4 - The Latin American economies, 1950–1990

Summary

An important feature of Latin American economic development historically has been the interaction between external and domestic economic structures. Links between the Latin American economies and the world markets increased in importance during the international trade boom towards the end of the nineteenth century when a production structure based on raw materials for export (and imports of manufactures) was consolidated. After the end of the Second World War, the region's development efforts were directed to transforming the structure of production and reducing external dependence. Import substitution industrialization (ISI) produced some positive results. The regional economy expanded rapidly. From 1950 to 1981 gross domestic product (GDP) increased at an average annual rate of 5.3 per cent. However, while average income per capita increased at an annual rate of 2.6 per cent, vast inequalities in the distribution of the benefits of economic growth persisted throughout the region – between social groups, between urban and rural areas, between regions within countries and between countries. At the same time, new forms of dependency on the international economy emerged. ISI and the diversification of consumption patterns in the 1950s and 1960s gave rise to the adoption of increasingly complex imported technologies, capital intensive as well as highly dependent upon imported inputs. Also, the 1960s saw a significant inflow of direct foreign investment concentrated in the production of manufactured import substitutes, benefiting from high levels of effective protection. Given the sizeable import content of these industries and high profit rates, the net savings of foreign currency were sometimes negligible or even negative.