Brazilian defence market booming due to government incentives

The Brazilian defence market is booming, fuelled by government incentives to modernise the country's armed forces and develop a robust, export-oriented military industrial complex, the market is expected to reach a value of $35.88 billion during 2012.

Over the past decade, Brazil has become one of the largest emerging economic powers in the world, leading to ambitious investment and modernisation plans being developed for the Brazilian armed forces.

In addition, a desire to grow a strong defence industry in order to boost the economy's export output and to demonstrate its geo-political power has fuelled such spending.

One of the key factors driving growth within the Brazilian defence market is the efforts to protect the Amazon region. The System for the Vigilance of the Amazon (SIVAM) program, which the government executed in partnership with Raytheon, involves the patrol and protection of the dense Amazon region against deforestation, land invasion, drug trafficking, and illegal mining.

The number of foreign and domestic defence companies in Brazil jumped to 150 last year from 39 in 2007, with sales of $3.5 billion. The government has signed contracts for equipment worth more than $12 billion and the Defence Ministry estimates the armed forces will need annual investments of 20 billion reais over the next two decades.

Brazil's main construction companies, including Odebrecht and Queiroz Galvao SA, are joining in the competition for contracts. Belo Horizonte, Brazil-based Andrade Gutierrez SA created a defence joint venture in January with aerospace and industrial electronics company Thales SA (HO) of France.

Embraer SA (EMBR3), the world's fourth-largest airplane maker, projects defence revenue to grow 17% this year to 1 billion reais and to account for a quarter of its income by 2020, up from 14.7% now.

Brazil currently allocates an average of 1.5% of its GDP to the defence market, a figure which is among the lowest in the region, and it also spent the smallest per capita defence spending in the region of US$195 in 2012.

For more information on the Brazilian defence market, see the latest research: Brazilian Defence Market

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