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.
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