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Product Synopsis
This report is the result of SDI's extensive market and company research covering the Brazilian defense industry, and provides detailed analysis of both historic and forecast defense industry values including key growth stimulators, analysis of the leading companies in the industry, and key news.
Introduction and Landscape
Why was the report written?
The Future of the Brazilian Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2018 offers the reader an insight into the market opportunities and entry strategies adopted by foreign original equipment manufacturers (OEMs) to gain a market share in the Brazilian defense industry.
What is the current market landscape and what is changing?
Brazilian defense expenditure increased at a CAGR of 8.29% during the review period and valued US$35.85 billion in 2013. The focus of the Brazilian government will be on the modernization of its armed forces, participation in peacekeeping operations, and military procurements.
What are the key drivers behind recent market changes?
The modernization of the armed forces, development of indigenous defense capabilities, and large defense procurement projects are the major drivers of the Brazilian defense industry.
What makes this report unique and essential to read?
The Future of the Brazilian Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2018 provides detailed analysis of the current industry size and growth expectations from 2014 to 2018, including highlights of key growth stimulators. It also benchmarks the industry against key global markets and provides a detailed understanding of emerging opportunities in specific areas.
Key Features and Benefits
The report provides detailed analysis of the current industry size and growth expectations from 2014 to 2018, including highlights of key growth stimulators, and also benchmarks the industry against key global markets and provides a detailed understanding of emerging opportunities in specific areas.
The report includes trend analysis of imports and exports, together with their implications and impact on the Brazilian defense industry.
The report covers five forces analysis to identify various power centers in the industry and how these are expected to develop in the future.
The report allows readers to identify possible ways to enter the market, together with detailed descriptions of how existing companies have entered the market, including key contracts, alliances, and strategic initiatives.
The report helps the reader to understand the competitive landscape of the defense industry in Brazil. It provides an overview of key defense companies, both domestic and foreign, together with insights such as key alliances, strategic initiatives, and a brief financial analysis.
Key Market Issues
Brazil has a strict offset obligation for defense deals, equivalent to 100% of the contract value. This has proved a challenge for those foreign OEMs whose government has a policy of limited technology transfer, including the US-based company Boeing. Moreover, Brazil's offset policy requires that defense contracts use domestic companies for the manufacture and assembly of defense systems. A number of foreign OEMs have agreed to such offset requirements due to the availability of inexpensive labor and raw materials in the country. However, a significant portion of these companies are reluctant to share proprietary information with Brazil, and often fail to supply defense systems to the country as a consequence. These rigorous requirements by Brazil often delay the approval of defense deals.]
A significant challenge faced by defense suppliers to Brazil is the time taken by the Ministry of Defense to ratify defense deals. As defense procurements occur through competitive bidding, competing companies must undergo technical compliance checks, after which the ministry enters a lengthy negotiation process with bidders, designed to secure the maximum technology transfer at the lowest price. As such, the ratification process is further delayed by long negotiation periods and competing offers given by the various defense firms. Examples include the delay in selecting a supplier for the fourth-generation fighter jets and the delayed purchase of armored personnel carriers from the Italian branch of Invesco Ltd.Despite having the eleventh-largest defense expenditure globally, Brazil only allocates around 6-7% of its total defense expenditure to arms procurement. The country currently allocates 41% of its defense budget towards providing pensions for retired military personnel, and a significant amount is spent on the administration of its defense forces. Although domestic advancements by Brazilian defense firms are fueling the component procurement market, the deal value for these components is often small. This results in the Brazilian defense industry appearing as a relatively less attractive investment opportunity for foreign OEMs.
Key Highlights
All defense procurement and acquisitions made by the Ministry of Defense and associated bodies follow a competitive bidding process. The Ministry of Defense decides which company from which to procure equipment, depending on whether the equipment complies with the ministry's requirements, which company offers the lowest price, and which company offers the most technology transfer. The rule applies for both domestic and foreign suppliers without any preferential treatment for domestic suppliers.
Brazilian aircraft imports account for almost 46% of its total arms procurements, and involves the import of advanced fighter jets and components for the manufacture of indigenous aircraft systems such as helicopters and cargo aircraft. As the country's currency is strengthening and import duties are waved off, importing aircraft seems to be lucrative for the country. The country's naval procurements include submarines from Brazil and France. France has emerged as Brazil's leading arms supplier, with 17.5% share in country's total defense imports. On a number of occasions France has offered technology transfer to Brazil, which has helped it secure defense contracts with the country. Brazil supplies engines to Brazilian aircraft and submarine manufacturers, and is the second-largest arms supplier to the country. The implementation of the Amazon Protection System (SIVAM) has lead the country to procure radar and satellite components, most of which are supplied by the US defense firm Raytheon. During the review period, Brazil has also procured missile systems from Israel, the US, and Spain, which included anti-ship, anti-submarine, and beyond visual range missiles.
During 2008-2012, aircraft were the major exported product, with total 81% of the defense exports. This largest percentage of aircraft can be attributed to multiple deals of Embraer with foreign countries like Chile, Ecuador and Colombia etc.
