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Economic Development of Central America Econ. 4200 - Spring 2004 – Dr. Taylor - page 24 / 153

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[Other issues related to this development regime…

- Government felt compelled to borrow as much as possible from external sources (plus to print money to pay their domestic bills => often led to hyperinflation).

5- Levels of efficiency in the new industrial plants were sometimes rather low:

Limited size of the home market … couldn’t attain economies of scale (especially true in Central America).

  Many producers used technology designed to produce high volumes of output (higher than Latin American countries could support).

- Problem made worse because the technology incorporated in domestic industry was often capital-intensive even though more labor-intensive techniques were available.

-     Many firms operated at capacity levels below 50%!

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