The Great Depression in
Latin America
Case Study of Brazil under Vargas:
Import Substitution Industrialization
IB History of the Americas
Guiding Questions
• What is ISI?
• In general, what effect did the Great Depression have on
the economies of Latin American countries?
• To what extent did Vargas change the economy of Brazil
during the 1930’s?
• Compare and contrast the economic policies of
Roosevelt and Vargas.
Latin America and the Depression
• Latin America was hit hard by the Great
Depression but responded with political reforms
and an effort to gain greater economic
independence
• Cut off during WWI, LA nations experienced
industrial growth from ISI (import substitution
industrialization)…most was in the form of
textile production
Latin America and the Depression:
Socialism
• By the 1930s, the liberal governments of the 19th C
began to show failure…the middle class had forged
alliances with elites and the military rather than
expressing individual democratic beliefs as was done in
the West
• The “intelligentsia” in LA (artists and writers) reached out
to Europe for inspiration and began to form Socialist
parties, particularly after the Russian Revolution of 1917
• Socialist parties were not the only political entities
decrying the unity of the middle and upper class
elites…even the Roman Catholic church denounced this
unity as “unholy”, presenting secularization in capitalist
society
Latin American Response
• Social reform movements made
great headway in the 1930s
• In short, it was quasi-Fascism, state
control over all aspects of the
economy, w/ strict authoritarian rule
• The most successful form was
instituted in Mexico by Lázaro
Cárdenas…through land reforms
known as ejidos, millions of acres of
land were redistributed into
communal farms AND oil production
was wholly nationalized into a state
controlled monopoly, NO foreign
influence
The economy before the Great
Depression
• WWI impacts Brazil.
– Coffee was main export
– Growing demand for necessary items revitalized economy
– The demand for sugar, beans, & other items created an economic boom
in Brasil by 1915
• Profits derived from coffee provided resources to help create
industry in Brazil
• Increased urbanization and industrialization strengthened both
the industrial bourgeoisie and the working class
– The working class became more racially & ethnically diverse
as a result of urbanization & industrialization
– Brazilian culture was also affected by economic expansion
• New immigrants from Japan & the Ottoman Empire joined the African
contingent.
• In the urban areas the diversity gave birth to the samba (think
Carnival)
Organized Labor in Brazil
• Due to wartime inflation, trade
unions got together and there
were more strikes.
– 1917: A strike on São Paulo
was led by women seeking
higher wages, respect from
male supervisors, improved
working conditions
– Their plight caused a strike
wave from 1917-1920 in which
many employers gave in to the
demands
• However, permanent
improvements did not
happen
Working conditions pre-depression
Dominant products of agriculture in 1920’s
• Coffee
• Sugar
• Cotton
– Food production was so neglected that Brasil had to
import 4/5 of their grain
• City life
– Workers earned around $.60/day; 10-12 hours a day
6 days a week; women earned 60% of what men
made & had to endure the patriarchal setup
ISI Defined
• Import Substitution Industrialization
(called ISI) is a trade and economic policy
based on the premise that a country
should attempt to reduce its foreign
dependency through the local production
of industrialized products.
• ISI requires state-induced industrialization
through government spending
ISI in Latin America
• Import substitution policies were adopted by
most nations in Latin America from the 1930s
until the late 1980s.
• Adoption of ISI is attributed to the impact of the
Great Depression, when:
– Latin American countries, which exported primary
products (henequen, fruit, beef) and imported almost
all of the industrialized goods they consumed (radios,
appliances), were prevented from importing due to a
sharp decline in their foreign sales.
– This served as an incentive for the domestic
production of the goods they needed.
ISI in Latin America
• The first steps in ISI were based on
practical choices of how to face the
economic limitations caused by recession.
– countries placed protective tariffs on imports on
products that it wanted to produce locally. Protected
industries are also assisted by the government.
• Populist government Brazil (Vargas)
modeled Fascist Italy (and, to some
extent, the Soviet Union) as inspirations of
state-induced industrialization.
ISI
• Positivism: a philosophy that appealed
to science (viewed as “positive”
knowledge) as the ultimate arbiter of
truth
– In Latin America: sought a "strong
government" to "modernize" society – played
a major influence on Latin American military
thinking in the 20th century.
– Vargas saw industrialization (especially steel
production) was synonymous of "progress"
and was naturally placed as a priority in ISI
policy.
ISI in Latin America
• ISI was most
successful in
countries with large
populations and
income levels which
allowed for the
consumption of locally
produced products.
• Argentina, Brazil,
Mexico, and, to a
lesser extent, Chile,
Uruguay and
Venezuela, had the
most success with ISI
ISI in Latin America
• In Latin American
countries where ISI was
most successful, it was
accompanied by changes
in government. Old
neocolonial governments
were replaced by semidemocratic governments.
• Banks, utilities (gas,
water, electric) and certain
foreign-owned companies
were nationalized or
transferred ownership to
local businesspeople.
Vargas & ISI in Brazil
• Getúlio Vargas served as
president and dictator of
Brazil from 1930 to 1945
and from 1951 until his
suicide in 1954.
• Vargas also won the
nickname "O Pai dos
Pobres" (Portuguese for
"The Father of the Poor")
because of his worker's
policy.
Changes in Brazil’s Economy
• Between the two World
Wars, Brazil was a rapidly
industrializing nation; "the
sleeping giant of the
Americas" and a potential
world power.
• However, the oligarchic
confederation of the Old
Republic, resisted
change, industrialization,
urbanization, and other
broad interests of the new
middle class.
Vargas-Brazil
• October 1930
bloodless coup
ousted President
Julio Prestes and
elected president
Washington Luís.
Vargas-Brazil
• Vargas's Liberal
Alliance won
support of Brazil's
growing urban
middle class and a
group of tenentes
(career military
officers), who had
grown frustrated
with the politics of
(landed elites in
coffee and cattle
business)
• Liberal Alliance backed
Vargas (who lost). The
election outcome was
denounced as
fraudulent (often the
case in the period
known as the Old
Republic1889–1930).
• The military,
traditionally active in
Brazilian politics,
deposed Washington
Luís and installed the
runner-up Vargas as
the “provisional
president”
Vargas-Brazil
• Like FDR in the U.S., Vargas
focused on economic
stimulus. A state
interventionist policy utilizing
tax breaks, and import quotas
allowed Vargas to expand the
domestic industrial base.
• Vargas linked his proindustrial policies to
nationalism, advocating heavy
tariffs to
– "perfect our manufacturers
to the point where it will
become unpatriotic to feed
or clothe ourselves with
imported goods."
Vargas-Brazil
Coffee Valorization Program
collapsed: price support
program, a safety net in
times of economic crisis
• Vargas attempted to bring
it back on its feet through:
–
–
–
–
Restriction of plantings
Purchase of surplus stocks
Burning excess coffee
(however, the coffee industry
did not grow in the 30s, but
other agricultural goods did
like cotton, using similar
valorization methods)
Vargas-Brazil
• Parallels between Vargas
and the fascist European
states began to appear by
1934, when a new
constitution was enacted
with some direct almostfascist influences
• Fascist-style programs
would serve two important
aims in Brazil,
– stimulating industrial
growth and
– suppressing the
communist influence in
the country.
Vargas-ISI in Brazil
• The Brazilian constitution established a Chamber of
Deputies that placed government authority over the
private economy
• Vargas implemented import substitution methods
through industrialization to improve the local economy
and reduce foreign dependency.
– Strategy involved using a strong nationalist appeal
• While increasing worker’s rights, Vargas greatly imposed
labor regulations on labor. The new constitution,
expanded social programs and set a minimum wage but
also placed stringent limits on union organizing and
"unauthorized" strikes.
Vargas-Brazil
• Industrial production increased by double from
1931 to 1936, even when the US was still in
depression, Brazil’s national income had begun
to rise.
• The Brazilian Economy was no longer
dependent on outside factors.
• In 1940, a Five Year Plan was announced to
expand the heavy industries and the railroad
system: National Motor Company, National Steel
Company, National Petroleum Company
• Achieved self-sufficiency; autocracy
Vargas-Brazil
• Although "the father of
the poor“ expanded
the electorate, granted
women's suffrage,
enacted social security
reforms, legalized
labor unions as a
populist, Vargas also
whittled down the
autonomy of labor and
crushed dissent
Getulio, how about being
a Good Neighbor & help
me whoop some Nazis.
It’s gonna cost you Yankee!
50 million in gold
& a steel mill
In our next unit…
Good Neighbors in Wartime?
Diego Rivera
“Artist of the People”
(1886-1957)
Self-Portrait Dedicated to Irene
Rich. / Autorretrato dedicado a Irene
Rich. 1941. Oil on canvas. 61 x 43
cm. Smith College Museum of Art,
Northampton, MA, USA.
Diego Rivera
• Diego Rivera is considered the father of Mexican
mural art and the father of modern political art in
Mexico.
• The birth of Mexican mural art in the 1920's was
one of the most revolutionary events the
government has done for the country because it
recognized the power of political art.
• One of these ideas was the creation of murals on
public buildings so that art could be shared with
the masses.
• Diego Rivera
was born in
Guanajuato,
Mexico.
• He began to
study art in
Mexico City
at an early
age.
• In 1907, he
received a
grant to
study art in
Europe.
The Threshing Floor. La era. 1904. Oil on canvas. 100 x 114.6 cm.
Museo Casa Diego Rivera, Guanajuato, Mexico.
• During the 1930s,
Diego Rivera was
invited to paint
murals in the United
States.
• He used his murals
to tell powerful
stories of the
struggles of working
people.
Allegory of California. / Alegoria de California.
1930-31. Fresco. Mural on wall and ceiling of
main staircase between tenth and eleventh
floors. Pacific Stock Exchange Tower, San
Francisco, CA