IB History Great Depression in Latin America Notes

Background

1. 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.
2. Between 1929 and 1932, Latin America’s total exports fell by nearly 50%, and industrial imports declined by 60–70%.
3. 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

1. 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).
2. When global demand fell, prices collapsed by half or more, wiping out government revenue and rural incomes.
3. The loss of U.S. and European investment paralyzed infrastructure projects and banking systems.

Rise of Import Substitution Industrialization (ISI)

1. Unable to afford imports, countries began producing goods domestically.
2. Governments imposed tariffs and encouraged local industry, a strategy known as Import Substitution Industrialization (ISI).
3. This marked a turning point from export dependency to industrial self-sufficiency, especially in Brazil, Mexico, and Argentina.
4. State-led industries and mixed economies emerged, supported by protectionist policies.

Urbanization and Shifting Labor Patterns

1. As rural economies collapsed, mass migration to cities increased, swelling the urban working class.