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The paper suggests a conceptual framework for analyzing the relationship between democracy and economic growth based on the international dimension. In essence, democracy positively effects economic growth in a given country when international actors seek to promote democracy in that country by punishing violations of democratic norms with economic sanctions. The paper specifies conditions under which violation of democratic norms gets punished with economic sanctions. First, foreign actors must have an interest in defending democracy in a given country. Second, the costs of defending democracy must not outweigh its benefits. Finally, economic sanctions must be employed as a tool for the defense of democracy. Furthermore, factors that affect the negative impact of economic sanctions on economic growth in the 'target' country are specified in the paper. They are as follows: economic openness of the 'target' country, extent of economic interdependence with sanctioning countries, as well as the structure of the economy and opportunities to diversify economic relations with other foreign actors. Besides, the impact of sanctions on growth depends on the duration of their application. Further, the paper illustrates the logic of the conceptual framework with the empirical example of Latin America. During the Cold War, democracies in the region did not face any economic advantages with regard to international factors. Latin America's Cold War history was highly influenced by the strategic struggle between the US and the Soviet Union. For the US, the main purpose in the region was to carry out the policy of containment of communism. This meant that certain undemocratic but friendly regimes were often supported, while hostile but democratic ones were undermined. The situation changed cardinally after the Cold War ended. When the strategic threat of communism disappeared, the US changed its policy focus from containment of communism to the promotion and defense of democracies. Moreover, Latin America experienced intensive processes of democratization and economic liberalization. This created conditions for the collective system of defense of democracy in the region. Certain factors contributed to the potential impact of economic sanctions in the region in the 1990s. Economic liberalization and higher economic openness made countries more vulnerable to potential sanctions. Furthermore, Latin American countries had high levels of economic interdependence with the US, the EU and other regional democracies, all of which were ready to defend democratic systems. Finally, the disintegration of the Soviet Union and disappearance of non-democracies in the region highly reduced opportunities for economic diversification in the case of economic sanctions. In Latin America in the 1990s, every violation of procedural democratic norms was met with economic sanctions which had negative effect on economic growth in the violating country. These cases were Haiti (1991), Peru (1992) and Guatemala (1993). In the case of Paraguay (1996), the threat of economic sanctions was one of the factors that helped to preserve democratic system in the country. This means that the analysis of the relationship between political regime type and economic growth in Latin America in the 1990s is incomplete and potentially incorrect, if international factors are not taken into account. Finally, the paper gives suggestions for further research, in particular hinting to the possible structural global shift in the democracy-growth relationship in post-Cold War environment. International factors provide a possible explanation why empirically democracies tend to grow faster than autocracies after the end of the Cold War

The paper suggests a conceptual framework for analyzing the relationship between democracy and economic growth based on the international dimension. In essence, democracy positively effects economic growth in a given country when international actors seek to promote democracy in that country by punishing violations of democratic norms with economic sanctions. The paper specifies conditions under which violation of democratic norms gets punished with economic sanctions. First, foreign actors must have an interest in defending democracy in a given country. Second, the costs of defending democracy must not outweigh its benefits. Finally, economic sanctions must be employed as a tool for the defense of democracy. Furthermore, factors that affect the negative impact of economic sanctions on economic growth in the 'target' country are specified in the paper. They are as follows: economic openness of the 'target' country, extent of economic interdependence with sanctioning countries, as well as the structure of the economy and opportunities to diversify economic relations with other foreign actors. Besides, the impact of sanctions on growth depends on the duration of their application. Further, the paper illustrates the logic of the conceptual framework with the empirical example of Latin America. During the Cold War, democracies in the region did not face any economic advantages with regard to international factors. Latin America's Cold War history was highly influenced by the strategic struggle between the US and the Soviet Union. For the US, the main purpose in the region was to carry out the policy of containment of communism. This meant that certain undemocratic but friendly regimes were often supported, while hostile but democratic ones were undermined. The situation changed cardinally after the Cold War ended. When the strategic threat of communism disappeared, the US changed its policy focus from containment of communism to the promotion and defense of democracies. Moreover, Latin America experienced intensive processes of democratization and economic liberalization. This created conditions for the collective system of defense of democracy in the region. Certain factors contributed to the potential impact of economic sanctions in the region in the 1990s. Economic liberalization and higher economic openness made countries more vulnerable to potential sanctions. Furthermore, Latin American countries had high levels of economic interdependence with the US, the EU and other regional democracies, all of which were ready to defend democratic systems. Finally, the disintegration of the Soviet Union and disappearance of non-democracies in the region highly reduced opportunities for economic diversification in the case of economic sanctions. In Latin America in the 1990s, every violation of procedural democratic norms was met with economic sanctions which had negative effect on economic growth in the violating country. These cases were Haiti (1991), Peru (1992) and Guatemala (1993). In the case of Paraguay (1996), the threat of economic sanctions was one of the factors that helped to preserve democratic system in the country. This means that the analysis of the relationship between political regime type and economic growth in Latin America in the 1990s is incomplete and potentially incorrect, if international factors are not taken into account. Finally, the paper gives suggestions for further research, in particular hinting to the possible structural global shift in the democracy-growth relationship in post-Cold War environment. International factors provide a possible explanation why empirically democracies tend to grow faster than autocracies after the end of the Cold War