Determinants of Latin American Arms Imports: Focusing on a comparison between the Cold War and Post-Cold War

Abstract

Latin America is not a region that imports a large amount of weapons like Middle East or East Asia. Nevertheless, the diversity of suppliers is greater than in any other region, with the United States no longer dominating the market as it did prior to the mid-1960s. For this reason, Latin America is of special interest in analyzing the determinants of arms imports. It is undeniable that the end of the Cold War was a turning point in the global arms trade as demonstrated by a dramatic reduction in the total volume of arms trade. This decline can be primarily explained by the collapse of the Soviet. Hence, many scholars have argued that the main determinants of arms trade changed from political factors to economic factors. The main purpose of this thesis is to identify and compare the main determinants influencing the Latin American arms imports during the Cold War (1970-1991) and the post-Cold War (1992-2010). In order to identify these determinants, I used an empirical analysis with six clusters of explanatory variables which are assumed to correlate with arms imports such as national characteristics (area size and population), governmental characteristics (regime type and degree of democracy), military characteristics (defense expenditure), economic characteristics (GDP per capita, external debt, and trade openness), international conflict involvements (external war, internal war, and terrorism), and alliance entanglements (alliance with the U.S. or Soviet and value of the US military aid). In doing so, two models of panel regression - country fixed effects and country-time fixed effects - are used in this research. The regression results clearly show that the determinants influencing Latin American arms imports changed from the political factors to economic factors after the end of the Cold War. Degree of democracy, terrorism, and military aid from the U.S. have a strong influence on Latin American arms imports during the Cold War, while these political factors have absolutely no effect on Latin American arms imports after the end of the Cold War. However, GDP per capita have no impact on Latin American arms imports during the Cold War, while this economic factor has a significant effect on Latin American arms imports after the end of the Cold War.