Modernization of naval and air force capabilities to provide excellent market opportunities

Tuesday 17 July 2012, Amsterdam

Peruvian defense expenditure, valued at US$2.1 bn in 2011, registered a CAGR of 13.2% during the review period (2007-2011) and is expected to grow at a CAGR of 10.4% during the forecast period (2012-2016), to reach an estimated US$3.8 bn in 2016. Furthermore, Peru’s cumulative defense expenditure over the forecast period is expected to be US$15.8 bn, of which US$13.2 bn is expected to be revenue expenditure (reference graph).

With a 2011 defense budget of US$2.1 bn, Peru invests a relatively small portion of its GDP towards defense in comparison with European countries such as the UK and France. Despite the country maintaining an open economy and providing a number of investment incentives, a small defense budget acts as a key challenge for foreign companies interested in entering the Peruvian defense industry.

The arms procurement process in Peru is not transparent, with purchases often deemed to be classified and not shared outside the concerned department. The law on contracts and acquisitions requires all state institutions, without exception, to consult the Office of the Comptroller General before making a purchase, but this rule has been violated by the MoD on many occasions. This creates further doubt among international suppliers as the defense contract bidders don’t have a clear understanding of the parameters required to be fulfilled in order to secure a contract.

Peru’s defense industry comprises small companies with little specialization in weapon categories, resulting in a lack of availability of advanced defense technology in the country, which stands as an infrastructural challenge for the foreign weapon suppliers who intend to conduct business in Peru.