. In doing so, Prebisch predicted many benefits: dependence on imports would lower, and the country would not be forced to sell agricultural goods for low prices to pay for industrial goods, the income rate would go up, and the country itself would have a strong growth.<ref name="auto"/>

ISI was most successful in countries with large populations and income levels, which allowed for the consumption of locally produced products. Latin American countries such as Argentina, Brazil, and [[Mexico]] (and to a lesser extent [[Chile]], [[Uruguay]] and [[Venezuela]]) had the most success with ISI.<ref>{{Cite book |last=Blouet |first=Olwyn |author2=Olwyn Blouet |author3=Brian W. Blouet |title=Latin America and the Caribbean: A Systematic and Regional Survey |publisher=John Wiley |year=2002 |location=New York }}</ref> 

While the investment to produce cheap consumer products may be profitable in small markets, the same cannot be said for capital-intensive industries, such as automobiles and heavy machinery, which depend on larger markets to survive. Thus, smaller and poorer countries, such as [[Ecuador]], [[Honduras]], and the [[Dominican Republic]], could implement ISI only to a limited extent. [[Peru]] implemented ISI in 1961, and the policy lasted until the end of the decade in some form.<ref>{{cite web|url=http://www.sjsu.edu/faculty/watkins/peru.htm|title=ECONOMIC HISTORY AND THE ECONOMY OF PERU|website=www.sjsu.edu|access-date=4 April 2018|archive-date=5 October 2000|archive-url=https://web.archive.org/web/20001005151205/http://www.sjsu.edu/faculty/watkins/peru.htm|url-status=dead}}</ref>

To overcome the difficulties of implementing ISI in small-scale economies, proponents of the economic policy, some within [[UNECLAC]], suggested two alternatives to enlarge consumer markets: income redistribution within each country by agrarian reform and other initiatives aimed at bringing Latin America's enormous marginalized population into the consumer market and [[regional integration]] by initiatives such as the [[Latin American Free Trade Association]] (ALALC), which would allow for the products of one country to be sold in another.

In Latin American countries in which ISI was most successful, it was accompanied by structural changes to the government. Old [[neocolonialism|neocolonial]] governments were replaced by more-or-less [[democratic government]]s. Banks, utilities, and certain other foreign-owned companies were [[nationalized]] or had their ownership transferred to locals.

Many economists contend that ISI failed in Latin America and was one of many factors leading to the so-called [[Latin American debt crisis|lost decade of Latin American economics]].

Against most opinions, one historian argued that ISI was successful in fostering a great deal of social and economic development in Latin America:

<blockquote>"By the early 1960s, domestic industry supplied 95% of Mexico's and 98% of Brazil's consumer goods. Between 1950 and 1980, Latin America's industrial output went up six times, keeping well ahead of population growth. Infant mortality fell from 107 per 1,000 live births in 1960 to 69 per 1,000 in 1980, [and] life expectancy rose from 52 to 64 years. In the mid-1950s, Latin America's economies were growing faster than those of the industrialized West."<ref>{{cite book|title=Globalization and the Postcolonial World: The New Political Economy of Development|first=Ankie|last=Hoogevelt|date=1997}}{{page needed|date=August 2024}}</ref></blockquote>