Peru - Military Spending

By the early 1990s the military domain commanded 20 percent of central-government expenditures, 5 percent more than education, the next largest share of the national budget, and much more than health services, which claimed 5.8 percent in 1988. Indeed, Peru's military expenditures of US$106 per capita exceeded three times the average expenditure per capita of all other South American nations in 1988. Over a twenty-year period, between 1972 and 1992, the military budget gained 38 percent in its share of the national budget, whereas education dropped by 35 percent and health gained by less than 5 percent.

Center-right Peruvian President Alan García came in for criticism for calling for a curb on military spending in Latin America while increasing arms purchases in Peru. Since the 2006 start of García’s term, which ended in July 2011, Peru’s armed forces spent 807 million dollars on weapons and other war materiel — an average of 161.4 million dollars a year and 13.4 million dollars a month — the highest spending on upgrading the country’s military since the regime of Alberto Fujimori (1990-2000), according to different sources.

According to Defence Ministry sources, the biggest amounts went towards the upgrade of 12 French-made Mirage 2000 fighter jets (120 million dollars) and of eight Russian MiG-29 fighter aircraft (108 million), and the purchase of six Russian-made Mi-17 helicopters and two Mi-35P combat helicopters (107.8 million), Spike Israeli anti-tank missiles (87.7 million), French-built Exocet anti-ship missiles (70 million), and 12 Canadian DH6-400 Twin Otter transport aircraft (67 million dollars).

While possibly there is not an “arms race” in this region, there is a tendency to upgrade existing equipment. And these upgrades in turn triggers weapons purchases in neighboring countries, especially in cases of long-standing border disputes or military tension. A case in point is that of Peru and Chile. Santiago’s purchase of 132 Leopard 2 tanks from the German army for 124 million dollars prompted the Peruvian army to acquire 113.7 million dollars worth of Israeli and Russian anti-tank missiles. And Chilean air force purchases bringing its total fleet of F-16 fighter jets to 46 led Peru’s air force to refurbish its fleet of 12 Mirage 2000s and 19 MiG-29s, while it was also preparing to upgrade 18 Russian Sukhoi-25 fighter bombers.

In Peru, military spending reached $2.09 billion in 2011, a nearly 40 percent increase from 2008. The government has also funded new aircraft purchases, in part to focus on coca eradication. In 2011, Peru signed an agreement to purchase 12 air force planes from Canada’s Viking Air for $100 million. Last year, the government announced a second plane purchase: a fleet of new fighter planes from Korea Aerospace Industries. But as the country was due to sign the $200 million contract with South Korea this month, Peru’s Ministry of Finance objected, saying the air force required previous approval from the ministry.

With so much attention focused on Brazil and its security modernization prior to the World Cup and Summer Olympics, it’s easy to forget that there are other countries in South America making significant strides in military procurement. Peru, though it maintains a relatively small military, is shaping up to be one of the more vibrant markets over the coming decade.

Since the early 2000’s, Peru has experienced steadily-improving economic conditions owing to a flourishing export-oriented economy. Increased foreign investment and the universal appeal of Peru’s main exports – gold, copper, and other vital metals – have lifted the country out of its previous slump and left it with a much stronger economic outlook. That influx of money is finally beginning to trickle down to the military, and with an aging inventory of platforms and systems, they are happy to see it. While GDP was slated to continue growing at around 6% to $223b in 2014, military spending, at least in the short term, is projected to more than double that rate.

Peruvian military procurement is focused on two main mission areas – naval security and anti-narcotics. Regional competition and a sizable coastline put pressure on the Peruvian military to maintain a robust, modern naval force. This has been a struggle up until recently, when new funding allowed the Peruvian navy to start exploring its options and expanding purchases. Daewoo International recently signed contracts with the Peruvian navy to build multipurpose vessels, while the fleet added river patrol boats, opened a competition for 500-ton patrol vessels, and stated a need for an Antarctic research vessel.