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Venezuela defence market: Expenditure to reach $8 billion by 2018
Future of the Venezuelan Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2018 - a new market research report on 2014-04-18 12:13:02
Expenditure in the Venezuela defence market recorded a CAGR of 7.82% during the review period and is expected to value US$5.7 billion in 2013. Modernization activities and border disputes drove expenditure during the review period, and both factors are expected to continue to be drivers throughout the forecast period. Defence expenditure in Venezuela is expected to register a CAGR of 11.37% and reach a value ofUS$8.0 billion by 2018.

As a percentage of gross domestic product (GDP) the Venezuelan defence budget stood at 1.64% in 2013, and is expected to increase to 2.08% of GDP by 2018, largely due to the expected increase in defence expenditure. The capital expenditure allocation of the Venezuelan defence budget, which stood at 41.6% during the review period, is expected to increase to 68.9% during the forecast period, as a result of increased budget allocation for equipment purchases.

Consequently, revenue expenditure is likely to decrease from 58.4% in the review period to 31.1% in the forecast period. Key opportunities for equipment suppliers are expected in the areas of fighter and multi-role aircrafts, transport and utility aircraft, and attack aircraft. Other areas expected to provide opportunities for equipment suppliers are the purchase of main battle tanks, diesel electric submarines, as well as surface-to-air and surface-to-surface missiles.

Corruption has become a major obstacle for foreign companies aiming to enter the Venezuelan defence market, as it can result in unfair contract awards. According to Transparency International´s corruption perceptions index, Venezuela is a highly corrupt country with a score of 19, and the country ranks 165th out of 174 countries.

Government tenders are often unreliable in Venezuela because the process frequently lacks transparency; in May 2010, the former Venezuelan defence minister was sentenced to nearly eight years in prison for misappropriating state funds while in office. As part of the anti-corruption drive initiated by the Venezuelan government, in June 2013, a senior tax official was arrested on charges of corruption. The authorities had previously apprehended senior officials from government ministries, state companies and other organizations on charges of corruption.

In May 2006, the US judged that Venezuela had not been fully co-operating in counter terrorism efforts and announced an arms embargo against the country, banning the export and re-export of US originated defence equipment to Venezuela. Consequently, the country started to import defence equipment from Russia and Spain, who were prepared to export to Venezuela.

During 2007-2011, Venezuela imported around US$2.0 billion of arms from Russia, including 24 Sukhoi fighter jets, over 100 T72 tanks, dozens of combat helicopters, and air defence systems. China is also an important import partner for the country, and during the review period Venezuela purchased long-rage surveillance radar systems and fighter jets from China. Other import partners include the Netherlands, Switzerland, Ukraine, Germany, and Italy. Venezuela purchased naval patrol boats from Spain, and radar systems from the Netherlands. Over the review period, Venezuela imported weapons worth US$11.0 billion from Russia.

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