The Illusion of Protectionism: Lessons from Latin America’s Economic Experiments
Economic nationalism has always sold a compelling story: close the gates, build at home, and greatness will follow. It’s a familiar promise, wrapped in flags and fueled by grievance. In the United States, it’s been repackaged as “America First.” But it’s hardly a new idea, and its track record is far more cautionary than triumphant—especially for those paying attention to what has already played out across the Global South.
In Latin America, the experiment has been run many times. Countries like Argentina, Brazil, and Mexico once embraced protectionist policies in hopes of jumpstarting their own industrial revolutions. Tariffs were raised, imports restricted, and domestic production heavily subsidized. For a while, it looked like success. Assembly lines restarted. Employment ticked up. The optics were good. But the underlying dynamics told a different story.
Shielded from competition, many of these industries stopped evolving. With little incentive to innovate or reduce costs, they grew sluggish. Products declined in quality while prices climbed. In Mexico, efforts to substitute imports with domestic goods meant that basic appliances and cars became both more expensive and harder to find. Consumers shouldered the burden. Meanwhile, the industries that were meant to be nurtured into global players never made it out of the nursery. When the gates finally reopened under trade liberalization, the years of insulation left them unprepared and uncompetitive.
But protectionism was never just about economics. It became a performance of sovereignty—an assertion of control when the levers of global power felt increasingly out of reach. For political leaders, raising tariffs or banning imports offered a quick and visible way to signal defiance, to tell a story of self-reliance and national pride. That the story often unraveled didn’t make it less attractive. It gave people a sense of agency, even when the structural conditions undermining domestic production remained untouched.
And those conditions matter. Latin America’s failures weren’t simply homegrown. Countries that tried to chart independent paths were often disciplined—financially, diplomatically, and economically—by the very global system they were trying to resist. The rules of trade, the leverage of creditors, and the power of transnational firms shaped outcomes just as much as local policy choices. In this light, protectionism was as much a defensive maneuver as a proactive one.
Even so, it was often captured by elites. Once behind the tariff wall, many industries operated less as engines of development than as rent-seeking monopolies. State contracts flowed to well-connected firms. Innovation stalled. Patronage expanded. What began as a bid for national strength too often turned into a mechanism for private enrichment. The public, meanwhile, paid more and got less.
Retaliation came too. One country’s protective tariff is another’s export barrier. When Argentina restricted agricultural exports to prioritize domestic supply, it cut off its own farmers from higher-paying international markets. Revenues fell. Trust eroded. Brazil tried to force the birth of a national electronics sector. It remained decades behind its international peers, with no foothold abroad and no incentive to catch up.
These policies didn’t just protect. They isolated. And the costs weren’t just economic. They hardened political divisions, reshaped expectations, and deepened dependence on the state without building the capacity needed to adapt.
None of this means governments should throw open the gates and surrender to market forces. But protectionism by itself isn’t a development strategy. It’s a wall. And walls, once built, tend to become their own justification.
There are better models. Germany didn’t succeed by walling itself off, but by investing in education, infrastructure, and innovation. Chile, after painful experiments with closed markets and military rule, pivoted toward diversified trade and fiscal discipline. Both cases show that support for domestic industry matters—but it has to be coupled with a vision for adaptability, not just self-sufficiency.
In the end, it comes down to what kind of economy we’re actually trying to build. One that responds to fear by withdrawing, or one that learns, invests, and adapts. The past is littered with the ruins of short-term gains mistaken for long-term strength. We shouldn’t add to them.
Suggested Readings
Amsden, Alice H. Asia’s Next Giant: South Korea and Late Industrialization. Oxford University Press, 1989.
Babb, Sarah L. Managing Mexico: Economists from Nationalism to Neoliberalism. Princeton University Press, 2001.
Chang, Ha-Joon. Kicking Away the Ladder: Development Strategy in Historical Perspective. Anthem Press, 2002.
Evans, Peter. Embedded Autonomy: States and Industrial Transformation. Princeton University Press, 1995.
Ferguson, James. Global Shadows: Africa in the Neoliberal World Order. Duke University Press, 2006.
Frank, Andre Gunder. Capitalism and Underdevelopment in Latin America: Historical Studies of Chile and Brazil. Monthly Review Press, 1967.
Gereffi, Gary, and Donald L. Wyman, eds. Manufacturing Miracles: Paths of Industrialization in Latin America and East Asia. Princeton University Press, 1990.
Prebisch, Raúl. “The Economic Development of Latin America and Its Principal Problems.” United Nations Economic Commission for Latin America (ECLA), 1950.