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

  • ID: 4436366
  • Report
  • Region: Vanuatu, Venezuela
  • 90 pages
  • Strategic Defence Intelligence
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Venezuelan Homeland Security to Cross Us$22 Billion in 2022 from Around Us$21.5 Billion in 2018

Venezuela is amongst the largest arms importers in Latin America and accounts for nearly one-third of the military goods imported in the region. The increasing military expenditure is largely supported by revenues from the world’s largest proven oil reserves in the country. This burgeoning defense expenditure can be attributed to the modernization of the armed forces, re-armament programs, border disputes, and a strong focus on the development of the indigenous military sector. Defense expenditure in Venezuela is expected to register a CAGR of nearly 0.4% to reach about US$8.8 Billion by 2022.

Venezuelan homeland security (HLS) expenditure stands at over US$21 Billion in 2017 and is expected to register a CAGR of almost 0.8%, to cross US$22 Billion in 2022 from around US$21.5 Billion in 2018. The expenditure is primarily driven by the need to respond to growing threats from organized crime, current civil unrest, and cyber threats. At the same time, a growing economic crisis is expected to cut down HLS expenditure.
Venezuela’s domestic defense production capabilities are relatively underdeveloped. And, as a result, the country relies on foreign OEMs to fulfill its military requirements for sophisticated equipment. During the historic period, Russia emerged as the largest supplier of military hardware to the country with over 70% share of imports, followed by China at around 17%, and Spain at just over 5%.

Historically, Russian defense firms have entered the Venezuelan defense industry through direct sales. However, the country is increasing efforts to reduce its military dependency on foreign suppliers and, therefore, is largely concentrating on the joint development of defense systems in order to strengthen its domestic defense manufacturing capabilities. Moreover, the country has witnessed a number of military partnership agreements with Brazil, Russia, Ecuador, and Argentina, among many others.

The report “Future of the Venezuelan Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022” offers detailed analysis of the Venezuelan 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 an in-depth analysis of the following:

  • The Venezuelan defense industry market size and drivers: Detailed analysis of the Venezuelan defense industry during 2018-2022, including highlights of the demand drivers and growth stimulators for the industry. It also provides a snapshot of the country’s 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.
  • Porter’s Five Force analysis of the Venezuelan 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 country’s 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 Venezuelan 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: CA Venezolana de Industrias Militares (CAVIM), UCOCAR, and Diques y Astilleros Nacionales CA (DIANCA)

Scope

  • With a defense budget of US$8.6 billion in 2017, Venezuela is amongst the largest arms importers in Latin America and accounts for nearly one-third of the military goods imported in the region. The increasing military expenditure is largely supported by revenues from the world’s largest proven oil reserves in the country. This burgeoning defense expenditure can be attributed to the modernization of the armed forces, re-armament programs, border disputes, and a strong focus on the development of the indigenous military sector.
  • The country’s capital expenditure (CAPEX) is anticipated to increase during the forecasted. A number of procurements have fueled growth of the capital budget allocation, including the Shannxi Y-8 transport aircraft, Norinco VN-4 armored vehicles, T-72BIV MBTs (Russian tanks) and BTR-80 armored vehicles, S-125 Pechora-2M SAM systems, Sukhoi fighter jets, 2S23 Nona-SVK self-propelled guns, Stan Patrol 5009 offshore patrol vessels, Stan Patrol 4207 coastal patrol vessels, Enstrom 480 helicopters, and Diamond Aircraft DA40NG Star trainers. Key opportunities for equipment suppliers are expected in areas such as multi-role aircraft, naval vessels, missile systems, surveillance systems, and UAVs.
  • The Venezuelan homeland security expenditure is primarily driven by the need to respond to growing threats from organized crime, current civil unrest, and cyber threats. At the same time, a growing economic crisis is expected to cut down HLS expenditure. The country will invest in biometric systems, border protection and training, CCTV systems, electronic surveillance systems, radar systems, and UAVs. Additionally, opportunities in security systems and platforms are expected to arise as a result of the country concentrating on strengthening border security.

Reasons to buy

  • This report will give the user confidence to make the correct business decisions based on a detailed analysis of the Venezuelan 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 Venezuelan defense industry covering sections including demand drivers, Porter’s Five Forces Analysis, Key Trends and Growth Stimulators, and latest industry contracts
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1. Introduction
1.1. What is this Report About?
1.2. Definitions
1.3. Summary Methodology
1.4. About the Author

2. Executive Summary

3. Market Attractiveness and Emerging Opportunities
3.1. Current Market Scenario
3.1.1. Primary Threat Perception
3.1.2. Military Doctrine & Strategy
3.1.3. Military Fleet Size
3.1.4. Procurement Programs
3.1.5. Social, Political, and Economic Environment & Support for Defense Projects
3.1.6. Political and Strategic Alliances
3.2. Defense Market Size, Historical and Forecast
3.2.1. Venezuelan defense expenditure expected to increase at a CAGR of 0.39% over 2018-2022
3.2.2. Modernization, border disputes, and the development of the domestic defense industry to drive defense expenditure over the forecast period
3.2.3. Venezuelan defense expenditure as a percentage of GDP to increase
3.3. Analysis of Defense Budget Allocation
3.3.1. Share of revenue expenditure accounts for the majority of the Venezuelan defense budget over the forecast period
3.3.2. Capital expenditure is expected to gain momentum to reach a forecast CAGR of -1.05% during 2018-2022
3.3.3. Per-capita defense expenditure expected to decrease during the forecast period
3.4. Homeland Security Market Size and Forecast
3.4.1. Homeland security budget to register a negative CAGR of 6.96% during the forecast period
3.4.2. Civil unrest, drug trafficking, and organized crime to drive the HLS market
3.4.3. Venezuela to be at ‘some risk’ from terrorist attack
3.4.4. Venezuela faces moderate threat from foreign terrorist organizations
3.4.5. Venezuela has a terrorism index score of 2.0
3.4.6. The terrorism index is calculated on the basis of the following factors:
3.5. Benchmarking with Key Global Markets
3.5.1. Venezuela’s defense budget to remain low in the forecast period
3.5.2. Venezuela’s military expenditure is limited compared to countries with the highest defense expenditures
3.5.3. Venezuela allocates a high percentage of GDP to defense
3.6. Market Opportunities: Key Trends and Growth Stimulators
3.6.1. Military Infrastructure Construction
3.6.2. Missile Defense Systems
3.6.3. Military Training Aircraft
3.6.4. Military Facilities Management

4. Defense Procurement Market Dynamics
4.1. Import Market Dynamics
4.1.1. Limited capability of domestic defense market drives imports
4.1.2. Venezuela largely imports from Russia
4.1.3. Air defense systems, missiles, and armored vehicles are the most imported military hardware
4.2. Export Market Dynamics
4.2.1. Defense exports increased during the historic period

5. Industry Dynamics
5.1. Five Forces Analysis
5.1.1. Bargaining power of supplier: High
5.1.2. Bargaining power of buyer: Low
5.1.3. Barriers to entry: Medium
5.1.4. Intensity of rivalry: low to medium
5.1.5. Threat of substitution: low to medium

6. Market Entry Strategy
6.1. Market Regulation
6.1.1. Venezuela does not disclose any offset obligations
6.1.2. Venezuela allows 100% FDI in defense industry
6.2. Market Entry Route
6.2.1. Budget Process
6.2.2. Procurement Policy and Process
6.2.3. Direct selling is the preferred market entry route for foreign OEMs
6.2.4. Joint product development and military collaborations provide market entry opportunities
6.3. Key Challenges
6.3.1. Small defense budget and underdeveloped domestic industry discourages foreign participation
6.3.2. Corruption serves as an obstacle for market entry
6.3.3. The arms embargo against Venezuela makes market entry difficult for foreign defense companies

7. Competitive Landscape and Strategic Insights
7.1. Competitive Landscape Overview
7.2. Key Domestic Companies
7.2.1. CA Venezolana de Industrias Militares (CAVIM): Overview
7.2.2. CAVIM: Products and Services
7.2.3. CAVIM: Recent Announcements and Strategic Initiatives
7.2.4. CAVIM: Alliances
7.2.5. UCOCAR CA: Overview
7.2.6. UCOCAR CA: Products and Services
7.2.7. UCOCAR CA: Recent Announcements and Strategic Initiatives
7.2.8. UCOCAR CA: Recent Contract Awards
7.2.9. Diques y Astilleros Nacionales CA (DIANCA): Overview
7.2.10. DIANCA: Recent Announcements and Strategic Initiatives
7.2.11. DIANCA: Products and Services
7.2.12. DIANCA: Alliances
7.2.13. DIANCA: Recent Contract Awards

8. Business Environment and Country Risk
8.1. Economic Performance
8.1.1. Gross Domestic per Capita
8.1.2. Gross Domestic Product, current US$
8.1.3. Exports of Goods and Services
8.1.4. Imports of Goods and Services
8.1.5. Gross National Disposable Income
8.1.6. Local Currency Unit per US$
8.1.7. Market Capitalization of Listed Companies
8.1.8. Market Capitalization of Listed Companies as a Percentage of GDP
8.1.9. Total Government Cash Surplus/Deficit as a Percentage of GDP
8.1.10. Exported Goods as a Percentage of GDP
8.1.11. Imported Goods as a Percentage of GDP
8.1.12. Services Exports as a Percentage of GDP
8.1.13. Services Imports as a Percentage of GDP
8.1.14. Foreign Direct Investments, Net (BoP, Current US$ Billion)
8.1.15. Net Foreign Direct Investment as a Percentage of GDP
8.1.16. Mining, Manufacturing and Utilities Output (LCU Billion)

9. Appendix
9.1. About the Author
9.2. Disclaimer

List of Tables
Table 1: Venezuelan Army Strength
Table 2: Venezuelan Air Force Strength
Table 3: Venezuelan Navy Strength
Table 4: Venezuelan - Ongoing Development and Procurement Programs
Table 5: Venezuelan - Future Procurement Programs
Table 6: Venezuelan Defense Expenditure (VEF Billion & US$ Billion), 2013-2022
Table 7: Venezuelan GDP Growth and Defense Expenditure as Percentage of GDP Growth, 2013-2022
Table 8: Venezuelan Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022
Table 9: Venezuelan Defense Capital Budget (VEF Billion & US$ Billion), 2013-2022
Table 10: Venezuelan Per Capita Defense Expenditure (US$), 2013-2022
Table 11: Venezuelan Homeland Security Expenditure (VEF Billion & US$ Billion), 2013-2022
Table 12: Terrorism Index, 2017
Table 13: Benchmarking with Key Markets, 2013-2017 vs. 2018-2022
Table 14: The Venezuelan Budget Formation Timetable
Table 15: Competitive Landscape of the Venezuela Defense Industry
Table 16: CA Venezolana de Industrias Militares (CAVIM) - Product Focus
Table 17: CA Venezolana de IndustriasMilitares (CAVIM) - Alliances
Table 18: UCOCAR CA - Product Focus
Table 19: UCOCAR CA: Recent Contract Wins
Table 20: Diques y Astilleros Nacionales CA (DIANCA) - Product Focus
Table 21: Diques y Astilleros Nacionales CA (DIANCA): Alliances
Table 22: Diques y Astilleros Nacionales CA (DIANCA): Recent Contract Wins

List of Figures
Figure 1: Venezuelan Defense Expenditure (VEF Billion), 2013-2022
Figure 2: Venezuelan Defense Expenditure (US$ Billion), 2013-2022
Figure 3: Venezuelan GDP Growth and Defense Expenditure as Percentage of GDP Growth, 2013-2022
Figure 4: Venezuela Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022
Figure 5: Venezuelan Capital Expenditure on Defense (VEF Billion), 2013-2022
Figure 6: Venezuelan Defense Capital Expenditure (US$ Billion), 2013-2022
Figure 7: Venezuelan Per Capita Defense Expenditure (US$), 2013-2022
Figure 8: Venezuelan Homeland Security Expenditure (VEF Billion), 2013-2022
Figure 9: Venezuelan Homeland Security Budget (US$ Billion), 2013-2022
Figure 10: Terrorism Heat Map, 2017
Figure 11: Terrorism Index, 2017
Figure 12: Benchmarking with Key Markets: 2013-2017 vs. 2018-2022
Figure 13: Defense Expenditure of Countries with the Highest Global Military Expenditure (US$ Billion), 2017 and 2022
Figure 14: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2017
Figure 15: Military Infrastructure Construction Market Size (US$ Million), 2017-2027
Figure 16: Missile Defense Systems Market Size (US$ Million), 2017-2027
Figure 17: Military Training Aircraft Market Size (US$ Million), 2017-2027
Figure 18: Military Facilities Management Market Size (US$ Million), 2017-2027
Figure 19: Venezuelan Defense Imports, 2012-2016 (TIV Values)
Figure 20: Venezuelan Defense Imports by Country (%), 2012-2016
Figure 21: Venezuelan Defense Imports by Category (%), 2012-2016
Figure 22: Industry Dynamics-Porter’s Five Forces Analysis
Figure 23: Venezuela GDP per capita, 2015-2025
Figure 24: Venezuela Gross Domestic Product (current US$ Billion), 2015-2025
Figure 25: Venezuela Exports of Goods and Services (LCU Billion), 2005-2013
Figure 26: Venezuela Imports of Goods and Services (LCU Billion), 2005-2013
Figure 27: Venezuela Gross National Disposable Income (US$ Billion), 2005-2013
Figure 28: Venezuela LCU per US$, 2015-2024
Figure 29: Venezuela Market Capitalization of Listed Companies (US$ Billion), 2005-2012
Figure 30: Venezuela Market Capitalization of Listed Companies as a Percentage of GDP, 2005-2012
Figure 31: Venezuelan Government Cash Surplus/Deficit as a Percentage of GDP, 2000-2005
Figure 32: Venezuelan Exported Goods as a Percentage of GDP, 2005-2013
Figure 33: Venezuelan Imported Goods as a Percentage of GDP, 2005-2013
Figure 34: Venezuelan Services Exports as a Percentage of GDP, 2005-2013
Figure 35: Venezuelan Services Imports as a Percentage of GDP, 2005-2013
Figure 36: Venezuelan Foreign Direct Investments, Net (BoP, Current US$ Billion), 2005-2013
Figure 37: Venezuela Net Foreign Direct Investment as % of GDP, 2005-2013
Figure 38: Mining, Manufacturing and Utilities Output (LCU Billion), 2005-2014

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  • CA Venezolana de Industrias Militares (CAVIM)
  • Diques y Astilleros Nacionales CA (DIANCA)
  • UCOCAR
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