The ways in which world market instabilities affect indebted developing countries and explanations of their differential policy responses are the central issues addressed in this paper. The development of Brazil and Mexico is examined as examples of middle-income developing nations whose economies have assumed dependent development. Dependent development implies the persistence of relatively undifferentiated domestic economies, with rather narrow ranges of potential exports, continuing reliance on external capital flows and limited flexibility in adapting production to changing market conditions. The world market is analyzed as a construct which results from interaction between the international trade and finance regimes. These international regimes remain dynamically unstable. This is evidenced by extreme trade imbalances and exchange rate instability, as well as continued external debt expansion. Major dissimilarities in the policy environment of the two countries emerged when their sociopolitical development patterns, geohistorical evolution, and current relative participation in transnational corporate activity were examined. One important consequence is that Mexico's recent policy responses to world market instabilities link economic growth and sociopolitical stagnation while Brazil has combined economic immobilism and sociopolitical volatility. Tables, graphs and an 87-item reference list are included. (SM)