Essay on Import Substitution Industrialization

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Around the 1930s, Brazil and Latin American began following the process of Import Substitution Industrialization, which lasted until the end of the 1980s. The ISI policies devaluated the currency in order to boost exports and discourage imports, followed by adopting different exchange rates for goods (Watkins). ISI in Brazil had an interesting effect; it created a three-prong system of governmental, private, and foreign capital being directed at the infrastructure and heavy industry, manufacturing goods, and the production of durable goods. The program worked at first but then became a serious economic problem. When the 1980s came around Brazil realized that ISI policies lead to inefficient industries because of their lack of exposure to…show more content…
This helped keep the inflation low and with the high interest rates, a lot of foreign capital began to flow into the country. The government’s actions in the military dictatorship made it difficult for Brazil to attract foreign capital however; the Government under the Real Plan had a strong focus on the balance of payments and tried to maintain a positive influx of capital into the nation by appeasing the international public and to improve the economy (Joffe-Watt). The Real Plan helped the economy so much that it began gaining value against the US currency, however in the late 1990s the currency began to devaluate. For the Real Plan to keep working the currency had to appreciate with the economy, this would assure a constant supply of foreign capital and products that maintained the market stable. Following the Real Plan, Brazil had a minor economic downturn but after 2002, the economy has been increasing at a steady pace. The economy was able to grow around 4% in 2000, however the issues in Argentina in 2001 and the uncertainty of whom the next president would be created a confidence crisis in the economy. However in 2002 when Luis Inácio Lula da Silva (Lula) won the election most of the issues about his presidency went thrown out because of his policies. Even though Lula had very liberal policies he began making Brazil look
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