NEWTOWN, Conn. -- While Brazil is a relatively conflict-free country, it also maintains the largest defense budget in Latin America. Brazil's military is responsible for defending the country's sovereignty, and assisting in maintaining security within the nation. Brazil's military has been active in guarding Brazil's border from encroachments by drug traffickers, and in supporting police in providing security in Brazil's inner cities and favelas.
As the world has changed, so has the role of Brazil's military, which now focuses more on countering drug traffickers and criminal groups. The country's military has also played an important role in providing security for global events hosted by Brazil, such as the 2016 Olympic Games held in Rio de Janeiro.
At first glance, it would appear that Brazil's defense expenditures are steadily rising. Brazil spent BRL94.8 billion on defense in 2017, an increase from the BRL70.9 billion spent in 2013. However, the annualized growth of 7.6 percent has not kept pace with inflation. When the figures are compared in U.S. dollars, there has been an annualized decline of 2.5 percent between 2013 and 2017. In real terms, Brazilian defense spending increased at a miniscule 0.6 percent per year.
Due to the severe economic crisis currently affecting Brazil, the government has been unable to raise defense spending enough to keep up with inflation. Brazil continues to make progress on a number of major acquisition programs, such as the FX-2 and KC-390. However, with budgets declining, future purchases will be limited. For example, in 2018 Brazil purchased the HMS Ocean from the U.K. rather than develop its own helicopter carrier.
Brazil's largest expenditure is for personnel. These include salaries for current members of the military as well as pensions for retired personnel. In its proposed 2018 budget, Brazil plans to spend BRL74.7 billion, or about 80.6 percent of all allocations, on personnel and social expenses - an increase from an already high 73.8 percent in 2017. While personnel expenses has gone up, Brazil has sacrificed other expenses to lower its defense budget in 2018, which is expected to decline from BRL94.8 billion ($29.7 billion) in 2017 to BRL92.6 billion ($26.7 billion) in 2018. Capital investments, including defense equipment purchases, declined to 1.9 percent of the budget from 10.5 percent in 2017.
Going forward, Brazil will continue to need equipment to protect its resources, borders, and immense territory. Government support of local industry will also continue to be important as the country looks to rebound from its economic crisis.
For those reasons, the spending reductions will not continue. Spending will begin to increase in 2019 and will continue to grow at moderate rates through 2023. Between 2018 and 2023, defense spending will grow at an annualized rate of 3.9 percent, reaching BRL112 billion ($32.3 billion) by 2023.