Import Substitution Industrialization vs. Neoliberalism

Navid Ganjian

Professor Solorio

Geography 322

Import Substitution Industrialization vs. Neoliberalism

The last century of Latin America’s economic history can be divided into four phases: modern/liberal, import substitution industrialization, neoliberal, and post neoliberal. Each one of these eras has happened in a particular period of time during the past 100 years, but the dates will be ignored throughout the essay because the dates may not be precise about the starting and ending point of each era. Every era has its own policies which impacted this part of the world in different and uneven ways. Moreover, there was always some type of economic, social and political issues transitioning from one phase to another. This essay will focus on two of the eras: import substitution industrialization (ISI) and neoliberal.

When the New York Stock Exchange crashed and World War II caused a significant economic depression in North, the demand for primary products of Latin America cut in half. This crisis was a key factor of the transition to the ISI era, and the failure of this economic model was a key for transitioning to the new era called neoliberal. The ISI policies stated that the domestic economy should stop relying on imported finished products of other countries and start producing substitutes for those products locally. As Raúl Prebisch, an Argentinian economist, discussed the ISI policies put Latin American countries in isolation from other parts of the world and global economy until it could stand on its own foot and rely on its own domestic economy. Latin American governments started to collect high tariffs and quotas on imported goods and gave subsidies to local manufacturers even though not all the governments used these policies in a same way. ISI was more stable and successful in larger countries due to the amount of resources, the ability of borrowing monies to start industries, and the potential of growth in economic aspects. The population was also...