The Latin American Development Model

This study note looks at the Latin American Development Model

The Latin American development model is a term used to describe the economic development strategies that have been pursued by the countries of Latin America, such as Brazil, Mexico, and Argentina. These strategies have been characterized by import-substituting industrialization, state intervention in the economy, and a focus on primary exports.

Import-substituting industrialization is a strategy in which a country tries to develop its own industries by protecting them from foreign competition. This is done by imposing tariffs and other trade barriers on imported goods.

State intervention in the economy is a strategy in which the government plays a major role in the economy. This can include providing subsidies to businesses, regulating the economy, and owning and operating state-owned enterprises.

A focus on primary exports is a strategy in which a country focuses on exporting raw materials, such as oil, minerals, and agricultural products.

The Latin American development model has been largely unsuccessful. The region has experienced low rates of economic growth and high levels of poverty and inequality. There are a number of factors that have contributed to the failure of the model, including:

• Protectionism. Import-substituting industrialization has led to high prices for consumers and has made it difficult for businesses to compete in the global economy.
• Corruption. State intervention in the economy has often been accompanied by corruption, which has led to waste and inefficiency.
• Fiscal deficits. The high levels of government intervention in the economy have led to large fiscal deficits, which have made it difficult for governments to invest in infrastructure and education.
• Unsustainable debt. The high levels of government intervention in the economy have also led to unsustainable levels of debt, which has made it difficult for governments to finance their operations.

In recent years, there has been a move away from the Latin American development model. Many countries in the region have adopted more market-oriented economic policies. However, the region is still struggling to achieve sustainable economic growth and development.