Capital Formation in Machinery in Latin America, 1890-1930

The Economic Commission for Latin America and the Caribbean (ECLAC), in the early years of its existence, understood very well the importance of determining the magnitudes of investment, to which ECLAC attributed a central role in economic development. Thus, in 1950 and in the early 1960s ECLAC undertook a series of studies of national cases in which great attention was paid to the examination of the process of physical capital accumulation and its determining factors, especially external financial restriction. The statistical compilation work done by ECLAC was commendable – it is necessary to establish this, since economic historians have often showed indifference at the mass of data contained in this monographic collection. However, ECLAC was only able to undertake studies of some countries and rarely gathered systematic information for the period prior to 1925 (Yáñez and Tafunell, 2003). A few years ago, Hofman (2000) took up the research with a study of the growth factors in the Latin American economies in the 20th century, in which, from a growth accounting perspective, capital accumulation acquires great importance. The starting point of this research is 1900 and it confines itself to the study of six big economies: Argentina, Brazil, Colombia, Chile, Mexico and Venezuela. As is apparent, all the smaller economies in the region are absent, as well as some others, which in the early 20th century were no different in size from the six mentioned, such as Cuba, Peru and Uruguay. Studies abound of these same six national cases, which were undertaken by different economic historians specialised in this or that country. Therefore, this has not helped address the deficit of knowledge about how the formation of capital developed in the whole region, which comprises the twenty countries which in the first half of the 20th century were sovereign States².

This paper distinguishes itself from the preceding ones on this point. I have put great effort into quantifying the investment of all of the economies of the area, that is, the twenty independent republics of the period. Thanks to that, we are eventually able to determine the magnitudes of the investment of Latin America as a whole. And, most importantly, we can calibrate the performance of the smallest economies, whose macroeconomic evolution prior to the 1920s or even the 1940s we do not know very much about³. The quantitative elaboration presented here provides annual series for capital formation in machinery and other related equipment goods for the period 1890-1930, which corresponds to the height of the first globalisation⁴. The text which follows leaves aside any consideration or description related to the estimation procedures used (I request the reader interested in this to consult the appendix). I would simply like to point out here that, like national specialists before me, I have assumed that all machinery used to equip Latin American economies was imported.

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