The Peruvian Defense Industry-Market Opportunities and Entry … · Defense Market Size Historical...

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The Peruvian Defense Industry-Market

Opportunities and Entry Strategies

Analyses and Forecasts to 2016

The Peruvian Defense Industry-Market Opportunities and Entry Strategies Analyses and Forecasts to 2016


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TABLE OF CONTENTS

1. Introduction ........................................................................................................................... 9

1.1. What is this Report About? ............................................................................................................9

1.2. Definitions .......................................................................................................................................9

1.3. Summary Methodology .................................................................................................................11

1.4. SDI Terrorism Index ......................................................................................................................12

1.5. About Strategic Defence Intelligence (www.strategicdefenceintelligence.com) ......................12

2. Executive Summary ............................................................................................................ 13

3. Market Attractiveness and Emerging Opportunities ........................................................ 15

3.1. Defense Market Size Historical and Forecast..............................................................................16

3.1.1. Defense expenditure is projected to grow at a CAGR of XX% during the forecast period ...................... 16

3.1.2. Threat from the Shining Path group, modernization, border disputes, peacekeeping and an arms race

with neighboring countries to drive defense expenditure in the forecast period ................................................. 18

3.1.3. Defense budget as a percentage of GDP is expected a marginal increase during the forecast period ... 20

3.2. Analysis of Defense Budget Allocation .......................................................................................22

3.2.1. Revenue expenditure accounts for a majority of the Peruvian defense budget...................................... 22

3.2.2. Per capita defense expenditure expected to increase during the forecast period .................................. 24

3.2.3. Other expenditures account for the majority of the Peruvian defense budget ........................................ 26

3.2.4. Budget allocation for the army higher than the navy and the air force ................................................... 28

3.2.5. Defense budget allocation for the navy expected to increase ............................................................... 30

3.2.6. Defense budget allocation for the Air Force expected to be the lowest ................................................. 32

3.2.7. Other expenses expected to decrease during the forecast period ......................................................... 34

3.3. Homeland Security Market Size and Forecast ............................................................................36

3.3.1. Homeland security expenditure is expected to grow at a CAGR of XX% during the forecast period ...... 36

3.3.2. Capital expenditure is expected to increase in the forecast period ........................................................ 38

3.3.3. Cocaine trafficking and organized crime to drive HLS market ............................................................... 40

3.3.4. Peru considered at ‘some risk’ of terrorist attack .................................................................................. 41

3.3.5. Peru experienced low levels of terrorist activity during the review period .............................................. 43

3.4. Benchmarking with Key Global Markets .....................................................................................45

3.4.1. Peru’s defense budget expected to register marginal growth in the forecast period .............................. 45

3.4.2. Peru’s military expenditure is limited compared with countries with the largest defense expenditure ..... 47

3.4.3. Peru allocates a low percentage of GDP to defense ............................................................................. 48

3.4.4. Peru has a moderate per-capita defense expenditure .......................................................................... 49

3.5. Market Opportunities: Key Trends and Growth Stimulators ......................................................50

3.5.1. Increased demand for main battle tanks expected ................................................................................ 50



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3.5.2. The need to combat drug trafficking, illegal logging, and exploitation of natural resources will drive

demand for surveillance equipment.................................................................................................................. 50

3.5.3. Threat from the Shining Path group to generate demand for precise ammunition, unmanned aerial

vehicles (UAVs), assault rifles, and other combat equipment ........................................................................... 50

3.5.4. Modernization of naval and air force capabilities to provide excellent market opportunities ................... 51

4. Defense Procurement Market Dynamics ........................................................................... 52

4.1. Import Market Dynamics ...............................................................................................................53

4.1.1. Limited domestic defense capabilities drives the country’s defense imports.......................................... 53

4.1.2. Defense imports expected to increase during the forecast period ......................................................... 53

4.1.3. Italy accounted for the majority of Peru’s defense imports during the review period .............................. 54

4.1.4. Aircraft, ships, and missiles are the most imported military hardware ................................................... 56

5. Industry Dynamics .............................................................................................................. 57

5.1. Five Forces Analysis.....................................................................................................................57

5.1.1. Bargaining power of supplier: low to medium ....................................................................................... 58

5.1.2. Bargaining power of buyer: high ........................................................................................................... 58

5.1.3. Barriers to entry: medium ..................................................................................................................... 58

5.1.4. Intensity of rivalry: low to high .............................................................................................................. 58

5.1.5. Threat of substitution: low to high ......................................................................................................... 58

6. Market Entry Strategy ......................................................................................................... 59

6.1. Market Regulation .........................................................................................................................59

6.1.1. Offset policy aids development of domestic defense industry ............................................................... 59

6.1.2. Peru allows XX% FDI in defense industry ............................................................................................ 59

6.2. Market Entry Route .......................................................................................................................60

6.2.1. The country’s biennial defense exhibition provides an attractive entry route ......................................... 60

6.2.2. Direct selling is the preferred market entry route for foreign OEMs ....................................................... 60

6.3. Key Challenges .............................................................................................................................61

6.3.1. Small defense budget and limited technological capability limits the market entry of foreign companies 61

6.3.2. Lack of transparency hampers the growth of the Peruvian defense industry ......................................... 61

7. Competitive Landscape and Strategic Insights ................................................................ 62

7.1. Competitive Landscape Overview ...............................................................................................62

7.2. Key Domestic Companies ............................................................................................................62

7.2.1. Los Servicios Industriales de la Marina (SIMA): overview ..................................................................... 62

7.2.2. Los Servicios Industriales de la Marina (SIMA): products and services ................................................. 62

7.2.3. Los Servicios Industriales de la Marina (SIMA): recent announcements and strategic initiatives ........... 63

7.2.4. The Army Ammunition Factory (FAME): overview ................................................................................ 64

7.2.5. The Army Ammunition Factory (FAME): products and services ............................................................ 64

7.2.6. The Army Ammunition Factory (FAME): recent announcements and strategic initiatives....................... 65



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7.2.7. Desarrollos Industriales Casanave: overview ....................................................................................... 66

7.2.8. Desarrollos Industriales Casanave: products and services ................................................................... 66

7.2.9. Desarrollos Industriales Casanave: recent announcements and strategic initiatives ............................. 67

7.2.10. Desarrollos Industriales Casanave: alliances ....................................................................................... 67

8. Business Environment and Country Risk ......................................................................... 68

8.1. Demographics & Social Statistics ................................................................................................68

8.1.1. Population – Female ............................................................................................................................ 68

8.1.2. Population - Male ................................................................................................................................. 69

8.2. Economic Performance ................................................................................................................70

8.2.1. Construction Output, Current Prices, Local Currency ........................................................................... 70

8.2.2. Construction Output, Current Prices, US Dollars .................................................................................. 71

8.2.3. Current Account Balance as Percentage of GDP ................................................................................. 72

8.2.4. Debt-Service Ratio .............................................................................................................................. 73

8.2.5. Deposit Interest Rate ........................................................................................................................... 74

8.2.6. Exports of goods and services, current prices ...................................................................................... 75

8.2.7. External debt as percentage of GDP (%) ............................................................................................. 76

8.2.8. Foreign Direct Investment .................................................................................................................... 77

8.2.9. Fiscal Balance as a percentage of GDP ............................................................................................... 78

8.2.10. GDP at Purchasing Power Parity ......................................................................................................... 79

8.2.11. GDP, Constant Prices (Local Currency) ............................................................................................... 80

8.2.12. GDP, Constant Prices (US$) ................................................................................................................ 81

8.2.13. GDP, Current Prices (Local Currency) ................................................................................................. 82

8.2.14. GDP, Current Prices (US$) .................................................................................................................. 83

8.2.15. General Government Final Consumption Expenditure .......................................................................... 84

8.2.16. Gross Fixed Capital Formation, Current Prices .................................................................................... 85

8.2.17. Imports of goods and services ............................................................................................................. 86

8.2.18. Inflation, average consumer prices....................................................................................................... 87

8.2.19. Interest Rate (Lending) ........................................................................................................................ 88

8.2.20. Manufacturing Output, Current Prices (Local Currency Bn) .................................................................. 89

8.2.21. Manufacturing Output, Current Prices (US$ Billions) ............................................................................ 90

8.2.22. Market Capitalization of Stock Exchange (US$ mn) ............................................................................. 91

8.2.23. US$- Exchange Rate (Annual Average) ............................................................................................... 92

8.2.24. US$- Exchange Rate (EoP) ................................................................................................................. 93

8.2.25. Wholesale Price Index ......................................................................................................................... 94

8.3. Energy and Utilities .......................................................................................................................95

8.3.1. Crude Oil Distillation Capacity .............................................................................................................. 95

8.3.2. Electricity Installed Capacity ................................................................................................................ 96

8.3.3. Fossil Fuels Proved Natural Gas Reserves .......................................................................................... 97



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8.3.4. Fossil Fuels Proved Oil Gas Reserves ................................................................................................. 98

8.3.5. Hydroelectricity Installed Capacity........................................................................................................ 99

8.3.6. Natural Gas Consumption .................................................................................................................. 100

8.3.7. Natural Gas Production...................................................................................................................... 101

8.3.8. Net Conventional Thermal Electricity Generation ............................................................................... 102

8.3.9. Net Geothermal, Solar, Wind, and Wood Electric Power Generation .................................................. 103

8.3.10. Net Hydroelectric Power Generation .................................................................................................. 104

8.3.11. Petroleum Consumption .................................................................................................................... 105

8.3.12. Petroleum Production ........................................................................................................................ 106

8.4. Minerals ....................................................................................................................................... 107

8.4.1. Coal Consumption ............................................................................................................................. 107

8.4.2. Coal Production ................................................................................................................................. 108

8.5. Technology .................................................................................................................................. 109

8.5.1. Patents Granted ................................................................................................................................ 109

8.6. Social and Political Risk ............................................................................................................. 110

8.6.1. Political Stability Index ....................................................................................................................... 110

8.6.2. Transparency Index ........................................................................................................................... 111

9. Appendix ............................................................................................................................ 112

9.1. Contact Us ................................................................................................................................... 112

9.2. About SDI ..................................................................................................................................... 112

9.3. Disclaimer .................................................................................................................................... 112



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LIST OF FIGURES

Figure 1: Peruvian Defense Expenditure, 2007–2011 ................................................................................................................................................. 16 Figure 2: Peruvian Defense Expenditure, 2012–2016 ................................................................................................................................................. 17 Figure 3: Peruvian GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP, 2007–2011 ....................... 20 Figure 4: Peruvian GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP, 2012–2016 ....................... 21 Figure 5:Peruvian Defense Budget Split Between Capital and Revenue Expenditure (%), 2007–2011 ................................................................... 22 Figure 6: Peruvian Defense Budget Split Between Capital and Revenue Expenditure (%), 2012–2016 .................................................................. 23 Figure 7: Peruvian Per Capita Defense Expenditure (US$), 2007–2011 .................................................................................................................... 24 Figure 8: Peruvian Per Capita Defense Expenditure (US$), 2012–2016 .................................................................................................................... 25 Figure 9: Peruvian Defense Budget Breakdown (%), 2007–2011 ............................................................................................................................... 26 Figure 10: Peruvian Defense Budget Breakdown (%), 2012–2016 ............................................................................................................................. 27 Figure 11: Peruvian Defense Budget Allocation for the Army (US$ Billion), 2007–2011 ........................................................................................... 28 Figure 12: Peruvian Defense Budget Allocation for the Army (US$ Billion), 2012–2016 ........................................................................................... 29 Figure 13: Peruvian Defense Budget Allocation for the Navy (US$ Billion), 2007–2011 ........................................................................................... 30 Figure 14: Peruvian Defense Budget Allocation for the Navy (US$ Billion), 2012–2016 ........................................................................................... 31 Figure 15: Peruvian Defense Budget Allocation for the Air Force (US$ Billion), 2007–2011 ..................................................................................... 32 Figure 16: Peruvian Defense Budget Allocation for the Air Force (US$ Billion), 2012–2016 ..................................................................................... 33 Figure 17: Peruvian Defense Budget Allocation for Other Expenditure (US$ Billion), 2007–2011 ............................................................................ 34 Figure 18: Peruvian Defense Budget Allocation for Other Expenditure (US$ Billion), 2012–2016 ............................................................................ 35 Figure 19: Peruvian Homeland Security Budget (US$ billion), 2007–2011 ................................................................................................................ 36 Figure 20: Peruvian Homeland Security Budget (US$ billion), 2012–2016 ................................................................................................................ 37 Figure 21: Peruvian Homeland Security Budget Split (%), 2007–2011....................................................................................................................... 38 Figure 22: Peruvian Homeland Security Budget Split (%), 2012–2016....................................................................................................................... 39 Figure 23: SDI Terrorism Heat Map, 2011 ................................................................................................................................................................... 41 Figure 24: SDI Terrorism Index, 2011 .......................................................................................................................................................................... 42 Figure 25: Benchmarking with Key Markets – 2007–2011 vs. 2012–2016 ................................................................................................................. 46 Figure 26: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion), 2011and 2016 ................................................................ 47 Figure 27: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2011 .......................................................................... 48 Figure 28: Per-capita Defense Expenditure of the Largest Military Spenders in the World (US$), 2011 .................................................................. 49 Figure 29: Peruvian Defense Import Trend, 2007–2011 (TIV values)......................................................................................................................... 53 Figure 30: Peruvian Defense Imports by Country (US$ Million), 2007–2011 ............................................................................................................. 54 Figure 31: Peruvian Defense Imports by Country (%), 2007–2011 and 2011 ............................................................................................................ 55 Figure 32: Peruvian Defense Imports by Category (%),2007–2011 ............................................................................................................................ 56 Figure 33: Industry Dynamics Porter’s Five Forces Analysis ...................................................................................................................................... 57 Figure 34: Peruvian Population – Female (In Millions), 2008–2017 ............................................................................................................................ 68 Figure 35: Peruvian Population – Male (In Millions), 2008–2017 ................................................................................................................................ 69 Figure 36: Peruvian Construction Output, Current Prices, (In PEN Billions), 2001–2010 .......................................................................................... 70 Figure 37: Peruvian Construction Output, Current Prices, US Dollars (In Billions), 2001–2010 ................................................................................ 71 Figure 38: Peruvian Current Account Balance as Percentage of GDP, 2008–2017 .................................................................................................. 72 Figure 39: Peruvian Debt-Service Ratio, 2001–2010................................................................................................................................................... 73 Figure 40: Peruvian Deposit Interest Rate, 2001–2010 ............................................................................................................................................... 74 Figure 41: Peruvian Exports of goods and services, current prices (US$ Billion), 2001–2010 .................................................................................. 75 Figure 42: Peruvian External Debt as percentage of GDP (%), 2001–2010 ............................................................................................................... 76 Figure 43: Peruvian Foreign Direct Investment (US$ Billion), 2001–2010.................................................................................................................. 77 Figure 44: Peruvian Fiscal Balance as a percentage of GDP (%), 2001–2010 ........................................................................................................ 78 Figure 45: Peruvian GDP at Purchasing Power Parity (US$ Billion), 2006–2015 ...................................................................................................... 79 Figure 46: Peruvian GDP at Constant Prices (in PEN Billion), 2006–2015 ................................................................................................................ 80 Figure 47: Peruvian GDP at Constant Prices (US$ Billion), 2006–2015 ..................................................................................................................... 81 Figure 48: Peruvian GDP at Current Prices (PEN Billion), 2006–2015 ....................................................................................................................... 82 Figure 49: Peruvian GDP at Current Prices (US$ Billion), 2006–2015 ....................................................................................................................... 83 Figure 50: Peruvian General Government Final Consumption Expenditure (US$ Billion), 2001–2010 ..................................................................... 84 Figure 51: Peruvian Gross Fixed Capital Formation, Current Prices (US$ Billion), 2001–2010 ................................................................................ 85 Figure 52: Peruvian Imports of goods and services (current US$ Billion), 2001–2010 .............................................................................................. 86 Figure 53: Peruvian Inflation, average consumer prices, 2008–2017 ......................................................................................................................... 87 Figure 54: Peruvian Lending Interest rate, 2001–2010 ................................................................................................................................................ 88



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Figure 55: Peruvian Manufacturing Output, Current Prices (PEN Billion), 2001–2010 .............................................................................................. 89 Figure 56: Peruvian Manufacturing Output, Current Prices (US$ Billion), 2001–2010 ............................................................................................... 90 Figure 57: Peruvian Market Capitalization of Stock Exchange (US$ Million), 2001–2010 ......................................................................................... 91 Figure 58: Peruvian US$- Exchange Rate (Annual Average), 2002–2011 ................................................................................................................. 92 Figure 59: Peruvian US$- Exchange Rate (EoP), 2002–2011 .................................................................................................................................... 93 Figure 60: Peruvian Wholesale Price Index, 2000–2009 ............................................................................................................................................. 94 Figure 61: Peruvian Crude Oil Distillation Capacity (Thousand Barrels Per Cal Day), 2000–2009 ........................................................................... 95 Figure 62: Peruvian Electricity Installed Capacity (Million Kilowatts), 2000–2009 ...................................................................................................... 96 Figure 63: Peruvian Fossil Fuels Proved Natural Gas Reserves (Trillion Cubic Feet), 2002–2011 .......................................................................... 97 Figure 64: Peruvian Fossil Fuels Proved Oil Gas Reserves (Billion Barrels), 2002–2011 ......................................................................................... 98 Figure 65: Peruvian Hydroelectricity Installed Capacity (Million Kilowatts), 2000–2009 ............................................................................................ 99 Figure 66: Peruvian Natural Gas Consumption (Billion Cubic Feet), 2001–2010 ..................................................................................................... 100 Figure 67: Peruvian Natural Gas Production (Billion Cubic Feet), 2001–2010 ......................................................................................................... 101 Figure 68: Peruvian Net Conventional Thermal Electricity Generation (Billion Kilowatt hours), 2001–2010 ........................................................... 102 Figure 69: Peruvian Net Geothermal, Solar, Wind, and Wood Electric Power Generation (Billion Kilowatt Hours), 2001–2010 .......................... 103 Figure 70: Peruvian Net Hydroelectric Power Generation (Billion Kilowatt hours), 2001–2010 ............................................................................... 104 Figure 71: Peruvian Petroleum Consumption (Thousand Barrels Per Day), 2002–2011 ......................................................................................... 105 Figure 72: Peruvian Petroleum Production (Thousand Barrels Per Day), 2002–2011 ............................................................................................. 106 Figure 73: Peruvian Coal Consumption (Thousand Short Tons), 2001–2010 .......................................................................................................... 107 Figure 74: Peruvian Coal Production (Thousand Short Tons), 2001–2010 .............................................................................................................. 108 Figure 75: Peruvian Patents Granted, 2002–2011 ..................................................................................................................................................... 109 Figure 76: Peruvian Political Stability Index, 2002–2010 ........................................................................................................................................... 110 Figure 77: Peruvian Transparency Index, 2002–2011 ............................................................................................................................................... 111



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LIST OF TABLES

Table 1: Peruvian Defense Expenditure, 2007–2011 .................................................................................................................................................. 17 Table 2: Peruvian Defense Expenditure, 2012–2016 .................................................................................................................................................. 18 Table 3: Peruvian GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP, 2007–2011 ......................... 21 Table 4: Peruvian GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP, 2012–2016 ......................... 22 Table 5: Peruvian Defense Budget Split Between Capital and Revenue Expenditure (%), 2007–2011 .................................................................. 23 Table 6: Peruvian Defense Budget Split Between Capital and Revenue Expenditure (%), 2012–2016 ................................................................... 24 Table 7: Peruvian Per Capita Defense Expenditure (US$), 2007–2011 ..................................................................................................................... 25 Table 8: Peruvian Per Capita Defense Expenditure (US$), 2012–2016 ..................................................................................................................... 26 Table 9: Peruvian Defense Budget Breakdown (%), 2007–2011 ................................................................................................................................ 27 Table 10: Peruvian Defense Budget Breakdown (%), 2012–2016 .............................................................................................................................. 28 Table 11: Peruvian Defense Budget Allocation for the Army (US$ Billion), 2007–2011 ............................................................................................ 29 Table 12: Peruvian Defense Budget Allocation for the Army (US$ Billion), 2012–2016 ............................................................................................ 30 Table 13: Peruvian Defense Budget Allocation for the Navy (US$ Billion), 2007–2011............................................................................................. 31 Table 14: Peruvian Defense Budget Allocation for the Navy (US$ Billion), 2012–2016............................................................................................. 32 Table 15: Peruvian Defense Budget Allocation for the Air Force (US$ Billion), 2007–2011 ...................................................................................... 33 Table 16: Peruvian Defense Budget Allocation for the Air Force (US$ Billion), 2012–2016 ...................................................................................... 34 Table 17: Peruvian Defense Budget Allocation for Other Expenditure (US$ Billion), 2007–2011 ............................................................................. 35 Table 18: Peruvian Defense Budget Allocation for Other Expenditure (US$ Billion), 2012–2016 ............................................................................. 36 Table 19: Peruvian Homeland Security Budget (US$ billion), 2007–2011.................................................................................................................. 37 Table 20: Peruvian Homeland Security Budget (US$ billion), 2012–2016.................................................................................................................. 38 Table 21: Peruvian Homeland Security Budget Split (%), 2007–2011 ........................................................................................................................ 39 Table 22: Peruvian Homeland Security Budget Split (%), 2012–2016 ........................................................................................................................ 40 Table 23: SDI Terrorism Index ...................................................................................................................................................................................... 44 Table 24: Benchmarking with Key Markets – 2007–2011 vs. 2012–2016 .................................................................................................................. 46 Table 25: Defense Offset Regulations in Peru ............................................................................................................................................................. 60 Table 26: Los Servicios Industriales de la Marina (SIMA) – Products and Services .................................................................................................. 63 Table 27: The Army Ammunition Factory (FAME)– Product Focus ............................................................................................................................ 65 Table 28: Desarrollos Industriales Casanave – Product Focus ................................................................................................................................... 67 Table 29: Desarrollos Industriales Casanave: Alliances .............................................................................................................................................. 68


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1. Executive Summary

Peru’s defense expenditure expected to register a CAGR of XX% during the forecast period

During the review period, Peruvian defense expenditure grew at a CAGR of XX% and registered US$XX

billion in 2011. The persistent threat from insurgent guerrilla organization the Shining Path group, border

disputes with Chile, an arms race within the Latin American region, active participation in peacekeeping

missions, and drug trafficking stimulated expenditure during the review period, and these factors are

expected to support defense expenditure throughout the forecast period. Defense expenditure in Peru is

anticipated to increase at a CAGR of XX% and reach a value of US$XX billion by 2016. As a percentage

of gross domestic products (GDP) the Peruvian defense budget stood at XX% in 2011, and is expected to

increase to XX% of GDP by 2016.

The capital expenditure allocation of the Peruvian defense budget, which stood at XX% during the review

period, is expected to increase to XX% during the forecast period, as a result of a modernization strategy

adopted by the government. Consequently, revenue expenditure is likely to decrease from XX% in the

review period to XX% during the forecast period.

Key opportunities for equipment suppliers are expected in areas such as main battle tanks, surveillance

equipment, unmanned aerial vehicles (UAVs), and combat equipment such as assault rifles and precise

ammunition.


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2. Market Attractiveness and Emerging Opportunities

During the review period the Peruvian defense budget recorded a CAGR of XX%. Expenditure was

supported by a modernization program, participation in peacekeeping missions, and measures to counter

drug trafficking. In 2011 the Peruvian defense budget stood at XX% of GDP and is expected to marginally

increase to XX% of GDP by 2016. During the review period, Peru’s capital expenditure allocation stood at

XX% of the total defense budget, and this is expected to increase to XX% over the forecast period due to

the government’s weapons procurement plans. Consequently, the share of revenue expenditure in the

total defense budget is expected to decrease from XX% in the review period to XX% in the forecast

period.


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2.1. Defense Market Size Historical and Forecast

2.1.1. Defense expenditure is projected to grow at a CAGR of XX% during the forecast period

Peruvian defense expenditure, valued at US$XX billion in 2011, registered a CAGR of XX% during the

review period and is expected to grow at a CAGR of XX% during the forecast period, to reach an

estimated US$XX billion in 2016. Furthermore, Peru’s cumulative defense expenditure over the forecast

period is expected to be US$XX billion, of which US$XX billion is expected to be revenue expenditure.

The following table and figure show Peruvian defense expenditure during the review period:

Table 1: Peruvian Defense Expenditure, 2007–2011

Year Defense expenditure(US$bn)

Defense growth percentage

2007 XX XX

2008 XX XX

2009 XX XX

2010 XX XX

2011 XX XX

CAGR 2007–2011 XX%

Source: Ministry of Finance, Peru and SDI analysis © SDI

Figure 1: Peruvian Defense Expenditure, 2007–2011


Defe

nse E

xp

en

dit

ure

Growth Rate (%)

XX

XX

XX

XX

XX

XX

XX

2007 2008 2009 2010

Revenue Expenditure Capital Expenditure

2011


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The following table and figure show Peruvian projected defense expenditure over the forecast period:

Table 2: Peruvian Defense Expenditure, 2012–2016

Year Defense expenditure (US$ bn)

Defense growth percentage

2012 XX XX

2013 XX XX

2014 XX XX

2015 XX XX

2016 XX XX

CAGR 2012–2016 XX%


Figure 2: Peruvian Defense Expenditure, 2012–2016


XX

XX

XX

XX

XX

XX

XX

2012 2013 2014 2015


2016

Growth Rate (%)

Defe

nse E

xp

en

dit

ure


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2.2. Analysis of Defense Budget Allocation

2.2.1. Revenue expenditure accounts for a majority of the Peruvian defense budget

During the review period the Peruvian Ministry of Defense (MoD) allocated XX% of its total defense

budget to revenue expenditure and the remaining XX% to capital expenditure. Capital expenditure is

expected to increase to XX% of the total defense budget during the forecast period as the government is

expected to procure weapons primarily to counter the threat posed by the Shining Path group, and

develop a military deterrence capability in light of its volatile relationship with Chile. The share of revenue

expenditure is expected to decline to XX% of the total Peruvian defense expenditure.

The following table and chart display Peru’s defense budget share of capital and revenue expenditure

during the review period:

Table 3: Peruvian Defense Budget Split Between Capital and Revenue Expenditure (%), 2007–2011

Year Capital Expenditure Share Revenue Expenditure Share

2007 XX XX

2008 XX XX

2009 XX XX

2010 XX XX

2011 XX XX


Figure 3:Peruvian Defense Budget Split Between Capital and Revenue Expenditure (%), 2007–2011


0%

20%

40%

60%

80%

100%

2007 2008 2009 2010 2011


%o

f D

efen

se E

xpen

dit

ure


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The following table and chart display Peru’s defense budget share of capital and revenue expenditure

over the forecast period:

Table 4: Peruvian Defense Budget Split Between Capital and Revenue Expenditure (%), 2012–2016

Year Capital Expenditure Share Revenue Expenditure Share

2012 XX XX

2013 XX XX

2014 XX XX

2015 XX XX

2016 XX XX


Figure 4: Peruvian Defense Budget Split Between Capital and Revenue Expenditure (%), 2012–2016


0%

20%

40%

60%

80%

100%


%o

f D

efen

se E

xpen

dit

ure

2012 2013 2014 20162015


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2.3. Homeland Security Market Size and Forecast

2.3.1. Homeland security expenditure is expected to grow at a CAGR of XX% during the forecast period

Peru’s homeland security expenditure consists of maintaining internal security, law enforcement, and

crime prevention. The country’s homeland security budget totaled US$XX billion in the review period and

is expected to increase to US$XX billion in the forecast period, at a CAGR of XX%. Peru’s homeland

security budget is driven by the need to police cocaine trafficking and organized crime. To counter the

threats posed by criminal activities, Peru is expected to invest in tactical training programs for its Special

Forces, precise ammunition, assault rifles, and intelligence technologies such as electronic identification

documents, e-passports, and automated border crossing and CCTV systems. Over the forecast period,

homeland security equipment manufacturers expect increased demand for equipment capable of

enhancing seaport and airport security.

The following table and chart show Peruvian homeland security budget allocation during the review

period:

Table 5: Peruvian Homeland Security Budget (US$ billion), 2007–2011

Year Homeland security budget (US$ billions) Growth rate

2007 XX XX

2008 XX XX

2009 XX XX

2010 XX XX

2011 XX XX

Source: Ministry of Economy and Finance, Peru and SDI analysis © SDI

Figure 5: Peruvian Homeland Security Budget (US$ billion), 2007–2011


Ho

mela

nd

Secu

rity

Exp

en

dit

ure

XX

XX

XX

XX

XX

XX

XX

2007 2008 2009 2010 2011

Ho

mela

nd

Secu

rity

Exp

en

dit

ure

XX

XX

XX

XX

XX

XX

XX

2007 2008 2009 2010 2011


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The following table and chart show Peruvian homeland security budget allocation over the forecast period:

Table 6: Peruvian Homeland Security Budget (US$ billion), 2012–2016

Year Homeland security budget (US$ billions) Growth rate

2012 XX XX

2013 XX XX

2014 XX XX

2015 XX XX

2016 XX XX


Figure 6: Peruvian Homeland Security Budget (US$ billion), 2012–2016


XX

XX

XX

XX

XX

XX

XX

2012 2013 2014 2015 2016

Ho

mel

and

Sec

uri

ty E

xpen

dit

ure

The Peruvian Defense Industry-Market Opportunities and Entry … · Defense Market Size Historical...

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