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Chapter 12

ITS 201 Chapter Notes - Chapter 12: Import Substitution Industrialization, International Monetary Fund, Structural Adjustment

International Studies
Course Code
ITS 201
Kathryn Lafever

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To decrease imports, Latin American leaders put tariffs and other barriers on foreign imports
-Also directly taxed foreign investment and forced profits to be reinvested in Latin
Import Substitution Industrialization was initially a success with lots of manufacturing growth,
growth of the middle class and development of am middle class
However in the long term, import substitution industrialization was a failure
-Latin America never became independent form imports
+Machines for manufacturing still needed to be produced abroad
-Not enough domestic consumption and wasn’t focused on exports so minimal amount of
profits from international trade
+Latin Americans were too poor to buy most goods
+Domestic goods were of poor quality
-Domestic industries were too protected so didn’t produce well because there were no
competitive threats
+Too often enjoyed monopoly status
-Debt exploded because borrowed too much and earned too little
Latin America faced a debt crisis in 1980s
-Owed the World Bank, International Monetary Fund and European as well as United
States banks
-Lots of countries defaulted in the 1990s and never recovered
-Government corruption factored into this
+Military dictators would borrow money and leave problem of repayment up to
the future government
*Little incentive to borrow responsibly
-Partly because of lenders
+Had to lend a lot more because of United States inflation
+Used petrodollar deposits to lend because they had more funds from soaring
oil prices
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