The Venezuelan Defense Industry: Market Opportunities and Entry Strategies, Analyses and Forecasts to 2016

Published : July 2012
No. of Pages : 88

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Product Synopsis
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.

Procurement Dynamics.
The report includes trend analysis of imports and exports, together with their implications and impact on the Venezuelan defense industry.

Industry Structure.
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 initiatives.

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.

Key Highlights
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.

1 Introduction
1.1. What is this Report About?
1.2. Definitions
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 expenditures
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$)
8.2.5. GDP, Current Prices (Local Currency)
8.2.6. Inflation, average consumer prices
8.3. Energy and Utilities
8.3.1. Crude Oil Distillation Capacity
8.3.2. Electricity Exports
8.3.3. Electricity Installed Capacity
8.3.4. Fossil Fuels Proved Natural Gas Reserves
8.3.5. Fossil Fuels Proved Oil Gas Reserves
8.3.6. Hydroelectricity Installed Capacity
8.3.7. Natural Gas Consumption
8.3.8. Natural Gas Production
8.3.9. Net Conventional Thermal Electricity Generation
8.3.10. Net Hydroelectric Power Generation
8.3.11. Petroleum Consumption
8.3.12. Petroleum Production
8.4. Minerals
8.4.1. Coal Consumption
8.4.2. Coal Production
8.5. Social and Political Risk
8.5.1. Political Stability Index
8.5.2. Transparency Index
8.6. Technology
8.6.1. Patents Granted
9 Appendix
9.1. Contact Us
9.2. About SDI
9.3. Disclaimer
Table 1: Venezuelan Defense Expenditure, 2007-2011
Table 2: Venezuelan Defense Expenditure, 2012-2016
Table 3: Venezuelan Defense Budget Split Between Capital and Revenue Expenditure (%), 2007-2011
Table 4: Venezuelan Defense Budget Split Between Capital and Revenue Expenditure (%), 2012-2016
Table 5: Venezuelan GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP, 2007-2011
Table 6: Venezuelan GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP, 2012-2016
Table 7: Venezuelan Per-Capita Defense Expenditure (US$), 2007-2011
Table 8: Venezuelan Per-Capita Defense Expenditure (US$), 2012-2016
Table 9: Venezuelan Capital Budget Allocation (US$ billion), 2007-2011
Table 10: Venezuelan Capital Budget Allocation (US$ billion), 2012-2016
Table 11: Venezuelan Defense Budget Allocation for Revenue Expenditure (US$ Bn), 2007-2011
Table 12: Venezuelan Defense Budget Allocation for Revenue Expenditure (US$ Bn), 2012-2016
Table 13: Venezuelan Revenue Expenditure Breakdown (%), 2007-2011
Table 14: Venezuelan Revenue Expenditure Breakdown (%), 2012-2016
Table 15: Venezuelan HLS Budget (US$ Billion), 2007-2011
Table 16: Venezuelan HLS Budget (US$ Billion), 2012-2016
Table 17: Venezuelan HLS Budget Breakdown (%), 2007-2011
Table 18: Venezuelan HLS Budget Breakdown (%), 2012-2016
Table 19: SDI Terrorism Index
Table 20: Benchmarking with Key Markets - 2007-2011 vs. 2012-2016
Table 21: CA Venezolana de IndustriasMilitares (CAVIM) - Product Focus
Table 22: UCOCAR CA - Product Focus
Table 23: UCOCAR CA: Recent Contract Wins
Table 24: Diques y AstillerosNacionales CA (DIANCA) - Product Focus
Table 25: Diques y AstillerosNacionales CA (DIANCA): Alliances
Table 26: Diques y AstillerosNacionales CA (DIANCA): Recent Contract Wins
Figure 1: Venezuelan Defense Expenditure, 2007-2011
Figure 2: Venezuelan defense Expenditure, 2012-2016
Figure 3: Venezuelan Defense Budget Split Between Capital and Revenue Expenditure (%), 2007-2011
Figure 4: Venezuelan Defense Budget Split Between Capital and Revenue Expenditure (%), 2012-2016
Figure 5: Venezuelan GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP, 2007-2011
Figure 6: Venezuelan GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP, 2012-2016
Figure 7: Venezuelan Per-Capita Defense Expenditure (US$), 2007-2011
Figure 8: Venezuelan Per-Capita Defense Expenditure (US$), 2012-2016
Figure 9: Venezuelan Capital Budget Allocation (US$ billion), 2007-2011
Figure 10: Venezuelan Capital Budget Allocation (US$ billion), 2012-2016
Figure 11: Venezuelan Defense Budget Allocation for Revenue Expenditure (US$ Bn), 2007-2011
Figure 12: Venezuelan Defense Budget Allocation for Revenue Expenditure (US$ Bn), 2012-2016
Figure 13: Venezuelan Revenue Expenditure Breakdown (%), 2007-2011
Figure 14: Venezuelan Revenue Expenditure Breakdown (%), 2012-2016
Figure 15: Venezuelan HLS Budget (US$ Billion), 2007-2011
Figure 16: Venezuelan HLS Budget (US$ Billion), 2012-2016
Figure 17: Venezuelan HLS Budget Breakdown (%), 2007-2011
Figure 18: Venezuelan HLS Budget Breakdown (%), 2012-2016
Figure 19: SDI Terrorism Heat Map, 2011
Figure 20: SDI Terrorism Index, 2011
Figure 21: Benchmarking with Key Markets - 2007-2011 vs. 2012-2016
Figure 22: Defense Expenditure of Countries with the Highest Global Military Expenditure (US$ Billion), 2011 and 2016
Figure 23: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2011
Figure 24: Venezuelan Defense Imports (US$ Million), 2007-2011
Figure 25: Venezuelan Defense Imports by Country (US$ Million), 2007-2011
Figure 26: Venezuelan Defense Imports by Country (%), 2007-2011
Figure 27: Venezuelan Defense Imports by Category (%), 2007-2011
Figure 28: Venezuelan Defense Exports (US$ Million), 2007-2011
Figure 29: Venezuelan Defense Exports by Category (%), 2007-2011
Figure 30: Industry Dynamics-Porter’s Five Forces Analysis
Figure 31: Venezuelan Population - Female (In Millions), 2008-2017
Figure 32: Venezuelan Population - Male (In Millions), 2008-2017
Figure 33: Venezuelan Current Account Balance as Percentage of GDP, 2008-2017
Figure 34: Venezuelan GDP at Purchasing Power Parity (US$ Billion), 2006-2015
Figure 35: Venezuelan GDP at Constant Prices (VEF Billion), 2006-2015
Figure 36: Venezuelan GDP at Constant Prices (US$ Billion), 2006-2015
Figure 37: Venezuelan GDP at Current Prices (Local Currency Billion), 2006-2015
Figure 38: Venezuelan Inflation, average consumer prices, 2008-2017
Figure 39: Venezuelan Crude Oil Distillation Capacity (Thousand Barrels Per Cal Day), 2000-2009
Figure 40: Venezuelan Electricity Exports Trend (Million Kilowatts), 2001-2009
Figure 41: Venezuelan Electricity Installed Capacity (Million Kilowatts), 2000-2009
Figure 42: Venezuelan Fossil Fuels Proved Natural Gas Reserves (Trillion Cubic Feet),
Figure 43: Venezuelan Fossil Fuels Proved Oil Reserves (Billion Barrels), 2002-2011
Figure 44: Venezuelan Hydroelectricity Installed Capacity (Million Kilowatts), 2000-2009
Figure 45: Venezuelan Natural Gas Consumption (Billion Cubic Feet), 2001-2010
Figure 46: Venezuelan Natural Gas Production (Billion Cubic Feet), 2001-2010
Figure 47: Venezuelan Net Conventional Thermal Electricity Generation (Billion Kilowatt hours), 2001-2010
Figure 48: Venezuelan Net Hydroelectric Power Generation (Billion Kilowatt hours), 2001-2010
Figure 49: Venezuelan Petroleum Consumption (Thousand Barrels Per Day), 2002-2011
Figure 50: Venezuelan Petroleum Production (Thousand Barrels Per Day), 2002-2011
Figure 51: Venezuelan Coal Consumption (Thousand Short Tons), 2001-2010
Figure 52: Venezuelan Coal Production (Thousand Short Tons), 2001-2010
Figure 53: Venezuelan Political Stability Index, 2002-2010
Figure 54: Venezuelan Transparency Index, 2002-2011
Figure 55: Venezuelan Patents Granted, 2002-2011

The Venezuelan Defense Industry: Market Opportunities and Entry Strategies, Analyses and Forecasts to 2016

Published By: ICD Research

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