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Paper short abstract:

The article argues that exogenous factors, such as global crises, paradigm shifts, and capitalist transnationalisation influence a new regime of rent management that reinforces Latin America's reliance on minimal technological inventories and static comparative advantages in low productivity sectors

Paper long abstract:

There is an increasing recognition in the political economy analysis of the role of institutions that what drives industrial development are the balances of power underlying a society. This shift is particularly visible within the so-called 'political settlements' literature. The 'political settlements' framework argues that there are no 'good' or 'bad' institutions, but only favourable and less favourable interdependent combinations of power and institutions. Inclusive and sustainable industrial development outcomes depend on the compatibility of rent management capacities with the distribution of power in a political settlement. However, there exists very little 'political settlements' literature on Latin America. Revising the main theoretical arguments of 'political settlements' framework and considering empirical trends in Latin America, this article argues that changes in elite interests and policy strategies promoting the region's deindustrialization trends and its shift towards service-based economies are not purely driven by power balances, but also by factors that are exogenous to the underlying political orders. A standard 'political settlements' analysis of Latin America's development does not conclusively explain the region's reliance on minimal technological inventories and static comparative advantages in low productivity sectors. This article argues that exogenous factors, such as global crises, paradigm shifts, and capitalist transnationalisation influence a new regime of rent management that induces and reinforces these tendencies.