Technology transfer patterns and industrialization in LDCs: a study of licensing in Costa Rica

Industrialization efforts in Central America started in the post–World War II period, partly as a result of advocacy by the U.N. Economic Commission for Latin America (ECLA) of import-substitution industrialization and integration policies. Import-substitution industrialization was expected to stimulate employment and technological development, and to alleviate the balance-of-payments difficulties resulting from deteriorating terms of trade. From the beginning, import-substitution industrialization was linked to the creation of the Central American Common Market (CACM), which was expected to encourage industrialization through the formation of larger markets and through protectionist policies. But integration's final form abandoned many of the policies advocated by ECLA, particularly those relating to planning and treatment of foreign actors. Instead, the 1960 integration agreements emphasized “free trade” and the rapid creation of a customs union. The Central American Common Market provided an opening to foreign capital, which was encouraged, rather indiscriminately, through protection and fiscal incentives.