Santiago, a Guatemalan entrepreneur, has started his own local paper-manufacturing company but fears that he won't be able to compete with international paper mills that already sell to Guatemalan businesses. To assist Santiago, the Guatemalan government has imposed tariffs on imported paper and extended his credit to enable the purchase of up-to-date equipment. This scenario exemplifies __________.
A) capital controls
B) foreign direct investment
C) import-substituting industrialization
D) the Washington Consensus

Question

Quizplus · Accepted Answer

The scenario described is an example of import-substituting industrialization, which involves government policies aimed at developing domestic industries to replace imported goods. In this case, the Guatemalan government is supporting Santiago's local paper-manufacturing company by imposing tariffs on imported paper and extending credit to enable the purchase of equipment. This is all in an effort to develop the domestic paper-manufacturing industry and reduce reliance on imported paper from international paper mills.

Santiago, a Guatemalan Entrepreneur, Has Started His Own Local Paper-Manufacturing