Future of the Brazil Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022

Future of the Brazil Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022

Summary

Brazilian Government reduced its budget and focused on implementing a transaction tax on the people to overcome the recession. Although the actual budget increased in terms of local currency from 2012 to 2016, it showed a downward trend in the dollar value owing to variations in the exchange rate. Military expenditure, which stands at US$29.3 Billion in 2017, registered at a CAGR of -2.96%. It is however, expected to grow at a CAGR of 5%+ during the forecast period.

Brazilian homeland security expenditure is estimated to reach US$5.1 Billion in 2022. The country is spending heavily on border security and homeland infrastructure and the country is in the process of modernizing its border control and security infrastructure.

In order to promote Brazils domestic defense industry, the majority of its arms imports deals include technology transfer obligations. However, a number of defense firms are either reluctant to share proprietary information or are prohibited by their countrys policy on the transfer of technology. This requirement has been a key deterrent for foreign OEMs entering the Brazilian industry.

The report Future of the Brazil Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022 offers detailed analysis of the Brazilian defense industry with market size forecasts covering the next five years. This report will also analyze factors that influence demand for the industry, key market trends, and challenges faced by industry participants.

In particular, this report provides the following analysis -
- The Brazilian defense industry market size and drivers: Detailed analysis of the Brazilian defense industry during 2018-2022, including highlights of the demand drivers and growth stimulators for the industry. It also provides a snapshot of the countrys expenditure and modernization patterns.
- Budget allocation and key challenges: Insights into procurement schedules formulated within the country and a breakdown of the defense budget with respect to capital expenditure and revenue expenditure. It also details the key challenges faced by defense market participants within the country.
- Porters Five Force analysis of the Brazilian defense industry: Analysis of the market characteristics by determining the bargaining power of suppliers, bargaining power of buyers, threat of substitution, intensity of rivalry, and barriers to entry.
- Import and Export Dynamics: Analysis of prevalent trends in the countrys imports and exports over the last five years.
- Market opportunities: Details of the top five defense investment opportunities over the next 10 years.
- Competitive landscape and strategic insights: Analysis of the competitive landscape of the Brazilian defense industry. It provides an overview of key players, together with insights such as key alliances, strategic initiatives, and a brief financial analysis.

Companies mentioned in this report: Empresa Brasileira de Aeronautica SA (Embraer) , Forjas Taurus SA, Avibras Industria Aerospacial (Avibras), Companhia Brasileira de Cartuchosis, Helibras, Industria de Material Belico do Brasil (IMBEL), Aeroelectronica, Indstria Naval do Cear (INACE), Northrop Grumman Brazil,and Lockheed Martin Brazil.

Scope

- Brazilian military expenditure, which stands at US$29.3 billion in 2017, registered at a CAGR of -2.96% during the historic period. It is however, expected to grow at a CAGR of 5.06% during the forecast period, and grow from US$30.3 billion in 2018 to reach US$36.9 billion by 2022. There is a huge difference between the planned budget and the executed budget in 2015 due to an economic crisis faced by the country, however with the countrys economy is showing some positive signs of recovery as the 2017 budget has marginally surpassed its initially planned estimates.
- The Brazilian MoD allocated an average of 11.9% of defense spending towards capital expenditure during the historic period, which is expected to increase to 13.2% over the forecast period. The major procurements of the country include multi-role aircraft, multi-mission helicopters, naval vessels, aircraft carriers, transport helicopters, and modernizing its armored vehicles, FX-2 program. In addition, border monitoring program- SISFRON (Sistema Integrado de Monitoramento de Fronteiras) and SISGAAZ (Sistema de Gerenciamento da Amaznia Azul), is to be implemented during the forecast period.
- The MoD is expected to invest in multi-role aircraft, disel electric submarine and military-IT and networking.

Reasons to buy

- This report will give the user confidence to make the correct business decisions based on a detailed analysis of the Brazilian defense industry market trends for the coming five years
- The market opportunity section will inform the user about the various military requirements that are expected to generate revenues during the forecast period. The description includes technical specifications, recent orders, and the expected investment pattern by the country during the forecast period
- Detailed profiles of the top domestic and foreign defense manufacturers with information about their products, alliances, recent contract wins, and financial analysis wherever available. This will provide the user with a total competitive landscape of the sector
- A deep qualitative analysis of the Brazilian defense industry covering sections including demand drivers, Porters Five Forces Analysis, Key Trends and Growth Stimulators, and latest industry contracts

1. Introduction 8
1.1. What is this Report About? 8
1.2. Definitions 8
1.3. Summary Methodology 10
1.4. About Strategic Defence Intelligence 11
2. Executive Summary 12
3. Market Attractiveness and Emerging Opportunities 14
3.1. Current Market Scenario 15
3.1.1. Primary Threat Perception 15
3.1.2. Military Doctrine & Strategy 16
3.1.3. Military Fleet Size 21
3.1.4. Procurement Programs 27
3.1.5. Social, Political and Economic Environment & Support for Defense Projects 29
3.1.6. Political and Strategic Alliances 30
3.2. Defense Market Size Historical and Forecast 31
3.2.1. Brazilian defense budget is expected to grow at an estimated CAGR of 5.06% during 2018-2022 31
3.2.2. Development of indigenous defense capabilities, modernization of defense systems, and large defense procurement projects are expected to drive the Brazilian defense expenditure 33
3.2.3. Defense budget as a percentage of GDP will remain at an average of 1.4% over the forecast period 35
3.3. Analysis of Defense Budget Allocation 37
3.3.1. Share of capital expenditure is expected to decrease during the forecast period 37
3.3.2. Capital expenditure is anticipated to record a CAGR of 7.72% during the forecast period 39
3.3.3. Army accounted for the largest percentage share of the overall Brazilian defense budget 41
3.3.4. Army to continue accounting for the lions share in Brazilian defense budget 43
3.3.5. The Brazilian Per-capita defense expenditure to increase during the forecast period 47
3.4. Homeland Security Market Size and Forecast 49
3.4.1. Homeland Security market in Brazil is expected to grow at a CAGR of 3.88% during the forecast period 49
3.4.2. International sporting events fuel growth in homeland security spending 51
3.4.3. Brazil falls under some risk category in the terrorism index 52
3.4.4. Brazil faces some threats from terrorist organizations 53
3.4.5. Brazil has a terrorism index score of 1.7 55
3.5. Benchmarking with Key Global Markets 56
3.5.1. Brazil ranks among major Global Defense Markets 56
3.5.2. Brazil is expected to remain among top defense spending countries in the world 58
3.5.3. Brazil is expected to spend an average of 1.37% of its GDP on defense over the forecast period 59
3.6. Market Opportunities: Key Trends and Drivers 60
3.6.1. Multi-role aircraft 60
3.6.2. Diesel Electric Submarine 61
3.6.3. Military IT -Networking 62
4. Defense Procurement Market Dynamics 63
4.1. Import Market Dynamics 64
4.1.1. Modernization of defense systems expect to drive arms imports 64
4.1.2. Germany, United States, and France are the major suppliers for Brazil 65
4.1.3. Aircraft and Naval vessels accounted for a total share 57.9% in the Brazilian defense imports 66
4.2. Export Market Dynamics 67
4.2.1. Development of domestic defense capability is expected to fuel exports in Brazils emerging military industry 67
4.2.2. Indonesia and Afghanistan are the major prospects for the Brazilian defense exports 68
4.2.3. Aircraft accounted for the majority of Brazilian defense exports during 2012-2016 69
5. Industry Dynamics 70
5.1. Five Forces Analysis 70
5.1.1. Bargaining power of supplier: low to medium 71
5.1.2. Bargaining power of buyer: medium to high 71
5.1.3. Barrier to entry: medium 71
5.1.4. Intensity of rivalry: low to medium 71
5.1.5. Threat of substitution: medium to high 71
6. Market Entry Strategy 72
6.1. Market Regulation 72
6.1.1. International and domestic defense procurement deals are primarily decided by competitive bidding 72
6.1.2. Stringent offsets requirements for all defense procurements 73
6.2. Market Entry Route 74
6.2.1. Budgeting Process 74
6.2.2. Procurement Policy and Process 75
6.2.3. Foreign OEMs follow direct offset route to enter defense market 76
6.2.4. Collaborations provide market entry opportunities 76
6.3. Key Challenges 77
6.3.1. Low allocation for defense capital expenditure and delay in the closure of defense deals are the major challenges of Brazilian Defense Industry 77
6.3.2. Complying with Brazils requirement for extensive technology transfer 77
7. Competitive landscape and Strategic Insights 78
7.1. Competitive landscape Overview 78
7.2. Key Public Sector Companies 80
7.2.1. Embraer: overview 80
7.2.2. Embraer: products 80
7.2.3. Embraer: recent announcement and strategic initiatives 80
7.2.4. Embraer - alliances 81
7.2.5. Embraer: recent contract wins 82
7.2.6. Embraer - financial analysis 84
7.2.7. Forjas Taurus SA: overview 86
7.2.8. Forjas Taurus SA: products 86
7.2.9. Forjas Taurus SA: recent announcement and strategic initiatives 88
7.2.10. Forjas Taurus SA: alliances 89
7.2.11. Forjas Taurus SA: recent contract wins 89
7.2.12. Forjas Taurus SA: financial analysis 90
7.2.13. Avibras Industria Aerospacial: overview 92
7.2.14. Avibras Industria Aeroespacial: products 92
7.2.15. Avibras Industria Aerospacial: recent announcement and strategic initiatives 93
7.2.16. Avibras Industria Aerospacial: alliances 93
7.2.17. Avibras Industria Aerospacial: recent contract wins 94
7.2.18. Companhia Brasileira de Cartuchos: overview 95
7.2.19. Companhia Brasileira de Cartuchos: products 95
7.2.20. Companhia Brasileira de Cartuchos: recent announcement and strategic initiatives 96
7.2.21. Companhia Brasileira de Cartuchos: recent contract wins 97
7.2.22. Helibras: overview 98
7.2.23. Helibras: products 98
7.2.24. Helibras: recent announcement and strategic initiatives 98
7.2.25. Helibras: alliances 99
7.2.26. Helibras: recent contract wins 100
7.2.27. Industria de Material Belico do Brasil (IMBEL): overview 101
7.2.28. Industria de Material Belico do Brasil (IMBEL): products 101
7.2.29. Industria de Material Belico do Brasil (IMBEL): recent announcement and strategic initiatives 103
7.2.30. Industria de Material Belico do Brasil (IMBEL): alliances 103
7.2.31. Industria de Material Belico do Brasil (IMBEL): recent contract wins 104
7.2.32. Aeroelectronica: overview 105
7.2.33. Aeroelectronica: products 105
7.2.34. Aeroelectronica: recent announcement and strategic initiatives 106
7.2.35. Aeroelectronica: alliances 106
7.2.36. Aeroelectronica: recent contract wins 106
7.2.37. Indstria Naval do Cear: overview 107
7.2.38. Indstria Naval do Cear: products and services 107
7.2.39. Indstria Naval do Cear: recent announcement and strategic initiatives 107
7.2.40. Indstria Naval do Cear: recent contract wins 107
7.2.41. Northrop Grumman Brazil: overview 109
7.2.42. Northrop Grumman Brazil: products 109
7.2.43. Northrop Grumman Brazil: recent announcement and strategic initiatives 109
7.2.44. Northrop Grumman Brazil: alliances 110
7.2.45. Northrop Grumman Brazil: recent contract wins 110
7.2.46. Lockheed Martin Brazil: overview 111
7.2.47. Lockheed Martin Brazil: products 111
7.2.48. Lockheed Martin Brazil: recent announcement and strategic initiatives 111
7.2.49. Lockheed Martin Brazil: alliances 111
7.2.50. Lockheed Martin Brazil: recent contract wins 112
8. Business Environment and Country Risk 113
8.1. Economic Performance 113
8.1.1. GDP per capita at constant prices (US$) 113
8.1.2. GDP at current prices (US$) 114
8.1.3. Exports of goods and services (BRL) 115
8.1.4. Imports of goods and services (BRL) 116
8.1.5. Gross national disposable income (US$ Billion) 117
8.1.6. BRL per US$ (period average) 118
8.1.7. Market capitalization of listed companies (US$ Billion) 119
8.1.8. Market capitalization of listed companies (% of GDP) 120
8.1.9. Government cash surplus/deficit as a percentage of GDP (BRL) 121
8.1.10. Goods exports and imports as a percentage of GDP 122
8.1.11. Services imports and exports as a percentage of GDP 123
8.1.12. Foreign direct investment, net (BoP, current US$ Billion) 124
8.1.13. Net foreign direct investment as a percentage of GDP 125
8.1.14. Mining, Manufacturing, Utilities Output (BRL Billion) 126
9. Appendix 127
9.1. About SDI 127
9.2. Disclaimer 127

List Of Tables

Table 1: Brazilian - Defense Modernization Priorities 16
Table 2: Brazilian Army - High Priority Projects 18
Table 3: Brazilian Army - High Priority Projects 19
Table 4: Brazilian Air Force - High Priority Projects 20
Table 5: Brazilian Army Strength 21
Table 6: Brazilian Air Force Strength 23
Table 7: Brazilian Navy Strength 25
Table 8: Brazilian - Ongoing Development and Procurement Programs 27
Table 9: Brazilian - Future Procurement Programs 28
Table 10: Brazilian Defense Expenditure (BRL Billion & US$ Billion), 2013-2022 31
Table 11: Brazilian GDP Growth and Defense Expenditure as Percentage of GDP Growth, 2013-2022 35
Table 12: Brazilian Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022 37
Table 13: Brazilian Defense Capital Expenditure (BRL Billion & US$ Billion), 2013-2022 39
Table 14: Brazilian Defense Budget Share - (%) Split by Services (Army, Navy, Air Force and Other), 2013-2022 41
Table 15: Brazilian Defense Budget Allocations in BRL Billion - Breakdown by Services (Army, Navy, Air Force and Others) 2013-2022 43
Table 16: Brazilian Defense Budget in US$ Billion - Breakdown by Services (Army, Navy, Air Force and Others) 2013-2022 45
Table 17: Brazilian Per Capita Defense Expenditure (US$), 2013-2022 47
Table 18: Brazilian Homeland Security Expenditure (BRL Billion & US$ Billion), 2013-2022 49
Table 19: Terrorism Index, 2017 53
Table 20: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022 56
Table 21: Brazil - Offset Guidelines and Agreements 73
Table 22: Brazil Budget Formation Timetable 74
Table 23: Competitive Landscape of the Brazilian Defense Industry 78
Table 24: Embraer- Alliances 81
Table 25: Embraer- Recent Contract Wins 82
Table26: Forjas Taurus SA- Alliances 89
Table27:Embraer- Recent Contract Wins 89
Table 28:Avibras Industria Aerospacial- Alliances 93
Table 29:Avibras Industria Aerospacial- Recent Contract Wins 94
Table30: Companhia Brasileira de Cartuchos (CBC) - Recent Contract Wins 97
Table 31:Helibras- Alliances 99
Table32:Helibras- Recent Contract Wins 100
Table33:Industria de Material Belico do Brasil (IMBEL)- Alliances 103
Table34:Industria de Material Belico do Brasil (IMBEL)- Recent Contract Wins 104
Table35:Aeroelectronica- Alliances 106
Table36:Aeroelectronica- Recent Contract Wins 106
Table37:Indstria Naval do Cear- Recent Contract Wins 107
Table38:Northrop Grumman- Alliances 110
Table39:Northrop Grumman - Recent Contract Wins 110
Table 40: Lockheed Martin- Alliances 111
Table 41:Lockheed Martin- Recent Contract Wins 112

List Of Figures

Figure 1: Brazilian Defense Expenditure (BRL Billion), 2013-2022 32
Figure 2: Brazilian Defense Expenditure (US$ Billion), 2013-2022 32
Figure 3: Brazilian GDP Growth and Defense Expenditure as Percentage of GDP Growth, 2013-2022 36
Figure 4: Brazilian Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022 38
Figure 5: Brazilian Defense Capital Expenditure (BRL Billion), 2013-2022 40
Figure 6: Brazilian Defense Capital Expenditure (US$ Billion), 2013-2022 40
Figure 7: Brazilian Defense Budget Share - (%) Split by Services (Army, Navy, Air Force and Other), 2013-2022 42
Figure 8: Brazil Defense Budget in BRL Billion - Breakdown by Services (Army, Navy, Air Force and Others) 2013-2022 44
Figure 9: Brazil Defense Budget in US$ Billion - Breakdown by Services (Army, Navy, Air Force and Others) 2013-2022 46
Figure 10: Brazilian Per Capita Defense Expenditure (US$), 2013-2022 48
Figure 11: Brazilian Homeland Security Expenditure (BRL Billion), 2013-2022 50
Figure 12: Brazilian Homeland Security Expenditure (US$ Billion), 2013-2022 50
Figure 13: Terrorism Heat Map, 2017 52
Figure 14: Terrorism Index, 2017 55
Figure 15: Benchmarking with Key Markets, 2013-2017 vs. 2018-2022 57
Figure 16: Defense Expenditure of the Worlds Largest Military Spenders (US$ Billion), 2017 and 2022 58
Figure 17: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2017 59
Figure 18: Multi-role Aircraft Market Size (US$ Million), 2017-2027 60
Figure 19: Diesel Electric Submarine Market Size (US$ Million), 2017 -2027 61
Figure 20: Military IT-Networking Market Size (US$ Million), 2017-2027 62
Figure 21: Brazilian Defense Import Trend (US$ Million), 2012-2016 (TIV values*) 64
Figure 22: Brazilian Defense Imports by Country (%), 2012-2016 65
Figure 23: Brazilian Defense Imports by Category (%), 2012-2016 66
Figure 24: Brazilian Defense Export Trend (US$ Million), 2012-2016 (TIV values) 67
Figure 25: Brazilian Defense Exports by Country (%), 2012-2016 68
Figure 26: Brazilian Defense Exports by Category (%), 2012-2016 69
Figure 27: Industry Dynamics - Porters Five Forces Analysis 70
Figure 28: Embraer - Revenue Trend Analysis (BRL Billion), 2012-2016 84
Figure 29: Embraer - Operating Profit Trend Analysis (BRL Billion), 2012-2016 85
Figure 30: Embraer -Net Profit Trend Analysis (BRL Billion), 2012-2016 85
Figure 31: Forjas Taurus SA - Revenue Trend Analysis (BRL Million), 2012-2016 90
Figure 32: Forjas Taurus SA - Operating Profit Trend Analysis (BRL Million), 2012-2016 90
Figure 33: Forjas Taurus SA - Net Profit Trend Analysis (BRL Million), 2012-2016 91
Figure 34: Brazilian GDP Per Capita at Constant Prices (US$), 2015-2025 113
Figure 35: Brazil GDP at Current Prices (US$ Billion), 2015-2025 114
Figure 36: Brazilian Exports of goods and services (BRL Billion), 2005-2014 115
Figure 37: Brazilian Imports of goods and services (BRL Billion), 2005-2014 116
Figure 38: Brazilian Gross National disposable income (US$ Billion), 20102014 117
Figure 39: Brazilian BRL per US$, 2015-2024 118
Figure 40: Brazilian market capitalization of listed companies (US$ Billion), 2005-2012 119
Figure 41: Brazilian market capitalization of listed companies (% of GDP), 2005-2012 120
Figure 42: Brazilian Government cash surplus/deficit as % of GDP (BRL), 2005-2009 121
Figure 43: Brazil Goods exports and imports as a % of GDP (%), 2005-2014 122
Figure 44: BrazilServices imports and exports as a % of GDP (%), 2005-2014 123
Figure 45: Brazilian Foreign direct investment, net (BoP, current US$ Billion), 2005-2014 124
Figure 46: Brazilian Net foreign direct investment as % of GDP, 2005-2014 125
Figure 47: Brazilian Mining, Manufacturing, Utilities Output (BRL Billion), 2005-2014 126

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