New Market Report: Brazil Defence & Security Report 2016

New Defense research report from Business Monitor International is now available from Fast Market Research

[USPRwire, Wed Mar 16 2016] We expect Brazilian defence expenditure to contract in 2016 amid the recession; however, it will remain at around 1.3% of GDP, and return to growth over the medium term as economic conditions improve. Defence spending will be driven by factors such as the country's efforts to reduce crime levels, prevent illegal activities in the Amazon, and contribute to international peacekeeping missions. Brazil has the largest defence budget in the Latin America region, and is able to invest significantly into procurement of military equipment and defence R&D. This enables the domestic defence sector to continue to develop, increasing export potential, and gradually allowing it to capture a large share of the Brazilian MoD's procurement contracts. Over the long term, therefore, we expect defence exports to grow at a faster pace than imports.

Recent Developments

We expect a second year of defence expenditure contraction in 2016 amid a worsening recession, as consumers face headwinds stemming from a poor labour market and the fixed investment decline continues.

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Over the medium-to-long term, meanwhile, with economic conditions allowing defence spending to grow, we expect the Brazilian defence ministry to address a range of its armed forces' requirements to replace ageing equipment. This modernisation effort is likely to involve purchases of new military aircraft, armoured vehicles, warships, submarines and C4 equipment.

As Brazil prepares to host the 2016 Olympic and Paralympic Games, international actors have expressed concerns over the high levels of crime in the country, and how this might affect athletes and spectators in the run-up to, and during the event. The government is under pressure to guarantee the safety of those participating in the games.

US defence electronics specialist Rockwell Collins is doubling the size of its factory in Brazil, with construction having commenced as of 2015.

Brazil has agreed to purchase 28 KC 390 aircraft from Embraer over the next 10 years, with the first delivery set for 2016. The KC-390 is a transport carrier designed to rival Lockheed Martin's KC-130 Hercules. Embraer is reportedly looking to import engine and navigation systems for the aircraft.

Brazil has ordered 50 M-36 Caracal helicopters from Helibras. 15 units were delivered in 2015 and the rest is expected to arrive in the coming months.

BAE Systems will provide Brazil's navy with 23 amphibious vehicles for a total of USD82mn. Deliveries will commence in 2017.

Defence Industry Risk Reward Index

Brazil performs well compared regionally in our Defence Industry Risk Reward Index (RRI), due to high levels of defence spending, steady growth in defence exports, a large armed forces and a relatively favourable operating environment. The country scores 63 out of 100 overall, placing first out of the six countries included in our rankings for Latin America.

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