Consequences of export boom in Latin America
When the world trade experienced slow growth, did not mean that the demand for goods was slow. Nonetheless, out of the many commodities that controlled Latin American export market, only three- oil, rubber, and cacao showed an increase in world volume that was above per cent annually during the period between 1913 and 1928 (Garrard, Peter and Bryan McCann 178). As a result, six significant Latin American goods- gold, wool, rye, cotton and silver did not make any increase that was more than one percent annually. Due to such difficulties, the world trade condition in Latin American markets led them to choose strategies to stay afloat and competitive. One of the options was commodity lottery. The relied on the leading export due to world demand and it helped to raise the value of exports rapidly while depending on a steady market share.
The emergence Of Import substitution Industrialization (ISI)
Import substitution Industrialization was a strategy pursued from the 1930s through the 1960s in Latin American countries such as Mexico, Brazil, and Argentina. There were three main strategies in ISI: domestic production of consumer goods, extension of domestic production, and export of manufactured goods as well as promoting industrial diversification (Garrard, Peter and Bryan McCann 180). Therefore, the origin of Import Substitution Industrialization was a result of the need to focus on promoting domestic production of past imported goods to promote industrialization. The theory behind the foundation of Import Substitution Industrialization is that it merged from international division of labor in less developed countries. In this case, Latin American countries largely exported basic products and in turn, imported manufactured commodities from countries in Europe and USA.
Primary goals for ISI and how they achieved the goals
In the 1950’s critics claimed that the division of labor was not workable as it only helped to promote poverty due to importation of basic commodities (Garrard, Peter and Bryan 182). Therefore, there was the urge to developing countries to encourage industrial practices such as manufacturing. The promotion policies were to protect emerging industries for imports and support capital as well as technological imports. It helped in fact industries to focus on the production of primary goods. The ISI came up with tariffs to help with exchange control, import licenses, exchange manipulation rates, to boost manufacturing. The main reason for the implementation of the policies was to help streamline the production of basic commodities while balancing the government, parastatals, and domestic enterprises. However, the promoters of free trade believe that ISI has distorted capital appropriation and discouraged developing countries from getting a comparative advantage in international trade.
Garrard, Virginia, Peter VN Henderson, and Bryan McCann. Latin America in the Modern
World. Oxford University Press, 2017.
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