Latin American Defense Market Breaks from Traditional Ties
NEWTOWN, Conn. [November 17, 2008] — Prospects for the Latin American defense market are beginning to look robust. Although Latin American military spending is relatively small compared to the Middle Eastern or Asian markets, the region’s military procurement right now shows little sign of slowing.
Plagued with obsolete equipment and outdated technology, the region as a whole finds itself hard-pressed to modernize. Financial constraint has forced many countries to refurbish existing equipment; however, it is no match for the new technology that others in the region can afford. For example, Colombia is refurbishing its fleet of Israeli Kfir fighters, but they’ll be no match against Venezuela’s new batch of 24 Su-30 fighters.
Over the years, U.S. arms restrictions have hindered many sales to the region, prompting some nations to diversify their options. Colombia and Mexico, though, will likely remain faithful to the United States, as it provides a large portion of defense funding and equipment needs for the two nations. Colombian defense procurement is based wholly on counter-insurgency, and Mexico is beginning to arm for the same. Meanwhile, Chile is nearing the end of a procurement cycle, while Argentina and Ecuador appear to be ramping up.
The region’s best sales prospects are Venezuela and Brazil. Venezuela has already spent over $4.4 billion on Russian hardware over the past three years. With the addition of a recent $1 billion loan to Venezuela from Russia, Venezuelan President Chavez’s ambitious procurement plans are quickly becoming a reality. The Venezuelan wish list ranges from air defense systems and missiles to additional fighters and armored vehicles.
Brazil, on the other hand, has entered into a phase of self-sustainment in which future procurements will either be produced domestically or involve intensive technology transfer. The Brazilian Air Force plans to replace its fighter fleet with some 120-150 fighters under project FX-2. Simultaneously, the Navy’s nuclear submarine program has been resurrected, with $550 million to be invested in the project over the next eight years.
“The Latin American market is perhaps the most promising for Russian manufacturers,” said Rebecca Barrett, Forecast International analyst and author of “The Military Market for Latin America” analysis. “Not only has the leftward trend in politics opened the door for negotiations with Russia, but the U.S. economic crisis has also exerted pressure on the region to diversify investment options. There is a rapidly growing need to expand relations outside the traditional ties.”
The U.S. arms embargo that provided significant blockades to Venezuelan military procurement has already caused a dramatic shift toward Russian-made equipment. Better prices, loan availability, and fewer restrictions are helping Russia penetrate the Latin American market.
Source: Forecast International, Inc.Forecast International, Inc. (www.forecastinternational.com) 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, email@example.com.