How successful have development policies been in Latin American Select Essay

How successful have development policies been in Latin American Select one country and assess its economic evolution from Impor - Essay Example The economic strategy which is known by the name â€Å"Import Substitution Industrialization† arose in relatively under-developed countries as a response to global markets. It was clear that many Latin American countries in particular could not keep up with the fluctuations and demands of a free market system. Many of the participants in the world markets possessed vastly superior technologies, infrastructure and buying power due to their more developed status and stronger currencies. This left weaker economies very vulnerable and so their governments stepped in to guide industrialization in ways which assisted in the development of the country as a whole, rather than just successful trade between individual companies and external customers. The focus was on the internal market rather than on the export market, and the aim of this strategy was to reduce reliance on foreign goods and at the same time encourage local manufacturers to supply more and more goods. As one of the larger South American states, Brazil has played an important part in the economic development of this sub-continent. In the period from the middle of the nineteenth century until the Great Depression in 1929-30 the majority of Latin America enjoyed a phase of export-propelled growth. The combination of reduced buying and selling capacity in industrialized countries and the huge disruption of the Second World War caused great fluctuations in the world markets and this in turn prompted countries like Brazil to focus more on expanding their own internal market. This is where import substitution was devised, as a method of driving forward industrialization while at the same time reducing the country’s need for outside goods and foreign currencies. ... This encouraged innovation, and schemes were set up that allowed foreign companies to invest in Brazil, and transfer technology into that country so that the demand for finished goods could be met. Hirschman notes that countries who come late to industrialization can benefit from the knowledge that other countries have learned before them, for example Britain and other European states, and as a result of this the introduction of new working practices is much smoother. By the early 1960s import substitution industrialization in Brazil was judged to be a considerable success in the short term, but with some rather negative effects in the longer term. (Macario, 1964) One long term effect was that Brazilian industrialists became complacent, and they got used to the lack of competition that ensured their continued success, regardless how efficient they were. There was no external incentive to improve quality or efficiency, and so when Brazil wanted to participate in the world markets to o btain modern goods, it was found that Brazilian products fell far behind those of competitors. There was also very little independent decision making in the industrial sector, since most of the leadership came from government initiatives. When looking at the import substitution period in Brazil from 1930 onwards it is important to understand the significance of political changes which were introduced by the charismatic leader Getulio Vargas. By setting up a Ministry of Labor he managed to get dialogue going between industrialists and government and this eventually cemented his control over all aspects of the economy. (Roett: 2010, p. 38) This central control deepened import substitution policies and allowed various beneficial reforms such as