Import Substitution

Import Substitution Industrialization (ISI)
Definition
Government strategy that emphasizes replacement of some agricultural or industrial imports to encourage local production for local consumption, rather than producing for export markets. Import substitutes are meant to generate employment, reduce foreign exchange demand, stimulate innovation, and make the country self-reliant in critical areas such as food, defense, and advanced technology.

What Does Import Substitution Industrialization (ISI) Mean?
An economic theory employed by developing or emerging market nations that wish to increase their self-sufficiency and decrease their dependency on developed countries. Implementation of the theory focuses on protection and incubation of domestic infant industries so they may emerge to compete with imported goods and make the local economy more self-sufficient.

Investopedia explains Import Substitution Industrialization (ISI)
Import Substitution Industrialization (ISI) came to emergence in the post-World War II era in Latin American countries. ISI seeks to protect local industries through various avenues such as tariffs, import quotas and subsidized government loans. Those countries practicing ISI seek to develop production channels for every stage of a product, not just the final product. ISI runs counter to the economic theory of comparative advantage, where countries specialize in the production of goods in which they have a particular advantage, and then engage in international trade

1. a) The failure of the import substituting industrialisation
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1. Abstract
Until the 1930s Latin Americas economic export-led concept of selling raw materials to Europe and North America in order to earn foreign currency worked (in Argentina even well); but this classic free-trade model fell