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.
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.
