The Argentine Defense Industry Market Opportunities and Entry Strategies, Analyses and Forecasts to 2016

Lon­don, April 3rd, 2012 – The Argen­tine defense bud­get stood at US$2.96 bil­lion in 2011, the result of a CAGR of 16.55% dur­ing the review peri­od and this robust growth was pri­mar­i­ly dri­ven by high per­son­nel turnover in the armed forces. The gov­ern­ment announced a 21% wage increase in the salaries of the armed forces in 2010. In 2012 the defense bud­get is esti­mat­ed at US$3.64 bil­lion and is expect­ed to reg­is­ter a CAGR of 16.40% dur­ing the fore­cast peri­od to reach US$6.68 bil­lion by 2016. This robust growth is a result of the need to mod­ern­ize the Argen­tine armed forces fol­low­ing decades of under­in­vest­ment after defeat in the Falk­lands war in 1982, and the col­lapse of the Argen­tine econ­o­my in 2001. The gov­ern­ment intends to increase the defense bud­get of the coun­try from 0.7% of GDP in 2011 to 1.5% of GDP and while the time peri­od for doing so is unclear, it is esti­mat­ed that the defense bud­get will increase to 1.2% of GDP by 2016.

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Dur­ing the review peri­od cap­i­tal expen­di­ture was allo­cat­ed an aver­age of 3.6% of the defense bud­get and this low allo­ca­tion was due to the high expen­di­ture on salaries and pen­sions, which account for 70% of the defense bud­get. How­ev­er, mod­ern­iza­tion plans are expect­ed to increase cap­i­tal expen­di­ture to an aver­age of 7.2% of the defense bud­get dur­ing the fore­cast peri­od.

Argen­tine defense expen­di­ture is rel­a­tive­ly small and stood at US$2.96 bil­lion in 2011, low­er than large spenders such as its neigh­bour Brazil, which spent US$36 bil­lion in the same year. Despite being the low­est spender in South Amer­i­ca, Argen­tine defense expen­di­ture is expect­ed to reach US$6.7 bil­lion, although this is still rel­a­tive­ly low com­pared to the largest spenders world­wide.

Argen­tine defense imports peaked in 2007 but declined in sub­se­quent years due to eco­nom­ic con­straints forc­ing the gov­ern­ment to post­pone defense mod­ern­iza­tion plans. How­ev­er, dur­ing the fore­cast peri­od, imports are expect­ed to increase with the resump­tion of the mod­ern­iza­tion plans. The US accounts for the major­i­ty of imports, with coun­tries such as Spain, Rus­sia, Brazil and Aus­tria also export­ing equip­ment to the Argen­tine armed forces, although the US is expect­ed to con­tin­ue to dom­i­nate the mar­ket dur­ing the fore­cast peri­od. Air­craft and sen­sors were the largest import cat­e­gories dur­ing 2007–2011 and are expect­ed to con­sti­tute the major­i­ty of imports over the fore­cast peri­od. Rus­sia is expect­ed to enter the mar­ket through the sup­ply of trans­port heli­copters, the planned pur­chase of train­ing heli­copters from BELL, trans­port air­craft and fight­er air­craft. The domes­tic defense indus­try pos­sess­es lim­it­ed capa­bil­i­ties result­ing in neg­li­gi­ble exports.

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