The Oil Drilling Rig Industry is characterized with a few typical work specific to this industry only. The work begins with the search for new oil basins or construction of wells. During this time the services of drilling contractors and se…
This report is the result of SDI’s extensive market and company research covering the Chilean defense industry, and provides detailed analysis of both historic and forecast defense industry values including key growth stimulators, analysis of the leading companies in the industry, and key news.
Introduction and Landscape
Why was the report written
The Chilean defense Industry Market Opportunities and Entry Strategies, Analyses and Forecasts to 2017 offers the reader an insight into the market opportunities and entry strategies adopted by foreign original equipment manufacturers (OEMs) to gain a market share in the Chilean defense industry.
What is the current market landscape and what is changing
With an estimated market value of US$2.5 billion in 2012, Chile was one of the largest defense markets in Latin America; however, defense expenditure declined steeply in 2012 due to transfer of Carabineros de Chile and Investigations Police of Chile to the Ministry of Interior and Public Security. Furthermore, due to an aggressive modernization strategy, border disputes, and persistent threats from drug traffickers, its defense expenditure is expected to grow over the forecast period and to reach US$4 billion by 2017. With the removal of heavy funding from the Copper Reserve Law for defense from 2012 onwards, the country’s economic growth is expected to drive the size of the Chilean defense industry. Capital expenditure will see a marginal increase due to the country’s heavy procurement pattern during the review period, and the majority of the expenditure will be allocated tithe army and navy. The Chilean defense industry is expected to experience a high growth rate over the forecast period, making it one of the fastest-growing defense markets in the world over the next five years.
What are the key drivers behind recent market changes
Chile is a narrow strip of land between the Andes Mountains on the east and the Pacific Ocean to the west, and it shares land borders with Argentina, Peru, and Bolivia; due to its long narrow shape, the country has border disputes with many countries. Growing relations with the US are expected to lead the improvements in the modernization of the armed forces. Over the forecast period, Chilean defense expenditure is expected to be driven by border disputes and modernization programs.
What makes this report unique and essential to read
The Chilean Defense Industry Market Opportunities and Entry Strategies, Analyses and Forecasts to 2017 provides detailed analysis of the current industry size and growth expectations from 2013 to 2017, including highlights of key growth stimulators. It also benchmarks the industry against key global markets and provides a detailed understanding of emerging opportunities in specific areas.
Key features and Benefits
- The report provides detailed analysis of the current industry size and growth expectations from 2013 to 2017, including highlights of key growth stimulators, and also benchmarks the industry against key global markets and provides a detailed understanding of emerging opportunities in specific areas.
- The report includes trend analysis of imports and exports, together with their implications and impact on the Chilean defense industry.
- The report covers five forces analysis to identify various power centers in the industry and how these are expected to develop in the future.
- The report allows readers to identify possible ways to enter the market, together with detailed descriptions of how existing companies have entered the market, including key contracts, alliances, and strategic initiatives.
- The report helps the reader to understand the competitive landscape of the defense industry in Chile. It provides an overview of key defense companies, both domestic and foreign, together with insights such as key alliances, strategic initiatives, and a brief financial analysis.
Key Market Issues
- The Chilean domestic defense industry is still in its nascent stage, and the country relies on imports from various countries to fulfill its weapons procurement needs. Chilean defense imports by volume ranked thirteenth in the world during 2005–2009, and Chile’s largest import trading partners are currently the US, Spain, Germany, and the Netherlands. The US has emerged as the main import trading partner with a substantial increase in share, from 16% during 2006–2010 to 30% in 2010 alone. Aircraft and ships constituted the majority of Chilean imports during 2005–2010, followed by armored vehicles and missiles.
- The Chilean Copper Reserve Law (CRL), initially imposed in 1958 as a 15% tax on mining profits, changed to a 10% tax on total sales from the state-run copper exporter Codelco in 1973;this law has resulted in the infusion of a large amount of cash into the Chilean armed forces, facilitating large-scale defense procurement. In 2011, the new law replaced CRL funds to Economic and Social Stabilization Fund (ESSF), resulting in a decrement in the defense budget for 2012. An initiative in 2010 included a contingency fund to provide further resources in exceptional circumstances, such as the major reconstruction program following the devastating earthquake of February 2010, and this development has been the cause for much debate, with both sides finding support.
- The Chilean defense industry is expected to grow at a CAGR of 9.84% over the forecast period, from an estimated US$2.7 billion in 2013 to US$4 billion in 2017, after the separation of the departments of Carabineros de Chile and Investigations Police of Chile from the Ministry of Defense in 2012. Border disputes and military modernization initiatives will drive growth in defense expenditure during the forecast period. Due to legislature changes, the benefit from the Copper Reserve Law will stop during the forecast period; through the Copper Reserve Law, 10% of state-owned copper producer Codelco’s annual revenues were transferred in equal proportion to the army, navy, and air force for arms procurement.
- The country has hosted a biennial defense exhibition since 1998, providing investors an opportunity to access the country’s defense market. The Chilean Ministry of Defense (MoD) also encourages joint ventures and technology-sharing agreements to enable domestic firms to enhance their capabilities and enhance diplomatic relations between the countries. Examples of these collaborations include the US-Chile agreement on sharing military technical data, the Declaration of Intent signed by Brazil and Chile to jointly develop the KC-390 military transport aircraft, and the joint venture between the Chilean military and BAE Systems to build the 160mm Rayo Rocket project.
- As a percentage of GDP, Chilean defense expenditure stood at an average of 1.48% during the review period. In 2012, the defense expenditure as percentage of GDP is expected to be 0.92% due to the transfer of Carabineros de Chile and Investigations Police of Chile to the Ministry of Interior and Public Security (MoIPS) in 2011. During the forecast period, the defense expenditure is expected to increase and as a percentage of GDP it is anticipated to reach 1.04% by 2017.