The Great Depression inLatin 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 semi-democratic 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 pro-industrial 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 almost-fascist 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? 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.

The Threshing Floor. La era. 1904. Oil on canvas. 100 x 114.6 cm. Museo Casa Diego Rivera, Guanajuato, Mexico.

• 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.

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

• 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.