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Future of the Peruvian Defense Industry - Market Attractiveness, Competitive Landscape, and Forecasts to 2022

Future of the Peruvian Defense Industry - Market Attractiveness, Competitive Landscape, and Forecasts to 2022

Summary

Peru’s defense budget values at around US$2.3 Billion in 2017 and registered a CAGR of -0.16% during the historic period. The persistent threat from insurgent guerrilla organization ‘the Shining Path group’, border conflicts with Chile, active participation in peacekeeping missions, narco-terrorism, defense sector reforms, and modernization initiatives drove defense expenditure over the historic period. With this trend expected to continue over the forecast period, the country’s defense expenditure is anticipated to be valued at around US$2.7 Billion in 2022, registering a CAGR of over 2% over the forecast period.

Peruvian homeland security (HLS) expenditure stands at around US$3.4 Billion in 2018 and is expected to grow at a CAGR of over 7% over the forecast period to cross US$4.5 Billion in 2022. It will be driven by police reforms and modernization, as well as the need to curb cocaine trafficking and organized crime. With the aim of combating narco-terrorism, budgetary allocations are being made for the purchase of patrol vehicles, helicopters, anti-riot gear, anti-riot vehicles, and digital communication equipment.

Between 2012 and 2016, Russia emerged as the largest supplier of military hardware to Peru, with a share of over 27% of total defense imports, followed by South Korea and the Netherlands with shares of around 21% and 11% respectively. Aircraft accounted for the majority of defense imports with a share of over 50% during the historic period. As Peru plans to increase its defense budget and procure more weapons to increase its military base and counter the Shining Path group, imports are expected to increase during the forecast period.

Peru’s domestic defense industry is still undeveloped; therefore, the country did not export any arms during the historic period. However, the Ministry of Defense (MoD) has recently expressed that it wants to strengthen its arms manufacturing capacity, starting with the production of naval units in its three hubs at Callao, Chimbote, and Iquitos. Peru also plans to start co-manufacturing air force planes in the forecast period.

The report ""Future of the Peruvian Defense Industry - Market Attractiveness, Competitive Landscape, and Forecasts to 2022"" offers detailed analysis of the Peruvian defense industry with market size forecasts covering the next five years. This report will also analyze factors that influence demand for the industry, key market trends, and challenges faced by industry participants.

In particular, this report provides the following -
- The Peruvian defense industry market size and drivers: Detailed analysis of the Peruvian defense industry during 2018–2022, including highlights of the demand drivers and growth stimulators for the industry. It also provides a snapshot of the country’s expenditure and modernization patterns.
- Budget allocation and key challenges: Insights into procurement schedules formulated within the country and a breakdown of the defense budget with respect to capital expenditure and revenue expenditure. It also details the key challenges faced by defense market participants within the country.
- Porter’s Five Force analysis of the Peruvian defense industry: Analysis of the market characteristics by determining the bargaining power of suppliers, bargaining power of buyers, threat of substitution, intensity of rivalry, and barriers to entry.
- Import and Export Dynamics: Analysis of prevalent trends in the country’s imports and exports over the last five years.
- Market opportunities: Details of the top five defense investment opportunities over the next 10 years.
- Competitive landscape and strategic insights: Analysis of the competitive landscape of the Peruvian defense industry. It provides an overview of key players, together with insights such as key alliances, strategic initiatives, and a brief financial analysis.

Companies mentioned in this report: Los Servicios Industriales de la Marina (SIMA), The Army Ammunition Factory and Desarrollos Industriales Casanave

Scope

- Peru’s defense budget values US$2.3 billion in 2017 and registered a CAGR of -0.16% during the historic period. The persistent threat from insurgent guerrilla organization ‘the Shining Path group’, border conflicts with Chile, active participation in peacekeeping missions, narco-terrorism, defense sector reforms, and modernization initiatives drove defense expenditure over the historic period.
- The capital expenditure allocation, which stood at an average of 18.3% during 2013-2017, is anticipated to increase to an average of 27.5% during the forecast period. This increase is primarily due to the fact that Peru has already signed several deals for the procurement of advanced defense equipment and undertaken steps to increase the capabilities of the country’s indigenous defense industry.
Procurements that are expected to account for capital expenditure over the forecast period include frigates, multirole aircraft, submarines, and main battle tanks (MBTs).
- The MoD is expected to invest in frigates, multirole aircraft, submarines, and main battle tanks (MBTs).

Reasons to buy

- This report will give the user confidence to make the correct business decisions based on a detailed analysis of the Peruvian defense industry market trends for the coming five years
- The market opportunity section will inform the user about the various military requirements that are expected to generate revenues during the forecast period. The description includes technical specifications, recent orders, and the expected investment pattern by the country during the forecast period
- Detailed profiles of the top domestic and foreign defense manufacturers with information about their products, alliances, recent contract wins, and financial analysis wherever available. This will provide the user with a total competitive landscape of the sector
- A deep qualitative analysis of the Peruvian defense industry covering sections including demand drivers, Porter’s Five Forces Analysis, Key Trends and Growth Stimulators, and latest industry contracts


1. Introduction
1.1. What is this Report About?
1.2. Definitions
1.3. Summary Methodology
1.4. About Strategic Defence Intelligence
2. Executive Summary
3. Market Attractiveness and Emerging Opportunities
3.1. Current Market Scenario
3.1.1. Primary Threat Perception
3.1.2. Military Doctrine and Strategy
3.1.3. Military Fleet Size
3.1.4. Procurement Programs
3.1.5. Social, Political and Economic Environment and Support for Defense Projects
3.1.6. Political and Strategic Alliances
3.2. Defense Market Size Historical and Forecast
3.2.1. Defense expenditure to grow at a CAGR of 2.30% over the forecast period
3.2.2. Threat of narco-terrorism, defense reforms and modernization, border disputes, and peacekeeping operations to drive defense expenditure
3.2.3. Defense budget as a percentage of GDP is anticipated to average 1.1% during the forecast period
3.3. Analysis of Defense Budget Allocation
3.3.1. Revenue expenditure accounts for the majority of the Peruvian defense budget
3.3.2. Peruvian defense capital expenditure is expected to grow at a CAGR of 2.86% during the forecast period
3.3.3. Per capita defense expenditure expected to increase during the forecast period
3.4. Homeland Security Market Size and Forecast
3.4.1. Homeland security expenditure is expected to grow at a CAGR of 7.92% during the forecast period
3.4.2. Measures to prevent cocaine trafficking and organized crime to drive HLS expenditure
3.4.3. Peru considered at ‘moderate risk’ of a terrorist attack
3.4.4. Peru experiences moderate levels of terrorist activity
3.4.5. Peru has a terrorism index score of 3.0
3.5. Benchmarking with Key Global Markets
3.5.1. Peruvian defense budget expected to register marginal growth over the forecast period
3.5.2. Peru’s military expenditure is limited compared to countries with the largest defense expenditure
3.5.3. Peru allocates a low percentage of GDP to defense
3.6. Market Opportunities: Key Trends and Growth Stimulators
3.6.1. Transport Aircraft
3.6.2. Frigates
3.6.3. Multirole Aircraft
3.6.4. Training Aircraft
3.6.5. Main Battle Tank
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. Russia to account for the majority of Peru’s defense imports during the forecast period
4.1.3. Aircraft and missiles are the most imported military hardware
5. Industry Dynamics
5.1. Five Forces Analysis
5.1.1. Bargaining Power of Supplier: Low to Medium
5.1.2. Bargaining Power of Buyer: Medium to High
5.1.3. Barriers to Entry: Medium
5.1.4. Intensity of Rivalry: Medium to High
5.1.5. Threat of Substitution: Medium to High
6. Market Entry Strategy
6.1. Market Regulation
6.1.1. Budgeting process
6.1.2. Procurement Policy and Process
6.1.3. Offset policy aids development of domestic defense industry
6.1.4. Peru allows 100% FDI in the defense industry
6.2. Market Entry Route
6.2.1. The country’s biennial defense exhibition provides an attractive entry route
6.2.2. Direct selling is the preferred market entry route for foreign OEMs
6.3. Key Challenges
6.3.1. Small defense budget and limited technological capability limits the market entry of foreign companies
6.3.2. Lack of transparency hampers the growth of the Peruvian defense industry
7. Competitive Landscape and Strategic Insights
7.1. Competitive Landscape Overview
7.2. Key Domestic Companies
7.2.1. Los Servicios Industriales de la Marina (SIMA): Overview
7.2.2. Los Servicios Industriales de la Marina (SIMA): Products and Services
7.2.3. Los Servicios Industriales de la Marina (SIMA): Recent Announcements and Strategic Initiatives
7.2.4. Los Servicios Industriales de la Marina (SIMA): Alliances
7.2.5. Los Servicios Industriales de la Marina (SIMA): Recent Contract Wins
7.2.6. The Army Ammunition Factory (FAME): Overview
7.2.7. The Army Ammunition Factory (FAME): Products and Services
7.2.8. The Army Ammunition Factory (FAME): Recent Announcements and Strategic Initiatives
7.2.9. Desarrollos Industriales Casanave: Overview
7.2.10. Desarrollos Industriales Casanave: Products and Services
7.2.11. Desarrollos Industriales Casanave: Recent Announcements and Strategic Initiatives
7.2.12. Desarrollos Industriales Casanave: Alliances
8. Business Environment and Country Risk
8.1. Economic Performance
8.1.1. GDP Per Capita (US$)
8.1.2. GDP, Current Prices (US$ Billion)
8.1.3. Exports of Goods and Services, Current Prices (LCU billion)
8.1.4. Imports of Goods and Services, Current Prices (LCU billion)
8.1.5. Gross National Disposable Income (US$ billion)
8.1.6. Local Currency Unit per US$ (Period Average)
8.1.7. Market Capitalization of Listed Companies (US$ Billion)
8.1.8. Market Capitalization of Listed Companies (% of GDP)
8.1.9. Government Cash Surplus/ Deficit as a Percentage of GDP (LCU)
8.1.10. Goods Exports as a Percentage of GDP
8.1.11. Goods Imports as a Percentage of GDP
8.1.12. Services Imports as a Percentage of GDP
8.1.13. Services Exports as a Percentage of GDP
8.1.14. Foreign Direct Investment, net (BoP, current US$ Billion)
8.1.15. Net Foreign Direct Investment as a Percentage of GDP
8.1.16. Mining, Manufacturing, Utilities Output LCU Billion
9. Appendix
9.1. About SDI
9.2. Disclaimer
List of Tables
Table 1: Peruvian Ground Forces Strength
Table 2: Peruvian Navy Strength
Table 3: Peruvian Air Force Strength
Table 4: Peruvian - Ongoing Development and Procurement Programs (US$ Million), 2014-2018
Table 5: Peruvian - Future Procurement Programs
Table 6: Peruvian Defense Expenditure (PEN Billion & US$ Billion), 2013-2022
Table 7: Peruvian GDP Growth vs. Defense Expenditure as a Percentage of GDP, 2013-2022
Table 8: Peruvian Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022
Table 9: Peruvian Defense Capital Expenditure (PEN Billion & US$ Million), 2013-2022
Table 10: Peruvian Per Capita Defense Expenditure (US$), 2013-2022
Table 11: Peruvian Homeland Security Expenditure (PEN Billion & US$ billion), 2013-2022
Table 12: Terrorism Index, 2017
Table 13: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022
Table 14: Peru Budget Formation Timetable
Table 15: Defense Offset Regulations in Peru
Table 16: Competitive Landscape of the Mexican Defense Industry
Table 17: Los Servicios Industriales de la Marina (SIMA) - Products and Services
Table 18: Los Servicios Industriales de la Marina (SIMA) - Alliances
Table 19: Los Servicios Industriales de la Marina (SIMA) - Recent Contract Wins
Table 20: The Army Ammunition Factory (FAME) - Product Focus
Table 21: Desarrollos Industriales Casanave - Product Focus
Table 22: Desarrollos Industriales Casanave - Alliances
List of Figures
Figure 1: Peruvian Defense Expenditure (PEN Billion), 2013-2022
Figure 2: Peruvian Defense Expenditure (US$ Billion), 2013-2022
Figure 3: Peruvian GDP Growth vs. Defense Expenditure as a Percentage of GDP, 2013-2022
Figure 4: Peruvian Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022
Figure 5: Peruvian Capital Budget Allocation (PEN Billion), 2013-2022
Figure 6: Peruvian Capital Budget Allocation (US$ Million), 2013-2022
Figure 7: Peruvian Per Capita Defense Expenditure (US$), 2013-2022
Figure 8: Peruvian Homeland Security Budget (PEN billion), 2013-2022
Figure 9: Peruvian Homeland Security Budget (US$ billion), 2013-2022
Figure 10: Terrorism Heat Map, 2017
Figure 11: Terrorism Index, 2017
Figure 12: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022
Figure 13: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion), 2017 and 2022
Figure 14: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2017
Figure 15: Transport Aircraft Market Size (US$ Million), 2017-2027
Figure 16: Frigates Market Size (US$ Million), 2017-2027
Figure 17: Multirole Aircraft Market Size (US$ Million), 2017-2027
Figure 18: Training Aircraft Market Size (US$ Million), 2017-2027
Figure 19: Main Battle Tank Market Size (US$ Million), 2017-2027
Figure 20: Peruvian Defense Import Trend, 2012-2016 (TIV values)
Figure 21: Peruvian Defense Imports by Country (%), 2012-2016
Figure 22: Peruvian Defense Imports by Category (%), 2012-2016
Figure 23: Industry Dynamics Porter’s Five Forces Analysis
Figure 24: Peruvian GDP Per Capita (US$), 2015-2025
Figure 25: Peruvian GDP at Current Prices (US$ Billion), 2015-2025
Figure 26: Peruvian Exports of Goods and Services, Current Prices (LCU Billion), 2005-2014
Figure 27: Peruvian Imports of Goods and Services, Current Prices (LCU Billion), 2005-2014
Figure 28: Peruvian Gross National Disposable Income (US$ billion) 2007-2014
Figure 29: Local Currency Unit per US$, 2015-2024
Figure 30: Market Capitalization of Listed Companies in Peru (US$ Billion), 2005-2012
Figure 31: Market Capitalization of Listed Companies in Peru (% of GDP), 2005-2012
Figure 32: Peruvian Government Cash Surplus/ Deficit as a % of GDP (LCU), 2005-2012
Figure 33: Peruvian Goods Exports as a % of GDP, 2005-2013
Figure 34: Peruvian Goods Imports as a % of GDP, 2005-2013
Figure 35: Peruvian Services Imports as a % of GDP, 2005-2013
Figure 36: Peruvian Services Exports as a % of GDP, 2005-2013
Figure 37: Peruvian Foreign Direct Investment, net (BoP, current US$ Billion), 2005-2013
Figure 38: Peruvian Net Foreign Direct Investment as a % of GDP, 2005-2013
Figure 39: Mining, Manufacturing, Utilities Output (LCU Billion), 2005-2014

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