Brazil Defence and Security Report 2016
BMI View: We expect Brazilian defence expenditure to contract in 2016 amid the recession; however, itwill remain at around 1.3% of GDP, and return to growth over the medium term as economic conditionsimprove. 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 hasthe largest defence budget in the Latin America region, and is able to invest significantly into procurementof 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'sprocurement contracts. Over the long term, therefore, we expect defence exports to grow at a faster pacethan imports.
We expect a second year of defence expenditure contraction in 2016 amid a worsening recession, asconsumers face headwinds stemming from a poor labour market and the fixed investment declinecontinues.
Over the medium-to-long term, meanwhile, with economic conditions allowing defence spending togrow, we expect the Brazilian defence ministry to address a range of its armed forces' requirements toreplace ageing equipment. This modernisation effort is likely to involve purchases of new militaryaircraft, armoured vehicles, warships, submarines and C4 equipment.
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