THE MILITARY INDUSTRIAL COMPLEX A PARASITE ON SPANISH ECONOMY REPORT no. 12 REPORT no. 12 THE MILITARY INDUSTRIAL COMPLEX A parasite on Spanish economy Pere Ortega Camino Simarro Centre d’Estudis per la Pau J.M. Delàs · Justícia i Pau Barcelona, April 2012 Centre d’Estudis per la Pau JM Delàs Justícia i Pau · Rivadeneyra 6, 10è 08002 Barcelona T. 93 317 61 77 F. 93 412 53 84 www.centredelas.org [email protected] [email protected] Barcelona, April 2012 Graphic design: Fundació Tam-Tam D.L.: B-19745-2010 ISSN: 2013-8032 REPORT no. 12 The military industrial complex. A parasite on Spanish economy 4 THE MILITARY REPORT INDUSTRIAL COMPLEX A PARASITE ON SPANISH ECONOMY no. 12 Index EXECUTIVE SUMMARY 1. INTRODUCTION......................7 The military-industrial complex in Spain is based on an oligopoly made up of four big companies that provide all the weapons that the Ministry of Defence 2. MILITARY PRODUCTION IN SPAIN . .8 uses for its armies. EADS-Casa manufactures aeronautics for the air force; Na- vantia produces warships for the navy; Santa Bárbara/General Dynamics sells 3. A SHORT HISTORY OF THE MILITARY heavy and small arms to the army and, last but not least, Indra provides all the INDUSTRY IN SPAIN . 9 aforementioned armed forces and their weapons with most of the electronics and new technologies. 4. SOME SIGNIFICANT CHANGES IN THE SECTOR . .11 These four companies make up between 75 and 80% of the total turnover of military production which amounted to approximately E 6.6 billion in 2009. 5. DEFENCE INDUSTRIAL That represented 1.24% of the national industrial production and 1.1% of the SUBSECTORS . .12 total work force of the Spanish industry employing about 29,000 people in the defence manufacture. 6. THE ARMS OLIGOPOLY . 12 Navantia . 12 Moreover, the intense cooperation between the Ministry of Defence and the EADS-Casa .............................14 Ministry of Industry, facilitated through a creative financial mechanism inaugu- General Dynamics Santa Bárbara .......16 rated in 1996, and the commitments undertaken by the Ministry of Defence for INDRA . .17 the development of big programmes for new weaponry caused a bubble in the production of arms. This situation brought both the Ministry of Defence and the 7. THE SPANISH MILITARY INDUSTRY State an accumulated debt of about E37bn that cannot be paid off and that only IN THE WORLD RANKING ............18 increases the debt of the public Treasury that is currently in quite a bad state. 8. WHO IS WHO IN THE SPANISH Both statistics and economic-financial data show the inefficiency of the military MILITARY INDUSTRIAL COMPLEX . 19 industry. In order to reduce the negative impact of the military industry on the whole Spanish economy it is therefore necessary to take action from multiple 9. TEMPORARY RECEIVERSHIP OF directions: firstly, the number of troops in the armed forces must be reduced THE MINISTRY OF DEFENCE AND THE to lower the demand for arms; the purchase and participation in joint progra- ARMS BUBBLE . 21 mmes for new weaponry have to be halted; the Ministry of Industry must stop granting credits to companies for military Research and Development (R&D); 10. THE ECONOMIC CRISIS AS A finally, studies must be made into the conversion of military industries into ci- CHANCE FOR CONVERSION . .22 vil production to avoid the loss of employment and create a positive impact on social wellbeing. APPENDIX ............................25 REPORT no. 12 The military industrial complex. A parasite on Spanish economy 5 Index of tables Table 1. Defence turnover and employment by subsector (2009)..........................13 Table 2. Navantia commercial activity (2009-2010) . .14 Table 3. Subsidies given to Navantia (2009-2010) . 14 Table 4. Subsidies given to EADS-Casa (2008-2009) ......................................15 Table 5. Subsidies given to Indra (2009-2010) . 18 Table 6. Credits given to Indra (2009-2010)...............................................18 Table 7. The Spanish military industry in the world ranking (2009) . 19 Graphic 1. Sales by Defence subsectors (2009) ...........................................13 Graphic 2. Employment by Defence subsectors (2009) ...................................13 Appendix Table 1. Military companies in Spain 2009 . .25 Table 2. Main military contracts 1996-2025 ..............................................27 Table 3. Aerospatial Sector (2009) . .28 Table 4. Naval Sector (2009) .............................................................29 Table 5. Electronics and Communications (2009) . 29 Table 6. Military vehicles (Armoured and land platforms) (2009) ..........................30 Table 7. Engineering (2009) .............................................................30 Table 8. Weaponry and ammunitions (2009) .............................................31 Table 9. Turnover balance by company (2000-2010) . .31 Table 10. Sales by company (2000-2010) . 32 Table 11. Employment by company (2000-2010) .........................................32 Table 12. Military R&D in Spain (1997-2009) . .33 Table 13. Directory of companies and military industries and acronyms . 34 Map 1. The military industry network with the state and financial groups . 43 REPORT no. 12 The military industrial complex. A parasite on Spanish economy 6 THE MILITARY REPORT INDUSTRIAL COMPLEX A PARASITE ON SPANISH ECONOMY Pere Ortega · Coordinator of the Delàs Center for Peace Studies no. 12 Camino Simarro· Researcher at the Delàs Center for Peace Studies The Spanish military 1. INTRODUCTION production. Finally, the Annex includes industry has caused a twelve tables with figures divided by bubble in the sector of arms This report examines the Spanish mili- company, subsectors, contracts, R&D… production that the Ministry tary industry and analyzes its impact on and a map of the network existing be- of Defence cannot assume the Spanish economy, an impact which tween the state, financial groups and is not positive; it is in fact worsening the main Spanish military industries to the economic crisis that the Span- show the dependency of the military ish state is currently experiencing. As industries both on the Spanish state shown in the report, the military in- and on financial institutions or private dustry in Spain has contributed to the groups. increase of the public debt and caused a bubble in the sector of arms produc- All data included in the report was ex- tion that the Ministry of Defence can- tracted from the balances of the com- not assume. panies or from the SABI database and compared to that of the Trade Register. In the three following sections the re- Most of it corresponds to 2009. None- port analyses the military industry in theless, the balances, with the excep- Spain, its history and the main changes tion of the big companies (EADS-Casa, that have occurred in the sector during Navantia, Indra, General Dynamics, Sen- the last years. In order to deepen the er, Amper, Eurocopter and ITP), do not analysis of the military industrial sec- offer information about the percent- tor, the fifth section includes figures age represented by military produc- from defence subsectors, which show tion in the company’s gross production the existence of what we call the arms or the number of employed people oligopoly in the sixth section. This oli- working in the military sector. For this gopoly shows the internationalisation reason we opted for the information of the world military industry and the provided by some secondary sources1 role of Spain in its globalisation. In to gain access to these figures. The end the seventh section we will see that the result is that the data we provide here, four Spanish companies that comprise though not exactly precise, offers a the oligopoly (EADS-Casa, Navantia, representative approach to the reality Indra and General Dynamics/Santa of the sector. Bárbara) occupy high positions in the world ranking of military industry. We This report completes other studies by also wanted to show what President Ei- the Study Center for Peace J.M. Delàs senhower called the military-industrial devoted to analysing each one of the complex, some of the hidden interests elements that make up what we know lying behind military industry. Know- as the arms cycle or the military-eco- ing who is who in this field will help nomic cycle, made up by the military us understand why the Ministry of expenditure of the Spanish state, the Defence has committed itself to enor- research (R&D) with military objectives, EADS-Casa, Navantia, Indra mous contracts that were recognised the military industry, the arms trade and General Dynamics/ as unnecessary. The two final sections and the end use of the arms. As we Santa Bárbara occupy show the results of an inefficient indus- will see, the military industry is one of high positions in the world try and provide data on a possible con- ranking of military industry version of the military industry to civil 1. See Table 1 of the Annex. REPORT no. 12 The military industrial complex. A parasite on Spanish economy 7 About 500 companies the most relevant factors of the whole Among the cited companies we in- currently provide their military economic cycle. cluded two, Defex and Isdefe, 100% of services and arms to the whose activity takes place in the mili- Ministry of Defence 2. MILITARY PRODUCTION tary sector and which provide services IN SPAIN rather than products. Isdefe is a con- sulting firm that provides technologi- About 500 companies currently provide cal services and advice to the military their services and arms to the Ministry industry. However, we did not include of Defence. This report only cites seven- the Compañía Española de Seguros ty companies that are undoubtedly the de Crédito a la Exportación (Spanish most important manufacturers2 of arms Company of Credit Insurance for Ex- or arms components. It analyses the pe- ports, CESCE) which, as the map in the riod between 2009 and 2011. As we ex- Annex shows, totally depends on the plained, figures come from the balances Ministry of Economy. As its name sug- provided by the companies or the SABI gests CESCE insures exportation op- database compared with those of the erations, including all arms exported Trade Register.