By the beginning of the 1950s, and even more so by the end of the Korean War, the Latin American republics were faced with a clear choice: to opt explicitly for an inward-looking model of development that would reduce their vulnerability to external shocks or to press ahead with export-led growth on the basis of some combination of export intensification and export diversification.
This choice was not made in a vacuum. Each option favored different groups within society, giving a political twist to most of the economic arguments. At the same time, international and regional institutions pressed hard to influence the outcome. Although the International Monetary Fund (IMF) favored outward-looking policies as a solution to balance-of-payments problems, the Economic Commission for Latin America (CEPAL), under the dynamic leadership of Raúl Prebisch, defended inward-looking policies. With the deterioration in the net barter terms of trade (NBTT) after the Korean War (a key feature in CEPAL's case for inward-looking development), the intellectual pendulum began to swing toward import-substituting industrialization (ISI). Yet many governments were still reluctant to abandon export-led growth altogether, in recognition of the key role still played by the export sector in economic, social, and political terms.