Brazil followed an import substitution strategy characterized by massive government investment, targeting of key industries, and protection against competition with high tariff walls. For decades, the strategy appeared to be successful: Brazil grew by 7% per year between 1950 and 1980 and created a large and diversified industrial sector. But during the “lost decade” of the 1980s disaster struck again. Inflation soared, investment collapsed, foreign investors ran for cover, and growth stagnated as the country was haunted by the largest external debt in the developing world.