Press Release

Contact: Rebecca Barrett, International Military Markets, Latin America and the Caribbean Analyst

Phone: (203) 426-0800

Fax: (203) 426-4262

Web site: www.forecastinternational.com

E-mail: rebecca.barrett@forecast1.com

Forecast International, Inc.

22 Commerce Rd. Newtown, CT  06470 USA

 

FOR IMMEDIATE RELEASE

 

Regional Arms Market Heating Up in Latin America

 

NEWTOWN, Conn. [December 17, 2007] — Prospects for the Latin American defense market are beginning to look up as the region continues to stabilize and demand for procurement increases. According to Forecast International’s latest annual survey of the Latin American defense market, spending for the region as a whole is expected to top off at $37.9 billion by 2010 and then ease slightly. While only about 20 percent of total defense spending goes toward procurements, $7.6 billion is still a substantial amount for the region as a whole.  Furthermore, Latin American nations are notorious for conjuring up additional funding when necessary. 

 

The U.S. arms embargo on Venezuela has forced this dynamic country to look elsewhere to fulfill its military modernization requirements. Russia has been enthusiastic in filling this need, heavily promoting its arms in Venezuela over the past two years. These efforts have been successful in encouraging Venezuelan President Hugo Chávez to procure more arms than he had originally intended to buy.  While the Venezuelan defense budget does not leave much room for Chávez’s ambitious plans, windfall oil income has come in handy to finance such purchases.   “A sudden change in prices could devastate Chávez’s procurement plans, should it happen midstream,” said Rebecca Barrett, author of the Forecast International study.  "However, while Chávez’s plans are somewhat ambitious, they are not unachievable.”

 

As Venezuela continues to place more orders with Russia, Brazil is beginning to rearm itself as well.  Shortly after arms sales from Russia to Venezuela topped $4 billion over the course of two years, Brazil this fall announced an increase in defense spending of more than 50 percent. Recent allegations of an arms race between the neighboring countries have been met with fervent denials by Brazil.

 

After appearing somewhat stagnant, Brazil's defense market in recent months has begun to show substantial prospects. According to Barrett, “Future procurements will focus on maintaining national security. As tensions throughout the region are increasing, and violent conflict in neighboring nations threatens the security of Brazil’s Amazonian borders, any increases in defense spending are likely to be wielded towards security equipment.”  

 

By early 2007, signs emerged that a major force structure overhaul was under way in Argentina. Although purchases remain contingent upon economic conditions in Argentina, the national government has announced its intentions to international suppliers. As it is beginning to penetrate the region full throttle, Russia has also jumped on the opportunity to enter the Argentine market. Fortunately for Argentina, with Russia in contention, bartering might be an option for the financing of future procurements. Russian relations with Argentina have been strengthening over the course of 2007, and the list of equipment being offered remains quite extensive. Although its wish list is long, so far Argentina seems to be making procurement decisions based on necessity, not desire.

 

Several other nations are making plans much like Argentina has, rather than exploiting their wallets. Both the Chilean and Peruvian governments are more focused on reorganization than modernization at this time. Chile, however, does have several procurements under way, which has caused Peru to raise an eyebrow. Lack of funding will force Peru to focus its attention elsewhere for the time being. 

 

Surprisingly, Colombia continues to fight an overwhelming insurgency rather than pay much attention to Chávez’s rearmament efforts. Tensions between the two countries, exacerbated by guerilla spillover into Venezuelan territory, are somewhat at ease as Chávez toils to mediate negotiations between the FARC and the Colombian government. At the same time, President Álvaro Uribe knows better than to let his guard down completely when it comes to Chávez.

 

It remains uncertain whether recent procurements are to fill the pent-up requirements of the past or to maintain a competitive advantage in a regional arms race. One thing is certain, however; Latin American prospects are increasing for the defense industry.

 

Forecast International, Inc., is a leading provider of Market Intelligence and Analysis in the areas of aerospace, defense, power systems, and military electronics.  Based in Newtown, Conn., USA, Forecast International specializes in long-range industry forecasts and market assessments used by strategic planners, marketing professionals, military organizations, and governments worldwide.  To arrange an interview with Forecast International’s editors, please contact Ray Peterson, Vice President, Research & Editorial Services (203-426-0800, ray.peterson@forecast1.com).