ABSTRACT
To understand the origins of Import Substitution Industrialization (ISI) in Latin America, one needs to briefly return to the Golden Age. Latin America prospered during this period by exporting commodities and importing products that it could not produce or that could be produced more cheaply in other parts of the world. The structure of developing countries led them to export commodities and import manufactures from the developed countries. Invariably, encouraging the development of industry in Latin America meant wholly or partially excluding imports from competing with domestic firms. A key component of ISI was an artificially low exchange rate. In terms of industrialization, this had the advantage of making the importation of capital goods more inexpensive. Financial subsidies sometimes came in a different form. Financial systems in some Latin American countries were subject to varying degrees of financial repression. The drive to industrialize the countries of Latin America under ISI sometimes led to the development of state-owned enterprise.
