Industrial Development Strategies in the Southern Hemisphere: A Latin American Viewpoint
In the face of a global economic transformation, countries in the Global South are adapting their industrial policies to address the challenges posed by the climate emergency, digital revolution, and geopolitical competition.
Ensuring digital sovereignty is crucial for securing control over strategic digital assets, as data flows from the Global South to the North are currently extracted as raw material by major tech platforms. A progressive industrial policy agenda aims to redefine the institutional architecture of industrial policy, setting the "rules of the game", redefining market boundaries, and directing accumulation towards collective objectives.
The neoliberal multilateral trade order has been effectively surpassed, with unilateral measures displacing principles like "Most-favoured-nation" (MFN) and "National Treatment". Industrial policy instruments, including tariffs, investment regulations, subsidies, and public spending, have become normalised as a legitimate means to strengthen domestic strategic sectors.
This shift is driven by the climate emergency, the digital revolution, rising military tensions, and an escalating trade war. In response, countries in the Global South are implementing industrial policy strategies designed to address structural challenges and build new productive capabilities.
One such strategy is diversification into higher-value and green sectors. Latin America, for example, needs to overcome its specialisation in low-productivity, high-carbon activities by promoting industrial upgrading and green transition pathways such as the production and use of green hydrogen.
Another strategy involves developing strategic control and local beneficiation of critical minerals. Building domestic industries around copper, lithium, rare earths, and other critical minerals can help avoid being locked into extractive, low-value export models. This involves creating equitable supply chains, local manufacturing, and trade frameworks that support technological learning and community benefit sharing.
Strengthening technological learning and productive complexity is also a key focus. Attention is given to industrial policies that foster technological spillovers, innovation capabilities, and deeper value addition rather than relying on commodity exports or low-skilled labor-intensive manufacturing.
Green and just industrial strategies integrate sustainability and social justice into industrial policy design to support energy transitions, reduce carbon emissions, and create sustainable employment opportunities tailored to local contexts and political projects.
Regional integration can also leverage economies of scale and market access. Initiatives like the African Continental Free Trade Area (AfCFTA) can synergize regional industrial development and support competitive capabilities in regional and global markets.
Building international partnerships on new technologies facilitates knowledge transfer, technology investment, and the relocation of value chains into the Global South. Bilateral and multilateral partnerships around emerging industries such as green hydrogen can help achieve these goals.
However, protectionist strategies without obligations are unlikely to reverse the long-term erosion of productive capabilities that has occurred over decades of neoliberal deregulation. Latin America faces longstanding structural weaknesses, including premature deindustrialisation, low productive complexity, and deep internal gaps in productivity and income, contributing to volatile and stagnant long-term growth.
The global economy is undergoing a profound transformation, moving away from neoliberal globalisation. Escalating tariffs and new barriers to investment are undermining global trade, increasing financial market volatility, and feeding a cycle of global economic slowdown, whose impacts are most acutely felt in developing economies.
Latin America can provide an alternative to the centralized military-industrial complex focused on national security in the Global North, offering a participatory, sustainability-oriented industrial policy committed to protecting the global commons. By adopting these strategies, the region can build resilient, diversified, and ecologically sustainable productive capabilities.
- Countries in the Global South, such as those in Latin America, are implementing industrial policy strategies focused on diversifying into higher-value and green sectors, like the production and use of green hydrogen, to overcome specialization in low-productivity, high-carbon activities.
- To secure control over strategic digital assets and avoid being locked into extractive, low-value export models, the Global South is developing strategic control and local beneficiation of critical minerals, like copper, lithium, rare earths, and other critical minerals.
- International partnerships on new technologies can help countries in the Global South achieve goals like knowledge transfer, technology investment, and the relocation of value chains by engaging in bilateral and multilateral partnerships around emerging industries such as green hydrogen.
- In the face of a global economic transformation, progressive industrial policy agendas are redefining the institutional architecture of industrial policy, setting rules and market boundaries to direct accumulation towards collective objectives, like sustainability and social justice.
