BMI's Executive Summary

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2007 was another quite tough year for President Bachelet on the domestic front. She was struggling with fairly low opinion poll ratings, and opposition to her economic, transport, and education policies. She also faced bickering within the ruling coalition, industrial action in the copper industry and student demonstrations, some of which on occasion turned violent. That said, BMI regards all these things as fairly normal for the kind of robust democracy that Chile has become in the almost two decades since the end of military rule. The underlying defence and security position of the country remained comparatively strong, and in our opinion unaffected by short-term political factors.

The President has also perhaps been given less credit than she deserves for managing the country's sometimes complicated regional relations. With territorial disputes with Peru and Bolivia to the north, some largely resolved but still sensitive issues with Argentina to the east, a regional diplomatic and political challenge from President Hugo Chávez-inspired Venezuelan radicalism, and a dependence on imported energy, there are plenty of pitfalls for any Chilean government to negotiate. Bachelet has however managed to improve relations with both Peru and Bolivia, and has worked to put together a regional 'Arc of the Pacific' to counter Venezuela's influence.

In our view Chile has very few internal or external military threats that cannot be contained. The Chilean procurement programme, however, is raising concerns among the country's neighbours, particularly Bolivia and Peru. Large-scale modernisation plans for the armed forces are currently underway, sourcing advanced weapons systems from abroad. Furthermore, the Ministry of Defence is eager to encourage greater co-operation between the services, which are largely independent. The country's defence industry is small, but should benefit from offset agreements in the near future. Although the defence industry is not as advanced or sizeable as that of Brazil, it is perhaps equivalent to that of Argentina. The number of employees within Chile's defence industry totals approximately one half of those in Brazil, and is roughly equal to those in Argentina. In addition to small arms and ammunition, Chile now manufactures armoured and soft-skinned vehicles, artillery, ballistic rocket systems, anti-aircraft equipment, infantry support weapons, naval and air craft, aerial bombs and rockets, and radar and electronic equipment.

Contents

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Chapter 1 - Executive Summary

SWOT Analysis

Chile Political SWOT

Chile Security SWOT

Chile Defence Industry SWOT

Chile Economic SWOT

Chile Business Environment SWOT

Chapter 2 - Political Overview

Domestic Political Outlook

Reshuffle Revival? Electoral Engineering?

Hostage To Fortune

Pinochet's Legacy

External Political Outlook

Bachelet Decides

Energetic Diplomacy

All At Sea?

Chapter 3 - Security Risk Analysis

BMI’s Security Ratings

Risk Ratings

Table: Regional Risk Ratings

Table: State Terrorism Vulnerability Index

Regional Security: Latin America

US-Latin America Relations

Regional Arms Race

Narcotics And Security

Chile Security Risk Rating

Chile Conflict Risk

Chile Terrorism Risk

Chile Physical Safety Risk

Chapter 4 - Security Overview

Internal Security Situation

External Security Situation

Chile-Argentina Relations

Chile-Peru Relations

Chile-Bolivia Relations

Chapter 5 - Military Structure & Defence Industry

Armed Forces

Regional Armed Forces (including conscripted) 2006

International Deployment

Table Foreign Deployments

Weapons Of Mass Destruction

Market Overview

Arms Trade Overview

Imports

Exports

Industry Trends & Developments

Procurement Trends & Developments

Chapter 6 - Industry Forecast Scenario

Table: Chile Defence Sector – Historical Data & Forecasts

Table: Chile Defence Sector – Historical Data & Forecasts

Key Risks To BMI’s Forecast Scenario

Chapter 7 - Macroeconomic Forecast

Fundamentally Sound Moderation

Risks To Outlook

Table: Economic Activity – Historical Data And Forecasts

Chapter 8 - Competitive Landscape

Table: Key Players – Chile Defence Sector

Chapter 9 - Company Profiles

Astilleros y Maestranzas de la Armada

Empresa Nacional de Aeronáutica (ENAER)

Fábrica y Maestranzas del Ejercito

Chapter 10 - BMI Forecast Modelling

How we generate our industry forecasts

Defence Industry

Sources

Chapter 11 - Appendix A: Risk Ratings Methodology

Conflict Risk Methodology

Terrorism Risk Methodology

Physical Safety Risk Methodology

Overall Risk Rating

State Vulnerability Index Methodology

Competitive Landscape for Latin America Defence & Security: Sample of  
Companies Ranked

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Rankings and Competitive Landscapes by production and sales; market share and change on previous year; number of employees, ownership structure and year established. Also includes analysis of company expansion, export and investment strategies.

Network of Defence & Security Sources

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BMI's Latin America Defence & Security Reports are based on an extensive network of multilateral organisations, government departments, automotive industry associations, chambers of commerce and company reports. Information sources include: