Wednesday, 15 February 2012

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

London, 15 February, 2012 – The defense expenditure of Colombia is smaller in comparison to other countries in the world. However, Colombian defense expenditure demonstrated faster growth than India, Saudi Arabia and the world’s largest defense spending country, the US, during the review period. Indeed, the defense expenditure of Columbia increased at a CAGR of 14.75% during the period and is expected to grow at a CAGR of 10.05% during the forecast period (reference figure below).

Between 2005 and 2010, Colombia’s defense expenditure increased at a CAGR of 14.75%. However, as a result of the global economic recession, Colombia’s defense expenditure is expected to grow at a slower CAGR of 10.05% during the forecast period. In Colombia, defense expenditure is primarily driven by external factors such as the threat and military development of Venezuela and internal factors such as the threat from rebel groups such as the Revolutionary Armed Forces of Colombia (FARC) and the National Liberation Army (ELN), and the prevention of drug trafficking and related crime in the country. During the review period, the Colombian government’s military modernization program moderately increased the defense expenditure of Colombia, despite financial constraints attributed to the global economic recession.

Following the independence of Colombia and its neighbor, Venezuela, both countries began to perceive each other as a threat. During the last decade, political and diplomatic relations between the two countries has ranged between periods of mutual understanding and tension. Colombia’s close relationship with the US has also contributed to the distrust between Colombia and Venezuela.

In addition to the external threat from Venezuela, Colombia is under threat from indigenous terrorism and crime and the country has the highest homicide rate in the world. Although the security situation has improved, crime remains a significant problem in the country and the Columbian government considers crime to be one of its biggest challenges.

Colombia faces significant internal security challenges from rebel and paramilitary attacks and high levels of criminal activity. Although the Colombian government has had some success in dispelling rebel groups, Colombia has one of the highest crime rates in the world. As a result, the Colombian government and the country’s businesses have invested in security and other monitoring systems to safeguard citizens and other national assets.

As a result of these factors, the Colombian military is expected to undergo modernization during the forecast period. In 2006, the Colombian Congress approved a new law securing funds for military modernization programs.

The Colombian government channels a considerable amount of its defense expenditure towards the elimination of the drug trade. Colombia is the world’s principal producer and distributor of refined cocaine, 70% of which is exported to the US drug market. The US has contributed to fund the prevention of the drugs trade and counterinsurgency, making Colombia the largest recipient of US military aid after Israel.

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