Latin America Defense Spending 31 August 2020

Report Introduction

This report provides a review of the defense spending power of nine (9) Latin American countries. For each of these countries, Janes has provided a list of their major defense procurement programs underway, including an assessment of the likelihood that each program will be funded given the current global economic scenario as affected by the COVID-19 pandemic. For each country, Janes also provides a directory of the top –public and private- defense companies/ defense industry organizations.

A 5-year defense spending forecast is provided for the six (6) largest spenders: Argentina, Brazil, Chile, Colombia, Mexico, and Peru, which identifies the type of capabilities that Janes foresees will be required in the 2020-2024 timeframe.

The report also provides a brief overview of the defense and security spending capacity of eight (8) Caribbean and Central American countries.

Latin America defence budget and regional growthChart Title rate, 2005-30 • The region has only recently emerged

60 12% from economic contraction 10% 50 8% • Heavy dependency on hydrocarbon 6% 40 4% and commodity exports exposes the 2% region’s governments to price 30 0% volatility -2% 20 -4% • Lack of domestic, developed defence 10 -6% -8% industries along with across the board 0 -10% currency devaluations against the USD will hit procurement plans

• 2021 is expected to be the peak of Argentina Bolivia Brazil defence cuts, with a return to growth Chile Colombia Ecuador for the region by 2025

Mexico Paraguay Peru

Uruguay Venezuela Regional Average Growth (pre-covid)

Regional Average Growth Note: Venezuela forecast not include in Regional Average Growth (pre-Covid)

Latin America Main Trends and Drivers

Countries covered in this report: Caribbean Community

Mexico

Ecuador Colombia

Peru Brazil

Bolivia Uruguay

Chile Argentina

Argentina Defense Spending

Total Defense Budget by Force for Argentina 2020-2024

Argentina has been moderately affected by Covid-19. However, the global and local Force 2020 2021 2022 2023 2024 economic shock caused by the Coronavirus is projected to contract real GDP by Army 731.06 616.06 609.34 595.44 610.31

6.02%, with the country likely to default on IMF repayments, the first instance since Navy 414.54 342.03 311.94 325.12 360.63 2001. With most of Argentina’s debt held in dollars the global pandemic has Air Force 330.04 314.82 272.84 275.80 249.67 exacerbated the debt situation, devaluing the Argentinian peso by 30% against the Defense- 921.21 670.47 624.80 630.14 628.80 dollar since July 2019. Debt, as a result, has ballooned to above 70% of GDP. Wide

Total 2,396.85 1,943.38 1,818.92 1,826.50 1,849.41 Janes Defence Budgets forecasts that defence will suffer due to economic impacts of Covid-19, with a large-scale fall of 18.92% in 2021 through to 6.41% in 2022 and 0.42% in 2023. This will most likely be felt through major procurement programs being put on hold, the start of which has been seen with the KAI FA-50 light fighter aircraft procurement program being suspended indefinitely in early 2020. Total Defense Budget by Activity for Argentina

Force 2020 2021 2022 2023 2024

Procurement 33.46 44.66 45.80 54.29 68.99

R&D 6.91 7.38 8.75 9.45 10.69

Personnel 1,307.94 1,164.09 1,077.56 1,067.72 1,081.39

Ops & Mant 196.71 172.11 168.91 174.77 173.11

Other 851.83 555.14 517.90 520.27 515.23

Total 2,396.85 1,943.38 1,818.92 1,826.50 1,849.41

Argentina Defense Procurement Programs

Top Programs (2020-2024) 5-year procurement forecast (2020-2024) - $ M Program Description Likelihood 1 LPD for the Navy to restore LPD Medium amphibious capability 316.83 Two training ships to be completed Training vessels High in local shipyards

933 249 200 VN1 IFVs and APCs for the VN1 8x8 APC Low Army 8-12 medium lift helicopters for the 205.91 Utility helicopters Medium Army

180.83 Multirole fighter 10-12 light fighter aircraft for the Air Medium aircraft Force 173.14 12-18 additional Pampa III light 59.6 IA63 Pampa III High attack/training jets for the Air Force 60.33 73.4 77.41 87.38 25 IA100 basic trainers for the Air IA100 High Force Transport Coastal/Patrol Trainer Multi-Role Elect Destroyer Corvette Battle Mgmt C2 IFV_L. Attack(veh) Tactical transport 2-4 C295 or C-27J for the Air Force Low Logistics/Support Survey/Ocean Other Programs aircraft

Argentina Defense Industry Landscape

Top Local Organizations

Company / Organization Market Sector Ownership Defense Trade Shows

CINAR Shipbuilding and maintenance Ministry of Defense

The shipyard is licensed to manufacture Fiat, Bürmeister & Wain Government of the Astillero Rio Santiago and Sulzer diesel engines. Province of Buenos Aires

Manufacturing and development of light utility helicopters for None Cicare SA commercial and government use as well as helicopter simulation Private systems Provider of manufacturing services (aircraft and components) and FAdeA Ministry of Defense aerospace maintenance and modernization services Design and construction of low orbit and geostationary satellites; Government of the INVAP air traffic control radar systems; and nuclear research reactors. Province of Rio Negro

Nostromo Defensa Development of UAVs Private

Group of factories. FM Fray Luis Beltran produces cartridges, ammunition, hand guns, and light rifles. FM Villa Maria and FM Azul (Buenos Aires) produce powders and explosives. FM Rio Tercero DGFM produces chemicals and metallurgical products. FM Santa Cruz is a Ministry of Defense developer of ammonia, nitric acid and ammonium nitrate. In 2014 another plant opened in San Jose to produce explosive powders for mining.

simulation systems, rocket systems, radar systems, C4ISR, IT Ministry of Defense CITEDEF security; telemetry; night-vision systems; non‐destructive Copyright © 2020 Jane's Group UK Limited. All Rights Reserved.materials testing; and targeting systems 8

Bolivia Defense Spending

Total Defense Budget by Force for Bolivia 2020-2024

Bolivia has been minimally affected by Covid-19, with GDP expected to drop by -0.76% Force 2020 2021 2022 2023 2024 in 2020. However, defence spending is heavily influenced by the revenue generated Army 124.42 99.05 90.73 88.28 90.44 through hydrocarbons, particularly oil and gas. With a decline in the global price of oil Navy 24.59 19.81 18.16 17.66 18.09 since 2013, along with internal economic problems as well as domestic political Air Force 60.96 87.16 79.85 77.69 79.60 tensions, Bolivia has made cuts to defence spending from 2018 onwards. This trend will Defense- 248.90 190.18 174.21 169.50 173.64 most likely increase due to suppressed global demand for oil and gas during the Wide Coronavirus global shut down and subsequent global recession. While oil prices are Total 458.87 396.20 362.95 353.13 361.77 expected to rise nearing the end of 2020, global oversupply is expected to be a feature in the medium term.

Janes Defence budgets forecasts defence cuts of 13.66% in 2021, 8.39% in 2022 and 2.71% in 2023. Defence spending is expected to stabilise from 2024, should the global Total Defense Budget by Activity for Bolivia price of oil remain near current prices further cuts may continue.

Force 2020 2021 2022 2023 2024

Procurement 42.67 64.50 59.54 57.93 59.35

R&D 1.03 2.43 2.23 2.17 2.23

Personnel 388.75 277.93 253.65 246.79 252.83

Ops & Mant 22.56 40.75 37.59 36.58 37.46

Other 3.86 10.59 9.94 9.66 9.90

Total 458.87 396.20 362.95 353.13 361.77

Bolivia Defense Procurement Programs

Top Programs (2020-2024) Top Local Organizations Program Description Likelihood

Company / Market Sector Ownership Tactical transport Two C295 or C-27J transport Organization Low aircraft aircraft for the Air Force Fabrica Boliviana de Ammunition manufacturing Ministry of Municiones Defense Light attack aircraft 6 light attack jets to supplement FANEXA Explosives manufacturing Ministry of Medium Defense (jet) the K-8s for the Air Force ENAUTO Vehicle maintenance Ministry of Defense Light attack aircraft 6 turboprop light attack aircraft for ENABOL Shipbuilding and maintenance Ministry of High Defense (turboprop) the Air Force to replace the PC-7s

40,000 new assault rifles for the Assault rifles Low Army

12-24 armored personnel carriers APC to replace Roland and oldest Medium M113s for the Army

Brazil Defense Spending

Total Defense Budget by Force for Brazil 2020-2024

Brazil has been significantly affected by Covid-19 due to internal political conflict, particularly Force 2020 2021 2022 2023 2024 with President Bolsonaro’s opposition for Coronavirus preventative measures. Having just Army 6,299.02 6,433.04 6,716.09 6,726.88 6,726.24 emerged from a severe recession between 2015 and 2016, the economic impact of Navy 4,091.16 4,535.62 4,466.52 4,539.81 4,787.60 Coronavirus is expected to be widespread. This coupled with a large fall in commodities Air Force 4,233.01 3,954.93 4,156.80 4,390.69 4,551.60 demand and the country having experienced significant flight of foreign investment during the Defense- 1,510.41 770.59 961.78 911.28 792.31 early stages of the pandemic, the Brazilian Real has devalued by nearly 25% against the Wide dollar as of May 2020. Janes Defence Budgets forecasts a contraction of 4.5% in real GDP Total 16,133.60 15,694.18 16,301.19 16,568.66 16,857.75 for 2020 with a quick return to growth of 3.5% in 2021 and 3.2% in 2022.

2020 defence budget saw a significant drop of 35.56% in real terms, largely due to withholding of discretionary funds by Bolsonaro for political purposes. Bolsonaro has demonstrated major defence cuts are not off the table when it comes to achieving political Total Defense Budget by Activity for Brazil aims and so heavier cuts to services are expected due to domestic political tensions as well as a large drop in overall state spending. However, with potential for Brazilian oil industry to Force 2020 2021 2022 2023 2024 capture a larger portion of the global market through low production costs of USD6 per barrel Procurement 1,251.30 952.28 1,152.21 1,365.74 1,462.22 to USD13 for pre-salt layer and deep water drilling, along with fixed high personnel costs, real term defence cuts of 2.7% are expected in 2021, with growth of 3.9% in 2022. R&D 76.00 115.16 125.59 120.00 135.09 Personnel 11,546.60 12,297.12 12,515.59 12,396.58 12,371.09

Ops & Mant 1,406.52 1,550.57 1,803.91 1,946.57 2,119.54

Other 1,853.18 779.05 703.89 739.77 769.81

Total 16,133.60 15,694.18 16,301.19 16,568.66 16,857.75

Brazil Defense Procurement Programs

Top Programs (2020-2024) 5-year procurement forecast (2020-2024) - $ M Program Description Likelihood Tamandare corvettes 4 MEKO A-100 corvettes for the High Navy

2592.33 Riachuelo submarine 3 Riachuelo (modified Scorpene) High submarines for the Navy 5692 KC390 25 KC390 for the Air Force High 2096.7

Lead-in Fighter 12 LIFTs for the Air Force Medium 1945.8 Trainer

312.65 Guarani AFVs 1,000 VBTP-MR Guarani AFVs High 1435.06 for the Army 416.43

477.17 Attack helicopters 12 attack helicopters for the Medium 534.7 504.81 647.27 705.91 Army LMV 77-144 Iveco LMV for the Army High Transport MultiRoleCombat(acft) Attack Sub Frigate APC Multi-Role Elect Anti-Ship Anti-Aircraft Medium-range GBAD One battery of medium-range air Medium Ground Support All Others Fire Control Other Programs defense systems for the Army

Brazil Defense Industry Landscape

Top Local Organizations

Company / Market Sector Ownership Defense Trade Shows Organization ICN Nuclear and conventional submarines production for the National Submarine Private Development Program (PROSUB) Stella Tecnologia UAV development and manufacturing Private

Taurus Armas Small arms design and manufacturing Private

AVIBRAS Heavy weapons, weapon design, missiles, rockets, torpedoes, mines, bombs, Private telecommunications, explosives, satellite systems 06-09 April 2021 - LAAD MACJEE Aviation bombs and explosives manufacturer, special vehicles design and Private manufacturing Agrale Vehicle designer and manufacturer Private

AEL Sistemas Electronics and avionics manufacturer and integrator Private (subsidiary of Elbit Systems) Helibras Helicopter manufacturing and MRO Private (subsidiary of Airbus Helicopters) Novaer Aircraft developer and manufacturer Private

EMBRAER Major aircraft manufacturer which focuses on commercial aerospace, defense, and State-owned executive aviation

Chile Defense Spending

Total Defense Budget by Force for Chile 2020-2024

Chile has been significantly affected by Covid-19, suffering one of the highest rates of Force 2020 2021 2022 2023 2024 infection per capita in South America. This has been made worse due to underlying social Army 813.77 745.05 737.59 760.32 715.25 issues and mass demonstrations resulting from inequality, medicine costs and minimum Navy 529.01 608.09 626.50 531.85 569.97 wage issues since October 2019. While law requiring the state-run mining company CODELCO to turn over 10% of its export profits to the armed services was abolished in Air Force 596.71 546.17 467.93 460.69 480.56 Defense- July 2019, a global recession caused by Coronavirus is expected to suppress commodities 2,427.28 2,173.54 2,015.08 1,992.55 1,959.51 Wide prices, having knock on effects on government revenue. Total 4,366.77 4,072.85 3,847.10 3,745.41 3,725.29 Additionally, with Chile entering into this crisis with government debt equal to above 25% of GDP, government debt is expected to grow dramatically with the implementation of an economic rescue package in mid-March worth USD 11.7 billion, spending equivalent to 4.7% of GDP. Real GDP growth is expected to fall by -4.4% in 2020, with a return to growth Total Defense Budget by Activity for Chile of 0.95% in 2021, reaching pre-2014 levels by of over 4% by 2025.

Force 2020 2021 2022 2023 2024 While defense spending volatility has been reduced through diversifying military funding away from commodities revenue, a drop of 6.73% real GDP is forecast for 2021. Continued Procurement 528.54 431.16 402.25 416.47 421.24 suppression of commodities prices due to global recession is expected to further reduce R&D 4.88 6.30 6.25 5.98 5.88 defense spending, dropping by an addition -5.54% in 2022, -2.64% in 2023 and with a Personnel 2,934.64 2,811.11 2,660.87 2,598.34 2,583.51 returning to growth in 2025. Ops & Mant 365.79 388.08 373.46 365.27 369.79

Other 532.92 436.20 404.27 359.35 344.87

Total 4,366.77 4,072.85 3,847.10 3,745.41 3,725.29

Chile Defense Procurement Programs

Top Programs (2020-2024) 5-year procurement forecast (2020-2024) - $ M Program Description Likelihood Three 6000-8000 tonnes LPD High amphibious ships for the Navy 903.23 OPV 80 1-2 OPV 80s for the Navy Medium 2071

495.79 30-40 Stryker M1126 and M1128 Stryker Medium for the Marines 1 second-hand C-130 for the Air C-130 High 453.38 Force 3-6 additional S-70i for the Air 389.23 S-70i Medium Force 165.64 12 advanced jet trainers to Advanced Jet Trainer High 167.18 replace existing A/T-36 217.07 182.63 214.61 176.99 3-4 tactical transport aircraft for Light transport aircraft Medium Frigate Tank Transport MultiRoleCombat(acft) the Army to replace C212s Battle Mgmt C2 Multi-Role Elect Coastal/Patrol Anti-Ship 12 attack helicopters for the Attack helicopter Medium Platform Intercom Amphibious Other Programs Army

Chile Defense Industry Landscape

Top Local Organizations

Company / Market Sector Ownership Defense Trade Shows Organization

ASMAR Shipbuilding and repair Navy

Aerospace and defense systems specialist. Provides aerostructure ENAER State-owned fabrication, MRO for civil and military aircraft and military upgrades. 05-10 April 2022 - FIDAE FAMAE Ammunition, vehicles, artillery manufacture, vehicle MRO, defense R&D Army

SISDEF Command and control (C2) systems integration Private

DTS Defense electronics, simulation and command and control Private

Defense systems integration, focus on combat systems, fire control, DESA Private optronics and command and control

RMS Manufacture and production of unmanned systems and target drones Private

Colombia has been moderately affected by Covid-19. Coronavirus preventative measure were Total Defense Budget by Force for Colombia 2020-2024 implemented in a timely and relatively affective manner, complete with a government stimulus package equal to nearly 3% of GDP. However, GDP in real terms is expected to contract by 3.29% in 2020 following global trends, with a slow recovery of just 0.29% growth in 2021, 1.31% in 2022 Force 2020 2021 2022 2023 2024 and only regaining pre-coronavirus levels in 2024. Colombia has entered the crisis having suffered Army 2,176.13 2,043.30 2,088.07 1,955.17 1,961.25 a national decline in GDP since 2013, and with government oil revenue being one of the highest in the region, the suppression of global oil demand will have a significant impact on future government Navy 463.21 448.53 451.35 479.09 439.21 spending. This will be especially true if oil prices remain at uneconomical levels for extended Air Force 405.83 548.21 469.59 405.71 456.61 periods of time as it would risk permanently closing production or require government subsidies, Defense- 2,353.77 1,943.62 1,550.10 1,476.10 1,491.61 putting further strain on an already tight government budget. Additionally, since 1 January 2020 the Wide

Colombia Peso has reduced in value by 20% against the dollar. This coupled with a low credit Total 5,398.94 4,983.66 4,559.11 4,316.07 4,348.68 rating of BBB and a projected negative outlook on its credit situation could lead to further foreign investment capital flight should this rating be devalued further.

Rising tension with FARC and still active local paramilitary groups who have taken quarantine as an opportunity to murder political activists will mean that O&M and military personnel costs, Total Defense Budget by Activity for Colombia particularly for the army, will most likely be ring fenced. However, key capabilities gaps which potential future procurement programs would address, like the need for new fighter aircraft, will most likely be placed on hold. Procurement as a whole is forecast to suffer because of the Force 2020 2021 2022 2023 2024 devaluation of the Colombian Peso and the need to important defence related product due to a Procurement 216.06 507.09 503.25 504.72 499.55 weak domestic defense manufacturing sector. In addition, defence cuts may trickle down to other R&D 0.30 3.59 3.38 2.36 2.58 branches that are not heavily involved in internal security as this is one of the primary objectives of the Colombian military. As a result, defence spending is expected to be hit with 7.69% real term Personnel 3,691.17 3,243.19 2,961.52 2,781.12 2,783.87 reduction in 2021, with a further cut of 8.52% forecast in 2022 and additional cuts of 5.33% in 2023. Ops & Mant 1,232.78 967.45 839.49 789.33 822.67 This is expected to reverse and returning to growth in 2025 should oil prices recover significantly Other 258.63 262.34 251.47 238.54 240.01 towards pre-Coronavirus levels Total 5,398.94 4,983.66 4,559.11 4,316.07 4,348.68

Top Programs (2020-2024) 5-year procurement forecast (2020-2024) - $ M Program Description Likelihood 1-2 offshore patrol vessels for OPV 93C Medium 483.69 the Navy 2-4 coastal patrol vessels for the CPV Mk II High Navy 441.26 1449 1-3 Landing Craft Utility vessels BDA High for the Navy

338.05 12 Lead-in Fighter Trainer/Light A-37 replacement Low attack aircraft to replace A-37s 326 8-16 aircraft to replace T-37 T-6C+ procurement Medium trainers 109.62

129.45 169.65 12-18 fighter aircraft for the Air 134.49 Kfir replacement High 145.66 147.28 Force Transport Coastal/Patrol Frigate MultiRoleCombat(acft) SAM procurement SHORAD system for the Army Medium Multi-Role Elect Ground Support Other Gun Anti-Ship Amphibious Other Programs IFV procurement 36-48 8x8 IFVs for the Army Low

Colombia Defense Industry Landscape

Top Local Organizations Defense Trade Shows Company / Organization Market Sector Ownership

COTECMAR Shipbuilding and repair, upgrade and modernization Navy

DARET Department of Weapons and Electronics; Navy R&D center for Navy weapon integration and fire control development INDUMIL Small arms, explosives, artillery ordnance and aviation bombs Ministry of Defense 29 Nov-01 Dec 2021 - Expodefensa development and production for the Colombian military and export BAMAN Army Maintenance Battalion; vehicle development, Army manufacturing and customization CIAC Military aircraft manufacture, upgrade, repair and overhaul Ministry of Defense

CODALTEC Radar, software and simulator development and production Ministry of Defense for the Colombian military and export 01-03 Sept 2021 – Colombiamar Armor International Development and manufacturing of armored vehicles for Private police and military customers Eduardoño Development and manufacturing of fast boats for commercial Private and military applications Dynacomp Development and production of composites and armouring Private solutions for land, naval and air applications

10-13 Jul 2021 – F-AIR

Ecuador Defense Spending

Total Defense Budget by Force for Ecuador 2020-2024

Force 2020 2021 2022 2023 2024

Army 850.40 779.35 791.45 737.73 770.47

Ecuador has been significantly affected by the Coronavirus. The country has largely been Navy 303.09 288.81 266.08 310.88 282.44 the epicenter of the virus in Latin America, with the number of reported deaths and cases Air Force 279.81 276.80 284.39 248.60 302.44 most likely inaccurate due to low rates of testing. Entering into the Coronavirus situation Defense- 188.34 155.11 147.04 165.17 148.59 following a small contraction in real terms of 0.1% in GDP in 2019 and a government debt Wide equal to 54% of GDP, Ecuador is expected to have a 4.65%. real term GDP contraction in Total 1,621.64 1,500.07 1,488.96 1,462.38 1,503.94 2020. Heavy reliance on oil and gas, which makes up for nearly 50% of the country’s exports and around 30% of public expenditure as well as large parts of the economy supplemented by other commodities such as bananas and cocoa will also impact growth. Total Defense Budget by Activity for Ecuador This combined with Ecuador using the dollar is forecast to adversely impacting exports due to large falls in currency pairs against the dollar for major trade partners in the region, impacting government expenditure and revenue streams. Force 2020 2021 2022 2023 2024

Procurement 260.85 223.49 223.80 231.05 249.16 With Ecuador utilizing its military for enhanced order-keeping and pandemic response 0.11 0.09 0.07 0.10 0.10 primarily in the province of Guayas, this may potentially safeguard defense spending from R&D deep cuts. However, while the country has received an IMF loan for USD4.2 billion, Personnel 1,026.96 959.70 929.32 915.59 920.89 austerity already implemented as conditions of the loan that cut the 2020 defense budget in Ops & Mant 279.98 279.79 270.57 257.33 290.84 real terms by 13.47% are forecast to be extended up until 2023, with a further 7.5% cut to Other 53.74 37.00 65.20 58.31 42.95 defense in 2021, 0.74% in 2022 and a return to minimal growth of 2.84% in 2024 should Total 1,621.64 1,500.07 1,488.96 1,462.38 1,503.94 global oil prices return to pre-Coronavirus levels.

Top Local Organizations Top Programs (2020-2024)

Company / Market Sector Ownership Program Description Likelihoo Organization d ASTINAVE Shipbuilding and maintenance Navy LCU procurement 1-2 Landing Craft Utility boats Medium for the Navy CICTE Army R&D centre Army

DIAF Aircraft maintenance, electronics, and applied Air Force KT-1 procurement 8 KT-1 advanced training High engineering aircraft for the Air Force FMSB Santa Ammunition and small arms production Private Barbara S.A. H125M 6-8 H125M armed helicopter Medium Fabril Fame SA Military clothing and body armor production Private procurement for the Army

Explocen Dynamite, pentolite, emulsion, ANFO, safety State-owned IFV procurement 80 8x8 or tracked IFVs for the Low fuse, detonating cord and blasting Army accessories production A.N.D.E.C. S.A Armouring Private Defense Trade Shows

Mexico Defense Spending

Total Defense Budget by Force for Mexico 2020-2024

Mexico has been moderately impacted by Covid-19, with economic damage being significant. Force 2020 2021 2022 2023 2024 Local government bond markets saw non-resident outflows of nearly USD8 billion between Army 3,883.77 3,441.64 3,213.86 3,060.63 3,328.31 late February and late April, having resulted in a flight to dollar and a devaluing of the Peso Navy 1,539.14 1,699.32 1,566.06 1,503.42 1,698.57 by around 22%. Despite this, Mexico will not feel the effects of low oil prices in 2020 thanks Air Force 345.17 817.39 751.59 703.97 762.55 to a successful hedging strategy securing a price of $49 per barrel set in its annual budget. Defense- However, with continued suppression of oil prices Mexico faces uneconomic production 377.73 187.45 184.04 218.93 191.40 Wide which will impact government revenue. In addition, President Obrador announced that the Coronavirus stimulus package of USD31 billion was to be sourced from the existing budgets, Total 6,145.81 6,145.80 5,715.55 5,486.95 5,980.83 which is expected to compound the need for heavy cuts to non-essential government spending. Janes Defense Budgets forecasts a contraction in real term GDP of 7.08% in 2020, followed by a return to growth of 4.28% in 2021. Total Defense Budget by Activity for Mexico.

As the pre-Coronavirus 2020 budget already marked a 1.8% real term cut in defense Force 2020 2021 2022 2023 2024 spending from 2019 levels as part of government efforts to balance the budget, non-essential Procurement 237.54 396.95 362.21 333.48 328.48 defense spending is expected to be reduced further 2021, with forecast cuts of 2.44% for that year. With the majority of defense expenditure going towards personnel costs, heavy defense R&D 116.74 192.41 169.21 169.07 187.44 spending cuts won’t be seen until 2022, with an expected decline in real terms of -10.32%, Personnel 4,153.69 3,805.66 3,422.76 3,212.68 3,410.46 continuing into 2023 with a -7.9% decline, and growth of 4.56% in 2024 should global oil Ops & Mant 1,321.10 966.27 894.08 814.28 863.38 prices remain at low levels. Other 316.74 634.61 528.56 422.61 388.44

Total 6,145.81 6,145.80 5,715.55 5,486.95 5,980.83

Mexico Defense Procurement Programs

Top Programs (2020-2024) 5-year procurement forecast (2020-2024) - $ M Program Description Likelihood ASW helicopter Two ASW helicopters either Low NH90 or MH-60R for the Navy 778.63 Oaxaca-class OPV Two OPVs for the Navy High Tzinacan radar Undisclosed number of locally- Medium 1388 developed air surveillance radars 542.5 for the Navy and Air Force

361.97 122.55 Garfio 3 Fire Control Two locally-developed fire High System control systems for Oaxaca- class OPVs 349.62 139.56 240.42 F-5 replacement 12 fighter aircraft for the Air Low 309.11 151.83 Force 162.99 Transport aircraft 3-4 tactical transports to Low Transport Frigate Ground Support Coastal/Patrol complement existing C-130s Unidentified R&D Multi-Role Elect Radios/Terminals HLS Networks MultiRoleCombat(acft) HLS C2 Other Programs IFV procurement 36 8x8 IFVs for the Army Low

Mexico Defense Industry Landscape

Top Local Organizations Company / Organization Market Sector Ownership Defense Trade Shows ASTIMAR Shipbuilding. ASTIMAR consists of five shipyards: two in the Ministry of the Navy Gulf of Mexico, ASTIMAR 1 & 3; and three on the Pacific coast, ASTIMAR 6, 18 and 20 INIDETAM Navy R&D Center Ministry of the Navy

DGIM Military production for SEDENA. Capabilities include Ministry of Defense manufacture of small arms, ammunition, ordnance and military clothing; assembly of light armored vehicles and artillery; and vehicle MRO 20-24 April 2021 - FAMEX CIDEFAM Army and Air Force R&D Center Ministry of Defense

Aguila Private Ammunition producer Private

Hydra Technologies Designs and builds a wide variety of UAVs Private

Centigon Builds light armored vehicles Private

IBN Industrias Militares Builds light armored vehicles Private

Epel Builds light armored vehicles Private 13-15 April 2021 – Expo Seguridad

Peru Defense Spending

Total Defense Budget by Force for Peru 2020-2024

Peru has been significantly affected by Covid-19, being one of the worst affected Latin Force 2020 2021 2022 2023 2024 American countries. Economic impact of a global recession coupled with a downturn in Army 684.89 675.43 635.97 639.49 643.78 commodities prices is expected to have additional effects on Peru’s economy. With high revenues from hydrocarbon exports and nearly 10% of the country’s GDP coming from Navy 575.47 478.60 473.55 514.80 504.80 mining, Peru is expected to have a contraction of 3% real GDP in real terms for 2020 with a Air Force 389.86 446.70 397.25 390.12 418.97 return to low levels of growth in 2021. Defense- 505.81 471.15 450.08 466.54 476.18 Wide

Heading into the Coronavirus pandemic, Defense spending in Peru had already been cut due Total 2,156.03 2,071.88 1,956.85 2,010.95 2,043.73 to lower commodities prices and shifting government priorities in the 2019 and 2020 budget; a contraction to GDP and government revenue is forecast to continue these cuts. Potential future procurement plans such as MGPs planned launch of purchasing process in 2020/2021 Total Defense Budget by Activity for Peru for the first two of six new frigates will most likely be placed on hold. Additionally, a notable portion of Peruvian defense expenditure, hovering around 15-20% of total defense spending, is funded with royalties on natural gas exploration through the Fund for the Armed Forces Force 2020 2021 2022 2023 2024 and National Police. While the calling up of 10,000 reservists to enforce lockdown in April Procurement 114.96 125.28 145.53 187.03 209.09

2020 is expected to cushion O&M decreases, a real term reduction in defense spending of R&D 17.08 10.84 12.56 13.06 13.33 3.9% in 2021 is forecast, with an uptick in cuts in 2022 to 5.55%, returning to hesitant growth Personnel 1,485.94 1,375.17 1,259.08 1,245.03 1,246.21 in 2023 of 2.77%. Ops & Mant 472.25 488.61 479.38 501.58 508.85

Other 65.80 71.98 60.30 64.25 66.25

Total 2,156.03 2,071.88 1,956.85 2,010.95 2,043.73

Peru Defense Procurement Programs

Top Programs (2020-2024) 5-year procurement forecast (2020-2024) - $ M Program Description Likelihood 4 coastal patrol vessels for the PCGP-50 CPV High Navy 448.18 2 river patrol gunboats for the Gunboat replacement High Navy 1224 2-3 transport aircraft to replace 391.73 Tactical transport Medium L-100-20s

C-27J 4 C-27J for the Air Force High 251.34

12-16 Lead-in Fighter Trainers 244.14 MB-339 replacement Medium for the Air Force 4 air surveillance radars for the Radar replacement Medium 86.52 Air Force 131.02 88.16 87.53 92.1 97.14 IFV 60-80 IFVs for the Army Low

Frigate Transport Attack Sub Coastal/Patrol Peruvian Air Force internal Battle Mgmt C2 MultiRoleCombat(acft) Multi-Role Elect Tank Tactical UAV High Gun Ground Support Other Programs development

Peru Defense Industry Landscape

Top Local Organizations Defense Trade Shows Company / Organization Market Sector Ownership

SIMA-Peru Shipbuilding and maintenance Navy

SEMAN Aerospace MRO and upgrade Air Force

13-16 May 2021 - SITDEF CIDEP Air Force R&D Center Air Force

CEMABLIN Armored vehicle MRO and upgrade Army

FAME Personal armour and small arms production Ministry of Defense

Diseños Casanave Mechanized vehicles upgrades, communications, small arms Private

Uruguay Defense Spending

Uruguay has been moderately affected by Covid-19 due to the smooth implementation of measures to Total Defense Budget by Force for Uruguay 2020-2024 contain the spread of the virus and mitigate economic impact, although these measures have been limited. With attempts to mitigate the economic impact ranging from a Solidarity Fund sourced through public employees wage cuts, unemployment insurance expanding by USD400 million and a well structure pre- Force 2020 2021 2022 2023 2024 Covid-19 multilateral credit line of USD2.2 billion arranged for emergencies along with a developed Army 191.40 180.21 175.47 176.38 176.59

welfare system may mean Uruguay weathers virus spread well. On a wider level President Pou’s Navy 90.72 81.54 83.08 85.54 84.69 government, which took to office in March 2020, has moved quickly to introduce bills cutting administrative spending and microeconomic reforms promised during campaigning as part of a wider fiscal consolidation Air Force 59.23 52.99 50.70 49.33 50.25 Defense- plan. However, given the shock of Coronavirus adding additional financial pressures, these pre- 214.87 204.62 205.31 207.51 209.69 Coronavirus measures to minimize debt in a system already beset by government spending overruns Wide means Uruguay has entered into the global pandemic period on a weak footing. Currency devaluation Total 556.22 519.36 514.56 518.76 521.22 against the dollar of just over 10% has also contributed to this. With high government debt expected to grow to around 70% of GDP in 2020 (up from just over 60% in 2019) and an already slowing economy (0.22% real GDP in 2019) reflected in a negative outlook on the countries BBB- sovereign rating, strong fiscal stimulus that would push for a swift economic recovery may be limited. In addition, Uruguay has Total Defense Budget by Activity for Uruguay traditionally experienced contractions driven by downturn within its neighbors of Brazil and Argentina. As a result, Uruguay is expected to have a real GDP contraction of 1.34% in 2020, a slow return to growth of 1.82% in 2021 with a steady increase towards just under 3% by 2024. Force 2020 2021 2022 2023 2024 Procurement 66.99 62.77 64.17 65.16 64.86 Defense spending has slowed in recent years from 2018, with budgets ranging between -1.37% in real R&D 0.00 0.00 0.00 0.00 0.00 terms and 0%. With no border issues and being relatively isolated from insecurities facing the wider region like insurgencies and drugs trade, defence budgets and personnel numbers have remained relatively low. Personnel 366.59 338.96 335.84 338.38 342.37 With the use of the military to increase border patrols during the pandemic, defense budget cuts are Ops & Mant 72.01 73.82 75.34 75.87 78.33 forecast to be in line with similar budget cuts of 2015 (2015 saw cuts of 14.8% in real terms) which focused Other 50.63 43.81 39.21 39.35 35.66 on short-cycle acquisition budget as opposed to personnel or operational budgets. Cuts to defense-wide budget including defense-wide institutions are also expected to be a source of freeing up capital with these Total 556.22 519.36 514.56 518.76 521.22 consuming 38% of Uruguay’s defense budget in 2018. These are forecast to take affect over a sustained period. As such, Uruguay is expected to cut real defence spending by 6.63% in 2021, 0.92% in 2022, a return to growth of 0.81% in 2023 and steady growth rates of 2-4% by 2025. Copyright © 2020 Jane's Group UK Limited. All Rights Reserved. 28

Uruguay Defense Procurement Programs

Top 10 Local Organizations Top Programs (2020-2024)

Company / Market Sector Ownership Program Description Likelihood Organization OPV 2 offshore patrol vessels for the High Servicio de Material y Armamento del Rifle production Army Navy Ejercito C-130 replacement 2 second-hand C-130s for the Air High SCRA Ship maintenance Navy Force

IA58 replacement 6 light attack aircraft for the Air Low Force

APC 36-48 armored personnel Medium carriers for the Army

MRAPs 2-4 MRAPs for the Army for UN High operations in the Golan

Caribbean Community Defense Spending Review

The Regional Security System (RSS), consists of security forces from Barbados, Antigua & Barbuda, Dominica, Grenada, St. Kitts & Nevis, St. Vincent & the Grenadines and St. Lucia, is the only regional consortium which would procure relevant systems. RSS currently operates two aging C-26As for maritime surveillance, which were donated by the US in 1999. These aircraft may need to be replaced in the coming years. Since the RSS has been involved in more regional SAR operations since 2010, it may be more likely to explore acquiring light or medium helicopters. Funding, however, will depend on the member states and largely on Barbados, which shoulders much of the burden for supporting the RSS.

The political will in Barbados to support the RSS has receded, with no indication of a long-term commitment to building the RSS Air Wing’s capacity. Barbados is more likely to invest in helicopters to support its offshore oil and gas exploration.

Trinidad & Tobago has demonstrated the means to procure light aircraft, light helicopters, and medium helicopters to support the country’s security forces and its offshore oil & gas operations, with the last orders made in 2015 for five Bell helicopters. However, the downturn in the global oil market has forced T&T into an economic recession necessitating the grounding of existing aircraft and postponing payments for the five Bell helicopters.

Jamaica has begun to suffer the effects of the COVID-19 pandemic. As the Jamaican government earmarked JMD $3.03 billion (USD $20.4 million) to purchase new aircraft for the Jamaica Defence Force, having already commissioned a Beechcraft King Air 350 WR maritime patrol aircraft (MPA) and two Bell 429 helicopters in 2018. There is not yet any information on whether government budget cutbacks in the wake of the pandemic will affect the earmarked funds.

Caribbean Community Defense Spending Review

Belize and the Bahamas had little capacity to procure equipment before the pandemic, and since their tourism-dependent economies will contract during the crisis it is unlikely they will make funds available for new aircraft in the foreseeable future.

The Dominican Republic is fairly developed relative to its Caribbean neighbors, and its government may have had the capacity to procure new equipment, however they have relied on donated and second-hand equipment in the recent past and they have experienced the greatest suffering from the COVID-19 pandemic regionally by a large margin. Thus, the DR is unlikely to make funds available for the purchasing equipment for the foreseeable future.

Before their recent oil discoveries, Guyana and Suriname relied on donations and second-hand purchases to fulfil their security requirements. With increased government revenue from the new industry, however, they will likely have greater capacity to purchase equipment, including aircraft and helicopters. Not only will they need to replace their aging existing fleets in the near future, but their respective security forces will also need to build on the capacity to monitor their sparsely populated hinterlands and border areas. Suriname, however, is perhaps around five years away from gaining real revenue from its oil deposits since they were discovered more recently, and the government is currently in a dire financial situation.

For more information, please contact:

Inigo Guevara Managing Director of Janes Markets, JanesEquipment, and Industry (JEMI) Consulting [email protected] Americas: +1 800 447 2273 Europe, Middle East, and Africa: +44 (0) 1344 328 300 [email protected] and the Pacific Rim: +604 291 3600

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