Venezuela Defence and Security Report 2016
BMI View: Venezuela's domestic defence sector remains one of the smallest in Latin America in terms ofexpenditure, which we project at USD5.1bn in 2019. Moreover, in terms of production, Venezuela willremain an insignificant player in the world arms market. Local defence companies are capable ofmanufacturing a range of equipment - including small arms and ammunitions, simple vessels and aircraft,armoured vehicles and textiles - though their ability to develop more technologically advanced itemsremains limited. As such, the country continues to rely on foreign suppliers to meet the requirements of itsarmed forces. Over our forecast period to 2019, we expect security threats associated with conflictsinvolving neighbouring Colombia, local terrorism from drug trafficking groups and political instability todrive domestic demand for military products. As such, we forecast Venezuela's defence budget to growsteadily over the next five years.
Venezuela relies on oil export receipts to fund government spending, and rapidly falling global oil pricesheighten the existing risks from economic mismanagement and political instability. We estimate arecessionary environment in 2016, however, the defence budget will continue to rise despite inevitablebudget cuts. We forecast defence spending to reach the USD5.1bn mark in 2019. This view is reinforced bythe military's influence in government affairs and the fact that it is in President Nicolás Maduro's interest tokeep the military on side in the face of his waning popularity.
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