Beyond Import Substitution

By the beginning of the 1970s it had become evident that the countries of Latin America needed to revise their model of development. The importsubstitution model had generated very rapid industrialization, especially in Brazil and Mexico, during the postwar period, but it had begun to exhibit clear signs of exhaustion. Import-substitution industrialization had generated contradictions that the model was incapable of resolving: the chronic deficit in the balance of payments, the financial crisis of the state, and sectoral disequilibrium that resulted from giving priority to industrial growth at any cost, the lack of vertical integration of the industrial apparatus, and the persistence of social and economic inequalities that threatened political stability. Additionally, as countries progressed into the production of consumer durables and embarked on the production of intermediate and capital goods, transnationals gained dominance in many of the most dynamic sectors of the Latin American economies (Evans and Gareffi, 1982). This article attempts to examine the efforts, since the 1970s, of Latin America's two largest economies, Brazil and Mexico, to reform their models of development. Its focus is on one aspect of this strategic reform, the promotion of the export of manufactures.