Mexico and Brazil in Comparative
Perspective: Two Import-Substituting
Trajectories
(Haggard)
WHY ISI?
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30s & 40s Twin Shocks: Elites response = expansion
50s Secondary ISI:
Economic Motivationsexternal shocks, size, resource
endowment, balance of payments problems, FDI & borrowing
Social/Political Motivations: Pressure of urban political
sectors, Business support, manipulation of ISI for political
gains, intellectual rationale.
70s Debt Led ISI: supplement ISI with non traditional
exports.
Euromarket credit, FDI & oil boom.
The Primary-Product Growth Phase
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Exporters of Primary Goods: coffee, many crops
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Agro Export Sector: Coroneis – Cacique
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30s: Social Adjustment - Mexican Revolution
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Difference with Taiwan and Korea: political independence,
diversified economies and decentralized politics.
External Shocks, Political Consolidation and
the Origins of ISI
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BRAZIL
Twin Shocks: Policy experimentation by Fed. Deficits,
expansive monetary policy, trade and exchange control.
Political Motivations: Authoritarian Government, bourgeoisie
ascendance and coffee planters decline
MEXICO
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Depression: end of orthodoxy.
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Expanionary monetary and fiscal policies,
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Political Consolidation (post revolution), reconstruction of
financial system, centralization of the tax system
 Cardenas 20s: Populist government.
Nationalist development > Strong Unionism
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Secondary ISI
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Increased role of Government
Assumption: Due to comparative adv. in agriculture,
protectionist measures for industrialization.
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Coalition Factors: Correlation of forces: support for technocrats
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Brazil: cross-class electoral alliance
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Mexico: Organizational efforts of a dominant party
Towards Secondary ISI
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BRAZIL
Initial Liberal modifications
50s Industrialization support: emergence of a labor,
professional, managerial and bureaucratic middle class.
Kubitschek Regime: expansion of state role
Need for FDI and preferencial exchange rates
MEXICO
Reversal of Cardenismo: greater support for industry
Containment of labor demands
Creation of Central Bank, anticipatory devaluation
Orthodox Macroeconomic policies – Activist industrial
policies
The Third Path of ISI
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From mid 60s and early 70s to the debt crisis 80s
New Balance of payments constraints: oil shocks and
inherent vulnerabilities of the model.
Response: expansion of non traditional exports –
contradiction with macroeconomic policies
Political pressures to maintain high economic growth
introduction to democracy; opposition forces within PRI
80s collapse of external financing: real devaluations, wage
cuts
State response to shocks – function of political institutions
Constrains of new social groups after democratization over
economic policy Mexico: regional leader on outward looking
policies
Debt Led Growth and Export Promotion
BRAZIL
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Replacement of FDI with foreign borrowing 60s military’s
economic strategy: political repression
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67 Need of support from domestic private sector and middle
class.
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68-73 Brazilian Miracle: outward looking First Oil Shock: non
heterodox approach
MEXICO
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Response to social unrest: redistributive measures, education
and welfare incentives, + control over FDI
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Response to ISI vulnerabilities: incentive for non traditional
exports
 Contradition with continued support for capital-intensive
industries = Increased Borrowing
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Oil Boom: expansion of ISI & social expenditures
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1982: Mexico announces it can’t pay its debt
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Big Business and the Politics of Economic
Reform: Confidence and Concertation in
Brazil and Mexico
(Schneider)
Economic Reform Variations
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Similar Development Strategies
Argument: variations depended on relations between
business & government
A- Deeper financial crisis in Mexico
B- Concertation sped reform implementations
Investment Crisis and Radical Reform
Investment Crisis: contraction of capital flows from abroad,
public savings and private investment
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Reform initiatives: Investment Crisis vs. Political Change
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Mexico: falling oil prices, 13% public deficit = borrowing
greater capital flight, need to restore business confidence
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CONCERTATION
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Mexico (CMHN) > Brazil (ISID)
Stabilization through Concertation
MEXICO
 87 Pacto de Solaridad Economico: coordinated expectations
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87 Stock market crash
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95 Crisis: end of pacto
BRAZIL
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Social Pacts: could not set an income policy
Negotiation in Trade Liberalization
MEXICO
 COECE influence on NAFTA negotiations
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Benefits: Info flow, government
BRAZIL
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Concertation vs. Consultation: never institutionalized
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Radical market oriented reform: IEDI creation
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Sectoral Arrangements: adjustment to Intl. competition
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Concertation Auto Industry success
Benefits and sources of Concertation
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BENEFITS
Concertation is not indispensable
Concertation is preferable
Flexible nature
Vulnerable nature
COSTS
Greater rigidity on the implementation of reform
Delay on implementation
Further Implications
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Business Elites – State Elites: Exit & Voice
State dependence in Private Investment
Business influence: function of degree they can limit
government policies
State influence: sets the Agenda
State weakness: exit
Business Weakness: ambiguity for neoliberal reform
“State actors trade some autonomy for greater capacity”
Questions
1)- In which ways does ambiguity for the neoliberal
project work against businesses?
2)- Why do you think countries with small markets
and more limited resource endowments
(Uruguay and Costa Rica) adopted ISI?
3) - Do you think concertation has a real effect on
economic policy or is it a tool for the national
government to manipulate business behavior?