Substitution Industrialization Essay Example | Topics and Well Written Essays - 1500 words

Substitution Industrialization - Essay Example Even though ISI led to the industrialization of Brazil where agriculture products dominated the economy, it has some bad effects also like increasing rates of inflation and debts. ISI did not resolve the balance of payments problems. On the other hand ISI marked the golden period of Brazilian economy from the years early 1950's and early 1960's. Promotion of other sectors also resulted from ISI such as steel, petrochemicals, fuels, automobiles, transport infrastructure and electricity. Portuguese were the first people to come to Brazil and discover its potential resources. The first attraction for them was the Brazil wood. This wood was exported by them to the European countries. However, the real breakthrough was the sugar cane production. Sugar was in high demand in Europe and an opportunity for the people to make huge profits out of its export. African slaves were used for the production of sugar. But unfortunately after a period of time sugar supply became far more than the demand due to excessive production in the Caribbean and hence prices declined significantly. In the nineteenth century, another important development in the Brazilian economy was the escalation of coffee exports. By the year 1929 coffee contributed to around 73% of the total exports. Tremendous growth of coffee exports led to the development of transport infrastructure like railways and ports. As the movements for the abolition of slavery gained momentum, the only other alternative for the employers was the free wage labour in form of immigrants from the extremely poor rural lands of European countries like Italy, Portugal and Spain. Millions of people immigrated to Brazil from Europe. Only few of them worked on plantations due to miserable conditions and others opted to move to the cities and set up their own workshops. On the other hand there was an overproduction of coffee in the country without many takers. Decline of coffee exports and the labour immigration from Europe formed the basis for the origin of industrialization. As a consequence of the Great Depression and t he Second World War there was an enormous fall off in the exports of coffee. Availability of the goods imported to Brazil also declined. As a result most of the products were needed to be produced in the country itself that led to forced import substitution industrialization. Financial crisis in the country led to the rise of populism on the political front. The newly elected president Getulio Vargas was backed by military. Landowners lost their monopoly and a centralized system was setup. The president being conscious about the present and future prospects of the coffee export trade concentrated the resources on the industrial development of the country. New policies and changes in support of the industries were formulated. Initial steps like providing the basic inputs, cultivation of energy sources and so on were taken by the administration. The period after the Second World War saw Brazil heading towards a growing and sound industrial foundation, the main sectors being food, textile, leather and wood. After the end of Vargas's reign, the new president Dutra opted for the free trade policy and the market opened to the US imports. Major part of the foreign exchange was lost in the import of luxury consumer