Brazil continues to lead the way in Latin American defence expenditure. Upcoming and ongoing programmes means that Brazilian budgets over the next decade will be higher than those of the next five biggest Latin American spenders combined. Overall budgets can be deceptive though, as new procurements are limited by high personnel and maintenance requirements.

New analysis from Frost & Sullivan, Revenue Opportunities and Stakeholder Mapping in the Latin American Defence Market, estimates that the cumulative defence expenditure on new equipment procurement in Brazil, Chile, Colombia, and Peru will amount to $69.1 billion between 2011 and 2020. The majority of these procurements will be in Brazil.

“While a lack of big-ticket programmes in smaller countries does not necessarily entail a lack of opportunity for defence companies, Western manufacturers willing to export may be disappointed by challenging markets,” noted Frost & 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.”

Latin American countries’ stocks currently comprise a lot of Cold War and even WWII-era platforms. Long overdue modernization drives are now being pushed by governments, and the global recession’s comparatively light touch on the region is helping them to do so.

“Some countries’ defence forces are struggling with internal security problems,” added Ball. “The need to modernize is acute, and is the main driver of defence procurement in the region.”

In many countries, decades of economic fragility and instability coincided with transitions to democracy following military dictatorships. 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.

“Many Latin American countries are consistently forced to prioritize their most immediate and often very basic requirements,” remarked Ball. “Due to the inability of many Ministries of Defence to create comprehensive long-term procurement plans, forces continue to be strained to their operational limits.”

End-users in Latin America are extremely price conscious, in many cases even preferring to buy second-hand platforms and domestically refurbish and upgrade them. There is an increase in the popularity of modular platforms, and demand for upgrade components and packages will remain high.

“Governments in these under-developed countries look favorably on defence procurements with clear domestic industrial and technological benefits,” concluded Ball. “In order to foment incentive, companies should enter the market via partnership with local companies or by establishing a domestic manufacturing base.”