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AFTER YEARS OF DECLINE, CHILE'S DEFENSE SPENDING ENVIRONMENT IMPROVES
Tuesday, June 12, 2018
Click image for a larger picture

Chilean Piranha in the desert

Source: Flickr / Chilean Army


Chilean Piranha in the desert

Source: Flickr / Chilean Army


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NEWTOWN, Conn. -- Chile operates a well-equipped military. The main objectives of Chile's military are to secure the country from external threats; to protect the country against terrorism, drug traffickers, and organized crime; and to provide quick and effective responses to natural disasters. The Chilean military projects power within the region as a deterrent and to protect economic interests. Chile also wants to increase its cooperation with other countries by participating in peacekeeping forces.

Chile's defense spending has grown in nominal terms over the past five years. Between 2013 and 2017, defense spending increased at an annualized rate of 4.4 percent, rising from CLP1.4 trillion to CLP 1.7 trillion. However, due to inflation real defense spending stayed roughly stagnant during that period, rising from CLP1.6 trillion in 2013 to CLP1.7 trillion in 2017. Further demonstrating declining purchasing power in Chile, the budget actually declined in dollar terms, from $2.8 billion to $2.6 billion.

During that time, Chile's government emphasized other priorities, such as education. As a result, defense spending declined as a percent of the total national budget from 4.7 percent in 2013 to 3.9 percent in 2017.

Despite conflicting statistical measures of growth, the overall defense spending environment in Chile has been improving. After declining between 2011 and 2015, Chile's defense budget increased by 2 percent in 2016 and 13.1 percent in 2017. Chile will continue to increase defense spending in 2018 by 7.1 percent.

Chile's defense plan for 2018 calls for 66.8 percent of the budget to pay for personnel expenses. That is a drop from 68.7 percent in 2017. However, acquisition of non-financial assets only accounts for 1.6 percent of the budget, leaving little room to purchase military equipment.

Chile's defense budget will continue to rise going forward. The government's efforts to rein in spending provide some risk to future growth. However, Chile's economy is expected to remain one of the more stable in the region, enabling the government to steadily increase defense spending while also funding promised social reforms. The country's military is seen as a source of deterrence in the region, and also gives the country the ability to participate in peacekeeping activities and support the population during humanitarian crises. For these reasons, Chile's defense budget is expected to steadily climb at a compound annual growth rate of 4.2 percent between 2018 and 2023.

Source:  Forecast International
Associated URL: www.forecastinternational.com
Source Date: June 12, 2018
Author: B. Ostrove, Analyst 
Posted: 06/12/2018

 

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