Press Release

Contact: Tom Baranauskas, Latin America Defense Analyst

Phone: (203) 426-0800

Fax: (203) 426-4262

Web site: www.forecast1.com

E-mail: tom.baranauskas@forecast1.com

Forecast International, Inc.

22 Commerce Rd. Newtown, CT  06470 USA

 

FOR IMMEDIATE RELEASE

 

Instability on the Rise in Latin America, but Defense Spending Remains Largely Flat

 

NEWTOWN, Conn., November 3, 2003 - In its latest update of the "Latin America Defense Market Analysis" Forecast International estimates that total military spending for the region will reach about $24.5 billion in 2003 and modestly increase to just over $27 billion annually by 2007.  A small increase is expected in regional military spending over the period through 2008 to about $27.3 billion, but much depends on economies recovering and sustaining growth. 

 

Still, military opportunities remain, and the Latin American defense market has become noted for the fierce competition among contenders for even minor requirements.  Brazil's F-X fighter competition, for example, or Chile's new frigate requirement reveal just how intense the competition can be.  Contenders can improve their chances by setting up financing packages, with the region's militaries increasingly turning to borrowing to fund their larger requirements.

 

Latin America is seeing yet another round of instability that has been developing for some time, and the prospects for major future instability are quite likely.  However, the implications for defense spending remain somewhat nebulous.

 

For some time, the spillover of Colombia's internal security problems has created major headaches for its neighbors, forcing most to substantially increase security spending.  However, even these increases are not necessarily what they seem, especially given the fact that there appears to be a substantial amount of "robbing Peter to pay Paul" where other security/defense accounts suffer to fund border security improvements.  In Colombia itself the government is making some gains in combating its rebels, but at a high financial cost that may not be sustainable at its present level.

 

Meanwhile, violent crime within the region continues to swell, helped along by the easy availability of automatic weapons.  Indeed, criminal gangs now are often better equipped than local police.  To no one's surprise, the police are increasingly hard put to cope, prompting governments to send in the military, which are often untrained for, or unwilling to deal with, the problem. 

 

The region's most dangerous security development is the growing militancy of long-oppressed indigenous people, particularly in Ecuador and Bolivia.  This move toward militancy began in Ecuador a decade ago but it is in Bolivia that it has gestated into a real force.  When Bolivia's unpopular president Gonzalo Sanchez de Lozada sent the troops in yet again to put down widespread unrest, 65 people died in the subsequent crackdown.  Yet, the crackdown failed to suppress the protests and de Lozada was forced to resign in October 2003. 

 

The Bolivian chain of events has emboldened the indigenous people across the region, and considering their high degree of frustration, should provide a considerable source of worry for any Latin American leader.  The indigenous people's long-standing frustration is shared by most of the region's poor and disenfranchised, who feel that the free market reforms of the past decade have benefited them very little.  While guerrilla movements in past decades have fed off the poor, their leadership often came from the upper classes.  Led by a new generation of dynamic leaders, this developing grassroots movement of the disenfranchised sectors of Latin America takes full advantage of the communications revolution and has the potential for fast-paced chains of events that governments will be hard put to control.

 

The region's militaries face a wide range of potential threats, along with the need to maintain a conventional military capability, but funding remains a problem.  Of the $24.4 billion in military spending forecast for the region for 2004, a full 80 percent is likely earmarked for salaries, social security and pensions, leaving less than $5 billion to procure equipment, fuel or even food.   Furthermore, promised military budgets often are not completely delivered, leading to operational problems and procurement dislocations.  

 

Forecast International, is a leading provider of Market Intelligence and Analyses in the areas of aerospace, defense, power systems and military electronics.  Based in Newtown, CT, USA, Forecast International specializes in long-range industry forecasts and innovative marketing presentations, including regular 10-year forecasts.  To arrange an interview with Forecast International's analysts, please contact Monty Nebinger (203-426-0800, monty.nebinger@forecast1.com).