Mexico defence market: Spain a key supplier of military hardware

Press release   •   Aug 01, 2013 10:02 BST

Expenditure in the Mexico defence market, which stands at US$6.5 billion in 2013, increased at a CAGR of 10.1% during the review period. On a cumulative basis, the country is expected to spend an estimated US$42 billion on its armed forces during the forecast period. However, the country's overall defence spending is anticipated to register a CAGR of 11.2% during the forecast period and value US$10.28 billion in 2018. Military spending is expected to be driven by factors such as efforts in combating drug trafficking and the acquisition of advanced defence systems.

As the Mexican domestic defence industrial base is limited, the nation is dependent on foreign sources of arms to fulfill its military requirements. The country's defence spending grew at a CAGR of 10.1% in the review period, to stand at US$6.51 billion in 2013, which provided foreign suppliers with a lucrative opportunity to gain access to one of the fastest growing defence markets in Latin America. As the country lacks a formal offset obligation for arms procurement, foreign OEMs aren't incentivized to set up a branch or subsidiary in Mexico and prefer direct sales when entering the industry, which was evidenced by the EADS contract from the Mexican Air Force to provide CN-235-300M Persuader maritime patrol aircraft; likewise, Textron Marine and Land Systems also won an order to deliver six Motor Lifeboats to the Mexican Navy in 2008.

As the Mexican defence industry comprises only state-owned companies, with little specialization in weapon categories, the resulting lack of advanced defence technology means that foreign weapon suppliers that intend to conduct business in Mexico face infrastructure challenges. Although foreign suppliers can bring advanced technology to Mexico, this results in technology imports without offset incentives as the defence offset terms are not clearly defined by the Mexican MoD; consequently, foreign suppliers find pursuing a defence opportunity in Mexico challenging.

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