Future of the Peruvian Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2023

Table of Contents

1. Introduction 7

1.1. What is this Report About? 7

1.2. Definitions 7

1.3. Summary Methodology 9

1.4. About GlobalData 10

2. Executive Summary 11

3. Market Attractiveness and Emerging Opportunities 13

3.1. Current Market Scenario 14

3.1.1. Primary Threat Perception 14

3.1.2. Military Doctrine and Strategy 15

3.1.3. Military Fleet Size 16

3.1.4. Procurement Programs 20

3.1.5. Social, Political and Economic Environment and Support for Defense Projects 21

3.1.6. Political and Strategic Alliances 22

3.2. Defense Market Size Historical and Forecast 23

3.2.1. Defense expenditure to grow at a CAGR of

2.12% over the forecast period 23

3.2.2. Threat of narco-terrorism, defense reforms and modernization, border disputes, and peacekeeping operations to drive defense expenditure 25

3.2.3. Defense budget as a percentage of GDP is anticipated to average

0.9% during the forecast period 27

3.3. Analysis of Defense Budget Allocation 29

3.3.1. Revenue expenditure accounts for the majority of the Peruvian defense budget 29

3.3.2. Peruvian defense capital expenditure is expected to grow at a CAGR of

3.48% during the forecast period 31

3.3.3. Per capita defense expenditure expected to increase during the forecast period 34

3.4. Homeland Security Market Size and Forecast 36

3.4.1. Homeland security expenditure is expected to grow at a CAGR of

5.32% during the forecast period 36

3.4.2. Measures to prevent cocaine trafficking and organized crime to drive HLS expenditure 39

3.4.3. Peru considered at ‘moderate risk’ of a terrorist attack 41

3.4.4. Peru experiences moderate levels of terrorist activity 42

3.4.5. Peru has a terrorism index score of

2.5 44

3.5. Benchmarking with Key Global Markets 45

3.5.1. Peruvian defense budget expected to register marginal growth over the forecast period 45

3.5.2. Peru’s military expenditure is limited compared to countries with the largest defense expenditure 47

3.5.3. Peru allocates a low percentage of GDP to defense 48

3.6. Market Opportunities: Key Trends and Growth Stimulators 49

3.6.1. Top 10 Defense Sectors by Value (US$ Million) – Projections over 2018-2023 49

3.6.2. Transport Aircraft 50

3.6.3. Frigates 51

3.6.4. Multi-role Aircraft 52

4. Defense Procurement Market Dynamics 53

4.1. Import Market Dynamics 55

4.1.1. Defense imports expected to increase during the forecast period 55

4.1.2. South Korea to account for the majority of Peru’s defense imports during the forecast period 56

4.1.3. Aircraft and Naval Vessels are the most imported military hardware 58

5. Industry Dynamics 59

5.1. Five Forces Analysis 59

5.1.1. Bargaining Power of Supplier: Low to Medium 60

5.1.2. Bargaining Power of Buyer: Medium to High 60

5.1.3. Barriers to Entry: Medium 60

5.1.4. Intensity of Rivalry: Medium to High 60

5.1.5. Threat of Substitution: Medium to High 60

6. Market Entry Strategy 61

6.1. Market Regulation 61

6.1.1. Budgeting process 61

6.1.2. Procurement Policy and Process 61

6.1.3. Offset policy aids development of domestic defense industry 62

6.1.4. Peru allows 100% FDI in the defense industry 62

6.2. Market Entry Route 63

6.2.1. The country’s biennial defense exhibition provides an attractive entry route 63

6.2.2. Direct selling is the preferred market entry route for foreign OEMs 64

6.3. Key Challenges 65

6.3.1. Small defense budget and limited technological capability limits the market entry of foreign companies 65

6.3.2. Lack of transparency hampers the growth of the Peruvian defense industry 65

7. Competitive Landscape and Strategic Insights 66

7.1. Competitive Landscape Overview 66

7.2. Key Domestic Companies 68

7.2.1. Los Servicios Industriales de la Marina (SIMA): Overview 68

7.2.2. Los Servicios Industriales de la Marina (SIMA): Products and Services 68

7.2.3. Los Servicios Industriales de la Marina (SIMA): Recent Announcements and Strategic Initiatives 69

7.2.4. Los Servicios Industriales de la Marina (SIMA): Alliances 69

7.2.5. Los Servicios Industriales de la Marina (SIMA): Recent Contract Wins 69

7.2.6. The Army Ammunition Factory (FAME): Overview 70

7.2.7. The Army Ammunition Factory (FAME): Products and Services 70

7.2.8. The Army Ammunition Factory (FAME): Recent Announcements and Strategic Initiatives 71

7.2.9. Desarrollos Industriales Casanave: Overview 72

7.2.10. Desarrollos Industriales Casanave: Products and Services 72

7.2.11. Desarrollos Industriales Casanave: Recent Announcements and Strategic Initiatives 73

7.2.12. Desarrollos Industriales Casanave: Alliances 73

8. Business Environment and Country Risk 74

8.1. Economic Performance 74

8.1.1. GDP Per Capita (US$) 74

8.1.2. GDP, Current Prices (US$ Billion) 75

8.1.3. Exports of Goods and Services, Current Prices (LCU billion) 76

8.1.4. Imports of Goods and Services, Current Prices (LCU billion) 77

8.1.5. Gross National Disposable Income (US$ billion) 78

8.1.6. Local Currency Unit per US$ (Period Average) 79

8.1.7. Market Capitalization of Listed Companies (US$ Billion) 80

8.1.8. Market Capitalization of Listed Companies (% of GDP) 81

8.1.9. Government Cash Surplus/Deficit as a Percentage of GDP (LCU) 82

8.1.10. Goods Exports as a Percentage of GDP 83

8.1.11. Goods Imports as a Percentage of GDP 84

8.1.12. Services Imports as a Percentage of GDP 85

8.1.13. Services Exports as a Percentage of GDP 86

8.1.14. Foreign Direct Investment, net (BoP, current US$ Billion) 87

8.1.15. Net Foreign Direct Investment as a Percentage of GDP 88

8.1.16. Mining, Manufacturing, Utilities Output LCU Billion 89

9. Appendix 90

9.1. About GlobalData 90

9.2. Disclaimer 90

List of Tables

Table 1: Peruvian Ground Forces Strength 16

Table 2: Peruvian Navy Strength 18

Table 3: Peruvian Air Force Strength 19

Table 4: Peruvian – Ongoing Development and Procurement Programs (US$ Million), 2014-2018 20

Table 5: Peruvian – Future Procurement Programs 20

Table 6: Peruvian Defense Expenditure (PEN Billion & US$ Billion), 2014-2023 23

Table 7: Peruvian GDP Growth vs. Defense Expenditure as a Percentage of GDP, 2014-2023 27

Table 8: Peruvian Defense Budget Split Between Capital and Revenue Expenditure (%), 2014-2023 29

Table 9: Peruvian Defense Capital Expenditure (PEN Billion & US$ Million), 2014-2023 32

Table 10: Peruvian Per Capita Defense Expenditure (US$), 2014-2023 34

Table 11: Peruvian Homeland Security Expenditure (PEN Billion & US$ billion), 2014-2023 37

Table 12: Terrorism Index, 2018 42

Table 13: Benchmarking with Key Markets – 2014-2018 vs. 2019-2023 45

Table 14: Top Peru Defense Sectors by Value (US$ Million), 2018-2023 49

Table 15: Peru Budget Formation Timetable 61

Table 16: Defense Offset Regulations in Peru 62

Table 17: Top Defense Suppliers in The Peruvian Defense Industry – By Value (US$ Million) 2018-2023 66

Table 18: Competitive Landscape of the Peruvian Defense Industry 67

Table 19: Los Servicios Industriales de la Marina (SIMA) – Products and Services 68

Table 20: Los Servicios Industriales de la Marina (SIMA) – Alliances 69

Table 21: Los Servicios Industriales de la Marina (SIMA) – Recent Contract Wins 69

Table 22: The Army Ammunition Factory (FAME) – Product Focus 70

Table 23: Desarrollos Industriales Casanave – Product Focus 72

Table 24: Desarrollos Industriales Casanave – Alliances 73

List of Figures

Figure 1: Peruvian Defense Expenditure (PEN Billion), 2014-2023 24

Figure 2: Peruvian Defense Expenditure (US$ Billion), 2014-2023 24

Figure 3: Peruvian GDP Growth vs. Defense Expenditure as a Percentage of GDP, 2014-2023 28

Figure 4: Peruvian Defense Budget Split Between Capital and Revenue Expenditure (%), 2014-2023 30

Figure 5: Peruvian Capital Budget Allocation (PEN Million), 2014-2023 33

Figure 6: Peruvian Capital Budget Allocation (US$ Million), 2014-2023 33

Figure 7: Peruvian Per Capita Defense Expenditure (US$), 2014-2023 35

Figure 8: Peruvian Homeland Security Budget (PEN Billion), 2014-2023 38

Figure 9: Peruvian Homeland Security Budget (US$ Billion), 2014-2023 38

Figure 10: Terrorism Heat Map, 2018 41

Figure 11: Terrorism Index, 2018 44

Figure 12: Benchmarking with Key Markets – 2014-2018 vs. 2019-2023 46

Figure 13: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion), 2018 and 2023 47

Figure 14: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2018 48

Figure 15: Transport Aircraft Market Size (US$ Million), 2018-2023 50

Figure 16: Frigates Market Size (US$ Million), 2018-2023 51

Figure 17: Multi-role Aircraft Market Size (US$ Million), 2018-2023 52

Figure 18: Top Peruvian Defense Procurements in Terms of Their Supplier Relationships 54

Figure 19: Peruvian Defense Import Trend, 2013-2017 (TIV values) 55

Figure 20: Peruvian Defense Imports by Country (%), 2013-2017 57

Figure 21: Peruvian Defense Imports by Category (%), 2013-2017 58

Figure 22: Industry Dynamics – Porter’s Five Forces Analysis 59

Figure 23: Peruvian GDP Per Capita (US$), 2015-2025 74

Figure 24: Peruvian GDP at Current Prices (US$ Billion), 2015-2025 75

Figure 25: Peruvian Exports of Goods and Services, Current Prices (LCU Billion), 2005-2014 76

Figure 26: Peruvian Imports of Goods and Services, Current Prices (LCU Billion), 2005-2014 77

Figure 27: Peruvian Gross National Disposable Income (US$ billion) 2007-2014 78

Figure 28: Local Currency Unit per US$, 2015-2024 79

Figure 29: Market Capitalization of Listed Companies in Peru (US$ Billion), 2005-2012 80

Figure 30: Market Capitalization of Listed Companies in Peru (% of GDP), 2005-2012 81

Figure 31: Peruvian Government Cash Surplus/ Deficit as a % of GDP (LCU), 2005-2012 82

Figure 32: Peruvian Goods Exports as a % of GDP, 2005-2013 83

Figure 33: Peruvian Goods Imports as a % of GDP, 2005-2013 84

Figure 34: Peruvian Services Imports as a % of GDP, 2005-2013 85

Figure 35: Peruvian Services Exports as a % of GDP, 2005-2013 86

Figure 36: Peruvian Foreign Direct Investment, net (BoP, current US$ Billion), 2005-2013 87

Figure 37: Peruvian Net Foreign Direct Investment as a % of GDP, 2005-2013 88

Figure 38: Mining, Manufacturing, Utilities Output (LCU Billion), 2005-2014 89