Mexican Defense Expenditure Grew at a CAGR of 8.6%

Monday 10 December 2012, Amsterdam

During the review period, Mexican defense expenditure grew at a CAGR of 8.6% and registered US$6.09 bn in 2012. The persistent threat from drug cartels and active participation in peacekeeping missions stimulated expenditure during the review period, and these factors are expected to continue to drive defense expenditure throughout the forecast period. The expenditure on defense by Mexico is anticipated to increase at a CAGR of 9% and reach a value of US$9.55 bn by 2017; as a percentage of gross domestic products (GDP), the Mexican defense budget stood at 0.5% in 2012 and is expected to marginally increase to 0.6% of GDP by 2017.

The capital expenditure allocation of the Mexican defense budget, which represented 3.8% during the review period, is expected to increase to 4.2% during the forecast period as a result of the continued modernization of military forces; consequently, revenue expenditure is forecast to decrease from 96.2% in the review period to 95.8% in the forecast period. Key opportunities for equipment suppliers are expected in areas such as surveillance equipment, special operation helicopters, and maritime patrol aircraft.

Mexico has not disclosed any offset obligations imposed for its arms procurement; however, in 2009, in its first offset agreement with the purchase of six EC 725 multipurpose helicopters worth US$300 m from Eurocopter, the French company agreed to set up an assembling facility in Mexico. During the forecast period, the country is also expected to give preference to arms exporters that provide technology transfers to offset equipment imports; moreover, the FDI policy in the country is favorable to foreign companies as Mexico allows 100% FDI in the defense sector.