NS4540 Winter Term 2017 Latin American Defense Expenditures Federal Reserve Bank of Chicago, Strong Dollar Weak Dollar

Overview General pattern of defense expenditures in developing countries: Hurt growth in resource constrained countries, Help growth in resource unconstrained countries Defense expenditures in Latin America can be explained to a large extent by the overall level of GDP together with fiscal funding variables, primarily government expenditures, or government revenues Patterns of defense expenditures tend to vary depending on whether or not a country is an arms producer – possibility of military Keynesianism.

Defense Sepending

Latin America I SIPRI Trends in World Military Expenditure, 2015 For Latin America military expenditure increased by 2.9% in 2015. The level is 33% higher than in 2006 For South America military spending was down 4.0% from 2014 but up 27% compared with 2006 For Central America military spending was up 3.7% from 2014 and 84% from 2006 Fall in South American spending was result of 64% cut in military budget by Venezuela Ecuador which had high levels of military spending for several years cut spending by 11% in 2015 due to fall in price of oil

Latin America II Stronger economic position boosted military expenditure in Colombia, Guyana, Paraguay, Peru and Uruguay In Central America military spending trends driven by extreme levels of violent organized crime Military forces have become increasingly involved in combating drug gangs and cartels Mexico’s military spending continued to expand (3.6%) in 2015 more than 92% higher than in 2006 Military expenditure in Honduras (world’s second largest homicide rate) increased by 186% between 2006 and 2015 Honduras’s military spending includes some proceeds of a special population-security tax imposed in 2012 to provide additional funds to the military, police and intelligence services