ABSTRACT
A well-established fact described by the literature on economic development is the importance of balance-of-payments constraints on economic growth. Developing economies depend on the foreign provision of certain classes of goods, such as capital goods and some types of raw materials, to increase their growth rates. Even import-substitution strategies cannot entirely overcome these constraints. In fact, import-substitution processes tend to make the balance-of-payments constraints even more binding, given that, when imports are stripped down to essential goods, it may be impossible to produce or to invest without them.
