Mexico - Defense and Security: Procurement drives expenditure (Strategy, Performance and Risk Analysis)
The aircraft category is one of the key growth drivers of the Mexican defense and security industry, accounting for 57.1% of capital expenditure in 2016; followed by the helicopters category with 12.9%. The country’s defense expenditure fell from US$5.7 billion in 2012 to US$5.4 billion in 2016, at a CAGR of -1.2% due to the government cuts to the defense budget. However, expenditure will post a forecast-period CAGR of 1.9% to reach US$6.2 billion in 2021. Modernization initiatives and the procurement of advanced defense systems to combat drug trafficking will drive Mexico’s defense expenditure.
MarketLine’s premium reports provide a comprehensive overview of each market within a country’s defense industry; benchmark key performance indicators against regional and global peers; review industry trends and drivers; evaluate the competitive landscape and innovation potential of singular markets; and conduct data-driven SWOT analysis to ascertain a structured assessment of the performance of each territory represented.Key Highlights
Mexico invests in modernization projects:
Mexico is investing in the modernization of military equipment. Major procurements include Beechcraft T-6C+ Texan II armed trainers, Grob Aircraft G120TP twin-seat turboprop, Airbus C295M medium transports, UH-60M Black Hawk utility helicopters, and Damen Stan Patrol 4207 vessels, which will help strengthen the country’s defense capabilities. Multi-mission military helicopters, military-IT networking, corvettes, MRO facilities, and transport aircraft will all be allocated funds over the forecast period.
Mexico allocates a low percentage of GDP to defense:
Mexican defense expenditure as a percentage of GDP will decrease to -0.4% by 2021 due to a slump in the economy. The decline in prices for oil and gas - the main drivers of Mexican GDP - adversely affected government spending. Mexico’s defense spending as a percentage of GDP averaged 0.5% during the review period, lower than the US, Brazil, Columbia, and Peru.
Homeland security expenditure to increase:
Total homeland security expenditure declined at a CAGR of -6.9%, from US$4.9 billion in 2012 to US$3.7 billion in 2016. However, expenditure will post a forecast-period CAGR of 3.9%, to reach US$5.0 billion in 2021. Mexico’s homeland security expenditure is primarily used to maintain its internal security and law enforcement services. The need to protect the country from growing internal threats and drug traffickers will drive HLS expenditure over the forecast period.
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