The Great Depression and Latin America

Import Substitution Industrialization (ISI)

Before ISI, Brazil and other parts of Latin America were practically third world with huge amounts of poverty.

Because of ISI Brazil and other Latin American countries are now what they are today, world powers.

ISI brought and saved the countries money by bringing industries to the countries in order for them to make themselves what they had previously been buying.

Import Substitution Industrialization

Between 1929 and 1932 Brazil's government reduced the amount of products being imported by 75%.

Exports also fell, but not as fast as the imports did.

Because of Brazil's large agricultural policies many Brazilians kept steady jobs.

The people of Brazil started to invest in the industries that used to be imported from outside sources.

The government supported the country's new investments by giving tax exemptions and low interest loans that were long-term.

Most imports had an initial 40% tax on them, the exceptions to this were items that would benefit the economy; items like machinery and any materials that would help build up new industries.

In 1940 the National Steel Commission was started and after that came the National Steel Company, that made a branch in Brazil.

The steel industry became big in Brazil along with aircraft and truck engine manufacturing and iron production.

Transportation - ISIBecause of Brazil's mountainous landscape, another large change to the country was transportation.

Getulio Vargas, the President of Brazil from 1930-1945 and 1951-1954, supported commercial aviation in Brazil.

By 1939, Brazil had now nine airline companies that traveled over 43,000 miles, carried around 71,000 passengers to and fro, 223 tons of mail, and 490 tons of freight.

This air travel from Brazil accounted for 75% of all of Latin America's air travel.

In 1941, Vargas also created the Air Ministry, a military branch of

aviation.

The expansion was not subject to aviation in Brazil; railroads, and roads were also built up at this time.

By 1939, Brazil had 258,390 miles of new roads.

There were new railroads that were built too, but there were only around half (around 21,500 miles of tracks) as many miles of train tracks versus the huge amount of miles that the airplanes would travel.

Workers - ISIBecause of industrialization flourishing in Brazil, Vargas made changes to the way people who were working were treated.

Following the lead from other corporate leaders, Vargas organized the economy into different industries and worker and employer sectors.

Vargas also implemented Brazilian labor laws that stated minimum wage and a maximum number of hours a person can work a week.

Constitution of 1943 states that "The law will regulate the progressive nationalization of mines, mineral deposits, and waterfalls or other sources of energy, as well as if the industries considers as basic or essential to the economic and military defense of the country." Article 119

The Effects of the Great Depression on

Latin AmericaAs the demand for goods declined in Latin America, because people in America were unable to pay for it, the inflow of capital decreased too.

This resulted in a fall of value in the Latin American currencies and a rise in the amount of unemployed people in Latin America.

Many Latin America countries were facing economic collapse. Two exceptions were Venezuela because of their oil industry and Honduras because

of their banana industry.

Some of the immediate effects on the Latin American countries was, of course, to lash out at the government for not keeping their countries financially okay.

There were several coups d'etats, which led to many countries being taken over by their militaries. These countries include Argentina, Brazil, Chile, Guatemala, Honduras, and Peru.

The first step to fix the economic crisis was to regulate the government in order to stabilize the economy. The governments set prices and created maximum levels of production in order to assist the existing economies and help them regain their strength.

The second step was Import Substitution Industrialization, which began making industries in the Latin American countries and not rely solely on foreign countries for factory made items.

The third and final step was to keep international markets open to their goods, they did this by engaging in two-sided trade agreements with already industrialized countries.

BrazilBefore the crash, Brazil's economy depended on their agriculture. Rubber, cotton, and cocoa were items that were sold in high demand, but coffee was their main export and revenue builder (70%).

The year before the crash Brazil had a foreign debt of 900 million dollars, which they were paying off by about 175 dollars a year.

As soon as the crash hit, coffee prices went down exponentially, leaving Brazil with a huge debt and a surplus of coffee.

Coffee was being sold at 22 cents a pound in September of 1929 and by December it had fallen to 15 cents a pound.

The state of São Paulo faced bankruptcy and asked for assistance, but was denied by President (at the time)Washington Luis.

The coffee bean planters were resentful of President Luis because they saw the decline in prices as temporary and Luis did not support coffee valorization and changed their political standings because of it.

A new President would be chosen soon, the election was between Luis's chosen successor Julio Prestes and Getulio Vargas.

Vargas did support coffee valorization, which won him a lot of popularity points, but even with that rise in popularity Prestes narrowly won the 1930 election.

Coffee prices dropped again, this time down to 10 cents a pound, and Brazil's debt deepened to $1,181 million, around 75% of that debt was owed by the government.

With other Latin American countries around Brazil having their governments over thrown, this made investors, like Europe and America reluctant to invest further into Brazil.

In 1930, Vargas took advantage of the broken down Brazil and led many revolts.

At this time the government could not control the rebels and a revolutionary junta was created.

Vargas was made the provisional president.

The economic crisis led to a coups d'etats and those who before fought for a democracy now saw Vargas as a strong leader for Brazil.

From then, 1930, to 1945 Vargas was the president of Brazil, and assumed dictatorial powers in 1938.

When Vargas took on his second term in office in 1951, he again imposed economic nationalism, including the ISI, though this time it was overshadowed by the fear and rumor of a coup.

There was an assassination attempt on his political advisory in 1954, and after the military tried to force him to resign. At this time Vargas committed suicide.

Gertulio Vargas

Brazil's EconomyBecause of ISI between 1924 and 1939 the industrial output in Brazil grew at an average rate of 6%.

The 1930s in Brazil were noted for the large increases in industrialization and the success that came with it.

In 1941, there were 44,100 plants, which gave jobs to 944,000 workers.

Coffee was still a major source of Brazil's revenue.

Five states in Brazil held 75% of all factory workers, São Paulo held 41% alone.

This left many places in Brazil unoccupied, including the west and the Amazon Valley, so Vargas offered 50 acre land grants to anyone who moved out there.

Argentina

In 1916 Argentina became a full democracy, the first democratic leader of Argentina was Hipolito Yrigoyen.

Argentina stayed a democracy until 1930, the cause of this change was the Great Depression which led to a military coup.

A period of militarism and dictatorship took over the previous democracy, this lasted until 1980.

Between 1860 and 1930, the time during and a little before the democracy, Argentina had the strongest economy in Latin America, with its annual growth at around 6.3%.

The UK had always been a large business partner for Argentina. This partnership continued into the 1920s.

Thankfully for Argentina, they were different from Brazil in the fact that they did not have one main source of income.

Argentina's main exports were beef and wheat, they also exported corn and linseed, but Argentinians also had other agricultural industries like food processing, meat packing, tanning leather, and milling flour.

The Yrigoyen administration created the Fiscal Petroleum Fields (YPF) in 1922 in order to not be quite as dependent on outside sources for fuel.

Argentina After the Crash

Argentina's market was immediately impacted when the 1929 crash hit.

The value of their 'cash crops' dropped 43% and their currency (Argentinian peso) was devalued by 40%.

This made business owners have to lay off workers, which of course, resulted in high unemployment.

The people blamed the government and their was a military coup that led to Yrigoyen being overthrown and a military junta (a small group ruling over a country after a coup d'etats, before an official government is reconstructed) took over that was led by General Jose Felix Uriburu.

Soon there was an election in 1932 between Uriburu and General Austin Justo, Justo won.

Hipolito Yrigoyen

Head of the Radical Party in Argentina, also the president of Argentina for two terms.

Very liberal president in Argentina. When he was in office, Yrigoyen fought for all male suffrage, democracy, more universities, and the YPF.

The economy was at its lowest low in 1933. The government began making policies to help the country.

These included creating agriculture regulating boards, that persistently requested for protectionist policies.

Also the Argentinian government tried to further its relationship with the UK to help build up its economy. This resulted in the Roca-Runciman Pact of 1933.

Roca-Runciman Pact of 1933

Origin- A pact between Argentina and the UK.

Purpose- Put restrictions on Argentina, in order to restore a good relationship with the UK. British markets preserved space for Argentinian goods, in exchange for a promise from Argentina to give preference to British made goods and protect British companies from nationalization.

Value- Able to see what the lengths these two countries would go to in order to keep their country a float and help the people and companies of their country.

Limitation- Unable to see if this was beneficial to both countries or not.

Argentina's RecoveryBecause of the ISI, the strong economy that Argentina started off with, and their protecting of the export industries, Argentina pulled out of the Great Depression very quickly.

World War II made the ISI more successful and showed the discontent for the government.

The discontent of the people led to another coup in 1943 which created another military dictatorship.

The Depression ended up helping Argentina in the long run by making them not as dependent on the UK for goods and support and also it made better, more profitable industries.

Lastly, a central bank was established in Argentina. This bank would have the power to determine the value of the money and would be able to print money. The Argentinian government found this necessary in case of another crash.

Populist PartyMany Latin American countries after the Great Depression, switched form their original government to dictatorships or populist regimes.

Traditional agriculture in Latin American countries continues to make the economy flourish, but the ISI also created elite groups of landowners.

The corporatist policy that Brazil and Argentina went by, became a prime model of a solid economy that other countries followed in order to escape the fall of the economy.

The political systems tended to shift towards authoritarianism, having military leaders control the LAtin American countries at this time (1929 and on).

Changes in CubaWhen the Great Depression hit Cuba, the economy went decreased greatly, because Cuba only had one main industry, its sugar industry.

Cuba also depended greatly on imports, because they are separated from the main land and they did not make their own products. So when the Great Depression hit Cuba had a very limited supply of basic needs.

During this time Cuba was being ruled by the extremely cruel dictator Machado y Morales.

Machado used bribes, manipulation and intimidation in order to control the government and the military.

The only people who were against Machado were college students who rebeled against him, they are known as ABC.

A civil war was impending in Cuba, so FDR convinced ambassador Sumner to stop it.

Machado fled Cuba to the Bahamas once he lost his influence over the people.

Once World War II began, Cuba's economy once again flourished because of the need foe imports and exports.

Bibliography

Berliner, Yvonne. History of the Americas: Course Companion. Oxford: Oxford UP, 2012. Print.

"CUBA." Cuba. 27 Feb. 2014 <http://www-

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Keen, Benjamin, and Keith Haynes. A History of Latin America. Boston: Houghton

Mifflin Harcourt, 2009. Print.