Defense Sector in Brazil
A regulatory framework established in 2013, gave preference to the Brazilian defense industries at the same time that the budget for this sector has risen. In this article we will take a look at some of the numbers in the Brazilian defense sector.
Overview
The Brazilian national defense works around a set of measures and actions from the government emphasising the military field for the defense of the Brazilian territory, its sovereignty and national interests against any threats.
For several years, low investment in the defense sector resulted in outdated equipment. Since the middle of the 1990s, Brazil has gained importance in the international atmosphere, and the defense sector has also benefited from this importance for being strategically relevant. Now, there is a new opportunity for companies to grow in this sector.
Market Size
According to the Brazilian Association of Defence and Security Industries Materials, known as Abimde, companies participating in this sector had revenue of USD 2.7 billion in 2011. The defense sector participation in the Brazilian GDP was 0.17%.
Sales of heavy military equipment, weapons and ammunition accounted for BRL 935 million in 2009, about 17% of this sector’s revenue for that year. The sector revenue increased 134% between 2005 and 2009, mainly due to the new efforts in the country's defense system.
The defense sector generated about 25,000 direct jobs and another 100.000 indirect ones in 2011, according to Abimde. The total amount of expenses for public safety were, in BRL millions:
| Year | From each State | From the Union | Total |
| 2007 | 37 393 | 5 904 | 43 297 |
| 2008 | 39 417 | 7 023 | 46 441 |
| 2009 | 42 946 | 8 162 | 51 108 |
| 2010 | 40 418 | 7 779 | 48 198 |
| 2011 | 45 658 | 5 744 | 51 402 |
Main Players
The defense sector presents an oligopolistic structure in Brazil. This means that its major players are large conglomerates with diversified activities, even outside this market.
With good prospects established for the defense sector in Brazil, many groups and companies are starting to invest in the sector. Still, in some cases the defense sector is only a small part of the company's revenue. Here are the main companies in the defense sector and the main products that they provide:
- Imbel - Indústria de Material Bélico do Brasil
- Forjas Taurus S.A.
- Companhia Brasileira de Cartuchos
- Condor S.A. Indústria Química
- Fábrica Almirante Jurandyr da Costa Muller de Campos (FAJCMC)
- Avibras Indústria Aeroespacial S.A.
- Mectron Engenharia, Indústria e Comércio Ltda
- Orbisat da Amazônia Indústria e Aerolevantamento S.A.
- Ominisys Engenharia Ltda
- Atmos Sistemas Ltda
- AEL Sistemas S.A.
National Investments
The Brazilian budget for the defense sector is destined to be used by the Ministry of Defence and the Armed Forces separating it into three categories: personal, funding and investment. Personal expense is the largest item.
The funding costs includes the expenses of maintaining the continuous preparation of the military structure such as food, uniforms, fuel, lubricants, light weapons and ammunition, transportation, training etc.
The investments are targeted to the acquisition of means and resources for adapting and equipping the armed forces. Usually with large scale supply for specific goods such as acquisitions of aircraft, helicopters, ships, boats, tanks, heavy armaments and ammunition.
Investments from the Brazilian Government
The government, partnered with research and military development entities, invests extensive amounts of money in the defense sector development. After the production is developed, the government guarantee the demand of production by providing developed goods to the armed forces.
National Bank of Development Benefits
A regulatory framework from 2013 provides preferential conditions for Brazilian companies in the defense sector. The National Bank of Development, BNDES, has offered incentives for industries to invest in the defense, security and aerospace sectors.
The Inova Aerodefesa plan has improved the relationship of BNDES with the sector and by applying for it, companies were selected to receive different financial benefits. BNDES supports innovation projects with technologies applicable in the following sectors:
- Aerospace Sector
Space and Satellite platforms
Aeronautics
- Defense Sector
Command and control systems and subsystems for defense
Technological Innovation Programs
- Security Sector
Management Systems
Non-lethal weapons
Foreign Trade of Defense Goods
Brazil is a modest player in the international trading of defense goods. There is a low volume of goods that are exported but a large concentration of foreign purchases of aircrafts, for example.
The Brazilian budget for defense was placed 11th in the world rank in 2012. As to exported defense goods, Brazil is ranked 25th worldwide. In 10 years, between 1993 and 2012, Brazil exported around US$ 739 million of defense goods.
As for the import of goods, more than US$ 5.4 billion have been spent during the same period. Ships, aircraft and armored vehicles were the main goods imported and those which most contributed to the trade deficit of Brazil.
The foreign trade of defense equipment amounted to US$ 247 billion from 2003 to 2012. During this period, the most traded products were:
- Aircrafts, responsible for US$ 108.1 million
- Ships, responsible for US$ 37.7 million
- Missiles, responsible for US$ 32.7 million
- Shielded vehicles, responsible for US$ 29.3 million
- Sensors, responsible for US$ 13.04 million