The Brazilian Defense Sector - Market
Opportunity and Entry Strategy,
Analyses and Forecasts to 2015
Market Intelligence Report
Reference code: ICDDF0002MR10
Published: JUNE 2010
www.icd-research.com
ICD Research
John Carpenter House
7 Carmelite Street
London EC4Y 0BS
United Kingdom
Tel: +44 (0) 20 7936 6400
Fax: +44 (0) 20 7336 6813
© ICD Research. This report is a licensed product and is not to be photocopied
TABLE OF CONTENTS
LIST OF TABLES .................................................................................................................. 9
LIST OF FIGURES .............................................................................................................. 10
1 Introduction ................................................................................................................. 12
1.1 About this R eport .................................................................................................................12
1.2 Definitions ............................................................................................................................12
1.3 Methodology .........................................................................................................................14
1.3.1 Secondary research ................................................................................................................................. 14
1.3.2 Primary research...................................................................................................................................... 14
1.3.3 Conventions ............................................................................................................................................. 15
1.4 IC D R es earc h T erroris m Index ............................................................................................ 15
1.5 About IC D R es earc h Defens e Intelligenc e C enter ............................................................. 15
2 Executive Summary .................................................................................................... 16
3 Market Attractiveness and Emerging Opportunities ................................................ 18
3.1 Defens e Market S ize and F orec as t...................................................................................... 18
3.1.1 Brazilian annual defense expenditure to reach US$48.2 billion by 2015 ................................................ 19
3.1.2 Modernization of defense systems, development of indigenous defense capabilities, and protection of
the Amazon system expected to drive defense expenditure ................................................................... 20
3.2 Analys is of Defens e B udget Alloc ation .............................................................................. 21
3.2.1 Share of capital expenditure to be at 5.5% during the forecast period.................................................... 21
3.2.2 Brazil to place focus on defense procurements across the army, navy and air force ............................. 22
3.2.3 Defense expenditure as a percentage of GDP to be at 1.8% in the forecast period ............................... 23
3.3 Homeland S ec urity Market S ize and F orec as t ................................................................... 24
3.3.1 Brazil expected to invest US$3 billion in homeland security during the forecast period ......................... 24
3.3.2 Protection of natural resources and improvement of security for Brazilian sporting events expected to
stimulate homeland security expenditure ................................................................................................ 25
3.4 B enc hmarking with K ey G lobal Markets ............................................................................ 26
3.4.1 Brazil is the country with the eleventh largest defense expenditure globally and allocated 1.7% of GDP
towards defense in 2009 .......................................................................................................................... 26
3.4.2 Brazil has minimal terrorism threats ........................................................................................................ 29
3.5 Market Opportunities : K ey T rends and G rowth S timulators ............................................. 31
3.5.1 Procurement of fighter jets and transport aircrafts expected to drive defense expenditure .................... 31
3.5.2 Indigenous development of submarines expected to increase naval procurements ............................... 31
3.5.3 Amazon protection program to increase use of satellite based imaging systems................................... 31
4 Defense Procurement Market Dynamics ................................................................... 32
4.1 Import Market Dynamic s ...................................................................................................... 32
4.1.1 Europe was the largest supplier of aircraft components to Brazil over the review period ....................... 32
4.1.2 Modernization of defense systems predicted to drive arms imports ....................................................... 33
4.1.3 Stringent offset obligations in a highly competitive market ...................................................................... 33
4.2 E xport Market Dynamic s ..................................................................................................... 34
Brazilian Defense Sector - Market Opportunities & Entry Strategies, Analyses and Forecasts to 2015
© ICD Research. This report is a licensed product and is not to be photocopied Page 2
TABLE OF CONTENTS
4.2.1 Development of domestic defense capability expected to fuel exports in Brazil’s emerging military
industry .................................................................................................................................................... 34
4.2.2 Customized aircraft systems expected to drive exports in the forecast period ....................................... 35
5 Industry Dynamics ...................................................................................................... 36
5.1 F ive F orc es Analys is ............................................................................................................ 36
5.1.1 Bargaining power of supplier: low to medium .......................................................................................... 37
5.1.2 Bargaining power of buyer: medium to high ............................................................................................ 37
5.1.3 Barrier to entry: medium .......................................................................................................................... 37
5.1.4 Intensity of rivalry: low to medium............................................................................................................ 37
5.1.5 Threat of substitution: high ...................................................................................................................... 37
6 Market Entry Strategy ................................................................................................. 38
6.1 Market R egulation ................................................................................................................38
6.1.1 Defense deals for domestic and international procurements are decided by competitive bidding ......... 38
6.1.2 Stringent offsets requirements for all defense procurements .................................................................. 38
6.2 Market Entry Route ..............................................................................................................40
6.2.1 Foreign OEMs