The Brazilian defence industry is booming, fuelled by government incentives to modernise the country's armed forces and develop a robust, export-oriented military industrial complex.
Expenditure within Brazil's defence market increased at a compound annual growth rate (CAGR) of 8.29% over 2009-2013, and was valued at US$35.85 billion by the end of 2012.
The focus of the Brazilian government will be on the modernisation of its armed forces, participation in peacekeeping operations, and military procurements. The modernisation of the armed forces, development of indigenous defence capabilities, and large defence procurement projects are the major drivers of the Brazilian defence industry.
Brazil, the world's sixth largest economy, was ranked as the world's eighth largest arms exporter in the 1980s but today languishes in 30th place, according to industry experts. Brazil still boasts the biggest armed forces in the region, although they have been considerably weakened by a lack of investment in equipment for more than two decades.
Brazil has a well-developed but fragmented defence market. The award of major sporting events such as the FIFA Football World Cup in 2014 and the Olympic Games in 2016 will mean significant investment in improvements to Brazil's defence infrastructure.
Brazil sees its neighbours and other emerging countries as natural markets for its products and has stepped up military and industrial cooperation with them.
Joint projects include the new KC-390 military transport plane being developed by Brazil's top plane maker Embraer, with partners from Argentina, Chile and Colombia -- which also plan to buy the aircraft. This strategy provides Brazil with customers while allaying fears of a Brazilian military build-up.
The country currently allocates 41% of its defence budget towards providing pensions for retired military personnel, and a significant amount is spent on the administration of its defence forces. Although domestic advancements by Brazilian defence firms are fuelling the component procurement market, the deal value for these components is often small. This results in the Brazilian defence industry appearing as a relatively less attractive investment opportunity for foreign OEMs.
The government says roughly 1.5 percent of the country's GDP goes to defence, much less than in several neighbouring countries and major emerging powers. The situation is promising for the Brazilian industry but challenges lie ahead.
For more information on the Brazilian defence market, see the latest research: Brazilian Defence Market
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