The Argentine Defense Industry - Market Opportunities and Entry Strategies, Analyses and Forecasts to 2017

Published by: Strategic Defence Intelligence

Published: Oct. 20, 2012 - 111 Pages


Table of Contents

1 Introduction
1.1 What is this Report About?
1.2 Definitions
1.3 Summary Methodology
1.4 SDI Terrorism Index
1.5 About Strategic Defence Intelligence
2 Executive Summary
3 Market Attractiveness and Emerging Opportunities
3.1 Defense Market Size Historical and Forecast
3.1.1 Argentine defense budget to grow at a CAGR of XX% during the forecast period
3.1.2 Defense expenditure to be driven by modernization programs, contributions to international peacekeeping missions and the Falkland Islands dispute with the UK
3.1.3 Defense expenditure as a percentage of GDP to reach XX% by 2017
3.2 Analysis of Defense Budget Allocation
3.2.1 Capital expenditure allocation expected to increase during the forecast period
3.2.2 Capital expenditure expected to register a CAGR of XX% during the forecast period
3.2.3 The army accounted for the largest share of the defense budget during the review period
3.2.4 Navy budget expected to increase at a CAGR of XX% during the forecast period
3.2.5 Army expenditure to cumulatively total US$XX billion during the forecast period
3.2.6 Air force expenditure to reach US$XX billion by 2017
3.3 Homeland Security Market Size and Forecast
3.3.1 Homeland security market expected to grow with the creation of a new ministry dedicated to homeland security
3.3.2 Increasing poverty, illegal immigration and organized crime drives homeland security expenditure
3.4 Benchmarking with Key Global Markets
3.4.1 Argentine defense budget expected to increase at a CAGR of XX%
3.4.2 Argentine defense expenditure is the lowest in South America
3.4.3 Argentina’s defense budget as a percentage of GDP to increase
3.5 Market Opportunities: Key Trends and Drivers
3.5.1 Navy to acquire off-shore patrol vessels, transport ships, and nuclear submarines
3.5.2 Argentine air force to procure fighter aircraft, transport aircraft and helicopters and upgrade its fleet of helicopters and military aircraft
3.5.3 Demand for light attack aircraft is expected to surge during the forecast period
4 Defense Procurement Market Dynamics
4.1 Import Market Dynamics
4.1.1 Defense imports expected to increase during the forecast period
4.1.2 The US is a major arms supplier to Argentina
4.1.3 Aircraft and sensors constitute a majority of Argentine arms imports
4.2 Export Market Dynamics
4.2.1 Argentina has negligible arms exports
5 Industry Dynamics
5.1 Five Forces Analysis
5.1.1 Bargaining power of supplier: low
5.1.2 Bargaining power of buyer: high
5.1.3 Barrier to entry: medium
5.1.4 Intensity of rivalry: low to high
5.1.5 Threat of substitution: high
6 Market Entry Strategy
6.1 Market Regulation
6.1.1 Offset policy aids development of domestic defense industry
6.1.2 Open foreign direct investment policy
6.2 Market Entry Route
6.2.1 FMS is an effective entry route for foreign defense companies
6.2.2 Technology transfers and partnerships encouraged by offset policy
6.2.3 Argentine defense industry open to foreign investment
6.3 Key Challenges
6.3.1 Defense budget fluctuations challenging the domestic defense industry
7 Competitive Landscape and Strategic Insights
7.1 Competitive Landscape Overview
7.2 Key Foreign Companies
7.2.1 Fábrica Argentina de Aviones: overview
7.2.2 Fábrica Argentina de Aviones: defense products
7.2.3 Fábrica Argentina de Aviones: recent announcements and strategic initiatives
7.2.4 Fábrica Argentina de Aviones: alliances
7.2.5 Fábrica Argentina de Aviones: recent contract wins
7.2.6 Astillero Río Santiago: overview
7.2.7 Astillero Río Santiago: products and services
7.2.8 Astillero Río Santiago: recent announcements and strategic initiatives
7.2.9 Astillero Río Santiago: alliances
7.2.10 Citedef: overview
7.2.11 Citedef: products and services
7.2.12 Citedef: recent announcements and strategic initiatives
7.2.13 Tandanor: overview
7.2.14 Tandanor: products and services
7.2.15 Tandanor: recent announcements and strategic initiatives
7.2.16 Tandanor: recent contract wins
7.2.17 Dirección General de Fabricaciones Militares: overview
7.2.18 Dirección General de Fabricaciones Militares: defense products
7.2.19 Dirección General de Fabricaciones Militares: recent announcements and strategic initiatives
7.2.20 Dirección General de Fabricaciones Militares: alliances
7.2.21 INVAP SE: overview
7.2.22 INVAP SE: defense products
7.2.23 INVAP S.E.: recent announcements and strategic initiatives
7.2.24 INVAP S.E.: alliances
7.2.25 Nostromo Defensa SA: overview
7.2.26 Nostromo Defensa SA: products and services
7.2.27 Nostromo Defensa SA: recent announcements and strategic initiatives
7.2.28 Nostromo Defensa SA: alliances
7.2.29 Nostromo Defensa SA: recent contract wins
8 Business Environment and Country Risk
8.1 Demographics & Social Statistics
8.1.1 Population – Female
8.1.2 Population - Male
8.2 Economic Performance
8.2.1 Construction Output, Current Prices, Local Currency
8.2.2 Construction Output, Current Prices, US Dollars
8.2.3 Current Account Balance as Percentage of GDP
8.2.4 Debt–Service Ratio
8.2.5 Deposit Interest Rate
8.2.6 Exports of goods and services, current prices
8.2.7 External debt as a percentage of GDP
8.2.8 Foreign Direct Investment
8.2.9 GDP at Purchasing Power Parity
8.2.10 GDP, Constant Prices (Local Currency)
8.2.11 GDP, Constant Prices (US$ Billion)
8.2.12 GDP, Current Prices (Local Currency)
8.2.13 GDP, Current Prices (US$)
8.2.14 General Government Final Consumption Expenditure
8.2.15 Gross Fixed Capital Formation, Current Prices
8.2.16 Imports of goods and services
8.2.17 Inflation, average consumer prices
8.2.18 Interest Rate (Lending)
8.2.19 Manufacturing Output, Current Prices (Local Currency Bn)
8.2.20 Manufacturing Output, Current Prices (US$ Billions)
8.2.21 US$ Exchange Rate (Annual Average)
8.2.22 US$ Exchange Rate (EoP)
8.2.23 Wholesale Price Index
8.3 Energy and Utilities
8.3.1 Hydroelectricity Installed Capacity
8.3.2 Natural Gas Consumption
8.3.3 Natural Gas Imports
8.3.4 Net Conventional Thermal Electricity Generation
8.3.5 Net Geothermal, Solar, Wind, and Wood Electric Power Generation
8.3.6 Net Hydroelectric Power Generation
8.3.7 Nuclear Electricity Net Generation
8.3.8 Petroleum, Consumption
8.3.9 Petroleum, Production
8.4 Labor
8.4.1 People Employed in R & D
8.5 Minerals
8.5.1 Coal Consumption
8.5.2 Coal Production
8.6 Social & Political Risk
8.6.1 Political Stability Index
8.6.2 Transparency Index
8.7 Technology
8.7.1 Fixed Broadband Internet Subscribers
8.7.2 Gross Domestic Expenditure on Research and Development as % of GDP
8.7.3 Patents Granted
9 Appendix
9.1 Contact Us
9.2 About SDI
9.3 Disclaimer
List of Tables
Table 1: Argentine Defense Expenditure, 2008–2012
Table 2: Argentine Defense Expenditure, 2013–2017
Table 3: Argentine GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP Growth, 2008–2012
Table 4: Argentine GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP Growth, 2013–2017
Table 5: Argentine Defense Budget Split Between Capital and Revenue Expenditure (%), 2008–2012
Table 6: Argentine Defense Budget Split Between Capital and Revenue Expenditure (%), 2013–2017
Table 7: Argentine Defense Capital Expenditure (US$ Million), 2008–2012
Table 8: Argentine Defense Capital Expenditure (US$ Million), 2013–2017
Table 9: Argentine Defense Function Expenditure Split (%), 2008–2012
Table 10: Argentine Defense Function Expenditure Split (%), 2013–2017
Table 11: Argentine Naval Expenditure (US$ billion), 2008–2012
Table 12: Argentine Naval Expenditure (US$ billion), 2013–2017
Table 13: Argentine Army Expenditure (US$ billion), 2008–2012
Table 14: Argentine Army Expenditure (US$ billion), 2013–2017
Table 15: Argentine Air Force Expenditure (US$ billion), 2008–2012
Table 16: Argentine Air Force Expenditure (US$ billion), 2013–2017
Table 17: Argentine Homeland Security Budget (US$ billion), 2008–2012
Table 18: Argentine Homeland Security Budget (US$ billion), 2013–2017
Table 19: Benchmarking with Key Markets, 2008–2012 vs. 2013–2017
Table 20: Offset Regulations in Argentina
Table 21: Fábrica Argentina de Aviones – Product Focus
Table 22: Fábrica Argentina de Aviones – Alliances
Table 23: Fábrica Argentina de Aviones - Recent Contract Wins
Table 24: Astillero Río Santiago – Product Focus
Table 25: Astillero Río Santiago – Alliances
Table 26: Citedef – Product Focus
Table 27: Tandanor – Product Focus
Table 28: Tandanor – Recent Contract Wins
Table 29: Dirección General de Fabricaciones Militares – Product Focus
Table 30: Dirección General de Fabricaciones Militares – Alliances
Table 31: INVAP SE – Product Focus
Table 32: INVAP S.E. – Alliances
Table 33: Nostromo Defensa SA – Product Focus
Table 34: Nostromo Defensa SA – Alliances
Table 35: Nostromo Defensa SA – Recent Contract Wins
List of Figures
Figure 1: Argentine Defense Expenditure, 2008–2012
Figure 2: Argentine Defense Expenditure, 2013–2017
Figure 3: Argentine GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP Growth, 2008–2012
Figure 4: Argentine GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as a Percentage of GDP Growth, 2013–2017
Figure 5: Argentine Defense Budget Split Between Capital and Revenue Expenditure (%), 2008–2012
Figure 6: Argentine Defense Budget Split Between Capital and Revenue Expenditure (%), 2013–2017
Figure 7: Argentine Defense Capital Expenditure (US$ Million), 2008–2012
Figure 8: Argentine Defense Capital Expenditure (US$ Million), 2013–2017
Figure 9: Argentine Defense Function Expenditure Split (%), 2008–2012
Figure 10: Argentine Defense Function Expenditure Split (%), 2013–2017
Figure 11: Argentine Naval Expenditure (US$ billion), 2008–2012
Figure 12: Argentine Naval Expenditure (US$ billion), 2013–2017
Figure 13: Argentine Army Expenditure (US$ billion), 2008–2012
Figure 14: Argentine Army Expenditure (US$ billion), 2013–2017
Figure 15: Argentine Air Force Expenditure (US$ billion), 2008–2012
Figure 16: Argentine Air Force Expenditure (US$ billion), 2013–2017
Figure 17: Argentine Homeland Security Budget (US$ billion), 2008–2012
Figure 18: Argentine Homeland Security Budget (US$ billion), 2013–2017
Figure 19: SDI Terrorism Heat Map, 2011
Figure 20: SDI Terrorism Index, 2011
Figure 21: Benchmarking with Key Markets, 2008–2012 vs. 2013–2017
Figure 22: Benchmarking with World’s Largest Defense Spenders (US$ Billion), 2012 and 2017
Figure 23: Benchmarking with Large Defense Spenders as % of GDP – 2012
Figure 24: Argentine Defense Imports (US$ million), 2007–2011
Figure 25: Argentine Defense Imports by Country (%), 2007–2011
Figure 26: Argentine Defense Imports by Category, 2007–2011
Figure 27: Industry Dynamics - Porter’s Five Forces Analysis
Figure 28: Argentine Population – Female (In Millions), 2008–2017
Figure 29: Argentine Population – Male (In Millions), 2008–2017
Figure 30: Argentine Construction Output, Current Prices, Local Currency (In Billions), 2001–2010
Figure 31: Argentine Construction Output, Current Prices, US Dollars (In Billions), 2001–2010
Figure 32: Argentine Current Account Balance as Percentage of GDP, 2008–2017
Figure 33: Argentine Debt–Service Ratio, 2001–2010
Figure 34: Argentine Deposit Interest Rate, 2001–2010
Figure 35: Argentine Exports of Goods and Services, Current Prices (US$ Billion), 2001– 2010
Figure 36: Argentine External Debt as a Percentage of GDP, 2001–2010
Figure 37: Argentine Foreign Direct Investment (US$ Billion), 2001–2010
Figure 38: Argentine GDP at Purchasing Power Parity (US$ Billion), 2006–2015
Figure 39: Argentine GDP at Constant Prices (Local Currency Billion), 2006–2015
Figure 40: Argentine GDP at Constant Prices (US$ Billion), 2006–2015
Figure 41: Argentine GDP at Current Prices (Local Currency Billion), 2006–2015
Figure 42: Argentine GDP at Current Prices (US$ Billion), 2006–2015
Figure 43: Argentine General Government Final Consumption Expenditure (US$ Billion), 2001–2010
Figure 44: Argentine Gross Fixed Capital Formation, Current Prices (US$ Billion), 2001–2010
Figure 45: Argentine Imports of Goods and Services (current US$ Billion), 2001–2010
Figure 46: Argentine Inflation, average consumer prices, 2008–2017
Figure 47: Argentine Interest Rate (lending), 2001–2010
Figure 48: Argentine Manufacturing Output, Current Prices (Local Currency Billion), 2001–2010
Figure 49: Argentine Manufacturing Output, Current Prices (US$ Billion), 2001–2010
Figure 50: Argentine US$ Exchange Rate (Annual Average), 2002–2011
Figure 51: Argentine US$ Exchange Rate (EoP), 2002–2011
Figure 52: Argentine Wholesale Price Index, 2000–2009
Figure 53: Argentine Hydroelectricity Installed Capacity (Million Kilowatts), 2000–2009
Figure 54: Argentine Natural Gas Consumption (Billion Cubic Feet), 2001–2010
Figure 55: Argentine Natural Gas Consumption (Billion Cubic Feet), 2004–2010
Figure 56: Argentine Net Conventional Thermal Electricity Generation (Billion Kilowatt hours), 2001–2010
Figure 57: Argentine Net Geothermal, Solar, Wind, and Wood Electric Power Generation (Billion Kilowatt hours), 2001–2010
Figure 58: Argentine Net Hydroelectric Power Generation (Billion Kilowatt hours), 2001–2009
Figure 59: Argentine Nuclear Electricity Net Generation (Billion Kilowatt hours), 2001–2010
Figure 60: Argentine Petroleum Consumption (Thousand Barrels Per Day), 2002–2011
Figure 61: Argentine Petroleum Production (Thousand Barrels Per Day), 2002–2011
Figure 62: Argentine People Employed in R & D (Number of researchers per million people), 2000–2008
Figure 63: Argentine Coal Consumption (Thousand Short Tons), 2001–2010
Figure 64: Argentine Coal Production (Thousand Short Tons), 2001–2010
Figure 65: Argentine Political Stability Index, 2002–2010
Figure 66: Argentine Transparency Index, 2002–2011
Figure 67: Argentine Fixed Broadband Internet Subscribers (Thousands), 2001–2010
Figure 68: Gross Domestic Expenditure on Research and Development as % of GDP, 2000–2008
Figure 69: Patents Granted, 2002–2011

Abstract

Product Synopsis

This report is the result of SDI’s extensive market and company research covering the Argentine defense industry. It 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 Argentine defense Industry - Market Opportunities and Entry Strategies, Analyses and Forecasts to 2017 offers the reader an insight into the market opportunities and entry strategies adopted by foreign original equipment manufacturers (OEMs) to gain market share in the Argentine defense industry.

What is the current market landscape and what is changing?
The Argentine defense budget stands at US$3.64 billion in 2012 and recorded a CAGR of 15.77% during the review period. This healthy growth is expected to continue with a CAGR of 19.22% over the forecast period, which is mainly driven by modernization plans, participation in peacekeeping missions, and disputes over the sovereignty of the Falkland Islands and their natural resources. During the review period, capital expenditure was allocated an average of 4% of the defense budget and this low allocation was due to the high expenditure on salaries and pensions, which account for 70% of the defense budget. However, modernization plans are expected to increase capital expenditure to an average of 7.8% of the defense budget during the forecast period.

What are the key drivers behind recent market changes?
Defense expenditure will be driven by modernization programs, contributions to international peacekeeping missions and the Falkland Islands dispute with the UK. The Argentine government is expected to increase its defense budget at a robust pace in order to modernize its defense equipment and support its domestic defense industry. As part of the United Nations (UN), the Argentine government began to contribute to peacekeeping missions in 1958 and since then has contributed over 35,000 troops for various peacekeeping missions around the world.

What makes this report unique and essential to read?
The Argentine defense Industry - Market Opportunities and Entry Strategies, Analyses and Forecasts to 2017 provides detailed analysis of the current industry size and growth expectations from 2013to 2017, 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 a detailed analysis of the current industry size and growth expectations from 2013to 2017, 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.

The report includes trend analysis of imports and exports, together with their implications and impact on the Argentine 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 Argentina. 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

The domestic defense industry supplies the majority of its production to the Argentine government and is therefore dependent upon it for its order book. The Argentine defense budget fluctuates as the government faces varying financial constraints, which affects supplier’s planning and resource management.

The Argentine defense industry does not have the requisite technological capability to competitively develop advanced defense equipment and compete with the global arms industry. The defense industry, which was previously mostly state owned, was privatized due to public financial constraints. However, the country has started developing its domestic defense industry and is attempting to improve it through industrial participation policies. The government is also participating in international development projects such as the Embraer KC-390, which will create export opportunities and produce a stable order book.

Key Highlights

The Argentine defense budget stands at US$3.64 billion in 2012, the result of a CAGR of 15.77% during the review period, and this robust growth was primarily driven by high personnel turnover in the armed forces. The government announced a 21% wage increase in the salaries of the armed forces in 2010. In 2013 the defense budget is estimated to be US$4.22 billion and is expected to register a CAGR of 19.22% during the forecast period to reach US$8.53 billion by 2017. This strong growth is a result of the need to modernize the Argentine armed forces following decades of underinvestment after defeat in the Falklands war in 1982 and the collapse of the Argentine economy in 2001. The government intends to increase the defense budget of the country from 0.8% of GDP in 2012 to 1.1% of GDP and, while the time period for doing so is unclear, it is estimated that the defense budget will increase to 1.5% of GDP by 2017.

Homeland security expenditure recorded a CAGR of 25.84% during the review period and is expected to increase at a CAGR of 3.83% during the forecast period, to reach US$5.2 billion by 2017. Homeland security expenditure is computed by combining the budget for the federal police, national gendarmerie, navy coast guard, and the airport security police budget. The federal police received the highest budget allocation with 40.5% of the total homeland security expenditure during the review period, followed by national gendarmerie, which accounted for an average of 35.6%, while the coast guard received an average of 19.9%, and airport security police accounted for the remaining 4.1% of the homeland security budget. The Ministry of Security is expected to procure advanced communication devices, safety equipment, and both land and air transport equipment.

Argentine arms imports reached their peak in 2007, when the Argentine military announced a multi-year funding program to restore and enhance the operational capabilities of its armed forces. However, in 2009, the economic constraints faced by the country forced it to postpone its military modernization plans. In 2011, the government announced plans to increase its defense expenditure in order to enhance its military hardware and support its domestic defense industry. These government initiatives to support its domestic defense industry are expected to result in increased imports as Argentina aims to gain advance technology for its domestic defense industry.

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