The Colombian Defense Industry: Market Opportunities and Entry Strategies, Analyses and Forecasts to 2017

Published : August 2012
No. of Pages : 114

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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 Colombian 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 Colombian defense Industry Market Opportunities and Entry Strategies, Analyses and Forecasts to 2017offers the reader an insight into the market opportunities and entry strategies adopted by foreign original equipment manufacturers (OEMs) to gain market share in the Colombian defense industry.

What is the current market landscape and what is changing?
The Colombian defense industry is expected to register strong growth in the next five years due to the rise of both external and internal security threats. However, due to the impact of the economic recession, the growth of Colombian defense expenditure is expected to be slower over the forecast period than in the review period. The significant reasons behind the rise of military expenditure are the threats from Venezuela and rebel forces on internal security, and the fight against drug trafficking. The increase in defense expenditure is required for the purchase of helicopters, battle tanks, UAVs, and air defense systems as, even though the country allocated an average of 4.4% of its GDP for defense during the review period, the majority of the budget was allocated to revenue expenditure. Moreover, the police force also receives a substantial share of the Colombian defense budget, averaging at 24% over the review period.

What are the key drivers behind recent market changes?
Threat from Venezuela, high crime levels, military modernization, threats from rebel groups, and drug trafficking, are set to drive the defense expenditure. Colombia is the only South American country to currently experience an ongoing internal conflict and, as a result, has a specific security policy aimed at achieving permanent state control over the entire territory of the country, as well as ending the production and trafficking of drugs. The country’s defense expenditure is primarily supported by factors such as the threat from Venezuela, high crime rates, military modernization, threats from rebel groups, and the drug trade.

What makes this report unique and essential to read?
The Colombian Defense Industry Market Opportunities and Entry Strategies, Analyses and Forecasts to 2017 provides detailed analysis of the current industry size and growth expectations from 2013 to 2017, 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 2013 to 2017, 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 Colombian 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 Colombia. 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
Corruption, bribery, and influence of anti-state elements damages the credibility of the military
The Colombian Ministry of Defense acknowledged that cocaine smugglers and leftist rebels had infiltrated the senior levels of the Colombian army, impeding efforts to defeat guerrilla organizations and combat the drug trade. Indeed, the army discovered classified military information in computer files of guerrillas from the FARC rebel group, which led the Ministry of Defense to believe that senior military officials may be sharing information in exchange for bribes. In another incident, Diego Montoya, who is the perceived head of the Norte del Valle cartel and has been accused of exporting hundreds of tons of cocaine to the US, is believed to have recruited army officers to provide him with protection and help his brother, Eugenio Montoya, to escape from a high-security prison.

Low capital expenditure discourages both foreign and domestic firms
The total Colombian defense budget was US$11 billion in 2009, of which only US$1.5 billion was allocated for capital expenditure purposes. Currently, domestic defense firms meet the majority of defense requirements in the low technology area, while foreign procurement is undertaken when the adequate sophistication and technology is not available in the domestic market. Many foreign OEMs consider such a low level of defense expenditure as an unfavorable condition in which to enter the Colombian defense industry. Furthermore, the Colombian government does not currently allow foreign investment in its defense industry, which further prevents foreign OEMs from entering the industry.

Imports have again subdued, while export capability remains low
The volume of Colombian defense imports growth has seen fluctuation over the last five years, except for 2008, when imports declined due to the global economic crisis. Historically, the US and Israel have been the major arms supplying countries to Colombia, which is expected to continue over the forecast period due to the strong diplomatic relations between these nations. The majority of imports are aircraft, a trend that is expected to continue over the forecast period. Defense-related exports from Colombia are minimal, as the country does not have the sufficient technology or the manufacturing capability required to operate a significant defense export market. The country’s domestic defense industry largely caters to low-technology defense products, such as grenades, machine guns, rifles, aircraft parts, and MRO activities.

Key Highlights
Colombia is expected to spend US$97.5 billion on defense during 2013-2017 to counter both internal and external threats
The defense expenditure of Colombia recorded a CAGR of 8.81% during the review period. However, due to economic recession, the defense expenditure of the country is expected to grow at a CAGR of 9.49% over the forecast period. The defense expenditure of Colombia is primarily driven by external factors such as the threat and military buildup of Venezuela, internal factors such as the threat from the rebel groups known as the Revolutionary Armed Forces of Colombia (FARC) and the National Liberation Army (ELN), and the fight against drug trafficking and related crime. The government’s military modernization program, which is now underway, has also moderately increased the defense expenditure of Colombia, despite the financial constraints associated with economic recession.

Homeland security market to grow steadily during 2013-2017
The Homeland Security (HLS) market in Colombia is a steadily growing sector, requiring high technology specialized services. It is estimated that the Colombian HLS market valued US$115 million in 2008, which will grow at a CAGR of 3.56% to reach US$167 million by 2017. Cumulatively, during the review period, the country is estimated to have spent US$609 million on homeland security.

Limitations of the domestic defense industry will support arms imports
The Colombian defense industry is underdeveloped and, therefore, has limited manufacturing and technological capabilities. Indeed, most of the country’s defense requirements are met through imports, as the majority of the domestic firms cater to low-end defense equipment. Although the Colombian government has recognized this challenge, it is expected that significant time will be needed to adequately develop the domestic defense industry to be capable of competing with foreign OEMs. Moreover, the country does not have a large number of defense companies that could collectively engage in research and development, or a significant defense research organization under the Ministry of Defense. Without an established defense industry, the majority of the country’s defense requirements will be fulfilled by imports over the forecast period.

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. Colombian defense expenditure expected to reach US$XX billion by 2017
3.1.2. Threat from Venezuela, high crime levels, military modernization, threats from rebel groups, and drug trafficking set to increase defense expenditure
3.1.3. Defense expenditure as a percentage of GDP expected to rise to XX% by 2017
3.2. Analysis of Defense Budget Allocation
3.2.1. Majority of defense budget allocated for revenue expenditure
3.2.2. Police and other defense expenses account for majority of defense budget
3.2.3. Budget allocation for army higher than remaining military divisions
3.2.4. Navy receives limited defense budget allocation
3.2.5. Government plans substantial investment in air force to boost air power
3.2.6. Police force receives a quarter of the total defense budget
3.3. Homeland Security Market Size and Forecast
3.3.1. Homeland security market to grow steadily during 2013-2017
3.3.2. Internal security challenges expected to increase homeland security expenditure
3.3.3. SDI Terrorism Index rates Colombia to be a “highly affected” region
3.3.4. Columbia scores XX on the terrorism index
3.4. Benchmarking with Key Global Markets
3.4.1. Colombian defense expenditure forecast to grow faster than the majority of the largest global defense budgets
3.4.2. Colombian defense expenditure is one of the highest in South America
3.4.3. Colombia spends more than XX% of its GDP on defense
3.4.4. Colombia is “highly affected” by acts of terrorism
3.5. Market Opportunities: Key Trends and Drivers
3.5.1. Increased demand for medium-lift utility helicopters expected in the next two years
3.5.2. Modernization of existing frigates
3.5.3. Lack of battle tanks to lead to new army procurement
3.5.4. UAV procurement will increase as a part of the military modernization program
3.5.5. US$3 billion proposal to enhance air defense systems will create new opportunities
3.5.6. Modernization of armed forces will create demand for defense equipment
4 Defense Procurement Market Dynamics
4.1. Import Market Dynamics
4.1.1. Limitations of the domestic defense industry will support arms imports
4.1.2. Defense imports have grown significantly over the last five years
4.1.3. Aircraft account for majority of defense imports
4.1.4. US and Israel continue to be major arms suppliers
4.2. Export Market Dynamics
4.2.1. Colombia is not a major defense exporting country
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: high to medium
5.1.3. Barrier to entry: low to high
5.1.4. Intensity of rivalry: low
5.1.5. Threat of Substitution: medium
6 Market Entry Strategy
6.1. Market Regulation
6.1.1. Offset guidelines are channeled to benefit industrial and social sectors
6.1.2. FDI in defense sector is closed
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. Corruption, bribery and influence of anti-state elements damages the credibility of military
6.3.2. Low capital expenditure discourages both foreign and domestic firms
7 Competitive landscape and Strategic Insights
7.1. Competitive landscape Overview
7.2. Key Public Sector Companies
7.2.1. Industria Militar: Overview
7.2.2. Industria Militar: Major Products and Services
7.2.3. Industria Militar: Recent Announcements and Strategic Initiatives
7.2.4. Industria Militar: Alliances
7.2.5. Industria Militar: Recent Contract Wins
7.2.6. Industria Militar: Financial Analysis
7.3. Key Private Sector Companies
7.3.1. Sudamin Aeronautica y Defensa S.A.: Overview
7.3.2. Sudamin Aeronautica y Defensa S.A.: Major Products and Services
7.3.3. Sudamin Aeronautica y Defensa S.A.: Recent Announcements and Strategic Initiatives
7.3.4. Sudamin Aeronautica y Defensa S.A.: Alliances
7.3.5. Cotecmar: Overview
7.3.6. Cotecmar: Major Products and Services
7.3.7. Cotecmar: Recent Announcements and Strategic Initiatives
7.3.8. Cotecmar: Alliances
7.3.9. Cotecmar: Recent Contract Wins
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. Construction Output, Current Prices, Local Currency
8.2.2. Construction Output, Current Prices, US Dollars
8.2.3. Current Account Balance as a Percentage of GDP
8.2.4. Debt-Service Ratio
8.2.5. Deposit Interest Rate
8.2.6. Exports of goods and services, current prices
8.2.7. External Debt as a Percentage of GDP (%)
8.2.8. Fiscal Balance as a percentage of GDP
8.2.9. Foreign Direct Investment
8.2.10. GDP at Purchasing Power Parity
8.2.11. GDP, Constant Prices (Local Currency)
8.2.12. GDP, Constant Prices (US$)
8.2.13. GDP, Current Prices (Local Currency)
8.2.14. GDP, Current Prices (US$)
8.2.15. General Government Final Consumption Expenditure
8.2.16. Gross Fixed Capital Formation, Current Prices
8.2.17. Imports of goods and services
8.2.18. Inflation, average consumer prices
8.2.19. Interest Rate (Lending)
8.2.20. Manufacturing Output, Current Prices (Local Currency Billions)
8.2.21. Manufacturing Output, Current Prices (US$ Billions)
8.2.22. Market Cap of Stock Exchange (US$ Millions)
8.2.23. US$- Exchange Rate (Annual Average)
8.2.24. US$- Exchange Rate (EoP)
8.2.25. Wholesale Price Index
8.3. Energy and Utilities
8.3.1. Hydroelectricity Installed Capacity
8.3.2. Natural Gas Consumption
8.3.3. Natural Gas Production
8.3.4. Net Conventional Thermal Electricity Generation
8.3.5. Net Geothermal, Solar, Wind, and Wood Electric Power Generation
8.3.6. Net Hydroelectric Power Generation
8.3.7. Petroleum, Consumption
8.3.8. Petroleum, Production
8.4. Labor
8.4.1. People Employed in R and D
8.5. Minerals
8.5.1. Coal Consumption
8.5.2. Coal Production
8.6. Social and Political Risk
8.6.1. Political Stability Index
8.6.2. Transparency Index
8.7. Technology
8.7.1. Fixed Broadband Internet Subscribers
8.7.2. Gross Domestic Expenditure on Research and Development as % of GDP
8.7.3. Patents Granted
9 Appendix
9.1. Contact Us
9.2. About SDI
9.3. Disclaimer
Table 1: Colombian Defense Expenditure(US$ Billion), 2008-2012
Table 2: Colombian Defense Expenditure(US$ Billion), 2013-2017
Table 3: Colombian GDP Growth vs. Defense Expenditure Growth, and Defense Expenditure as Percentage of GDP Growth, 2008-2012
Table 4: Colombian GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP Growth, 2013-2017
Table 5: Colombian Defense Budget Split Between Capital and Revenue Expenditure (%), 2008-2012
Table 6: Colombian Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2017
Table 7: Colombian Defense Capital Expenditure Breakdown (%), 2008-2012
Table 8: Colombian Defense Capital Expenditure Breakdown (%), 2013-2017
Table 9: Colombian Defense Capital Expenditure for the Army(US$ billion), 2008-2012
Table 10: Colombian Defense Capital Expenditure for the Army (US$ billion), 2013-2017
Table 11: Colombian Defense Capital Expenditure for the Navy (US$ billion), 2008-2012
Table 12: Colombian Defense Capital Expenditure for the Navy (US$ billion), 2013-2017
Table 13: Colombian Defense Capital Expenditure for the Air Force (US$ billion), 2008-2012
Table 14: Colombian Defense Capital Expenditure for the Air Force (US$ billion), 2013-2017
Table 15: Colombian Defense Capital Expenditure for the Police force (US$ billion), 2008-2012
Table 16: Colombian Defense Capital Expenditure for the Police Force (US$ billion), 2013-2017
Table 17: Colombian Homeland Security Expenditure, 2008-2012
Table 18: Colombian Homeland Security Expenditure, 2013-2017
Table 19: Benchmarking with Key Markets - 2007-2011 vs. 2012-2016
Table 20: SDI Terrorism Index
Table 21: Colombian Defense Projects, 2012
Table 22: Offset Regulations in Colombia
Table 23: Industria Militar - Major Products and Services
Table 24: Industria Militar - Alliances
Table 25: Industria Militar - Recent Contract Wins
Table 26: Sudamin Aeronautica y Defensa S.A. - Major Products and Services
Table 27: Sudamin Aeronautica y Defensa S.A. - Alliances
Table 28: Cotecmar - Major Products and Services
Table 29: Cotecmar - Alliances
Table 30: Cotecmar - Recent Contract Wins
Figure 1: Colombian Defense Expenditure(US$ Billion), 2008-2012
Figure 2: Colombian Defense Expenditure(US$ Billion), 2013-2017
Figure 3: Colombian GDP Growth vs. Defense Expenditure Growth, and Defense Expenditure as Percentage of GDP Growth, 2008-2012
Figure 4: Colombian GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP Growth, 2013-2017
Figure 5: Colombian Defense Budget Split Between Capital and Revenue Expenditure (%), 2008-2012
Figure 6: Colombian Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2017
Figure 7: Colombian Defense Capital Expenditure Breakdown (%), 2008-2012
Figure 8: Colombian Defense Capital Expenditure Breakdown (%), 2013-2017
Figure 9: Colombian Defense Capital Expenditure for the Army(US$ billion), 2008-2012
Figure 10: Colombian Defense Capital Expenditure for the Army(US$ billion), 2013-2017
Figure 11: Colombian Defense Capital Expenditure for the Navy (US$ billion), 2008-2012
Figure 12: Colombian Defense Capital Expenditure for the Navy (US$ billion), 2013-2017
Figure 13: Colombian Defense Capital Expenditure for the Air Force (US$ billion), 2008-2012
Figure 14: Colombian Defense Capital Expenditure for the Air Force (US$ billion), 2013-2017
Figure 15: Colombian Defense Capital Expenditure for the Police force (US$ billion), 2008-2012
Figure 16: Colombian Defense Capital Expenditure for the Police Force (US$ billion), 2013-2017
Figure 17: Colombian Homeland Security Expenditure, 2008-2012
Figure 18: Colombian Homeland Security Expenditure, 2013-2017
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 the World’s Largest Military Spenders (US$ Billion), 2011 and 2016
Figure 23: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2011
Figure 24: Colombian Defense Import TIV value (US$ Million), 2007-2011
Figure 25: Colombian Defense Imports by Category (%), 2007-2011
Figure 26: Colombian Defense Imports by Country (%), 2007-2011
Figure 27: Industry Dynamics - Porter’s Five Forces Analysis
Figure 28: Industria Militar - Revenue Trend Analysis, 2005-2010
Figure 29: Industria Militar - Operating Profit Trend Analysis, 2005-2010
Figure 30: Industria Militar - Net Profit Trend Analysis, 2005-2010
Figure 31: Colombian Population - Female (In Millions), 2008-2017
Figure 32: Colombian Population - Male (In Millions), 2008-2017
Figure 33: Colombian Construction Output, Current Prices, Local Currency (In Billions), 2001-2010
Figure 34: Colombian Construction Output, Current Prices, US Dollars (In Billions), 2001-2010
Figure 35: Colombian Current Account Balance as Percentage of GDP, 2008-2017
Figure 36: Colombian Debt Service Ratio, 2001-2010
Figure 37: Colombian Deposit Interest Rate, 2001-2010
Figure 38: Colombian Exports of goods and services, current prices (US$ Billion), 2001- 2010
Figure 39: Colombian External Debt as a Percentage of GDP (%), 2001- 2010
Figure 40: Colombian Fiscal Balance as a percentage of GDP, 2001-2010
Figure 41: Colombian Foreign Direct Investment (US$ Billion), 2001-2010
Figure 42: Colombian GDP at Purchasing Power Parity (US$ Billion), 2006-2015
Figure 43: Colombian GDP at Constant Prices (Local Currency Billion), 2006-2015
Figure 44: Colombian GDP at Constant Prices (US$ Billion), 2006-2015
Figure 45: Colombian GDP at Current Prices (Local Currency Billion), 2006-2015
Figure 46: Colombian GDP at Current Prices (US$ Billion), 2006-2015
Figure 47: Colombian General Government Final Consumption Expenditure (US$ Billion), 2001-2010
Figure 48: Colombian Gross Fixed Capital Formation, Current Prices (US$ Billion), 2001-2010
Figure 49: Colombian Imports of goods and services (current US$ Billion), 2001-2010
Figure 50: Colombian Inflation, average consumer prices, 2008-2017
Figure 51: Colombian Interest Rate Lending, 2008-2010
Figure 52: Colombian Manufacturing Output, Current Prices (Local Currency Billion), 2001-2010
Figure 53: Colombian Manufacturing Output, Current Prices (US$ Billion), 2001-2010
Figure 54: Colombian Market Cap of Stock Exchange(US$ Million), 2001-2008
Figure 55: Colombian US$- Exchange Rate (Annual Average), 2002-2011
Figure 56: Colombian US$- Exchange Rate (EoP), 2002-2011
Figure 57: Colombian Wholesale Price Index, 2000-2009
Figure 58: Colombian Hydroelectricity Installed Capacity (Million Kilowatts), 2000-2009
Figure 59: Colombian Natural Gas Consumption (Billion Cubic Feet), 2001-2010
Figure 60: Colombian Natural Gas Production (Billion Cubic Feet), 2001-2010
Figure 61: Colombian Net Conventional Thermal Electricity Generation (Billion Kilowatt hours), 2001-2010
Figure 62: Colombian Net Geothermal, Solar, Wind, and Wood Electric Power Generation (Billion Kilowatt hours), 2001-2010
Figure 63: Colombian Net Hydroelectric Power Generation (Billion Kilowatt hours), 2001-2010
Figure 64: Colombian Petroleum Consumption (Thousand Barrels Per Day), 2002-2011
Figure 65: Colombian Petroleum Production (Thousand Barrels Per Day), 2002-2011
Figure 66: Colombian People Employed in R and D (Number of researchers per million people), 2000-2008
Figure 67: Colombian Coal Consumption (Thousand Short Tons), 2001-2010
Figure 68: Colombian Coal Production (Thousand Short Tons), 2001-2010
Figure 69: Colombian Political Stability Index, 2002-2010
Figure 70: Colombian Transparency Index, 2002-2011
Figure 71: Colombian Fixed Broadband Internet Subscribers (Thousands), 2001-2010
Figure 72: Gross Domestic Expenditure on Research and Development as % of GDP, 2000-2009
Figure 73: Patents Granted, 2002-2011

The Colombian Defense Industry: Market Opportunities and Entry Strategies, Analyses and Forecasts to 2017

Published By: ICD Research

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