Press Release

Contact: Tom Baranauskas, Latin America Defense Analyst

Phone: (203) 426-0800

Fax: (203) 426-4262

Web site: www.forecastinternational.com

E-mail: tom.baranauskas@forecast1.com

Forecast International, Inc.

22 Commerce Rd. Newtown, CT  06470 USA

 

FOR IMMEDIATE RELEASE

 

Venezuela Poised to Take Over as Top Latin American Arms Buyer

NEWTOWN, Conn. [November 14, 2005] — Over the past year Venezuela has adopted a force structure revitalization program that could be worth as much as $30.7 billion through 2012.  If fulfilled, this would make the country the leading arms buyer in the region through the rest of the decade. 

 

The revitalization program is being stoked by strong prices for the country’s oil exports, which means that Venezuela can finally address pent-up needs to overhaul an aging force structure.  However, according to Forecast International Latin America analyst Tom Baranauskas, “The viability of the revitalization program is very much dependent on oil prices remaining strong, with ambitious government plans to increase social spending also likely to be vying for the windfall oil income.”

 

While details are sketchy, the Venezuelan Navy itself is planning to spend some VEB2.141 trillion ($998.1 million) on a fleet and equipment revitalization program that will stretch from 2006 to 2010.  The planned procurements include 138 naval vessels of all types, including larger patrol ships, smaller coastal and riverine patrol boats, three submarines, and various support ships.

 

The Air Force has a requirement for as many as 50 fighters, with Russian Su-27s or Chinese J-10s reportedly being considered, and for nearly as many Super Tucano turboprop attack/trainer aircraft.  The Army needs at least 30 transport and gunship helicopters, and is in talks to buy light armored vehicles, artillery, and various electronics systems.  An air defense upgrade program worth at least $150 million has been launched with the purchase of Chinese JYL-1 3-D radars.

 

The Venezuelan re-armament has raised some concerns in the region. Neighboring Colombia in particular can ill afford to match Venezuela’s re-armament when it has already made a deep financial commitment to fighting a major insurgency.  Nevertheless, local concern is minor compared to the Bush administration, which has painted a rather alarmist view of the future plans of Venezuela’s populist president Hugo Chavez.

 

One consequence of the tense relations between the U.S. government and Venezuela is that U.S. companies are not likely to garner much of the emerging Venezuelan revitalization market.  As it stands, Brazil, China, Russia, and Spain appear to be the favored countries in these procurements.

 

Meanwhile, the rest of the Latin American defense market is in a quiet phase.  Chile has been the most active buyer in recent years, leveraging high copper prices to finish off a major force structure overhaul. The looming purchase of about two-dozen used F-16 fighters and several hundred used Leopard 2 main battle tanks should wrap things up for now.  The traditionally strong Brazilian defense market has been rather weak of late, with reduced defense budgets and the Lula government’s political problems both serving to keep a large number of requirements from being fulfilled.

 

These factors notwithstanding, Forecast International expects military spending in the region to increase modestly from $31.75 billion in 2006 to $33.38 billion annually by 2010.   It is important to note, however, that, traditionally, only about 20 percent the country’s military budget is spent on the procurement of weapons and other equipment, with the rest being earmarked for salaries and social benefits.

 

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, CT, USA, Forecast International specializes in long-range industry forecasts and market assessments utilized by strategic planners, marketing professionals, military organizations, and governments worldwide.  To arrange an interview with Forecast International’s analysts, please contact Monty Nebinger (203-426-0800, monty.nebinger@forecast1.com).