Brazil leads region in defense spending

June 29, 2012 at 12:37 PM
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BUENOS AIRES, June 29 (UPI) -- Ongoing and upcoming Brazilian defense programs translate into the highest defense expenditures in Latin America over the next decade.

Business analysis firm Frost and Sullivan said it came to the conclusion after studying estimate defense expenditures for new equipment of Brazil, Chile, Colombia and Peru.

The total will be about $69.1 billion for all from 2011-20, with Brazil accounting for the majority of procurements.

"While a lack of big-ticket programs in smaller countries does not necessarily entail a lack of opportunity for defense companies, Western manufacturers willing to export may be disappointed by challenging markets," noted Frost and Sullivan Industry Analyst Chiara Ball.

"However, significant opportunities exist, especially for those willing to help governments' further industrial development by creating domestic or regional bases."

Coincidentally, the analysis by Frost and Sullivan was soon followed by an announcement from Brazil's Ministry of Defense that it will receive $733 million from the government's Accelerated Growth Program to procure defense equipment.

"Overall, this (AGP) program will allocate $4 billion in 2012, and aims to stimulate the Brazilian economy to expand investment and to generate employment and income," the ministry said.

The analysis by Frost and Sullivan stated that the equipment inventory of Latin American militaries mainly feature equipment left from World War II and the Cold War.

Modernization drives are under way and are facilitated by the worldwide recession's "comparatively" light impact on the region.

"In many countries, decades of economic fragility and instability coincided with transitions to democracy following military dictatorships," Frost and Sullivan said. "The economic and cultural result of this was institutionalized neglect of military capabilities, which is now changing.

"However, despite the overall economic growth of many of these countries, overall budgets are still too small to match the overwhelming requirements."

Ball said that the small budgets on many countries forces prioritizing to immediate and often very basic requirements. Often second-hand platforms are purchased and domestically refurbished and upgraded.

There is an increase in the popularity of modular platforms and demand for upgrade components and packages will remain high, Ball said.

"Governments in these underdeveloped countries look favorably on defense procurements with clear domestic industrial and technological benefits," he said. "In order to foment incentive, companies should enter the market via partnership with local companies or by establishing a domestic manufacturing base."

In Brazil's announcement, the Defense Ministry said the initial $ 733 million it is receiving will be used to buy 4,170 trucks, 40 Guarani armored vehicles and 30 Astros 2020 missile launcher vehicles.

The Guarani is a project of the Brazilian Army and will be produced by Brazil's Minas Gerais, an Iveco company. They are amphibious wheeled armored vehicles and will replace the current Urutu vehicles, which are more than 30 years old.

The Astros 2020 is a rocket and missile launcher system developed By Brazilian company Avibras.

The ministry said the projects will stimulate innovation and domestic production of technologically advanced facilities.

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