Import Substitution Industrialization (ISI)

This strategy mainly refers to a well-documented experiment in Latin America in the 1930s and 1940s, and research carried out by the CEPAL (the UN Economic Commission for Latin America – ECLA) in the 1950s, especially work published by the Argentine Raul Prebisch (who was to become the first Secretary General of UNCTAD in 1964). The starting point is the observation that when faced with a drastic reduction in foreign exchange, the main countries of Latin America had managed to respond to domestic demand by replacing imported products through the development of local production. The CEPAL theory holds that this process can be fruitfully extended to all sectors of industry, one after the other, and thus enable the country to ‘disconnect’ from the centre. A good dose of protectionism and coordinated State intervention are expected to promote the expansion of budding industries. South Korea applied the policy successfully but in special circumstances.