The Effects of the Import-Substitution Industrialization and Neoliberalism Policies in Latin America


Import-Substitution Industrialization is an economic theory employed mostly by developing nations. The primary goal of Import-Substitution Industrialization is to ensure that the given country reduces or even eliminates its reliance or dependence on the developed countries. To achieve this goal, a nation has to focus on producing goods locally rather than importing them. As such, this will result in the growth of the domestic industries, which will in return foster self-reliance and development. A state wishing to employ Import-Substitution Industrialization to develop their economy must adopt the following policies: subsidization of important industries, nationalization, increase of taxation, and formulation of trade policies, which are protectionist in nature. Neoliberalism, on the other hand, refers to a political and economic phenomenon that advocates for creating a free market where the government has little or no interference in the market. Neoliberalism promotes privatization, minimizing the number of resources that a government spends on social services and free trade (Jackiewicz and Bosco 1070). Both Neoliberalism and Import-Substitution Industrialization policies affected the urban geography of Latin America both positively and negatively.

Informal Sector (Housing and Employment)

Neoliberalism was supposed to promote privatization and create a free market where the government had little or no control. It also focused on slashing public employment. To reduce the cost of running newly privatized industries and improve their efficiency, these industries were forced to lay off their workers and even fire some of their employees. Import-Substitution Industrialization was supposed to create free nations by eliminating dependency. To reduce the number of imported goods, countries were forced to produce these goods locally. As a result, the need for skilled workers arose, which at the same time created demand for a new form of housing to fit the newly established class of skilled workers. The level of unemployment has increased due to the privatization of most government-run sectors. However, in the case of Brazil, the growth of industries increased which in return resulted in the increased number of available jobs reducing the level of unemployment. According to Jackiewicz and Bosco (1336), national industrialization would result in the increased employment opportunities. Industrialization was majorly focused in the large cities which resulted in the rise of employment demand. This created an influx of people migrating to the urban areas from the countryside, so that a problem emerged when these newly established industries could not absorb the immigrants. The houses available could not accommodate the vast number of unemployed immigrants. At the same time, wages went down along with the employment opportunities. This resulted in the increased demand for the few job opportunities available. Without so many people unemployed, people were forced by circumstances to work in the informal sector of the economy like street selling, or generally in not so well paid temporary jobs (Jackiewicz and Bosco 1739).

Over Urbanization, Urban Primacy, and Growth of Urban Centers

During the application of the Import-Substitution Industrialization, the growth of local industries surged resulting in rural-urban migration as mentioned above. The ISI policies were supposed to foster domestic production. Factories could only be founded in the cities which in return continued to increase in size due to the influx of people in search of jobs. These urban centers experienced high growth rate, which was greater than most of them could handle regarding social amenities. The fact that ISI objective was to set the price of food products below the market price promoted urbanization. A significant adverse effect of ISI was that it supported urban growth and denoted rural growth. The decrease in market prices crippled the subsistence of farmers residing in the countryside. Thus, this triggered them to migrate to the cities in search of a better life. As a result, the level of urban primacy increased attributed to the fact that ISI promoted development, growth, and investment in the cities. The earlier surge of rural-urban migration did not stop even though the industries could not support more workers, which led to over urbanization. Neoliberalism removed all industrial taxes and made it easy to invest in different industries in the country resulting in the increased production growth rate which favored urbanization.


This was one of the goals of the Neoliberalism policy. Through privatization, the government would not be able to control businesses established in the country. Chile adopted this policy by privatizing most of the state-run sectors. Privatization provided the government with money and relieved the duties and stress of running a business. Thus, this is done with a hope that the industry would be in a better position to manage the privatized enterprises, and increase their revenue, in return promoting national growth and development. To facilitate privatization, the government involved investors from the North. Foreign investors from Europe and the US made an investment in the telecommunication, transport, and energy. However, privatization caused more harm than good. The inhabitants of the Latin American countries suffered high levels of unemployment as a measure taken by the industries to cut on cost. The levels of inflation increased in the region which made it hard for the residents of these countries to get products. At the same time, the quality of goods decreased due to the lack of healthy competition. With the increased inflation, residents were willing to travel to other countries to acquire goods they considered cheaper and of higher quality compared to the locally produced products. The rise of poverty and inequality levels in Latin America is associated with privatization. Nevertheless, there have been positive effects of privatization in the region. In Argentina, child mortality has dropped since the privatization of municipalities where water services were poor. Despite the cases of layoff, wages have risen in the privatized sectors.

Secondary Cities

This is a term used to refer to the second level of cities to the primate city. There are a few factors that characterize a secondary city such as political and economic factors, administrative area, historical significance, and the size of the population. Due to ISI and Neoliberalism, most large cities in Latin America became saturated with companies which provided stiff competition despite the readily available local markets. Rural-urban migration led to the increased number of inhabitants in the mega cities. With the increased levels of unemployment and layoff, the low living population had to find ways to survive, which resulted in the rise of secondary cities. Secondary cities, on the other hand, provide secondary markets which are characterized by less competition, real estate and cheap labor, high talent levels and authorities, which provide the right environment for businesses to thrive in. In Argentina, for instance, La Plata is located a few miles from the capital city. La Plata living standards are high, and of a low cost. Besides, the level of talent available is high. In Brazil, Florianopolis is a secondary city that offers high-quality living standards and pools of skilled employees. Other notable secondary cities in Latin America include Valparaiso/Viña del Mar, Chile, Barranquilla, Colombia, Cali, Colombia, Medellin, Colombia, San Jose, Costa Rica, and Arequipa, Peru. These secondary cities are all characterized with pools of talents, high living standards and low cost. They provide a conducive environment for new startup companies to be established.

Squatter Settlement/Favela

Favela refers to a slum that is located in an urban center. They are rampant in Latin America specifically in Brazil. The ISI and Neoliberalism advocated for improving the economic status of Latin America. However, the increased rural-urban migration, increased layoff to cut the cost of operation and rise in unemployment were caused by these policies. There emerged a group of people who did not have enough income to live in the city but needed means to live in the towns. As a result, Favelas flourished, where the low income citizens could live and afford most of the necessities for life. Favelas are said to have existed long before the rise of the two policies, when soldiers from the Second World War were left without settlements. Slums are characterized by poor living standards, insecurity, and a low level of health care services and most importantly, the inhabitants have no legal claims to the lands they occupy. In Rio Brazil, the authorities have made attempts to increase the living standards in most Favelas. Due to the conditions in these slums, tourists tend to avoid these areas for their safety.


With increasing urbanization and industrialization in Latin America, there emerged gender-related problems. Women were traditionally supposed to take care of their families at home. One of the notable factors of gender inequality was related to wages. Women received low wages compared to men, while at the same time the number of women who became breadwinners increased. Neoliberalism led to the increased gender crimes in Latin America where women are highly educated compared to men yet men earn higher wages than women. However, recently policies have been put in place to promote feminism.

Neoliberalism and Import-Substitution Industrialization policies were supposed to promote growth and development in Latin America. Neoliberalism opened the region to the international market forcing the private sector to adjust to the competition by becoming stronger. Through these policies the governments and the international financial institutions came up with policies to promote development of such free zones as tourism, export market, maquiladoras and offshore services. Unfortunately, most countries in this region had already faced large financial debts after the Import-Substitution Industrialization tenure. Neoliberalism previously applied in the US and Britain had had success. Since its induction the region has developed and at the same time challenged the policy makers (Jackiewicz and Bosco 115).

Sustainable Development

Sustainable development is defined as development that is focused on providing for the needs of the current generation while at the same time ensuring that the needs of future generations are met. On the other hand, culture defines who we are and aids in shaping our identity. Culture facilitates development by controlling the physical and social environment. The physical environment is composed of buildings, heritage, biodiversity, natural resources, metabolism and geography while the social environment consists of local knowledge, ways of living, traditions, lifestyles, symbols, myths, celebrations and beliefs. Culturally sustainable development advocates for the society to associate itself with the development. Environmental sustainability advocates for the safe and efficient utilization of the resources in the natural environment to ensure that these remedies are not over or underutilized. During the slave trade regime, most Africans were sold to Latin America as slaves. As a result, they carried with them their traditions and cultural beliefs which are believed to have shaped the peculiarities of most regions in Latin America (Jackiewicz and Bosco 118).

Tourism and Its Effects on Sustainable Development in Latin America

Similar to most countries in the world Latin American countries have also put their best leg forward to leap from the benefits of tourism. Some of these advantages include luring money from foreign countries, acting as sources of jobs, which will in return help promote the growth of the local economy. Latin America offers one of the best tourist destinations in the world. However, vices such as violence and corruption among others have hindered full exploitation of these resources. According to Jackiewicz and Bosco (124), tourism is considered an export industry. Tourism is based on services rather than goods, where consumption relies on the production site. Tourism provides revenue that is used to acquire imports which result in the economic expansion. Demand shifters are conditions which affect tourism either positively or negatively. Some of the causes of demand shifters include demographic changes, special draws, which include sporting events involving international community, economic or political turmoil, currency exchange rates and natural disasters. Through tourism, it is possible to acquire foreign currency which aids in the acquisition of imports that are to foster the development of local economies. Questions have been raised whether tourism has resulted in the erosion of culture and beliefs among the inhabitants of Latin America. Due to tourism, natural habitats have been disrupted to create luxury structures in the region; some of these natural habitats include wild birds and turtles spawning sites. Destruction of coral reefs was done in an attempt to create structures which would attract more tourists. In 1920s, Mexico saw a rise in visitors from the US as most US dwellers went on vacation to Mexico. As a result, locals were forced to cater for the needs of the visitors. The locals tried to copy the way of life introduced by the visitors. Different forms of tourism had different effects on the development of the Latin American countries. Apart from having different cultural and environmental effects, one notable advantage of tourism is that it promotes local farming, local artisanship, diets and lands, employment development and skills development. An adventurous tourist has been known to visit even the Favelas which are suggested to pose security concerns, but in the slums, tourists can learn about the cultural beliefs of different communities. In return, to make payment to access these services tourists take money in regions where it is badly needed, which fosters sustainable development.

Forms of Tourism in Latin America

The two principal forms of tourism in Latin America include mass and alternative tourism. Mass tourism is shopping, and beach focused. It is characterized with overconsumption. This type of tourism focuses on regions which are culturally isolated. The Mexican and the Caribbean tourism are globalized, depending on imports such as beverages, equipment, and food. Nonetheless, this kind of tourism has had major environmental impacts on these countries. Cruise tourism is blamed for the widening gap between the locals and the tourists. It is evident that mass tourism or cruise tourism does not provide sustainable development. On the other hand, alternate tourism is believed to be more lenient on sustainable development. This form of tourism adopts many forms featured with their emphasis on the local culture and protection of the environment from degradation. Alternate tourism provides conditions which promote development locally. It interacts with the local cultures more intimately compared to the mass tourism. Thus, various forms of alternative tourism are combined to foster an eco-friendly environment. Integrating and improving these two types of tourism can aid in promoting sustainable development. Mass tourism should be enhanced to protect the environment while on the other hand alternate tourism should be strengthened to provide better markets and increase customer satisfaction.

Following the US baby boomers, the Belize became a popular destination for most US citizens as they searched for a place to settle. There was a high influx of the US residents in this area which stirred concerns from the locals as they felt that foreigners, specifically the Americans, were on the rise. Of primary concern is whether the Belize environment would be able to support the exploding population. In Puerto Rico, tourism serves as the primary source of income, which can be attributed to the colonial architecture and geographical location.

Effects of Export Economy on Latin America

One of the significant disadvantages of the export economy is that this kind of economy is at the mercy of the global prices of products. Export economies function to promote domestic industries by providing the world markets with products manufactured locally. However, this does not take place due to the unpredictable nature of the international market. The reduced growth in the world trade did not automatically mean that the demand for all the products stagnated. Products obtained from Latin America such as rubber, cacao and oil resulted in the increased demand for these goods. However, these countries did not reap full benefits of this phenomenon. Instead, they faced a decline in the amount of money earned from exports of these products. They faced stiff competition from European colonies in Africa which were also able to produce some of these commodities such as cacao and rubber. The decline in the prices of crude oil has caused harm to some of the biggest countries in Latin America. Venezuela depends on oil because most of its revenues are accrued from exporting oil. This could be partially attributed to the fact that these countries are linked to China which is focusing on establishing a stable and self-sufficient economy. Other countries which have had an adverse effect due to the decline in the prices of the exported products include; Mexico, Columbia, Peru and Chile affected by the dipping oil prices and minerals such as gold and copper. However, due to the diverse economy of Mexico, it has been able to thrive midst of these hard economic times because of the thriving manufacturing industries. The economic hardships cannot be overlooked. They include the following: Chile’s dwindling economic growth has slowed labor reforms, while Columbia may experience a blowback in its political system due to tax changes. Peru, on the other hand, has experienced unrest in the mining industry which may influence the decisions of the investors on whether to venture into the country. Mexico has not been left behind either; with the strained finances of the public security programs that have been neglected. The region experienced high levels of inflation which resulted in the increased commodity prices, yet the quality was not as expected by the consumers. The consumers reacted by opting to acquire products from other countries at a high cost. One of the causes of inflation is the instability in the exports. Neoliberalism resulted to most Latin American countries opting to shift from agriculture supported economies to focus more on the export of highly priced goods. With the saturation of the products in the foreign markets their prices went down which crippled economies of the countries that depended on them (Jackiewicz and Bosco 2294). One of the most popular fruit in Latin American countries is bananas. In 1996, there emerged the famous banana war with every country striving to reap maximum benefits from exporting bananas. In order to increase banana production, large areas of natural land were cleared in the Caribbean district and Columbia. Unfortunately, when the banana sector collapsed, most eastern Caribbeans lost their employment.

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