Today: September 27, 2016, 2:13 am

Chile defence market: Expenditure witnesses decline to $2.7 billion in 2013
Future of the Chilean Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2018 - a new market research report on 2014-04-28 08:14:01
After witnessing a decline at a CAGR of -2.06% during the review period, expenditure in the Chile defence market is valued at US$2.7 billion in 2013. The drastic fall in expenditure in 2012 was due to the transfer of the Carabineros de Chile and Investigations Police of Chile to the Ministry of Interior and Public Security (MoIPS) in 2011. During the forecast period, the country´s defence expenditure is expected to continue growing, with a CAGR of 8.67%, to reach US$4.0 billion by 2018. Border disputes and military modernization drive defence expenditure.The Chilean Copper Reserve Law (CRL), initially imposed in 1958 as a 15% tax on mining profits, changed to a 10% tax on total sales from the state-run copper exporter Codelco in 1973. This law has resulted in a large amount of cash being injected into the Chilean armed forces, facilitating large-scale defence procurement. In 2011, the new law replaced CRL funds with the Economic and Social Stabilization Fund (ESSF), which resulted in a reduction in the defence budget for 2012. An initiative in 2010 included a contingency fund to provide further resources in exceptional circumstances, such as the major reconstruction program following the devastating earthquake of February 2010, which has been the cause for much debate, with both sides finding support.The Chilean economy has begun to recover from the 2010 earthquake and tsunami crisis which caused damage worth US$30 billion disturbing all the sectors in the economy. To counter the mounting deficit and public debt, the government is cutting back on its expenditure, including that on defence. The focus sectors as per the 2013 federal budget are education, universities, research and development (RandD), and infrastructure to boost growth and the employment rate. With heavy dependence on copper exports which account for 55% of total exports, the economy might face trouble due to the fluctuating price of copper. This pattern may hamper the short term procurement and delay the modernization plan of the defence sector.Key HighlightsChile hosts Exponaval, a biennial naval and maritime defence conference and exhibition sponsored by the Chilean Ministry of Defence (MoD) and Navy. Launched in 1998, the event provides a platform for global naval defence equipment manufacturers to showcase their products, such as naval aviation equipment, refitted ships, and support fleets. At the 2012 event, representatives from 29 countries, over 180 exhibitors, and 15,000 visitors attended the event, which generated business in excess of US$700 million. In recent years, there have been a growing number of joint ventures between international companies and governments, and their Chilean counterparts. The Chilean government encourages these joint ventures and technology-sharing agreements, which enables domestic firms to enhance their capabilities while enhancing diplomatic relations between the countries. During 2008-2012, Germany and Italy, with a share of 96% and 4% respectively, were the suppliers of military hardware to Chile. However, during 2011, Germany supplied 100% of the defence equipment to the country. Over the next five years, Chile´s arms imports will continue to be dominated by European suppliers such as Germany, Italy, and France, as the country is an EU member and favors defence equipment manufactured by other member countries.

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