For centuries, Latin America’s economies have revolved around exporting commodities – be it digging up minerals and hydrocarbons, planting soya or coffee, or taking advantage of what animals leave behind, the region has historically relied on shipping natural resources overseas.
Depending on the era, this could certainly be a lucrative endeavor, but commodity prices are notoriously fickle, and a focus on natural resources stunted the region’s efforts to build the manufacturing supply chains that have been instrumental in East Asia’s rapid industrialization.
In the post-World War II era, many Latin American countries attempted to address this commodity reliance by implementing import-substitution industrialization policies. In practice, this meant high tariffs to discourage imports, thus protecting domestic industry.
But without international competition, Latin American products often turned out over-priced and underwhelming. And when the region did try to liberalize in the 1990s, it did not work out so well.
As the 20th century gave way to the 21st, a number of Latin American countries returned to commodities, including agricultural products produced using increasingly sophisticated technologies. And they also went back to protectionist measures such as local content requirements aimed at supporting a domestic manufacturing sector struggling with currency appreciation.
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