São Paulo – The Brazilian defence industry is betting on the future and government incentive to grow and boost its exports. The industry posts annual revenues of US$ 2.7 billion, of which US$ 1 billion originates from foreign sales. This Tuesday (6th), on presenting the estimates for coming years, the president of the Brazilian Association of Defence and Security Materials Industries (Abimde), Orlando José Ferreira Neto, stated that exports should reach US$ 4.2 billion by 2020, and US$ 7 billion by 2030.
Whether or not that goal will be attained, according to Abimde projections, is up to government incentive. “In practice, the industry’s revenues depend on purchases by the government and by security companies,” said Neto. In September, the Brazilian president Dilma Rousseff signed provisional measure 544 (MP 544), exempting the industry from paying Tax on Industrialized Products (IPI, in the Portuguese acronym), the Social Integration Program tax (PIS) Contribution for the Financing Social Security (Cofins) for the next five years.
As a result of MP 544, Orlando is hoping the industry will return to growth and, as a result, Brazil will gain significance in the international defence market. For such, in addition to MP 544, which regulates and aids the development of the industry, he says, it takes investment from the country in sectors such as industry-oriented education and infrastructure. In order for the industry to develop technology, some companies will also have to invest in risky projects, said Neto. The Abimde estimates that industry revenues will reach US$ 7.7 billion by 2020, and US$ 11.4 billion by 2030.
Those revenues will be partly generated through higher exports. In this particular industry, however, exporting calls for more than just being competitive. “Product sales are linked to geopolitics. It is only natural that [Brazilian products] enjoy prominence in South America and that they should gain space in Africa and in nonaligned Asian countries [a group of 118 nations that do not consider themselves aligned with any of the world powers]. Therefore, we cannot hope for any major sales to the United States, Europe and Russia. However, in places where Brazil is aiming for greater projection and influence, such as Africa, it is feasible,” said Neto.
In the long run, defence and security industry investment total US$ 120 billion, according to the Abimde. In the short term, investment stands at US$ 40 billion and include projects such as tender FX-2, for the purchase of 36 jet fighters. The tender was suspended this year by president Dilma Rousseff. The sum also includes the development of the Border Surveillance System (Sistema de Vigilância de Fronteira – Sisfon) and the Blue Amazon Management System (Sistema de Gerenciamento da Amazônia Azuil – Sisgaaz).
According to Orlando, who is also Embraer’s commercial vice president for Defence, 2011 was a bad year for the industry due to budget contingency. Still, much “political” progress has been made. “We believe that in 2012 the industry will return to growth,” said Neto.
*Translated by Gabriel Pomerancblum
