SOAS Research Online

Abstract

During the years from the end of the Second World War until the late 1970s, broad agreement emerged among Latin American governments with respect to the general orientation of economic policy and especially industrial policy. This broad agreement derived from two widely accepted propositions: 1) that domestic markets in Latin American countries operated inefficiently, both with regard to the allocation of resources among alternative uses and the distribution of the gains from economic growth; and 2) that the international trading system incorporated a bias against the major products exported by Latin American countries. These two propositions implied that state action was required to correct the failures of domestic markets and that governments needed to implement a broadly interventionist trade policy to transform the structure of exports and, by logical extension, domestic production. This combination of interventions in domestic markets and trade was encapsulated in the term ‘import substitution’.