Until 1930 Latin America's place within the capitalist division of labor had remained essentially unchanged since the middle of the nineteenth century, when most of the Latin American republics had developed highly specialized monocultural economies, generally designed to serve a specific market either in Europe or North America. Thus, Argentina and the other states along the Río de la Plata had specialized in meeting Britain's needs for primary products, in exchange for British capital and industrial goods; Brazil, Central America, Mexico, and Peru had developed similar relationships with the United States. Dependence on foreign markets produced an infrastructure that was totally export-oriented and that often completely ignored necessary development of the continent's interior.

As noted earlier, the Great Depression and the collapse of demand in the industrial world for Latin America's primary products permanently destroyed the previous world economic configuration. Unable to sell its primary commodities in Europe and the United States, Latin America could not purchase industrial products and so in general embarked on a policy of “import substitution.” By the late 1930s almost all of the region's countries had greatly expanded their light industries, and the major states had started to lay the basis for their own chemical, iron, and steel industries. Local industrialization was further stimulated by the inability of Europe and the United States to provide the region with industrial goods, by the outbreak of World War II and the Korean War, and by Europe's continuing failure to supply Latin America with the industrial products it needed.