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Argentine defence market increasing its defence expenditure at a robust pace

Press Release   •   Jun 19, 2013 12:35 BST

Expenditure within the Argentine defence market stood at US$4.1 billion in 2013, recording a compound annual growth rate (CAGR) of 15.37% over the past four years. Like many Latin American countries, Argentina is increasing its defence expenditure at a robust pace.

This significant growth is primarily driven by modernisation plans, new procurement of military equipment, and contribution towards international peacekeeping missions.

The Argentine defence sector did not see any major shocks over 2011. Tensions continue to grow between the UK and Argentina concerning Las Malvinas/The Falkland Islands, but it is highly unlikely that a military conflict will erupt again between the two states.

Tensions have been rising in the Argentine-British dispute over the sovereignty of the Falkland Islands/Las Malvinas. The Argentine government recently described the 2,000 British inhabitants of the island as 'hostages' and has been stepping up efforts to force the British government into negotiations.

The Argentine government has continued with its policy of improving domestic production capabilities and recent technological and development cooperation agreements between Argentina and Brazil are best viewed as moves to strengthen this capability.

The Argentine defence market has experienced a lack of investment due to the country's budgetary constraints. Argentina's armed forces are using obsolete defence equipment which needs to be replaced by more advanced equipment.

There are many naval vessels that are not operational and need repair and maintenance, but the armed forces' procurement plans are halted by a fluctuating defence budget.

Defence companies can enter the Argentine defence industry through Foreign Military Sales, which involve direct government-to-government transactions, and foreign companies can also establish partnerships and use technology transfers. The country's foreign investment policy encourages the establishment of subsidiaries, which provides further entry opportunities.

The majority of defence purchases from the US, which is the largest supplier of arms to Argentina, are made through FMS. There are approximately US$ 25.79 million and $ 0.37 million of arms and equipment sold to Argentina through FMS in the year of 2010 and 2011 respectively.

With a limited domestic defence industry, Argentina imports advanced defence equipment from countries such as the US, Russia, Spain, China, Brazil, and Austria. During 2008-2012, the country imported the highest share of arms from the US, constituting 78.8% of the total arms imports.

For more information on the Argentine defence market, see the latest research: Argentine Defence Market

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