Sergey Kandaurov
Senoir research officer
Master of Economics
Russia Strategic Research Institute.

The situation on the Latin American arms market has completely changed since 1992. If in 1989-1992 Russia had more than half of its volume since the military aid for Cuba ceased the Russian share has fell till 9.8%. The USA managed to keep the level of its supplies stable that is usually 15-17%. The limitation of the modern military equipment export to the region set by the USA helped the American firms to get profits delivering spare parts and out-of-date military equipment. On the other hand it restrained military and technological growth of the Latin American countries and held them in the sphere of the US political and economical influence. But the European armaments producers and Israel have strengthened their positions on the regional AME market using this situation. Since 1993 many Latin American countries bought AME from France, Israel, Spain, Italy, South Africa, Czech Republic, Egypt, Belorus and Taiwan.

In the last years the regional arms market began to revive. The demand for military aircrafts in the region (including both new and second-hand warplanes) is about 500 units till the year of 2005 what costs US$ 2-3 billion including maintenance, armament equipment and pilot training. The main fight for these supplies develops between the US and European producers. There some offers from the Russian firms as well.

Trying to regain its lost positions the US Administration raised the issue of the American fighters supplies to Chili during the US-Chilean summit in 1997 and also on the foreign ministers and the military delegation consultations. The American tightly tied up the MTC development and especially the arms supplies with the development of the bilateral relations and first of all with the problem of Chili's accession to NAFTA.

In reply to the USA activities the West-European  partners created a powerful lobby in the Latin American governmental, parliament’s and military circles to defend their interests in regards to MTC. They also suggest the USA to be an unreliable partner because of its tries to include political conditions in the deals. The West-European governments support their firms in the fierce competition with the US producers or between themselves. But the Europeans consider the offer of more attractive finance conditions on military equipment supplies, maintenance and operation privileges, the deal profits reinvestment to the customer's economy as the main mechanism to gain the Latin American market. The other MTC trend is second-hand military equipment supplies from the US and European armies' surplus.

The offer of more attractive finance conditions is also caused by the economic crisis in the region which made several Latin American states as Brazil, Venezuela, Peru and Columbia to reduce their defense expenses.

The USA

According to IISS in the last years Argentina, Brazil, Chili, Columbia, Ecuador, Peru, Mexico and Venezuela buy American armaments. The list of supplied armaments includes fighters, transport aircrafts, landing ships, helicopters, patrol boats, main battle tanks, armored personnel carriers. The great part of the armaments were from the US Army surplus.

In 1997  under the pressure from the military-industrial corporations which demanded to liberalize the American export policy towards the Latin American countries the US Administration canceled the limitations of high-technology arms export to the region. Clinton’s visit to Venezuela, Brazil and Argentina in autumn 1997 confirmed the understanding of the fact that quickly developing Latin American arms market could be taken by the European competitors. The USA even declared Argentina “a main non-NATO ally” that practically means it becomes the American armaments recipient.

Being seriously concerned by the growing aspirations of the Latin American countries to find new MTC partners in Europe, Asia and Russia, the USA uses such political and economical means as propaganda campaigns, political pressure, financial and technical aid, economic privileges and more attractive supply conditions to expel the competitors from the regional arms market. Although the Americans managed to monopolize the AME markets in Argentine, Mexico and Columbia, the undoubted regional military expenses leader – Brazil tries to conduct independent and balanced policy on foreign AME purchase.

France

Although the French presence on the Latin American market is still rather modest, enough countries of the region such as Argentina, Brazil, Peru, Venezuela have even though bought French armaments. The list of the armaments supplied in th recent years includes helicopter, air defense systems, anti-ship missiles, submarines. Using the situation when the regional arms market was closed for American producers France offered its Mirage-2000-5 fighters to Chili.

In the last years France tries to expand the export of its AME to the Latin American countries. The French government supports its armaments exporters. The policy of the French firms is to expand their positions by satisfying customers’ demand without dividing them on political reasons.

Great Britain

Under IISS and SIPRI for the last few years the British armament export to the region includes helicopters, gun mounts, destroyers, radar equipment, light tanks and air defense systems. The embargo on British armaments sales to Argentine imposed after the conflict on Falkland Islands was suspended only in the middle of the 90’s.

Other AME producers

The armaments export to the region by such countries as Germany, Italy, Spain, Sweden, the Netherlands and Israel is less significant but they still managed to secure their positions in Latin America. These countries supply different types of AME as patrol boats, tanks, fighters, transport aircrafts, air defense systems, APCs and others. Beside the regional countries aspiration to diversify their arms supplies, the fact that the summary volume of these countries’ export to Latin America exceeds the American one can be explained by the active marketing policy of the small exporters which includes granting AME production licenses to the customers; off-set offers such as profits reinvestment; different forms of military-industrial cooperation between AME suppliers; absence of any political conditions during the deal conclusion; small AME parties deliveries; AME supplier’s participation in the joint project and production of particular armament; second-hand armaments sales; high-ranking government officials support for arms business.

Russia’s opportunities

At one time the former USSR provided large AME supplies to Cuba, Nicaragua and Peru though these supplies were of political interests and gave practically no hard-currency profits. According to the representatives of SK ‘Rosvoorouzhenie” now Russia can’t be satisfied with its 10% share of the regional AME market so the task is to regain the market on the new commercial base.

The interest of the Latin American countries to the Russian armaments is caused by the number of the factors such as its simplicity, reliability and high efficacy; some regional countries’ desire to conduct more independent from the USA MTC policy; absence of the political pressure. Besides some countries already have Russian weapons and military equipment and need spare parts. The Latin American states are interested in different Russian military technologies because Russia passes weapons production licenses to “the third world” countries easier than the Western producers. Such weapons systems as helicopters, patrol boats, military transport aircrafts are demanded most of all.

But though Russia has attractive offers on these weapons systems the countries of the region mostly buy them from the Western exporters. Unfortunately the Russian suppliers are unable to offer a flexible payments scheme and price discounts to compete with the Western firms. There aren’t enough representatives of the military-industrial complex enterprises in the region so the Latin Americans have little information about the Russian economical legislation and production capabilities.