The growth and decline of import substitution in Brazil — revisited

Of all developing economies, Brazil in the early 1960s represented the most spectacular case of import substitution (IS) which, it was thought, had reached its final or ‘declining’ phases. This paper re-examines the theories of that period by applying econometric techniques to input-output and extended time series data.We trace the progress and regression of IS through different circuits and find the process to be reversible. Second, we find a dialectical relationship between the creation of inter-industry linkages and their destruction through leakages which undermine IS. Third, we identify a dialectical relationship between the ‘substitution of imports’ and the ‘importation of substitutes’, that is, the continual invasion of new imports which displace local products and create the need for IS, such as wheat substituting for tropical foods, plastics for woods and synthetic fibres for cotton.