As the world recovered from war and economic depression, ISI lost steam. Many Latin American countries became the most urbanized. There was a rise in Marxist ideas. Industrialization slowed and threatened a return to neocolonialism. Populist leaders, such as Getúlio Vargas and Juan Perón, rose in power to combat the new challenges. Populist leaders shifted the balance of power away from the elite to the lower classes.

Perón supported the rapid unionization of many sectors of Argentina’s economy, which earned him workers’ steadfast support. Perón also attempted to end all foreign ownership of anything in the country. Furthermore, he tried to continue Argentina’s drive for industrialization, though this was not very successful. Eventually, Perón was exiled by the military in 1955. Despite exile, however, he continued to influence Argentine politics simply because of his popularity with the people.

Following right on the heels of the Second World War was the Cold War, which divided the world into communist, led by the USSR (Russia), and capitalist, led by the US. US foreign policy toward Latin America during the Cold War began to sour the positive relations developed earlier. One point of contention was the Marshall Plan, which gave much foreign aid to Europe but very little to Latin America.