Import Substitution Industrialization Analysis

Up until the late 19th and early 20th centuries, Latin American countries had economies that were heavy exporters of goods due to their abundance of natural resources. In 1930, the Great Depression struck the global economy and foreign demand for Latin American goods became virtually nonexistent. International trade died down and deflation increased the burden of foreign debt. "Latin American presidents led efforts to foster industrialization through increasing state intervention in their economies" (Geddes 138) and proceeded to respond to the global financial crisis with Import Substitution Industrialization. Citizens thought of Import Substitution Industrialization as Latin America 's development strategy that would industrialize their country. The idea behind Import Substitution Industrialization was to enact protectionist trade policies that would protect Latin American countries ' industries from international …show more content…
The PRI was founded by the Institutional Revolutionary Party and they developed a tariff system that taxed imports on consumer goods, raw materials, and machinery. "The 1947 tariff act raised import tariffs slightly, pushing the rate on consumer goods to 50 percent and 10-15 percent, respectively" (Haber 43). They had also created a burdensome permitting system that blocked entry to domestic markets with duty payments, waiting periods for applications and a requirement for approval by the Ministry of Industry and Commerce (Haber et al. 2008, 43). However, their barriers could be bypassed if the businesses ' owner was connected and if the business was established. These measures were so profitable that “…manufacturers of other consumer products began to pressure the government to expand the range of restricted goods” (Haber et al. 2008, 43). The policies that the PRI enacted created corruption that incentivized