Economic History and Development in Latin America Lecture Series 6 | Accomplishments and Limits of Inward Looking Industrialization in Latin America (1950-1970)

On March 29, 2022, the Institute for International and Area Studies of Tsinghua University (IIAS) invited Professor Lucas Llach from the Department of History and Social Studies at the University of Ditra, Argentina, to deliver the sixth lecture entitled “Accomplishments and Limits of Inward Looking Industrialization in Latin America (1950-1970)” of Economic History and Development in Latin America lecture series. The lecture was presided over by Yuan Mengqi, a postdoctoral researcher at the IIAS.

At the beginning, Professor Llach briefly introduced the teaching ideas of this lecture. Firstly, he explained the meaning of import substitution industrialization. After the Great Depression and the World War II, industrialization in Latin American countries gradually shifted from export orientation to import substitution mode in order to get rid of the economic mire caused by excessive dependence on exports. He further explained governments’ measures to promote import substitution industrialization, such as setting tariffs, imposing import quotas and various export tax rates, guiding credit and allocating the proportion of state-owned assets in large-scale projects to protect the development of inward-looking economies. He went on to introduce the background of this shift in economic development paths in Latin America: first factor laid in the leadership, who grew up during wartime, holding strong negative feelings about the chronically unstable external dependence economy, and expecting a self-sufficient economic model. Then, guided by the theory of modernization, governments needed to lead and engage in promoting development so that more people can consume newly emerging manufactured goods, thus forming a virtuous circle. Finally, Latin American economists in ECLAC represented by Roal Prebish proposed that Latin American countries should implement import substitution strategy to break the “center-periphery” situation in the international economic structure. Professor Llach then delved into the performance of import substitution industrialization in Latin America and the similarities and differences between it and that in other emerging economies. Similar to Latin America, countries in Asia and Eastern Europe started late in industrialization. However, there are mainly three industrialization modes in different regions: the import substitution industrialization mode represented by Latin American countries and India; the East Asian mode represented by South Korea and Chinese Taiwan; the “true socialism” mode represented by the former Soviet Union and eastern European countries. After comparing the three, he proposed that import substitution industrialization still needs to have sufficient comparative advantage of population resources and is more suitable for larger countries. Finally, he reviewed the limitations of import substitution industrialization in details, including issues affecting the balance of payments and structural inflation. He pointed out that import substitution industrialization will lead to a foreign exchange bottleneck and it would stagnate after reaching a certain stage. In addition, it would drive inflation higher.

During the Q&A session, the audience actively raised questions and interacted with Professor Llach through heated and in-depth discussions on the relationship between the implementation of export-oriented industrialization or import substitution industrialization and the government system, the reasons behind the high level of wages in Latin America, the causes why import substitution industrialization cannot sustain in Latin America, the role of Argentine populism in the implementation of
import substitution industrialization policy, the role and effectiveness of MERCOSUR in regional integration, etc. The lecture concluded successfully in the audience’s warm applause.

Professor Lucas Llach teaches in the Department of History and Social Studies at the University of Ditra, Argentina and holds a Ph.D. in history from Harvard University. He received his B.S. in economics from the University of Ditra, and his M.S. in history from Harvard University and economics from the University of Ditra. He served as Vice Governor of the Banco Central de La República Argentina from 2016-2018, and Vice Governor of the Banco de la Nación Argentina in 2019, where he was responsible for policy formulation and implementation of financial electronization and informatization across Argentina. His main research areas include economic history, Latin American present and contemporary history, and medieval history. He is the author of a number of books, including Como Sapiens: correr, comer, amar y descansar a la manera de los humanos (Debate, 2020), Macroeconomía argentina (Alfaomeaga, 2006), Entre la equidad y el crecimiento (Siglo XXI, 2004), El ciclo de la ilusión y el desencanto (Ariel, 1998), etc.

Edited by: Xu Shuai
Typeset by: Cheng Yao
Proofread by: Yuan Mengqi