Contact: Tom Baranauskas, Latin America Defense Analyst
Phone: (203) 426-0800
Fax: (203) 426-4262
Web site: www.forecastinternational.com
Forecast International, Inc.
22 Commerce Rd. Newtown, CT
FOR IMMEDIATE RELEASE
Venezuela Poised to Take Over as Top Latin American
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
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Forecast International’s analysts, please contact Monty Nebinger (203-426-0800,