ABSTRACT
This chapter examines a "second-best" policy consistent with either an export promotion or export substitution strategy, but more likely to accompany the latter. The focus on import-substituting industrialization (ISI) within the Central American Common Market (CACM) in the 1960s was always seen by policy-makers as a prelude to manufactured exports towards the rest of the world. ISI—far from competing with the traditional export-led growth model based on primary products—is actually complementary to it. The chapter explores whether strategies of ISI within a regional framework and of increasing extra-regional manufactured exports are mutually exclusive or whether they can coexist within the same policy framework. It considers the difficulties of the CACM and asks whether its decline can be reversed without distorting the allocation of resources away from increasing extra-regional exports. The chapter outlines the question of whether economic cooperation at the regional level can be conducted outside the framework of CACM and, if so, in what areas.
