The Venezuelan Defense Industry: Market Opportunities and Entry
Strategies, Analyses and Forecasts to 2016
Published : July 2012 No. of Pages : 88 Price:US$1250
This report is the result of ICD Research / Strategic Defence Intelligence’s extensive market and company
research covering the Venezuelan 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 Venezuelan defense Industry Market Opportunities and Entry Strategies, Analyses and Forecasts to
2016 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 Venezuelan defense industry.
What is the current market landscape and what is changing?
Throughout the review period the Venezuelan defense budget recorded a CAGR of -2.08%, and
expenditure was driven by the modernization of armed forces and border disputes. In 2012 the
Venezuelan defense budget stood at 0.77% of GDP, and is expected to increase to 2.15% of GDP by
2016 due to the increase in defense expenditure, which is expected to reach US$7.3 billion by 2016.
During the review period Venezuela’s capital expenditure allocation stood at 29.9% of the total defense
budget, and this is expected to increase to 36.1% over the forecast period, due to decreased allocation
for equipment purchases during 2009-2011. Consequently, the share of revenue expenditure in the total
defense budget is expected to decrease from an average of 70.1% in the review period to an average of
63.9% in the forecast period.
What are the key drivers behind recent market changes?
The Venezuelan defense budget is primarily driven by the need to replace the obsolete and worn out
equipment of its armed forces. The government has realized the need to re-equip its military forces with
advanced technology and, as a result, the Venezuelan military is currently going through a modernization
phase. Venezuela shares borders with Colombia, Guyana and Brazil and has long-standing border
disputes with these countries. Tensions between Venezuela and Colombia escalated in August 1987 with
the Colombian guided missile frigate Caldas trespassing into disputed waters and refusing to leave,
claiming that they belonged to Colombia.
What makes this report unique and essential to read?
The Venezuelan Defense Industry Market Opportunities and Entry Strategies, Analyses and Forecasts to
2016 provides detailed analysis of the current industry size and growth expectations from 2012 to 2016,
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
Market Opportunity and Attractiveness.
The report provides detailed analysis of the current industry size and growth expectations from 2012 to
2016, 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 Venezuelan 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.
Market Entry Strategy.
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
Competitive Landscape and Strategic Insights.
The report helps the reader to understand the competitive landscape of the defense industry in
Venezuela. 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
Defense imports expected to increase and exports expected to decline in the forecast period.
During the review period, 76% of Venezuela’s total defense imports were from Russia and 10% were
from Spain. Venezuela is subject to an arms embargo from the US, a factor which led to Russia and
China being key import partners. Aircraft and missiles collectively accounted for 70.2% of the country’s
total arms imports during the review period. As Venezuela plans to continue modernizing its armed
forces, imports are expected to increase in the forecast period.
Relatively small defense budget, corruption and arms embargo by the US are key challenges for market
entry.Venezuela has allocated just US$2.38 billion for defense expenditure in 2011, which is a barrier to
foreign companies aiming to enter the Venezuelan defense market. Moreover, high corruption levels and
the US arms embargo, which prevents the export of defense products to Venezuela, also limit market
entry opportunities for foreign companies.
Venezuelan defense expenditure expected to register a CAGR of 9.98% during the forecast period.
Venezuelan defense expenditure recorded a CAGR of -2.08% during the review period and is expected to
value US$4.9 billion in 2012. Modernization and border disputes drove expenditure during the review
period and are expected to continue to do so throughout the forecast period. Defense expenditure in
Venezuela is anticipated to register a CAGR of 9.98% and reach a value of US$7.3 billion by 2016. As a
percentage of gross domestic product (GDP), the Venezuelan defense budget stood at 0.77% in 2011
and is expected to increase to 2.15% of GDP by 2016, largely due to the expected increase in defense
expenditure. Homeland security (HLS) expenditure expected to register a CAGR of 0.99% in the forecast
period. Venezuelan HLS expenditure is expected to value US$8.75 billion in 2012, register a CAGR of
0.99% during the forecast period and reach US$9.1 billion by 2016. HLS expenditure will be driven by
cybercrime, drug trafficking, and organized crime, and in order to counter these threats, Venezuela must
invest in surveillance and intelligence technologies.
Venezuela allows 100% foreign direct investment (FDI) in defense industry.
Venezuela’s FDI policy imposes no restriction on foreign investment in the defense industry and allows
foreign companies to acquire a domestic company or form a subsidiary in the country. The country does
not have a defense offset policy.
Venezuela Defense Industry
Table of Content
1.1. What is this Report About?
1.3. Summary Methodology
1.4. SDI Terrorism Index
1.5. About Strategic Defence Intelligence (www.strategicdefenceintelligence.com)
2 Executive Summary
3 Market Attractiveness and Emerging Opportunities
3.1. Defense Market Size Historical and Forecast
3.1.1. Venezuelan defense expenditure expected to register higher growth during the forecast period
3.1.2. Modernization and border disputes to drive defense expenditure in the forecast period
3.2. Analysis of Defense Budget Allocation
3.2.1. Revenue expenditure accounts for the majority of the Venezuelan defense budget
3.2.2. Defense budget as a percentage of GDP expected to increase during the forecast period
3.2.3. Per-capita defense expenditure expected to increase during the forecast period
3.2.4. Capital expenditure budget is expected to decline during the forecast period
3.2.5. Revenue expenditure expected to grow more quickly in the forecast period
3.2.6. Personnel expenditure accounts for the majority of the revenue expenditure budget
3.3. Homeland Security Market Size and Forecast
3.3.1. Homeland security (HLS) budget projected to decline in the forecast period
3.3.2. Cybercrime, drug trafficking and organized crime to drive the HLS market
3.3.3. Venezuela considered at ‘some risk’ of terrorist attack
3.3.4. Venezuela experienced low levels of terrorist activity during the review period
3.4. Benchmarking with Key Global Markets
3.4.1. Venezuela’s defense budget expected to increase in the forecast period
3.4.2. Venezuela’s military expenditure is limited compared to countries with the highest defense
3.4.3. Venezuela allocates a low percentage of GDP to defense
3.5. Market Opportunities: Key Trends and Growth Stimulators
3.5.1. Demand for jet trainer and light attack aircraft to increase
3.5.2. Military utility helicopters and fighter aircraft will provide attractive market opportunities
3.5.3. Demand for battle tanks expected to increase
3.5.4. Su-30MK2 fighters will provide attractive market opportunities
3.5.5. Demand for armored fighting vehicles to increase
3.5.6. Submarines and ships will provide attractive market opportunities
3.5.7. Demand for S-300 air defense missile system components to increase
4 Defense Procurement Market Dynamics
4.1. Import Market Dynamics
4.1.1. Limited capability of domestic defense market drives imports
4.1.2. Defense imports expected to increase in the forecast period
4.1.3. Russia and Spain account for the majority of Venezuela’s defense imports
4.1.4. Aircraft, missiles and sensors are the most imported military hardware
4.2. Export Market Dynamics
4.2.1. Defense exports increased in the review period
4.2.2. Ecuador was the largest importer of Venezuelan aircraft parts and missiles in the review period
5 Industry Dynamics
5.1. Five Forces Analysis
5.1.1. Bargaining power of supplier: low to high
5.1.2. Bargaining power of buyer: medium
5.1.3. Barriers to entry: medium
5.1.4. Intensity of rivalry: low to medium
5.1.5. Threat of substitution: low to medium
6 Market Entry Strategy
6.1. Market Regulation
6.1.1. Venezuela does not disclose any offset obligations
6.1.2. Venezuela allows 100% FDI in defense industry
6.2. Market Entry Route
6.2.1. 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 market entry for foreign companies
6.3.2. Corruption acts as an obstacle for market entry
6.3.3. Arms embargo against Venezuela makes market entry difficult for foreign defense companies
7 Competitive Landscape and Strategic Insights
7.1. Competitive Landscape Overview
7.2. Key Domestic Companies
7.2.1. CA Venezolana de IndustriasMilitares (CAVIM): overview
7.2.2. CA Venezolana de IndustriasMilitares (CAVIM): products and services
7.2.3. CA Venezolana de IndustriasMilitares (CAVIM): recent announcements and strategic initiatives
7.2.4. UCOCAR CA: overview
7.2.5. UCOCAR CA: products and services
7.2.6. UCOCAR CA: recent announcements and strategic initiatives
7.2.7. UCOCAR CA: recent contract awards
7.2.8. Diques y AstillerosNacionales CA (DIANCA): overview
7.2.9. Diques y AstillerosNacionales CA (DIANCA): products and services
7.2.10. Diques y AstillerosNacionales CA (DIANCA): alliances
7.2.11. Diques y AstillerosNacionales CA (DIANCA): recent contract awards
8 Business Environment and Country Risk
8.1. Demographics and Social Statistics
8.1.1. Population - Female
8.1.2. Population - Male
8.2. Economic Performance
8.2.1. Current Account Balance as Percentage of GDP
8.2.2. GDP at Purchasing Power Parity
8.2.3. GDP, Constant Prices (Local Currency)
8.2.4. GDP, Constant Prices (US$)
8.2.5. GDP, Current Prices (Local Currency)
8.2.6. Inflation, average consumer prices
8.3. Energy and Utilities
8.3.1. Crude Oil Distillation Capacity
8.3.2. Electricity Exports
8.3.3. Electricity Installed Capacity
8.3.4. Fossil Fuels Proved Natural Gas Reserves
8.3.5. Fossil Fuels Proved Oil Gas Reserves
8.3.6. Hydroelectricity Installed Capacity
8.3.7. Natural Gas Consumption
8.3.8. Natural Gas Production
8.3.9. Net Conventional Thermal Electricity Generation
8.3.10. Net Hydroelectric Power Generation
8.3.11. Petroleum Consumption
8.3.12. Petroleum Production
8.4.1. Coal Consumption
8.4.2. Coal Production
8.5. Social and Political Risk
8.5.1. Political Stability Index
8.5.2. Transparency Index
8.6.1. Patents Granted
9.1. Contact Us
9.2. About SDI
List of Tables
List of Figures