From the 1950s, the Argentinian economist Raúl Prebisch (1901-86) analysed the risks of Latin America’s dependence on the vagaries of foreign economies: the US, the UK, China. Since the colonial era, it had been consigned to the status of producer of raw materials, destined to import finished goods from the North. In former colonies where the middle class copy the North’s consumption patterns, every increase in national income means imports grow faster than exports, to the detriment of the balance of payments. Prebisch recommended developing local industry through import substitution.
In Brazil, President Fernando Henrique Cardoso’s (1995-2002) shock therapy had the opposite purpose: his policy facilitated imports, which would supposedly spur productivity and competitiveness. It didn’t matter if the balance of trade plunged into the red, the books could be managed by attracting foreign speculative capital, encouraged by high interest rates.
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