The Depression of 1929 has usually been portrayed as a turning-point in Latin America's transition from outward-looking (export-led) economic growth to inward-looking development based on import substituting industrialization (ISI). This analysis has been shared equally by the ‘structuralists’, who generally view the shift favourably, and by ‘neo-conservatives’, who regard the 1930s as the decade in which Latin America ‘lost its way’. There is no doubt that the decade saw the emergence in many countries of new economic, social and political forces, which would ultimately provide a very different shape to the Latin American model of economic development. However, although traditional export-led growth became very difficult in the 1930s, a residual commitment to primary products and outward-looking development survived throughout the region and foreign trade played an important role in the recovery from depression. It was not until the 1940s and 1950s that a number of Latin American countries explicitly rejected export-led growth and even then there were many (smaller) countries that remained committed to a version of outward-looking development.

From the First World War to the 1929 depression

The export-led growth model had been changing long before 1929. By the beginning of the twentieth century, the stimulus from export growth given to non-export sectors, such as manufacturing, had already reached the point where a group of countries (in particular Argentina, Brazil, Chile and Mexico) could meet a relatively high proportion of domestic demand with local rather than imported goods. This virtuous circle, under which productivity gains in the export sector were transferred to the non-export economy, did not always work smoothly (e.g., Peru) and in some cases hardly at all (e.g., Cuba), but the rudiments of a more sophisticated, and more balanced, export-led growth model were clearly apparent by the beginning of the twentieth century.