Answer: 1) slow growth of world trade
2) poor Industrialization
3) poor fiscal and financial system
4) currency instability
Explanation: Latin American countries depended on export-led growth after the First World War. However, the external environment was by then much less favourable. Export growth was therefore modest. Fiscal and financial policies became more orthodox after the war and this, coupled with the disappointing performance of the export sector, made it difficult to promote industry – especially in those countries where it had yet to take root. By the time of the Great Depression, no Latin American country had been able to escape from dependence on primary product exports. The region was therefore very vulnerable to the subsequent collapse of commodity prices.
Latin american countries entered the First World War with economies that were still very dependent on the export of primary products. The external context in which these commodities were traded became much less favourable during the war. This was seen at the time as a temporary setback, but it proved to be more permanent. Indeed, the period before the First World War now looks like a “golden age”.
Latin American countries had not sufficiently exploited this “golden age” to diversify their economies through industrialization and the development of related services. As a result, they were very vulnerable during and after the First World War to the deterioration in the external environment. The slow growth of exports in the 1920s made it difficult to foster manufacturing because of the latter’s dependence on imported capital and intermediate goods. At the same time, public policy became much more orthodox so that governments lacked the instruments to promote industrialization. All this would start to change after 1929 as a result of the Great Depression.
