Get ready for less imported products!

[John.St]

Mercosur could provide a large enough market for import substitution. But its members would have to stop putting up tariff and nontariff barriers between themselves to make it work.

ISI is extremely difficult to implement in a multi-country version, as each of the countries involved sees it as a way to promote their industry and not the other's - the problem you describe in your second sentence.

 

[Philsword]

If ISI worked the countries in Latin America should be industrial powerhouses by now as most have tried it one or more times over the decades.

 

[John.St]

If ISI worked the countries in Latin America should be industrial powerhouses by now as most have tried it one or more times over the decades.

Yes, they have tried, but not enforced the QA, which makes the whole difference.

Unregulated ISI leads to low quality and and high prices, because the companies fall asleep in a 'no competition' internal market. They must be forced to prepare for an open market.

False ISI has also been used to reduce unemployment - employing superfluous worker for no other reason, a perfect mistake, which was not made in Turkey, where unemplyment stayed at app. 45% during the ISI period.

The US used ISI (called protectionism) a century ago and it seems to have worked fine.
ISI also seems to work in Brasil.

 

[Philsword]

Yes, they have tried, but not enforced the QA, which makes the whole difference.

Unregulated ISI leads to low quality and and high prices, because the companies fall asleep in a 'no competition' internal market. They must be forced to prepare for an open market.

False ISI has also been used to reduce unemployment - employing superfluous worker for no other reason, a perfect mistake, which was not made in Turkey, where unemplyment stayed at app. 45% during the ISI period.

The US used ISI (called protectionism) a century ago and it seems to have worked fine.
ISI also seems to work in Brasil.

I think we are more or less in agreement.

The track record for a small country like Argentina is not good with ISI. The problem with the whole process is that it ignores the real world and usually just props up some local industry that's inefficient. The best way for QA to be accomplished is through competition. Those that make a good product stay in business, those that don't go out of business. With ISI you get the government stepping in to subsidize the failing industries and the problems just get worse and worse until the whole thing becomes
unsustainable.

 

[John.St]

I think we are more or less in agreement.

So do I.

The track record for a small country like Argentina is not good with ISI. The problem with the whole process is that it ignores the real world and usually just props up some local industry that's inefficient. The best way for QA to be accomplished is through competition. Those that make a good product stay in business, those that don't go out of business. With ISI you get the government stepping in to subsidize the failing industries and the problems just get worse and worse until the whole thing becomes unsustainable.

One problem is that a budding industry with low capacity cannot compete against e.g. multinationals. They have to be protected in order to grow, but as a repayment for protection they must be forced to improve quality and efficiency.

A government, which subsidizes failing industries is on the wrong track exactly as you write, it worsens the situation by keeping failed companies alive, thus limiting opportunities for the efficient ones.

As long as there are protective tariffs one can let the failing companies die in order to improve conditions (e.g. market size) for those, which show they are improving. The Turks seems to have learned from the long list of mistakes made in South America and later in Asia: you survive if you live up to good standards and die if you don't.

 

[Gringoboy]

My TB is being treated free of charge in a public hospital, including the drugs which are very expensive.
I have nothing but praise for the staff at Argentine public hospitals. They do a great job in very difficult circumstances.