BMI's Executive Summary

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During Q407, the administration of President Álvaro Uribe enjoyed some success in its struggles with the Fuerrzas Armadas Revolucionarias de Colombia (FARC) and drug smugglers. In late October, FARC commander Martin Cabellero, along with 18 other rebels, died in a battle with the Colombian army. The regional and municipal elections went ahead in October largely without incident. Voters chose 32 governors, 418 provincial legislators, 1,098 mayors and 12,030 council members across all but two of Colombia's 1,098 municipalities.

These developments followed the arrest in Q307 of several leading drug smugglers, including Diego Montoya, who had been widely recognised as being the leader of the Norte del Valle drug cartel. In early November, the US Drug Enforcement Agency (DEA) reported that there were clear signs of disruption in the markets for cocaine (and for methamphetamines). The DEA has found that, in the first nine months of 2007, the street price per gram of cocaine has risen by 44%, while the level of purity has fallen by 15%. Despite the arrests, there are several grounds for concern. For instance, there is some evidence of the emergence of new armed groups in the wake of the disbanding of the Autodefensas Unidas de Colombia (AUC). The International Crisis Group, for one, believes that the government's plans for the reintegration of paramilitaries into normal society is 'deeply flawed'. Meanwhile, much of the action has shifted across the porous border into neighbouring Venezuela, where crime is soaring. Indeed, some sources suggest that the murder rate in Venezuela is now significantly in excess of that of Colombia, which has long held a justified reputation for being a violent country.

In the meantime, relations between Colombia and Venezuela have deteriorated further. As noted in Q307, the Colombian government had been concerned about the purchases of large quantities of firearms (including 100,000 AK assault rifles from Russia) by the Venezuelan armed forces: the Colombian government is concerned that these weapons will find their way to paramilitary groups or drug smugglers in Colombia. Towards the end of November, Venezuela's President Hugo Chávez 'froze' relations with the government of Colombia. This was in response to President Uribe's decision to end the role of President Chávez as intermediary in negotiations with FARC. The implication is that an immediate release of the 44 'exchangeable' hostages held by FARC (including former presidential candidate Ingrid Betancourt) appears very unlikely.

In mid-October, the International Crisis Group (ICG) released a report, Colombia: Moving Forward with the ELN, which suggested that the peace negotiations between the government and the Ejercito de Liberación Nacional face failure unless substantial bottlenecks are overcome. The ICG suggested that a cease-fire is a necessary, but not sufficient condition for peace. 'The ELN should release kidnap victims, de-mine some areas, make more information available and propose a model for ceasefire implementation and verification. The Uribe administration should be more flexible on a complete cessation of hostilities and the concentration and identification of ELN troops in a ceasefire. Norway, Spain and Switzerland should consider offering expertise on ceasefires and related matters.'

Colombia's indigenous arms industry is small, but is looking to expand sales throughout South America and, indeed, further afield.

Contents

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Chapter 1 - Executive Summary

SWOT Analysis

Colombia Political SWOT

Colombia Security SWOT

Colombia Defence Industry SWOT

Colombia Economic SWOT

Colombia Business Environment SWOT

Chapter 2 - Political Overview

Domestic Political Outlook

Scandal Threatens Reform Outlook

Implications: Peace Plan Under Threat?

FARC Talks In The Balance?

External Political Outlook

Signed, Sealed But Not Delivered

CAN Vs Mercosur?

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

Narcotics and Security

Columbia Security Risk Rating

Colombia Conflict Risk

Colombia Terrorism Risk

Colombia Physical Safety Risk

Chapter 4 - Security Overview

Internal Security Situation

Civil War?

Paramilitary Demobilisation

FARC And Counter-Insurgency

Negotiations with the ELN

External Security Situation

Colombia-US Relations

Colombia-Venezuela Relations

Colombia-Ecuador Relations

Colombia-Nicaragua Relations

Colombia’s Multilateral Relations – European Union

Colombia’s Multilateral Relations – Organisation of American States

Table: Colombia Changes In Security Situation

Chapter 5 - Military Structure & Defence Industry

Armed Forces

Regional Armed Forces (including conscripted) 2006

International Deployment

Table: Foreign Deployments

Market Overview

Arms Trade Overview

Imports

Industry Trends & Developments

Procurement Trends & Developments

Table: Comparison Of Military Equipment And Proposed Procurements

Chapter 6 - Industry Forecast Scenario

Table: Colombia Defence Sector Historical Data & Forecasts

Table: Colombia Defence Sector Historical Data & Forecasts

Key Risks to BMI’s Forecast Scenario

Chapter 7 - Macroeconomic Forecast

Moderation To Sustainable Growth

Table: Colombia – Economic Activity

Chapter 8 - Competitive Landscape

Table: Key Players – Colombia Defence Sector

Chapter 9 - Company Profiles

Industria Militar (Indumil)

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: