regulation. And, as discussed later, big business, foreign and domestic, lacked incentives to push
the state to reform and so favored the status quo.
The four core features and their interactions were central concerns in day to day
management and basic organization of production. However, capitalists also faced other regular
aspects of their economies -- what Hall and Soskice call “shared expectations” -- that influenced
longer term strategies. A São Paulo industrialist, for instance, in the mid 20th century knew that
coffee would bring foreign exchange, use lots of unskilled labor, and generate overall economic
volatility. Commodity exports, and several other contextual factors were not core features of
capitalism itself, but they did shape these and sometimes close off alternative strategies.
IV. Background Factors and Context
Figure 2 illustrates graphically the complex set of other factors that reinforced core
features of Latin American capitalism: commodity exports, economic and political volatility,
shallow capital markets, a weak and interventionist state, and deep ethnic and socio-economic
divisions. Besides noting some of the crucial interactions, two other goals of this section are to
draw attention to the deeper historical roots of contemporary features of Latin American
capitalism and to shift explanations of institutional continuity from a functionalist equilibrium
based on immediate complementarities to an exogenous and politically contingent set of historical
factors.
1. Commodity exports. Throughout the 20th century, in periods of both free trade and
ISI, exports have been primarily low-valued added raw materials and semi-processed goods.
Exports of unprocessed commodities decreased over the second half of the 20th century as a
percentage of total exports. However, what grew proportionally was not higher technology
manufactured goods but largely middle technology processed commodities and basic scale-
intensive products like metals and paper pulp (Table 6).
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Convention