NEWTOWN: The legacy of Argentina’s former President Néstor Kirchner is not dead yet, but his goal of reorganizing the military by 2010 is definitively buried. With the implementation of a new defense law in 2006, it was hoped that the appropriate funding for the changes would follow. Although funding levels have seen some improvement in recent years, Argentina’s economic troubles have pushed these modernization plans to 2025.

The weakness of the Argentine economy is the nation’s most pressing threat. A negative growth outlook for the next two years has forced President Cristina Kirchner’s administration to cut military spending and scrap plans for pending upgrades and replacement programs. As long as the Argentine economy is in a slump, prospects for procurement remain dim.

The primary concern in Argentina for some time has been the economy, and the military has suffered serious budget restrictions as a result. So far this year, the government has been forced to suspend the Army’s Gaucho wheeled light vehicle program, the Navy’s new offshore patrol vessel undertaking, and the procurement of Russian Mi-17 helicopters. The pressing replacement of the Air Force’s Mirage III fighter fleet is also uncertain at this time, due to a lack of funding.

As inflation threatens to climb higher, the economy is forecast to shrink by 1.5 percent. Investors are quickly losing confidence in the market as Congress fails to devise a cohesive economic package. According to Rebecca Barrett, Latin American defense analyst at Forecast International, “Mrs. Kirchner has the potential to lead the country to economic prosperity; whether or not she will do so is the question. She must now begin to compromise with the opposition if she expects to pull the country out of its economic slump.”

Nonetheless, military budgets continue to rise year over year. However, Barrett points out, “While funding has been increasing in recent years, much of it appears to be going for salary increases to make the military more competitive with the civilian sector.” Thus it is not surprising that several of the armed force’s programs have been canceled. With at least 70 percent of defense spending going toward personnel costs, little remains for actual weapons acquisitions. Until the Argentine economy makes a significant rebound, defense-related acquisitions will be limited. In the meantime, modernization plans for the armed forces will have to wait until at least 2025.

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, Conn., USA, Forecast International specializes in long-range industry forecasts and market assessments used by strategic planners, marketing professionals, military organizations, and governments worldwide.