The beginning of the 1970s coincided with a series of external shocks to Central America, not all of which were unfavourable; world commodity prices rose, increasing profitability in export agriculture (EXA), while the availability of new technologies (the Green Revolution) encouraged some large-scale farmers to try their hand at producing crops for the home market. The result was a squeeze on small-scale farmers and an acceleration of the marginalisation of the peasantry.

The decline of the CACM at the end of the 1960s proved irreversible despite the best efforts of the technocrats, and new industrial strategies began to emerge involving a partnership between the state and the private sector. At the same time, industry became subject to a profit squeeze, as the cost of inputs (mainly determined by world prices) rose faster than output prices. Industrial production began to be concentrated in large units, as firms looked to cut costs, and the artisan sector suffered a severe squeeze. Thus, in both agriculture and industry the shift towards proletarianisation of the labour force accelerated.

The squeeze on industrial profits was caused fundamentally by the sharp rise in world prices in the early 1970s, further aggravated by the oil crisis in 1973–4. Central American republics, among the most ‘open’ economies in the world, found themselves importing inflation, which reached levels unheard of for over two decades.