The Effect of Declining Military Influence on Defense Budgets in Latin America

Abstract

While military governments have often been a tradition in many Latin American countries. a relatively small and stable amount of national resources is traditionally allocated to national defense. Most of the recent studies on the determinants of defense in this region of the world have employed data only through the midl 980s. Since then sweeping economic and political changes have taken place especially in Latin America. This paper examines the factors which have influenced Latin American defense allocations for fifteen countries in the 1980s to the mid- l 990s. We suggest that a long-run relationship exists between defense expenditures and other variables such as GNP and employ a technique to decompose year to year movements in the defense burden into two components: the component associated with shortrun factors and the component associated with correcting the deviation in the defense burden from the long-run pattern. Factors such as the military·s influence. and changes in regional military expenditures are examined. Our results suggest that for most of the fifteen countries a high proportion of the defense burden can be explained by a relatively small number of variables. For six countries, no long-run trend was identified and defense expenditures are determined by short-run shocks. For the other nine countries, equilibrating corrections are made to the defense budget in response to short-run shocks.