Background
- The Great Depression hit Latin America harder than any previous global crisis. Because most countries relied on exporting raw materials i.e. coffee, sugar, nitrates, and beef, the collapse of world trade led to plummeting export revenues, unemployment, and fiscal crises.
- Between 1929 and 1932, Latin America’s total exports fell by nearly 50%, and industrial imports declined by 60–70%.
- Governments faced growing unrest from urban workers, farmers, and middle classes, forcing a rethinking of economic and political systems that had long served export elites.
Economic Challenges: Collapse and Reorientation
Export Dependency and Collapse of Trade
- Latin American economies were monocultural, heavily dependent on one or two export commodities (e.g., coffee in Brazil, sugar in Cuba, nitrates in Chile, beef and wheat in Argentina).
- When global demand fell, prices collapsed by half or more, wiping out government revenue and rural incomes.
- The loss of U.S. and European investment paralyzed infrastructure projects and banking systems.
Definition
Export monoculture
- An economy reliant on a single export product, leaving it vulnerable to global market fluctuations.
Rise of Import Substitution Industrialization (ISI)
- Unable to afford imports, countries began producing goods domestically.
- Governments imposed tariffs and encouraged local industry, a strategy known as Import Substitution Industrialization (ISI).
- This marked a turning point from export dependency to industrial self-sufficiency, especially in Brazil, Mexico, and Argentina.
- State-led industries and mixed economies emerged, supported by protectionist policies.
Definition
Import Substitution Industrialization (ISI)
- Economic strategy promoting domestic industry to replace foreign imports, reducing dependence on global markets
Urbanization and Shifting Labor Patterns
- As rural economies collapsed, mass migration to cities increased, swelling the urban working class.
- Governments faced new demands for jobs, housing, and labor rights.
- These demographic shifts created the foundation for labor-based populist movements in the 1930s and 1940s.
Case study
Brazil – From Coffee Crisis to Vargas’s Estado Novo
- Economic Collapse:
- Brazil’s economy depended on coffee exports, which made up 70% of foreign earnings.
- When prices fell from $0.22 to $0.08 per pound (1929–1931), planters faced bankruptcy.
- Political Instability:
- The Revolution of 1930 ousted President Washington Luís; Getúlio Vargas rose to power promising reform and modernization.
- Economic Response:
- Vargas introduced state intervention, creating new industries (steel, textiles, transport) and promoting ISI.
- The government bought and destroyed coffee surpluses to stabilize prices.
- Social Consequences:
- Labor laws (e.g., 8-hour workday, minimum wage) expanded workers’ rights but also tied unions to the state.
- The Estado Novo (1937–1945) transformed Brazil into a corporatist, centralized regime.
Definition
Estado Novo (1937–1945)
- Vargas’s authoritarian regime emphasizing nationalism, state-led industrialization, and social control through corporatist labor policies.
Political Instability and Challenges to Democracy
Crisis of the Oligarchic Order
- Before 1929, most Latin American republics were oligarchic democracies, formally democratic but dominated by elite landowners and export interests.
- Economic collapse discredited these elites, undermining the legitimacy of liberal governments.
- Coups and revolutions swept the region, as military officers, populists, and reformers promised stability and modernization.
Rise of Authoritarian and Populist Regimes
- Populism emerged as a response to mass urbanization and class tension. Leaders claimed to represent “the people” against oligarchs and foreign interests.
- Military governments in Argentina, Peru, and Brazil consolidated power under nationalist slogans.
- Mexico, under Cárdenas (1934–1940), maintained revolutionary legitimacy through land reform and oil nationalization.
- In some countries (e.g., Chile, Uruguay), democratic institutions survived but adapted through stronger executive power.
Anti-Communism and Labor Control
- Growing labor unrest and socialist movements alarmed elites and foreign investors.
- Governments alternated between repression and co-optation, legalizing unions but placing them under state supervision.
- U.S. influence reinforced anti-communist measures through diplomatic and economic pressure.
Case study
Argentina : Crisis and the Rise of Military Conservatism
- Economic Impact:
- Argentina’s export-oriented economy (wheat and beef) suffered a 40% decline in export value by 1932.
- Foreign debt soared, and unemployment surged in urban centers.
- Political Upheaval:
- In 1930, General José Félix Uriburu overthrew President Yrigoyen, marking Argentina’s first military coup.
- Democracy gave way to the “Infamous Decade (1930–1943),” a period of electoral fraud, corruption, and conservative rule.
- Economic Policy:
- The Roca–Runciman Agreement (1933) secured limited British markets for Argentine beef but reinforced economic dependency on Britain.
- Industrial growth began slowly under ISI, but elite dominance persisted.
- Social Tension:
- Workers’ movements grew, laying the foundation for Peronism after WWII.
Social Challenges: Inequality and Reform Movements
Growing Class Polarization
- The Depression widened the gap between rich and poor.
- Urban middle classes demanded political reform and protection from foreign capital.
- Workers formed unions; peasants organized land movements inspired by Mexico’s revolution.
Role of Women and Social Reform
- Economic hardship pushed women into informal labor and factory work.
- Women’s organizations and socialist groups began advocating for suffrage and welfare.
- Though progress was uneven, the crisis expanded public debate on gender and citizenship.
Cultural and Intellectual Shifts
- The Depression fostered nationalist and anti-imperialist ideologies, challenging dependence on the U.S. and Europe.
- Artists and writers embraced Indigenismo and social realism, emphasizing native culture and working-class life.
- Universities became centers of reformist and revolutionary thought.
Definition
Indigenismo
- Recognition of Indigenous culture as integral to national identity
Exam technique
- Pair one populist (e.g., Vargas, Cárdenas) and one conservative/military regime (e.g., Argentina 1930) for contrast.
- Highlight how economic dependency → political instability → ideological transformation.
- Use ISI and populism as through-lines connecting economic and political change.
Common Mistake
- Treating Latin America as uniform. Emphasize regional variation.
- Ignoring the long-term developmental legacy of ISI and nationalism.
- Focusing only on economic collapse without linking to political consequences.
Self review
- Examine the economic and political impact of the Great Depression on two Latin American countries.
- To what extent did the Great Depression undermine democracy in Latin America?
- Evaluate how Latin American responses to the Great Depression reshaped their economies and political systems.
