Latin American industrial policy survives in disguise
Thesis
Latin America’s industrial policy is being remade under two pressures at once, hemispheric coercion and electoral realignment, on top of structural traps that have not moved. The risk in the green and digital transitions is re-commodification: ore leaves the region raw, and now clean electricity does too. Governments respond with industrial policy under other names, and neither alignment with Washington nor hedging has yet bought the space to pursue it.
The Babbage Forum asked me for the Latin American part of its opening session on the global context. The question that guided my intervention was whether a year of pressure from Washington, and of elections moving right, had ended the region’s return to industrial policy.
Seven ballots since October 2025 have moved right; the eighth, Brazil’s run-off, is on 25 October. Washington followed each result within weeks: a critical-minerals declaration with Chile one day after the inauguration, a minerals memorandum with Colombia after 32 days, a Treasury facility for Argentina six days before its midterm. Most of the instruments the new governments inherited stayed in place. Chile kept its state-led lithium model, and Argentina kept the RIGI while its Senate debates a larger version for AI, data centres and copper refining.
Beneath the politics, the traps have not moved. Output per worker fell below the world average in 2016 and has stood still since. Manufacturing has lost weight in GDP from Chile to Brazil. China’s share of the region’s exports rose from 2% to 13% between 2000 and 2024, and the five largest exports to China are all primary commodities.
The green and digital transitions were meant to offer a way out. So far they point to re-commodification. Everyone wants the refinery and nobody is building it: Brazil holds about a quarter of world reserves of graphite and of rare earths and accounts for a sliver of their production. Clean electricity is heading the same way. Sold to data centres as an input, it becomes the region’s next raw export; Brazil’s Redata bill is the clearest attempt so far to attach conditions to it.
Governments have answered with industrial policy under other names. The rightward turn changed the vocabulary (tax stability, permitting, tariffs with a domestic-content story) more than the selectivity: 95% of the value committed under Argentina’s RIGI is in mining and hydrocarbons. Brazil alone kept the name, with R$300bn of BNDES financing approved for Nova Indústria Brasil.
That leaves the choice I described in a recent CEBRI-Journal article as the crustacean’s: align with Washington or hedge. Alignment has bought tariff relief without exemption, and hedging keeps the Chinese market open. Both have bought minerals deals. Neither has yet bought industrial-policy space, and the conditions under which either could are what the region’s policymakers now have to work out.
Written with Claude Opus 5.5; reviewed and validated by the author.