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by Róbinson Rojas Sandford (1992)
Historical background:
Up to 1929-33 Latin American economy had been characterized by free
trade...exporting raw materials and cash crops, that is.
The world trade crisis (1929-1930s) prompted Latin American governments
to radically rethink their approach to economic development, i.e. Latin
American exports declined from an average of about US$ 5,000 million in
1928-29 to US$ 1,500 million in 1933...There were serious problems with
current account in the balance of payments and foreign exchange

Latin American societies found themselves able to finance decreasing
amounts of imported manufactured goods from the industrial countries;
...various measures were taken to conserve and ration decreased foreign
exchange resources:
       1.- tariffs were raised,
       2.- import quotas were enforced,
       3.- restrictions on the use of foreign exchange.

Since the 1930s Latin America changed from a group of free-trading
economies to one of highly protected economies.

Latin American capitalists, making the most of the scarcity of goods
and the level of protection, began to produce or increase the domestic
production of goods previously imported (manufactured goods).

Their new political economy was based on the following:

A.- all major industrial countries (especially U.S.A and Japan) had
    industrialized behind high protective tariffs;
B.- a country needed to develop a mature industrial structure before
    it could become involved in the free trading of manufactured goods;
C.- protective policies should promote a wide rather than a specialized
    range of industries;
D.- protective policies create more opportunities of employment at a
    time of rapid growth in both national populations and labour

By the 1950s the above became formalized in the policy known as

as theorized by the influential "Comision Economica para America Latina
de las Naciones Unidas" (CEPAL) (United Nations Economic Comission for
Latin America, ECLA, today known as Economic Comission for Latin
America and the Caribbean, ECLAC).

The main theoretical tenet of ECLA's approach was that former colonies
and non-industrialized nations were "structurally" different from
industrialized countries, and, therefore, the former needed different
recipes for economic modernization than the latter.

ECLA argued that colonization transformed former colonies' economies
in "structures especialized in producing raw materials, cash crops and
foodstuff at low prices to meet the needs of the colonizer's economies".
That created economically "fractured" societies, in which a modern
sector was being constrained by international trade, and a traditional-
backward sector was blocking any process of economic modernization. These
structures were creating a dynamic that was impoverishing former
colonies instead of promoting capitalist industrialisation. 


ECLA argued that there was an international division of labour lead by
industrialized countries.

This division of labour separated the capitalist world economy in two
well defined sectors:

                   THE CENTER: United States and Western European
                               industrialized societies;
                THE PERIPHERY: Latin American countries, India, newly
                               decolonized societies and the colonies
                               in Asia and Africa.

This center-periphery situation created an unbalanced process of
development characterized by the following features:
          INTERNATIONAL TRADE: the prices of manufactured goods
                               bought by the periphery were raising
                               faster than the prices of raw materials,
                               cash crops and foodstuff sold by the
                               periphery to the center. (This was going
                               to be known as "the deterioration of the
                               terms of trade").
THE BARRIERS TO INDUSTRIALISATION: ECLA saw two barriers to development
                                   in former colonies:
                                   a) international trade forcing their
                                      economies to concentrate in
                                      producing more raw materials and
                                      cash crops/foodstuff, which will
                                      contribute to further
                                      deterioration of terms of trade,
                                   b) the lack of a strong capitalist
                                      class in Latin America and the
                                      other former colonies calling for
                                      a strong participation of the
                                      state in the process of

From the above, ECLA proposed two general approaches to promote
capitalist industrialisation in developing societies:

INTERNATIONAL APPROACH : organise developing nation-states in a united
                         front to negotiate with industrialized nations
                         better conditions of international trade,
                         creating international mechanisms for maintaining
                         fair prices for raw materials, cash crops and
      NATIONAL APPROACH: Promote national strategies of industrialization    
                         based upon the main policy of producing
                         internally the majority of the manufactured
                         goods currently imported from industrialized
                         countries. This was going to be known as "the
                         import-substitution strategy".
                         And, this import-substituting drive was going
                         to be led by the governments through economic
                         planning (allocating resources to private hands,
                         both national and international, and state development
                         agencies in accordance with a general plan). From this,
                         the notions of "development economics", 
                         "development planning" and "development 
                         administration" became the theoretical foundations
                         of the process of development of the non-industrialised 

CEPAL envisaged four stages of industrial development:

First Stage:
            concentrated on the production of basic non-durable
            consumer goods such as textiles, foodstuffs and
Second Stage:
            specialization on more complex products, known as
            consumer durables, such as gas/electrical cookers,
            radios and television sets, and motor vehicles
            (both the technologies and parts of these products had to
             be imported at the outset, until domestic generation of
             both was created)
Third Stage:
            promotion of intermediate industries: plants
            manufacturing steel, petrochemicals, aluminium, etc.
            promotion of production of a wide range of parts and
            components plants, supplying the consumer goods industries
Fourth Stage:
             development of domestic technology through a growing
             capital goods industry (manufacturing machinery and

In all this process, there was a need of utilizing foreign capital,
private domestic capital, and state capital.

By and large, since the late 1940s the process of import-substitution
   strategy in Latin America was engineered through a distinctive 
   institutional structure:
the "triple alliance", or an alliance between
                     state owned firms,
                     national private enterprises, and
                     transnational corporations;

the balance between these categories varied from country to country.

By and large, national private enterprises were seen to be losing ground
in the 1960s to both public enterprises and transnational corporations.

           to invest in those intermediate and capital goods sectors
           that continued industrial expansion seemed to require,
           specially because of inadequate domestic capital market...
           to invest in the extractive industries and in the further
           processing and refining of the minerals concerned.

           great diversity in terms of size, technological level and
           forms of organization, but promoting large conglomerates
           with a wide variety of manufacturing interests, and often
           important tertiary functions in banking, insurance, finance,
           tourism, commerce, and the media.
           At the other end of the size range, large number of small
           enterprises, they were labour-intensive (methods) and low
           capital (inputs).
           Actually, a "fractured" system of production was reinforced
           upon the system of production inherited from colonial times,
           with MODERN, INTERMEDIATE AND PRIMITIVE sectors ( see
           R. Rojas, "Latin America: Blockages to Development", 1984,
           Table 1, page 195, or
           R.Rojas, Latin America: a failed industrial revolution:
 , and
           R.Rojas, Latin America: the making of a fractured society:

           to produce high technology, capital-intensive products for
           the domestic market under the same array of protective
           legislation utilised for national enterprises. Foreign
           direct investment was more important at the beginning on
           mining and agribusiness, and then, the flows deviated to

By the 1960s a clear process of "dependent" industrialisation was in
place in Latin America, as an outcome of this triple alliance, and
intellectuals from Chile, Argentina, Brasil and Peru, based at the
Universidad de Chile in Santiago, Chile, were producing an array of
criticism and elaborating alternative strategies for development:

"A real process of dependent development does exist in some Latin
 American countries. By development, in this context, we mean
 "capitalist development". This form of development, in the periphery
 as well as in the center, produces as it evolves, in a cyclical way,
 wealth and poverty, accumulation and shortage of capital, employment
 for some and unemployment for others. So, we do not mean by the notion
 of "development" the achievement of a more egalitarian or more just
 society. These are not consequences expected from capitalist
 development, especially in peripheral economies..."
 " the end, what has to be discussed as an alternative is not the
 consolidation of the state and the fulfillment of "autonomous
 capitalism", but how to superced them. The important question, then,
 is how to construct paths toward socialism"...( F. H. Cardoso and E.
Faletto, in working paper discussed in the late 1960s in CESO -Centro
de Estudios Economico Sociales-, Universidad de Chile, and later
included in the introduction to "Dependency and Development in Latin
America", University of California Press, 1979, a translation of
"Dependencia y desarrollo en America Latina", Siglo XXI, Mexico, 1969)


In Santiago de Chile, Universidad de Chile, in the Center for Social
Studies, CESO, a group of Latin American intellectuals (especially
economists and sociologists), in the early 1960s, began an overall
criticism of modernization theory and structuralist theory as seen by
ECLA's scholars, and started a set of theoretical approaches that was
going to be known generically as Dependency Theory. Names like
O. Sunkel, E. Faletto, T. Dos Santos, A. Quijano, F. H. Cardoso,
A. G. Frank, J. Ramos, R. Rojas, among many others, are associated with 
different shades of dependency theory. Names like A. Pinto and R. Prebisch, are 
associated with centre-periphery-structuralist theory. All these names 
are associated with the economic-political-antimperialist debate and 
theory creation process taking place in the 1960s and early 1970s in 
Santiago, Chile, and irradiating to the rest of the American continent.

Dependency basic point of view was as follows:

-ECLA's structuralist reading of Latin American (and probably the rest
 of former colonies) societies as economically "fractured" was correct.
-ECLA's assumption that international trade could take a "fairer"
 shape within conditions of capitalist monopolic capital was incorrect.
-ECLA economic theories and critiques were not based on:
        ----- an analysis of social process
        ----- an analysis of imperialist relationships among countries
        ----- an analysis of the asymmetric relations between classes
-Import-substitution strategies, carried out in conditions of capitalist
 relations of production dominated by the economic empires led by United
 States was a recipe for further "colonization", "domination",
-Old fashioned export-led strategies will have the same results, though
-There is no possibility of becoming independent, free nation-states
 in a world dominated by the capitalist economic-political empires.
 Therefore, the only possibility of becoming independent is creating
 an alternative system of production, a non-capitalist system of
 production. Here, the majority of dependentist intellectuals were
 proposing "socialism" as alternative, socialism as was being developed
 in Soviet Union (Dos Santos, et al). There was a minority that saw
 the Soviet system as yet another social stratified social formation,
 as bureaucratic socialism, and originating a new type of imperialism, 
 addressed as "social imperialism". This minority was proposing the
 study of alternative socialism, roughly along the lines of what was
 the political manifesto of the cultural revolution in People's China.
 (Among them, R. Rojas)

To advance in the creation of dependency theory, a methodology was
adopted, which can be summarized as follows:

Subject matter for the theory:
        societies whose structures are based
        neither on egalitarian relationships
        nor on collaborative patterns of social

Analytical approach:
    the understanding of the strong inequalities characterizing
    these social structures will require:
     1.- an explanation of the exploitative process through which
         these structures are maintained;
     2.- the analysis of the system of production;
     3.- the analysis of the institutions of appropriation.

The above amounts to the socio-economic fabric of a society, and
then its explanation to the political economy of inequality.

Therefore, central to dependency approach is assigning priority
to the analysis of the following:

a) mechanisms and processes of domination through which
   existing structures are maintained (both national and
   international structures);
b) forms of dependency creating mechanism of self-perpetuation
   and the possibilities of change;
c) antagonistic and non-antagonistic relations between social class
   and groups.

From the above, the most important model in dependency theory:

---the relationship between external and internal forces
   as forming a complex whole whose structural links are
   not based on mere external forms of exploitation and
   coercion, but are rooted in coincidences of interests
   between local dominant classes and international ones,
   and, on the other side, are challenged by local dominated
   groups and classes---

the above model allows to understand alliances and struggles between
classes and sector of classes.

     internal forces: domestic mechanisms of exploitation
     external forces: international mechanisms of exploitation
                      (international financial institutions,
                       transnational corporations,
                       international financial system,
                       international production system; and
                       foreign states, foreign armies,
                       foreign embassies protecting the
                       international mechanisms of exploitation)

the complex articulation of the above reappears as an "internal"
set of forces through the social practices of local groups and
classes which try to enforce foreign interests, because they
coincide with their own interests.

forms of dependency:
     -capital goods production sectors are not strong enough to
      ensure continuous advance of the system;
     -financial sector depends upon external support;
     -technological sector depend upon external supply;
     -organizational patterns of the domestic system of
      production depend upon the international market;

from the above "patterns of industrialization" emerge:
      industrialization in dependent economies enhances
      income concentration, as it increases sharp differences
      in productivity without generalizing a given level
      of productivity to the whole economy...
      industrialization in the periphery increases disparity
      of income among wage earners accentuating what has
      been called in Latin America the "structural heterogeneity"...
      industrialization in the periphery can be characterised as
      "dependent capitalist development" which generates regimes
      of production subordinated to the capitalist imperial core...
      (see ECLA, "Social Change in Latin America in the Early 1970s",
       United Nations, 1973, and the notion of "structural fracture"
       in R. Rojas, "Latin America: blockages to development",
       doctoral dissertation, 1984, both text available at 
       RRojas Databank:

Memorandum: dependency theory rejects any form of "capitalist
            development" for the periphery, and proposes the
            creation of alternative systems of production, mainly
            socialists -here the concept is not equivalent to
            "soviet socialism", which dependency theorists were
            criticising already in the early 1960s. For an attempt
            to create alternative systems of production see
S.Allende: Speech to the UN General Assembly, 4th Dec. 1972:
Chile: The Popular Unity's Programme 1969 (Alternative Development):
U.S. Senate: Covert Action in Chile 1963-1973:


Additional reading:
R.Rojas: The Chilean way to socialism. Popular Unity:
F.H.Cardoso: Dependency and Development in Latin America:
E. Galeano:Latin America and the Theory of Imperialism:
R.Rojas: El desarrollo del dominio imperialista en Chile:
A.Okolo: Dependency in Africa: stages of African political economy:
O. Sunkel: The transnational corporate system. 1985:
T. Dos Santos: The structure of dependence:

see also BOX 2


                      1952      1992
Argentina             33.9      26.0
Bolivia                6.0       2.9
Brazil                13.7      11.9
Chile                 17.1      11.8
Colombia              15.1       5.7              
Costa Rica             9.1       8.4
Cuba                  19.1       7.1
Dominican Republic    10.5       4.5
Ecuador                5.5       4.6
El Salvador           11.3       5.0
Guatemala             10.4       4.2
Haiti                  4.1       1.7
Honduras               8.0       2.5
Mexico                12.5      14.9
Nicaragua              8.8       1.5
Panama                18.6      10.4
Paraguay               4.6       5.9
Peru                   6.3       4.1
Uruguay               19.1      14.4
Venezuela             26.7      12.5
The United States Department of Commerce, and World Development Report
                          GROSS DOMESTIC PRODUCT
                            LATIN AMERICA

                        1965-1973  1973-1980  1980-1991
Argentina                   4.4       2.1        -0.3
Barbados                    6.7       3.5         2.2
Belize                      5.8       5.4         5.3
Bolivia                     4.2       3.8         0.3
Brazil                      9.8       6.4         2.4
Chile                       3.5       3.7         3.6
Colombia                    6.3       5.0         3.7
Costa Rica                  7.1       5.3         3.1
Dominican Republic          9.7       4.8         1.7
Ecuador                     7.6       6.6         2.0
El Salvador                 4.4       3.2         1.1
Guatemala                   6.0       5.5         1.1
Guyana                      3.1       1.0        -2.8
Haiti                       1.7       4.3        -0.7
Honduras                    4.6       6.6         2.5
Jamaica                     5.3      -2.9         1.8
Mexico                      6.8       6.2         1.2
Nicaragua                   3.5      -1.9        -2.3
Panama                      7.4       4.6         0.2
Paraguay                    5.1       9.6         2.7
Peru                        3.9       2.8        -0.4
Trinidad and Tobago         3.2       7.0        -4.6
Uruguay                     1.2       4.3         0.5
Venezuela                   3.7       3.3         1.4
1965-1973         6.6
1973-1980         4.8
1980-1991         1.5   
*Argentina, Brazil, Chile, Colombia, Ecuador, Guatemala, Mexico, Peru
and Venezuela
source: Trends in Development Economies 1992, The World Bank, 1992

1900-1913        2.1
1913-1929        2.8
1929-1954        3.5
1950-1960        5.4
1960-1970        5.5

             Industrial countries     Developing countries*
1938-1950              4.5                    3.8
1950-1960              5.0                    6.9
1960-1970              5.6                    6.3
                        (per capita)
             Industrial countries     Developing countries*
1938-1950              3.8                    2.1
1950-1960              3.8                    4.5
1960-1970              4.4                    3.6

                  Developing countries*
                  Light industry     Heavy industry
1938                  100                100
1953                  162                217
1958                  222                372
1963                  270                556
1970                  389                994 

         Industrial countries    Developing countries*
1938             100                    100
1953             196                    191
1958             251                    267
1963             325                    366
1970             468                    563
1980             661                  1,108
1991             914                  1,454

          Industrial countries    Developing countries
1938-1953       4.6                      4.4
1953-1958       5.1                      6.9
1958-1963       5.3                      6.5
1963-1970       5.6                      6.3
1970-1980       3.5                      7.0
1980-1991       3.0                      2.5                    
* Argentina, Brazil, Chile, Colombia, Ecuador, Guatemala, Mexico,
  Peru and Venezuela.
source: Statistical Yearbook 1970 and Statistical Yearbook 1971,
        United Nations, 1971
        Trends in Developing Economies 1992, The World Bank, 1992

                             (US$ millions)
    Year           Imports     Exports        Total
1910               1,098.1     1,308.6        2.406.7
1920               2,884.6     3,490.7        6,375.3
1922               1,616.4     2,108.1        3,724.5
1928               2,393.6     3,029.7        5,423.3
1932                 610.4     1,030.4        1,640.8
1939               1,346.5     1,858.5        3,205.0
1946               3,532.1     5,993.9        9,526.0
1951               7,287.4     7,311.3       14,598.7
source: compiled from the Pan American Union's FOREIGN TRADE SERIES and
        from FOREIGN COMMERCE YEARBOOK, published by the U.S.
        Department of Commerce, and from G. Wythe, "An Outline of Latin
        American Economic Development", New York, 1949

END OF BOX 1____________________________________________________________

BOX2 ___________________________________________________________________

From Cardoso and Faleto, "Dependencia y Desarrollo en America
                          Latina", Siglo XXI, Buenos Aires, 1969
We seek a global and dynamic understanding of social structures
instead of looking only at specific dimensions of the social
We stress the socio-political nature of the economic relations
of production.
We assume that the hierarchy that exists in society is the
result of established ways of organizing the production of
material and spiritual life.
This hierarchy also serves to assure the unequal appropriation
of nature and of the results of human work by social classes and
So we attempt to analyze domination in its connection with
economic expansion.

We recognize that:
---- social structures are the product of man's collective
behaviour. Therefore, although enduring, social structures can
be, and in fact are, continuously transformed by social
---- our approach is both structural and historical: it
emphasizes not just the structural conditioning  of social life,
but also the historical  transformation of structures by
conflict, social movements, and class struggles.
---- this mode of analysis is useful for those structures based
on social asymmetries and on explotative types of social
---- this mode of analysis require the study of the system of
production and the institutions of appropriation, that is, the
socio-economic base of society.
---- a central role is assigned to the analysis of the mechanisms
and processes of domination through which existing structures are

Our approach should bring to the forefront both aspects of
social structures: 
 the mechanisms of self-perpetuation and the possibilities for
 briefly, in spite of structural 'determination', there is room
 for alternatives in history.

the basic characteristic of dependency studies: the emphasis on
global analysis.

significant data are those that illuminate trends of change and
emerging processes in history in unanticipated ways.
---- we conceive the relationship between external and internal
forces as forming a complex whole whose structural links are not
based on mere external forms of exploitation and coercion, but
are rooted in coincidences of interests between local dominant
classes and international ones, and, on the other side, are
challenged by local dominated groups and classes.

---- imperialist penetration is the result of external social
forces ( multinational enterprises, foreign technology,
international financial system, embassies, foreign states and
armies, etc)...but, then, the system of domination reappears as
an "internal" force, through the social practices of local groups
and classes which try to enforce foreign interests, not precisely
because they are foreign, but because they may coincide with
values and interests that these groups pretend are their own.

---- capital concentration by multinational companies and the
monopoly of technological progress in the international market
located in the center of the international system are obligatory
points of reference for the analysis.

---- so the analysis of structural dependency aims to explain
the interrelationships of classes and nation-states at the level
of the international scene  as well as at the level internal to
each country.

we describe two dependency situations that prevailed prior to the
present system of international capitalism based on the dynamism
of multinational corporations: dependency where the productive
system was nationally controlled and dependency in enclave
----- in enclave economies, foreign invested capital originates
in the exterior, is incorporated into local productive processes,
and transforms parts of itself into wages and taxes... the goods
are realized in the external market
----- in economies controlled by the local bourgeoisie, the
circuit of capital is formally just the opposite...the starting
point for capital accumulation is thus internal...the
international market is required to realize the final steps of
the capital circuit.
----- the case of contemporary dependent industrializing
economies controlled by multinational corporations gives the
impression of a return to the enclave type of economy. However,
although initial accumulation often results from external
investment (though not nevessarily, because multinational
corporations do often use local funds to invest), there is an
important difference vis-a-vis enclave economies: a substantial
part of industrial production is sold in the internal market.
----- so, the forms adopted by dependency may vary considerably.
This variation in formis expressed in the socio-political context
through the size  and type of the working class as well as of the
bourgeoisie, the size and type of'middle class,' the weight of
bureaucracies, the role of the armies, forms of state, the
ideologies underlying social movements, and so forth.

From the economic point of view a system is dependent when the
accumulation and expansion of capital cannot find its essential
dynamic component inside the system. In capitalistic economies
the crucial component for the drive to expand is the capacity to
enlarge the scale of capital. This cannot be done without the
creation of new technologies and continuous expansion of the
production of 'capital goods', that is, machinery and equipment,
to permit the continuing growth of enterprise expansion and
capital accumulation.
 [end from Cardoso/Faleto...] 
END OF BOX 2____________________________________________________________