The Chilean defense budget is forecasted to grow by 70% from $1.3 billion in 2021 to $2.2 billion in 2026, according to GlobalData. This growth follows a few tumultuous years, which has seen Chile go through major political, social, and economic changes.

Madeline Wild, Associate Defense Analyst at GlobalData, comments: “Gabriel Boric’s election as President in 2021, the repeal of the Copper Laws, and referendums to rewrite the constitution have disrupted the status quo enjoyed by the Chilean Ministry of Defense (MoD) since the Pinochet-era. Since this time the Chilean military has been tightly linked to the government, in terms of operations, funding channels and decision making.”

GlobalData’s report, ‘Chile Defense Market – Attractiveness, Competitive Landscape and Forecasts to 2026’, reveals the complex political and procedural webs that dictate the size of the Chilean defense budget and examines their effect on budgetary growth. Since 2017 a negative compound annual growth rate (CAGR) of 16.3% has been recorded, with the overall budget dropping from $2.6 billion in 2017 to $1.3 billion in 2021.

The initial impact of the ending of Copper Laws funding coincided with the COVID-19 pandemic, resulting in the defense budget shrinking to only $1.3 billion in 2021, a negative CAGR of 16.3% from 2017. The reforms around the Copper Laws are part of a scheme aimed at reducing corruption and improving transparency in the Chilean government. As such, despite the preliminary fiscal shock of ongoing reforms the forecasted budget reflects the confidence imparted by a renewed commitment to accountability and equality. This has been demonstrated by both the changes to off-budget transactions, and the election of the liberal left-wing presidential candidate, Gabriel Boric.

Wild adds: “Over the last seventeen years the Chilean MoD was granted a total of $13.7 billion for acquisitions from the profits of the state-run copper company, CODELCO. This off-budget funding substantially bolstered the defense budget and so the repeal of the law in 2019 has the potential to be hugely disruptive to the Armed Forces modernisation program in forthcoming years. However, the gradual removal of funding, as well as a one of contribution to the MoD from CODELCO, will see the budget size recover from the shock of the law change.”

Whilst a more transparent and equal government will undoubtedly have long term benefits to the stability and security of Chile, the loss of funds will still be a strategic challenge for the MoD. Yet there has been no indication that funding will be reduced thanks to an ongoing domestic commitment to upholding defense capabilities.