Spurred by border disputes and military
modernization initiatives, the Chilean defense expenditure – which is already
one of the largest in South America – is forecast to grow from an estimated
US$2.9 billion in 2014 at a CAGR of 8.69% to reach US$4 billion by 2018,
according to Strategic Defence Intelligence’s new report: Future of the Chilean
Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts
to 2018.
Chile is a narrow strip of land between the Andes
Mountains on the east and the Pacific Ocean to the west, and shares land
borders with Argentina, Peru, and Bolivia. Due to its long narrow shape, the
country has border disputes with many countries. Growing relations with the US
are expected to lead improvements in the modernization of Chile’s armed forces,
which is expected to be one of the primary drivers of Chilean defense
expenditure to 2018.
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Border
Disputes
Chile has been involved in a maritime border dispute
with Peru and Bolivia since the 1879-1883 War of the Pacific, which resulted in
Peru and Bolivia losing substantial territory to Chile. Central to the dispute
is 14,500 square miles of fishing-rich sea that Chile currently controls.
Chile’s claim that the current border was established under the 1950s
agreements is dispute by the Peruvian government, which claims that those
agreements were fishing treaties and did not settle the maritime zone dispute
The relations between Chile and Bolivia remain
hostile and Bolivia has filed a lawsuit in the international court for its
share of the Pacific Ocean. Bolivia lost its coast in the 19th
century during war with Chile, and has remained land-locked ever since.
According to
military officials, Chile faces the threat of an asymmetric conflict from its
neighbors, and needs to develop a modular force structure capable of operating
in a wide variety of battlefield scenarios, with appropriate logistical support
such as fuel and ammunition trucks, heavy-lift helicopters, and medical
evacuation support. This is projected to be one of the primary drivers the
Chilean defense sector to 2018
Modernization
Initiatives
The Chilean Defense Ministry has declared military
modernization as one of its core objectives over the next five years. It plans
to prepare its forces with advanced equipment, technology, command systems, and
adequate training to ensure improved capabilities.
Funds are planned, and will be used for the upgrade
of the country’s fleet of F-16 Fighting Falcon attack aircraft, which will be
purchased from the Netherlands. The government also intends to replace its
fleet of FACH T-36 Halcon training aircraft with 12 aircraft of a different
make, as the former are expensive to maintain. The upgrade of Chile’s naval
defense from potential threats stemming from drug crime and other contraband
activity will also be a focus of the country’s defense expenditure over the
next 5 years.
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International
Peacekeeping
Chile fully implements the principle of international
cooperation and has developed an intense multilateral diplomacy by actively
participating in the UN missions related to peace and security in the world, and
also with bodies such as OAS and UNASUR, all of which contribute
synergistically to the preservation of peace and security at an international
level. Moreover, the country has also signed more than 80 bilateral and
multilateral defense agreements, and actively participates in combined forces
exercises in third world countries to prevent disruption to global security.
Chile’s most significant role in UN peacekeeping missions
is in Haiti, where it has stationed around 600 troops with support vehicles and
helicopters. Chile also has plans to participate in the European Union’s
peacekeeping forces. Collaboration in terms of the training of troops was
agreed upon by Germany and the Chilean government in 2012.
The purchase of multi-role ships supports the ability to
mobilize the battalion and support vehicles across great distances. After the
2010 earthquake, funding from the Copper Reserve Law (CPL) came under severe
criticism from the public: according to the CPL, 10% of all export revenues
from the state-owned copper company Codelco were automatically transferred each
year to the military, for the purchasing of weapons and equipment. According to
the new Economic and Social Stabilization Fund (ESSF), the copper revenues will
now be available under a government budget for departments in urgent need of
funds.
