How Was Banking-credit Allocated During Colombia's Industrialisation? the Politics of Finance in a Developing Country

Abstract: Accounts of Latin America's economic development in the middle of the twentieth century have been, and still are, dominated by interpretations framed under state-led and/or import-substituting industrialisation (ISI). This conventional literature attaches an extensive and penetrating role to the Latin American state in several policy fields, of which credit is a most important one. The current version goes that these states intervened heavily in money and capital markets to prioritise the channelling of ample and cheap supplies of credit to manufacturers, and in this way advanced official projects of protected industrialisation. This paper demonstrates that this was not always the case, as illustrated by the Colombian experience. In this case, the demands imposed by a highly clientelistic political system forced elected politicians to direct public financial resources away from manufacturing and into agriculture, particularly to coffee-growers. Preferential credit was channelled to agents competing in external markets rather than those producing for domestic markets in closed/protected economies.