Import substitution industrialization was an engine of growth for Latin American economies from the 1930s to the 1970s


The import substitution is considered as an economic trade policy which advocates for the replacement of imports with local and domestic production.  Ideally, the import substitution is considered as a trade policy that aims at promoting the economic growth of a country through the restriction of imports that led to barriers of domestic consumption (Shapiro, 2007). This is an important strategy to substitute the externally consumed goods and services with the local and domestic goods and services produced.

The import substitution industrialization was based on premise that each country should highly attempt to reduce the number of foreign products and dependency through increasing the amount of local production within the country. This policy was enacted by the Global South whose intention was the development of local production and self-sufficiency through the creation of the internal markets (Furtado, 2018). Within the context of the Latin American the import substitution industrialization happened during the Latin American structuralism where most of the Latin American countries had been organized for economic development.

The Import substitution industrialization theory began in Latin American countries after the world war two. The major objective of the implemented theory was to strengthen, protect and grow the local industries through various techniques such as import quotas, tariffs and subsidized loans for the government (Gwynne, 2017). The countries implemented the theory in an attempt to improve their production channels at each stage of the product development.  The theory of import substitution industrialization in Latin American countries was directed to counter some comparative advantages which could happen if the countries specialized in the production of goods (Gwynne, 2017). Ideally, the import substitution industrialization was an engine of growth for the Latin American countries between 1930s-1970s. This is because it contributed to the sustainable development of the countries after the second world war through improving domestic production and improving the infant industries.

The import substitution industrialization was then adopted by most of the Latin American countries from the 1930s to 1970s.  The ISI was successful in countries that had large populations such as Brazil, Argentina, and Mexico. This is because the investment to produce the consumer products was more profitable in smaller markets. To overcome the difficulties of the implementation of the import substitution industrialization, there were two alternatives that were suggested in order to ensure that they increase the consumer markets (Cárdenas, Ocampo and Thorp, 2016). These included the income redistribution within each country and the agrarian reform that brought Latin America’s marginalized population to regional integration and consumer markets.  In the Latin American countries where the import substitution industrialization was successful, there were structural changes within the government that promoted the growth of the ISI.

Before the start of the 20th century, most of the countries in Latin America were already incorporated into the growth process within the world economic order. The Latin American countries were facing fast growth due to the import substitution industrialization. From 1930 to the 1970s, Mexico and Brazil were considered among the fastest growing countries in the world economy markets (Cárdenas, Ocampo and Thorp, 2016). The major Latin countries were succeeding in industrialization as well as the increased share in the world production. During the 1930s these economies were undergoing institutional and macroeconomic developments. Ideally, the decline in Latin American countries exports led to the protection of the domestic manufacturing sectors due to the increased import prices (Astorga, Berges and Fitzgerald, 2011). This was an important strategy of boosting the domestic production within the countries. Manufacturing sectors within the Latin American countries have engaged in a bigger part in the overall production of shares within their economies thus becoming the leading engines of growth.

Most of the large Latin American countries believed that the import substitution industrialization policy was important in increasing the growth rate within the countries (Franko, 2018). This was considered an effective long-term development strategy that would benefit the region in terms of sustainable development. The ISI was aimed at bringing increased economic independence among the countries in Latin America with greater self-sufficiency with the manufacturing sectors that would grow to impact the world economy. The principal policy was intensified and promoted by instruments such as exchange controls, tariffs, and import exchange rates. The promotion of the import substitution industrialization was aimed at industrial sectors that would offer a comparative advantage (Bossert, 2018). This was an efficient way of utilizing resources that would be essential in the growth of the economy and increased production of the primary products within the economies. The ISI was important in substituting imported goods with domestic goods such as the basic necessities. Through this, the local communities would be able to put their money within their boundaries thus contributing to economic growth.

The pace and time of product specialization played a critical role in the productivity performance of each of the countries. For instance, in Brazil, the growth and development of the Brazilian coffee bean industry and increased food production in Argentina were essential preconditions that contributed to the growth of the manufacturers (Prebisch, 2016). The living standards of the individuals within the economies improved and the overall performance of the region improved shaped by institutional development during this period. Since the government was aware that the manufacturing sector was an important growth engine, they reduced the tax tariffs and non-trade barriers that were common policy instruments that high promoted growth. Additionally, the manufacturing sector improves the employment rates thus improving the living standards of individuals within the Latin America countries.

The import substitution industrialization policy is linked to an increase in profits of the domestic industry. Ideally, the trade restrictions have been aimed at protection of domestic industries in order for them to substitute the domestic products and services and gain a comparative advantage (Prebisch, 2016). The import substitution industrialization policies have largely been based upon the belief that they will boost the economic growth actively through shifting the economic activity from resource-based and traditional agriculture sectors within the economy towards more efficient and productive manufacturing sectors.  Sustainable development of the Latin American countries was based on the increase of the industrial sufficiency level and increased output of their own products The policy was important in protecting the domestic industries from the global market effects during that period. The economic development was considered as an important and gradual replacement effort of the external sources through the domestic output. The main benefits of the import substitution industrialization within the economies was to facilitate a stable dynamic of the labor productivity and the financial stability of the economies. The replacement of export at low levels led to increased processing that increased the share value and increased technological levels.

The import substitution industrialization promoted the growth of the local industries thus improving local production during the period. Ideally, due to the restriction of the imports, they were able to create demand for products that would be offered locally. Increased tariffs acted as barriers for imports thus leading to domestic production. This, in turn, led to a gap within the economy which led to the investment within their domestic boundaries. Thus, through the use of local resources and emphasis of local production, there were increased efforts of the domestic manufacturing sector that led to the formation of better industries that boosted the growth and stability of the manufacturing sector. Ideally, the profits and revenues that were arising from the various manufacturing sectors were essential for capital formation and investment. Additionally, investing in the domestic industries was essential in improving the growth of the countries through the ISI techniques.

Import substitution strategy also created necessary conditions for the development of strategic industries and the achievement of industrialization within the Latin American countries (Evans, 2018). This was essential for sustainable development and growth of the economies through ensuring that they achieved industrialization and reduce the number of imports. The import substitution was essential in enabling the Latin American countries to cultivate a lot from management and technical arrangement of domestic production that promoted diversification and increased modernization for the domestic industries. Thus the accumulation and construction of domestic capital would be essential for the development and stimulation of growth for the Latin American countries. The import substitution strategy was essential in the motivation of domestic demand. Basically, the investment and consumption demand of the local products was an important factor for economic growth and development (Smith, 2018). One of the characteristics of the import substitution strategy was through protection of the countries’ economies and work. They also aimed at the production of more resources leading industrial products that had large demand within the countries. Thus through the use of this strategy, they were able to motivate domestic consumption and production due to the change of demand within the countries.

Through increased domestic production, import substitution industrialization increased the international trade for the Latin American countries (Smith, 2018). This was essential for the growth and development of the countries. Through the strategy of import substitution, the countries were able to provide a stable and sufficient domestic market while trying to participate in the international competition.  Through the domestic industry growth, their products had increased competitiveness.  Thus due to the domestic market demand, the countries were able to export a number of domestic products which was an object of import substitution.  For instance, increased Brazilian coffee would increase the exportation of the domestic products that promoted the growth of domestic production. The coffee companies were then sensitive to domestic consumers and markets as well as international trade thus became more competitive in the international markets. This indicated that import substitution was a key strategic factoring the countries’ development.

The objectives of import substitution were to conserve the countries’ foreign exchange and create a process for the growth of domestic capital that was necessary for the formulation of their industrial sectors (Smith, 2018). To achieve the development agenda, the governments developed the import substitution which aimed at diversification and trade liberalization for growth. The Latin American countries adopted the import substitution to increase the economic gains and productivity within the country. This strategy was an important inward economic growth for the development of the countries through considerable growth for the industrial sectors. Thus the strategy was considered an essential engine for economic growth within the Latin American countries within the period.

During the period of import substitution in Latin America countries, the ISI was aimed at protecting the infant industries to increase their productivity. This ensured that these companies gained a competitive advantage in the international entities in terms of local industries supply and prices. The import substitution technique served as an incubate for the developing local industries to increase and have their capability to participate within the global markets. Hence this aided the manufacturing sectors to grow and develop the economy of the countries thus making the local economies self-sufficient. Additionally, employment was boosted during this period since there were increased domestic industries that improved their productivity. Ideally, the import substitution strategy was essential in enhancing the demand for more labor-intensive industries that led to the creation of more jobs. Thus, they contributed to increased employment rate that was essential in building economic sustainability and stability.  The focus shifted in the development of local production facilitating urbanization through increased industries that promoted the growth of the economies.


According to the above analysis, it is evident that import substitution was an important growth engine for the Latin American countries. The ISI was an important factor for the growth and development of the local production due to the experience of increased domestic production. Ideally, the import substitution strategy indicated the development of domestic industrial products that can substitute the import of such products. This strategy was essential and considered a vital strategy in the promotion of domestic demand. Through the promotion of industrial and manufacturing sector within the countries, the Latin American countries were able to sustainably improve their domestic products and increase protection on the domestic market. The existence of the import substitution industrialization strategy within Latin American countries during the 1930s-1970s was an important strategic growth engine for the countries through the promotion of domestic production and the local markets. Thus, it is clear that the import substitution industrialization strategy was successful policy utilized for the growth and industrialization of the Latin American countries.




Furtado, C. (2018). Economic Development of Latin America. In Promise Of Development (pp. 124-148). Routledge.

Gwynne, R. N. (2017). Industrialization and urbanization in Latin America. Routledge.

Cárdenas, E., Ocampo, J., & Thorp, R. (Eds.). (2016). An economic history of twentieth-century Latin America: Volume 3: Industrialization and the state in Latin America: The postwar years. Springer.

Franko, P. (2018). The puzzle of Latin American economic development. Rowman & Littlefield.

Bossert, T. J. (2018). The promise of theory. In Promise Of Development (pp. 303-334). Routledge.

Prebisch, R. (2016). Towards a dynamic development policy for Latin America. ECLAC Thinking, Selected Texts (1948-1998). Santiago: ECLAC, 2016. p. 255-275.

Evans, P. B. (2018). Dependent development: The alliance of multinational, state, and local capital in Brazil. Princeton University Press.

Smith, P. H. (2018). The Rise and Fall of the Developmental State in Latin America. The changing role of the state in Latin America (pp. 51-73). Routledge.

Shapiro, H. (2007). Industrial policy and growth. UN.

Astorga, P., Berges, A. R., & Fitzgerald, V. (2011). Productivity growth in Latin America over the long run. Review of Income and Wealth57(2), 203-223.

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