south american register of aggregate defense...

South American Register of Aggregate Defense Expenditures

SOU

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AM

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OF AG

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SOUTH AMERICAN REGISTER OF AGGREGATE DEFENSE EXPENDITURES

2006-2010

Volume 1 • Nº 1 • Year 2014

Carlos Pellegrini 1285 (1009), Buenos Aires, Argentina.

Phone: +54-11-43117124

www.ceedcds.org.ar

Published by: Center for Strategic Defense Studies of the South American Defense Council.

South American Nations.

Bardelás, Fontana & Oteiza Design

SOUTH AMERICAN REGISTER OF AGGREGATE DEFENSE EXPENDITURES

2006-2010Center for Strategic Defense Studies

South American Defense CouncilUnion of South American Nations

7

H. E. Agustín RossiMinister of DefenseRepublic of Argentina

H. E. Rubén Aldo Saavedra SotoMinister of DefensePlurinational State of Bolivia

H. E. Celso AmorimMinister of DefenseFederative Republic of Brazil

H. E. Jorge Burgos VarelaMinister of National DefenseRepublic of Chile

H. E. Juan Carlos Pinzón BuenoMinister of National DefenseRepublic of Colombia

H. E. María Fernanda Espinosa GarcésMinister of National DefenseRepublic of Ecuador

H. E. Clement James RoheeMinister of Home A rsCooperative Republic of Guyana

H. E. Army Gen. (R) Bernardino Soto EstigarribiaMinister of National DefenseRepublic of Paraguay

H. E. Pedro Álvaro Cateriano BellidoMinister of DefenseRepublic of Peru

H. E. Lamuré Carlo Adolf LatourMinister of DefenseRepublic of Surinam

H. E. Eleuterio Fernández HuidobroMinister of National Defense Defensa NacionalOriental Republic of Uruguay

H. E. Adm. in Chief Carmen Teresa Melendez RivasMinistry of Popular Power for the DefenseBolivarian Republic of Venezuela

South American Defense Council


8

Dr. Jorge Raúl Fernando FernándezSecretary of Strategy and Military A s Republic of Argentina

Army Gen. Gustavo Adolfo Sandoval EspinozaDeputy Minister of Defense and Integral Development Cooperation Plurinational State of Bolivia

Army Gen. José Carlos de NardiChief of the Joint Sta of the Armed Forces Federative Republic of Brazil

Dr. Marcos Robledo HoeckerDeputy Secretary of Defense Republic of Chile

Dr. Jorge Enrique Bedoya VizcayaViceministro de Defensa para las Políticas y Asuntos InternacionalesRepublic of Colombia

Dr. Carlos Larrea DávilaDeputy Minister of National Defense Republic of Ecuador

Dr. Roger LuncheonHead of the Presidential Secretariat and Head of the Defense BoardCooperative Republic of Guyana

Brig. Gen. (R) Victor Picagua AraujoDeputy Minister of National Defense Republic of Paraguay

Dr. Iván César Vega LoncharichDeputy Minister for Defense PoliciesRepublic of Peru

Dr. John Guno Arthur AchongDirector of DefenseRepublic of Surinam

Dr. Jorge Edgardo Menéndez CorteDeputy Secretary of National Defense Oriental Republic of Uruguay

Major Gen. Luis Eduardo Quintero MachadoDeputy Minister of Education for the DefenseBolivarian Republic of Venezuela

CEED Council of Directors


9

Alfredo W. Forti, MPADirector

Gen. (R) Gerardo Miguel Ángel Maldonado Gómez.Administrative Secretary

CEED Executive O ce

Mr. Daniel RodríguezLic. Pablo GalliRepublic of Argentina

Nav. Cap. Vladimir Cesar Terrazas Montesinos (May 2013 - December 2013)Plurinational State of Bolivia Nav. Cap. Ricardo Pinheiro PadilhaCol. Miguel Luiz Kothe JannuzziFederative Republic of Brazil Mr. Jaime Concha PuigrredónMr. Fernando VelascoRepublic of Chile

Col. Carlos Hernando Gordillo Jiménez (April 2013 - February 2014)Republic of Colombia

Pablo Celi de la Torre, PhD.Republic of Ecuador

Col. Julio Macedo CrialesNav. Cap. Mario Julio Hoyos PachecoRepublic of Peru

Lt. Col. Mitchell Juliën LabadieRepublic of Surinam

Col. Daniel Legnani

Oriental Republic of Uruguay

Div. Gen. Luz Maldonado López (May 2012 - April 2014)Bolivarian Republic of Venezuela

Group of Experts - National Delegates*

Sr. Claudio Alonso

Col. Eduardo Riveros GavilánRepublic of Paraguay

* This list reflects the current National Delegates and, where applicable, the last national representative appointed.


5. Conclusions

Table of Contents

BACKGROUND 19

METHODOLOGY 21

PREPARING THE REGISTER 23

2. South American Register of Defense Expenditures

2 . 1

2.2

2.3

REGIONAL DEFENSE EXPENDITURES 27

29DEFENSE EXPENDITURES WITH RELATION TO MACROECONOMIC VARIABLES

29

3. Defense Expenditures in the Region

3 . 1

3.2

3.3.1

3.3.2

DEFENSE EXPENDITURES AS A PERCENTAGE OF GROSS DOMESTIC PRODUCT (GDP)

30DEFENSE EXPENDITURES AS A PERCENTAGE OF GOVERNMENT SPENDING

1. Executive Summary

REGIONAL DEFENSE EXPENDITURES PER OBJECT 35

4. Qualitative Descriptors of Defense Expenditures

4. 1

4.2

REGIONAL EXPENDITURES ON PERSONNEL 38

REGIONAL EXPENDITURES ON OPERATIONS AND MAINTENANCE 40

REGIONAL EXPENDITURES ON INVESTMENTS 43

REGIONAL EXPENDITURES ON RESEARCH AND DEVELOPMENT 46

4. 1 . 1

4.1.2

4.1.3

4.1.4

REGIONAL DEFENSE EXPENDITURES PER INSTITUTION 48

13

17

25

33

63

Executive Summary

1

15

The South American Register of Defense Expenditures

is an instrument generated by the South American

Defense Council (CDS) as part of the Confidence Building

Measures agreed by the member countries of the Union

of South American Nations (UNASUR).

This Register is an official report on the defense

expenditures of the member countries of UNASUR,

based on a common definition of defense expenditures,

a standardized methodology for their measurement,

and a mechanism for the annual submission of their

respective information.

This Register was elaborated with the official information

submitted by the member countries.

Executive Summary

EXECUTIVE SUMMARY

�is Register is an o�cial report on the defense expenditures of the member countries of UNASUR.


South American Registerof Defense Expenditures

2

19

BACKGROUND

The Register is the result of a process that started with

the Joint Declaration of the Council of Heads of State

of UNASUR (Bariloche, August 28, 2009) whereby the

Council decided “To strengthen South America as a Zone

of Peace, committing to establishing confi ce-building

mechanisms in defense and security, sustaining decisions

to abstain from reverting to threats or the use of force

against the territorial integrity of another UNASUR state”.1

Subsequently, at the Extraordinary Meeting of Foreign

and Defense Ministers of UNASUR (Quito, September

15 and November 27, 2009), the decision was made to

establish a Confidence Building Mechanism, including

specific provisions for its implementation and guarantees.

With reference to defense expenditures, an agreement

was reached to make progress in the following areas:

2.1

Register is an expression of the political will and the consensus of the twelve member countries of UNASUR.

1 Joint Declaration of the Council of Heads of State of UNASUR, Bariloche, Argentina, August 28, 2009.

SOUTH AMERICAN REGISTER OF DEFENSE EXPENDITURES


is an expression of the political will and the consensus

of the twelve member countries of UNASUR in the area

of cooperation in defense. This Register also represents

a clear transparency and confidence uilding measure

that strengthens the regional integration process and

the common objective of conceiving South America as

a Zone of Peace.

With this fi issue, which regional aggregate

data, the Register not only becomes an institutional

product to be regularly updated in the area of

information on defense expenditures in the region, but

also an important input for decision-making in each

Member State and the South American Defense

Council itself.


20 South American Register of Aggregate Defense Expenditures

“The application of this section shall be conducted in two stages. The first stage shall refer to the collection of information on defense expenditures and the processes for the approval of the national defense budgets, in accordance with the provisions in the 2009-2010 Action Plan, and a second stage shall be intended to certify the information of the Member States and establish a standardized measurement of those expenditures”.3

The following was established for the enforcement of

these agreements:

2 Resolution of the Extraordinary Meeting of Foreign and Defense Ministers of UNASUR, Section 1. Description of Confidence Building Measures, subsection I Exchange of Information and Transparency, letter B. Defense Expenditures. Quito, Ecuador, September 15 and November 27, 2009.3 “Procedures for the Implementation of o fi and Security Building Measures”, item B. Defense Expenditures, approved by the II Regular Meeting of the CDS, Guayaquil, Ecuador, May 6 and 7, 2010.4 “Procedures for the Implementation of o fi and Security Building Measures”, item B. Defense Expenditures, approved by the II Regular Meeting of the CDS, Guayaquil, Ecuador, May 6 and 7, 2010.5 Declaration of Guayaquil, II Regular Meeting of the South American Defense Council, May 6 and 7, 2010.6 The members of the CDS Technical Group that participated in the process for the design of the Methodology for the Registration of Defense Expenditures were: for the Argentine Republic, Mr. Jorge Mauro Vega; for the Plurinational State of Bolivia, Div. Gen. José Luis Prudencio Medrano; for the Federative Republic of Brazil, Mr. Marco Antonio Alves; for the Republic of Chile, Gen. (R) Carlos Molina Johnson; for the Republic of Colombia, Mr. Andrés Ballesteros Moyano; for the Republic of Ecuador, Ms. Mariana Naranjo Bonilla; for the Republic of Paraguay, Col. Ramón Benegas Ferreira; for the Republic of Peru, Col. Raúl Patrnogic Rengifo; for the Republic of Suriname, Lt. Col. Mitchell Juliën Labadie; and for the Bolivarian Republic of Venezuela, Col. Juan Valles Petrilli.7 II Declaration of Lima, I Extraordinary Meeting of the South American Defense Council, Lima, Peru, November 10 and 11, 2011.

In 2010 and 2011 the Working Group, which included

representatives from the Defense Ministries of the member

countries , made progress on the analysis and standardization

of common technical parameters for measuring defense

expenditures, after which they submitted their Report.

At its I Special Meeting (Lima, November 10 and 11, 2011),

and following reception of the Report from the Working

Group, the South American Defense Council decided: “The Member States shall submit to the Chair of the South American Defense Council, by April 30 each year, the report on defense expenditures of the previous fiscal year based on the categories included in the United Nations “System for the Standardized International Reporting of Defense Expenditures” (…).

The Member States shall submit to the Chair of the South American Defense Council the defense budgets for the past 5 years, in a gradual manner, by October 30, 2010.

2.

1.

For the purposes of enforcing these agreements, the

Ministers decided at the same Meeting:

“To promote transparency in defense expenditures and set up a Working Group led by Argentina, Chile and Peru to develop a methodology to address technical and design elements of the system for measuring defense expenditures in our countries based on common and generally accepted principles”.5

“To approve the Final Report of the Working Group responsible for designing a Common Methodology for Measuring Defense Expenditures, to establish the South American Register of Defense Expenditures as a mechanism to measure the spending of UNASUR Member States, and to make the first submission of the information by December 31, 2011 through the Pro Tempore Chair of the CDS to the Center for Strategic Studies in its capacity as technical enforcement authority”.7

With this background, at the II Regular Meeting of the

CDS (Guayaquil, May 6 and 7, 2010) the Defense Ministers

adopted the “Procedures for the implementation of

o fi ce and Security Building Measures”. With respect

to defense expenditures, this document established that:

To inform “(…) on defense expenditures of the previous fiscal year, based on the categories included in the United Nations “System for the Standardized International Reporting of Military Expenditures.”

To submit “(…) the defense budgets of the past 5 years to the CDS, in a gradual manner.

To report the national defense budget in all its stages: formulation, approval, execution and control and certify the information with the South American Defense Council in order to establish a standardized measurement of defense expenditures”.2

The Member States shall submit information on their national defense budgets in all their stages: formulation, approval, execution and control (…).

The information above shall be displayed in the web pages of the respective Ministries of Defense and in the web page of the South American Defense Council.

The Chair of the Defense Council, following approval by the Member States, shall promote the design of a methodology for the standardized measurement of defense expenditures (…)”.4

3.

4.

5.

21

METHODOLOGY

The South American Register of Defense Expenditures is

based on a common definition of Defense Expenditures, a

standardized methodology for their measurement and an

annual mechanism for the submission of the information

from the member countries to the CEED, the technical

body responsible for its processing and publication.

In accordance with the definition adopted in the Common

Methodology for Measuring Defense Expenditures

approved by the CDS, Defense Expenditures shall mean:

“all the resources allocated by the Government for funding

the activities involved in the Nation’s external security.

It also includes the foreing assistance received for that

purpose (both monetary and non-monetary)”.8

These expenditures correspond to the Ministries of

Defense and their related bodies, the Armed Forces

and any other government agency whose function is

to defend the country against foreign threats (central

government and decentralized organizations).

2.2

Defense Expenditures shall mean: “all the resources allocated by the Government for funding the activities involved in the Nation’s external security.

8 Final Report of the Working Group for the Design of a Common Methodology for Measuring Defense Expenditures, section IV. Definition of defense expenditure, page 9.

Subsequently, the CEED, in its capacity as technical body,

submitted at the VI Meeting of the Executive Board of

the CDS (Asunción, June 4, 2012) a preliminary version

of the South American Register of Defense Expenditures

for the period 2006-2010, drafted in accordance with

the Common Methodology for Measuring Defense

Expenditures approved by the CDS and based on the

official information sent by the countries in due time.

Following, at the VIII Regular Meeting of the Executive Board

of the CDS (Lima, May 16 and 17, 2013), the CEED submitted

the fi l version of the Register containing the successive

observations, suggestions and data adjustments requested

by the member countries for its offi ial publication.


Finally, as a result of ministerial debate on its publication

in the V Ordinary Meeting of CDS (Paramaribo, February

20, 2014), the Ministers decided "the publication of the

South American Register of Defense Expenditure

2006-2010 only with regard to regional aggregate data

in order to have a regional vision”. Consequently, in this

fi edition, the national information submitted by the

Ministries of Defense and processed as set out in the

Methodology of the South American Register of

Defense Expenditures is not published.




is based on the incurred expenditures of the fi al year,

including extra-budgetary funding sources.

This common defi tion of defense expenditures excludes

those related to the internal security of the Member

States. Therefore, the expenditures of entities such

as law enforcement agencies, internal security forces

(border patrol, coast guard, etc.), civil aviation control

and maritime security agencies are not included.

The standardized methodology establishes an information

submission mechanism and a unified format by type of

expense and by defense institutions incurring the expense.

�e South American Register of Defense Expenditures is based on incurred expenditures.

The classification by object of expenditure includes:

The classification by agency executing the expenditure is:

Ministry of Defense;

Joint Staff;

Army;

Navy;

Air Force;

Others.

a.

b.

c.

d.

e.

f.

Personnel;

Operations and maintenance: consumer goods and services;

Investments: weapon systems, physical infrastructure, other equipment;

Research and Development.

1.

2.

3.

4.

�e methodology establishes an information submission mechanism and a uni�ed format by type of expense and by defense institutions incurring the expense.

23

Total Defense Expenditure: annual consolidated and accumulated amount for the year and annual variation rate during the five year period between 2006 and 2010.

Relative Defense Expenditure: measurement of the defense expenditure with reference to GDP and government spending.

Expenditure per Object: measurement of expenditure in the components a) Personnel; b) Operations and Maintenance; c) Investment; d) Research and Development.

Expenditure per Institution: considering the Ministries of Defense, Joint Staffs (or equivalent), Armed Forces (Army, Navy and Air Force) and Others if any.

1.

2.

3.

4.

With reference to the submission mechanism approved

by the CDS, by July 31 of each year, the countries shall

send to the CEED the expenditure information for the

previous fi year expressed in local currency and US

dollars (USD) at the annual average exchange rate.

For the qualitative analysis of the expenditure, the

indicators of reference shall be the defense expenditure as

a percentage of Gross Domestic Product (GDP) –nominal,

informed by the Central Banks or similar entities– and

the defense expenditure as a percentage of government

spending (both budgetary and extra-budgetary).

In the analysis, processing and submission of the

relevant information, the following criteria were taken

into account:

2.3 PREPARING THE REGISTER

The CEED, as the relevant technical body, is responsible for

the reception, consolidation, analysis, publication and storage

of the information submitted by the member countries of

the CDS. Furthermore, the CEED is in charge of proposing

the revision and/or updating of the methodology.

For this fi issue of the South American Register

of Defense Expenditures, the CEED conducted the

following actions and procedures:9

Reception of the information from the twelve member countries based on the Common Methodology;

Processing, analysis and validation of the information with each of the countries;

Meetings with the Working Group for the Design of a Common Methodology for Measuring Defense Expenditures, in order to review the information submitted by the countries in accordance with the methodology; make recommendations for the improvement of the Register; and design the criteria for the regional consolidation of the information;

Systematization of the information for submission to the CDS;

2.

3.

1.

4.

5.


Preparation of the final version of the South American Register of Defense Expenditure that, by disposition of the V Ordinary Meeting of the CDS, will be published this time only with regard to regional aggregate data.10

9 The National Representatives to the CEED that participated in the process for the preparation of the Register were: for the Argentine Republic, Col. Gustavo Dedieu (2011-2014) and Mr. Daniel Rodríguez; for the Plurinational State of Bolivia, Nav. Cap. Oscar o o Peñaranda (2011-2012) and Nav. Cap. Vladimir Cesar Terrazas Montesinos (2013-2013); for the Federative Republic of Brazil, Col. Américo Kunio Taguchi (2011-2013), Air Col. Alípio Ávalos Lopes (2012-2014) and Nav. Cap. Ricardo Pinheiro Padilha; for the Republic of Chile, Col. Esteban Guarda Barros (2011-2012), Ms. Verónica Barrios Achavar (2012-2013), Dr. Jaime Concha Puigrredón and Mr. Fernando Velasco; for the Republic of Colombia, Col. Oscar Cardona Prada (2012-2013) and Col. Carlos Gordillo Jiménez (2013-2014); for the Republic of Ecuador, Col. Franco Ordoñez (2011-2012) and Col. Fernando Carpio (2012-2014); for the Republic of Peru, Gen. Marco Miranda Valdez (2012-2014) and Nav. Cap. Pedro Ramírez Nuques (2012-2014); for the Republic of Suriname, Lt. Col. Mitchell Juliën Labadie; for the Republic of Uruguay, Lt. Gen. Ángel Bertolotti (2011-2012) and Gen. José María Burone (2013-2013); and for the Bolivarian Republic of Venezuela, Div. Gen. Luz Maldonado López (2012-2014). 10 In the literal 3 of the Ist Paramaribo Declaration, of the V Ordinary Meeting of the South American Defense Council, Ministers decided the "publication of the South American Register of Defense Expenditures 200 2010 only with regards to aggregated regional data in order to have a regional vision".


Defense Expenditures in the Region

3

27

REGIONAL DEFENSE EXPENDITURES

The Register the evolution of the ted

annual expenditures for the period 2006-2010, in

rrent and onstant dollars when indi ed, taking

2006 as the base year.

The regional defense expenditures in the period under

consideration amount to 126,032,188,000 US dollars, with an

average annual expenditure of 25,206,438,000 dollars.

3.1

�e Register re�ects the evolution of the accumulated annual expenditures for the period 2006-2010.

IN MILLION USD

IN MILLION USD

REGIONAL DEFENSE EXPENDITURES DURING THE PERIOD 2006-2010

CURRENT USD

CONSTANT USD

2010

33,176

2009

27,375

2008

27,010

2007

20,826

2006

17,645 25,206AVERAGE

GRAPH 1 //

2010

30,858

2009

25,754

2008

25,679

2007

20,239

2006

17,645 24,035AVERAGE

USD 126,032

USD 120,174

When onsidering the o t in onstant dollars, the

ted total is 120,174,393,000 dollars, with an

average annual expenditure of 24,034,879,000 dollars.

DEFENSE EXPENDITURES IN THE REGION



RELATIVE ANNUAL VARIATION RATE FOR THE REGIONAL DEFENSE EXPENDITURE IN THOUSAND DOLLARS

TABLE 1 //

TOTAL EXPENDITURES ANNUAL VARIATION

CURRENT USD CONSTANT USD

YEAR

17,644,593

20,826,253

27,010,337

27,374,774

33,176,231

126,032,188

17,644,593

20,238,920

25,678,887

25,753,828

30,858,166

120,174,399

2006

2007

2008

2009

2010

14.70%18.03%

26.88%29.69%

0.29%1.35%

19.82%21.19%

RELATIVE ANNUAL VARIATION RATE FOR THE REGIONAL DEFENSE EXPENDITURE AND GDP

GDPDEFENSE

EXPENDITURE

2006 - 2007

18.03%

23.52%

2007 - 2008

29.69%

21.20%

2008 - 2009

1.35%-2.47%

2009 - 2010

21.19% 21.00%

GDPDEFENSE

EXPENDITURE

2006 - 2007

14.70%

20.03%

2007 - 2008

26.88%

18.57%

2008 - 2009

0.29% -3.49%

2009 - 2010

19.82% 19.63%

CURRENT USD

CONSTANT USD

GRAPH 2 //

The following are the annual variations registered during the period:

DEFENSE EXPENDITURES WITH RELATION

TO MACROECONOMIC VARIABLES

The following tables and graph defense

expenditures as a of o o o

o o

The information was o o o both

the annual and the for the period

3.2

DEFENSE EXPENDITURES AS A PERCENTAGE

OF GROSS DOMESTIC PRODUCT

3.

2010

0.95%

2009

0.95%

2008

0.92%

2007

0.86%

2006

0.90% 0.92%

GRAPH 3 //

REGIONAL DEFENSE EXPENDITURE AS A PERCENTAGE OF REGIONAL GDP DURINGTHE PERIOD 2006-2010

The total South defense expenditure as a

of regional is stable throughout the

fi period, with an of This

shows that in global terms South is below other

regions in the regional defense expenditure / regional

o

total South American defense expenditure as a percentage of regional GDP is stable throughout the ve-year period, with an average of 0.92%.

EFENSE EX EN ITURES IN THE RE ION


30

DEFENSE EXPENDITURES AS A PERCENTAGE

OF GOVERNMENT SPENDING

3.2.2

2010

4.15%

2009

3.96%

2008

4.18%

2007

3.91%

2006

4.20%

4.08%

AVERAGE

REGIONAL DEFENSE EXPENDITURE AS A PERCENTAGE OF REGIONAL GOVERNMENTSPENDING DURING THE PERIOD 2006-2010

GRAPH 4 //

The information contained in the following graph demostrates

that relation between regional defense expenditures and

regional government spending remains stable, with an

average factor of 4.08%, throughout the period.


Qualitative Descriptors ofDefense Expenditures

4

33

REGIONAL DEFENSE

EXPENDITURES PER OBJECT

Below is the regional expenditure for the period 2006-2010

and the average annual variation rate for each of the following

components: a) Personnel; b) Operations and Maintenance;

c) Investments; and d) Research and Development.

4.1

REGIONAL ANNUAL DEFENSE EXPENDITURES IN PERCENTAGES PER OBJECT OF EXPENDITUREDURING THE PERIOD 2006-2010

AVERAGE

PERSONNEL

62.76%

57.91%

55.89%

58.46%

57.31%

58.12%

OPERATIONS ANDMAINTENANCE

22.80%

23.83%

23.15%

24.17%

23.38%

23.49%

INVESTMENTS

13.58%

17.61%

20.18%

16.48%

18.40%

17.56%

RESEARCH ANDDEVELOPMENT

0.35%

0.33%

0.61%

0.72%

0.75%

0.59%

YEAR

2006

2007

2008

2009

2010

TABLE 2 //

QUALITATIVE DESCRIPTORS OF DEFENSE EXPENDITURES


34

REGIONAL DEFENSE EXPENDITURES PER OBJECT OF EXPENDITURE DURING THE PERIOD 2006-2010

GRAPH 5 //

17,648

7,213

5,677

231

2010

15,057

6,224

4,243

185

14,351

5,945

5,181

157

2008

11,720

4,823

3,563

66

2007

11,073

4,023

2,397

62

2006

19,012

7,755

6,104

248

16,004

6,616

4,510

196

2009

15,095

6,253

5,449

165

12,060

4,963

3,667

68

11,073

4,023

2,397

62


35

The highest expenditures are observed in the area of

Personnel, with an average of 58.12% for the five-year

period, followed by Operations and Maintenance

(23.49%), Investments (17.56%) and Research and

Development (0.59%).

This breakdown per object reveals the fi

GRAPH 6 //

AVERAGE REGIONAL DEFENSE EXPENDITURE PER OBJECT OF EXPENDITURE FOR THE PERIOD 2006-2010

58.12% 23.49% 17.56% 0.59%

incidence of personnel expenditures throughout

the region as a percentage of the total regional

defense expenditure and the fact that “Personnel”

and “Operations and Maintenance” amount to a little

over 80% of the spending, whereas “Investments” and

“Research and Development” combined barely reach

19% of the total regional expenditure for the period.

2006

20.82% 17.22% 19.18%

2007 2008 20102009

ANALYSIS OF REGIONAL DEFENSE EXPENDITURE EXECUTED PER OBJECT DURINGTHE PERIOD 2006-2010

85.99%82.01%

79.18% 82.78%

IN MILLIONS USD

PERCENTAGE OF EXPENDITURE ON INVESTMENTSAND RESEARCH AND DEVELOPMENT

PERCENTAGE OF EXPENDITURE ON PERSONNELAND OPERATIONS AND MAINTENANCE

EXPENDITURE ON INVESTMENTSAND RESEARCH AND DEVELOPMENT

EXPENDITURE ON PERSONNELAND OPERATIONS AND MAINTENANCE

GRAPH 7 //

15,09617,002

21,34822,620

26,768

2,4593,735

5,615 4,7076,352

80.82%

14.01% 17.99%



36

REGIONAL EXPENDITURES ON PERSONNEL

This object of expenditure includes all salaries that the

Government as employer pays to military and civilian

personnel in the Ministries of Defense, the Armed Forces

and other related organizations. Retired personnel or

pensioners are not considered.

4.1.1

REGIONAL EXPENDITURE ON PERSONNEL DURING THE PERIOD 2006-2010 IN THOUSAND DOLLARS

TABLE 3 //

CURRENT USD CONSTANT USDYEAR

11,072,934

12,059,659

15,094,863

16,004,158

19,012,467

73,244,082

14,648,816

11,072,934

11,719,558

14,350,775

15,056,502

17,684,042

69,883,812

13,976,762

2006

2007

2008

2009

2010


37

In South America, the regional expenditure on Personnel

as a percentage of the total regional defense expenditure

remains stable at an average of 58.12% during the period.

REGIONAL PERSONNEL EXPENDITURE AS A PERCENTAGE OF THE REGIONAL DEFENSEEXPENDITURE DURING THE PERIOD 2006-2010 (IN PERCENTAGES)

20102009200820072006

GRAPH 8 //

58.12%

62.76%

57.91%

55.89%

58.46%

57.31%

DEFENSEEXPENDITUREPERSONNEL

2006-2007

5.84%

18.03%

2007-2008

22.45%

29.69%

2008-2009

4.92%

1.35%

2009-2010

17.45%

21.19%

REGIONAL ANNUAL RELATIVE VARIATION RATE IN PERSONNEL AND DEFENSEEXPENDITURE DURING THE PERIOD 2006-2010

CURRENT USD

CONSTANT USD

8.91%

14.70%

25.17%

26.88%

6.02%

0.29%

18.80%

19.82%

DEFENSEEXPENDITUREPERSONNEL

GRAPH 9 //

2006-2007 2007-2008 2008-2009 2009-2010



38

REGIONAL EXPENDITURES ON OPERATIONS AND MAINTENANCE

This object of expenditure includes all the expenditures under

the “consumer goods” and “services” sub-components. The

regional expenditure on Operations and Maintenance as a

percentage of the regional defense expenditure remains

stable at an average of 23.49% during the period.

4.1.2

REGIONAL EXPENDITURE ON OPERATIONS AND MAINTENANCE DURING THE PERIOD2006-2010 IN THOUSAND DOLLARS

TABLE 4 //


4,022,673

4,962,666

6,252,759

6,615,988

7,755,147

29,609,234

5,921,847

4,022,673

4,822,711

5,944,535

6,224,235

7,213,285

28,227,440

5,645,488

2006

2007

2008

2009

2010

23.49%

AVERAGE

REGIONAL EXPENDITURE ON OPERATIONS AND MAINTENANCE AS A PERCENTAGEOF THE REGIONAL DEFENSE EXPENDITURE DURING THE PERIOD 2006-2010 (IN PERCENTAGES)

20102009200820072006

23.38%

24.17%

23.15%

23.83%

22.80%

GRAPH 10 //


39

DEFENSEEXPENDITURE

DEFENSEEXPENDITURE


2006 - 2007

23.37%

18.03%

2007 - 2008

26.00%29.69%

2008 - 2009

5.81%

1.35%

2009 - 2010

17.22%21.19%


2006 - 2007

19.89%

14.70%

2007 - 2008

23.26%26.88%

2008 - 2009

4.71%

0.29%

2009 - 2010

15.89%19.82%

CURRENT USD

CONSTANT USD

GRAPH 11 //

REGIONAL ANNUAL RELATIVE VARIATION RATE IN OPERATIONS AND MAINTENANCEAND DEFENSE EXPENDITURE DURING THE PERIOD 2006-2010



40

The methodology used by the Register divides the

category of “Operation and Maintenance” into the

subcategories: “Consumer goods” and “Service”.

Consumer goods are those perishable supplies and

materials used for the current operation, including those

.sdoog latipac fo riaper dna noitavreserp eht ni deilppa

By their nature, they are intended for final consumption.

Services are those expenditures incurred for the regular

administration and operation of the Defense institutions,

including: basic consumption, leases, cleaning, technicians

and professionals, advertising, printing, commercial

and financial items, general rates, other taxes and

contributions. Taking into account the sub-components

that make up this expenditure, it is possible to say that

there is a similar distribution between consumer goods

(47.35%) and services (52.65%).

GRAPH 12 //

REGIONAL EXPENDITURE ON OPERATIONS AND MAINTENANCE BROKEN DOWNINTO SUB-COMPONENTS FOR THE PERIOD 2006-2010 (IN PERCENTAGES)

47.35% 52.65%

methodology used by the Register divides the category of “Operation and Maintenance” into the sub-categories: “Consumer goods” and “Service”.



REGIONAL EXPENDITURES

ON INVESTMENTS

This object of expenditure includes all expenditures

corresponding to the following sub-components:

4.1.3

Weapon systems: includes the procurement and modernization of military equipment for Defense, such as combat vehicles, armored combat vehicles, large artillery systems, fighter planes and helicopters, warships, missiles and missile launchers.

Physical infrastructure: includes the expenses for facility construction (barracks, landing strips, piers and others) and the acquisition of real property.

Other equipment: includes the procurement and modernization of vehicles, aircraft, logistic support vessels, machinery and transportation equipment, health, communications, education, information technology, office supplies, furniture and large spare parts, among others. This sub-component also includes intangible assets, such as special permits and licenses.

1.

2.

3.

REGIONAL EXPENDITURE ON INVESTMENTS DURING THE PERIOD 2006-2010 IN THOUSAND DOLLARS

TABLE 5 //


2,396,798

3,666,579

5,449,401

4,510,208

6,103,913

22,126,899

4,425,380

2,396,798

3,563,175

5,180,778

4,243,144

5,677,425

21,061,321

4,212,264

2006

2007

2008

2009

2010

The regional expenditure on Investments accounts for

an average 17.56% of the regional defense expenditure

during the period 2006-2010.

object of expenditure involves all the expenditure corresponding to the following sub-components “Weapon System”, “Physical Infrastructure” and “Other equipment”.

41



42

DEFENSEEXPENDITURES

DEFENSEEXPENDITURES

INVESTMENTS

2006 - 2007

52.98%

18.03%

2007 - 2008

48.62%

29.69%

2008 - 2009

-17.23% 1.35%

2009 - 2010

35.34%

21.19%

2006 - 2007 2007 - 2008 2008 - 2009 2009 - 2010

INVESTMENTS

48.66%

14.70%

45.40%

26.88%

-18.10% 0.29%

33.80%

19.82%

CURRENT USD

CONSTANT USD

GRAPH 14 //

REGIONAL ANNUAL RELATIVE VARIATION RATE IN INVESTMENTS AND DEFENSEEXPENDITURE DURING THE PERIOD 2006-2010

17.56%

AVERAGE

REGIONAL EXPENDITURE ON INVESTMENTS AS A PERCENTAGE OF THE REGIONAL DEFENSEEXPENDITURE DURING THE PERIOD 2006-2010 (IN PERCENTAGES)

20102009200820072006

18.40%

16.48%

20.18%

17.61%

13.58%

GRAPH 13 //



43

According to the total expenditures for the Investments

category it shows that: 44.34% correspond to weapons

systems, 42.72% to other equipment, and 12.94% to

physical infrastructure.

WEAPON SYSTEMS

OTHER EQUIPMENT

PHYSICAL INFRASTRUCTURE

GRAPH 15 //

REGIONAL EXPENDITURE ON INVESTMENTS BROKEN DOWN INTO SUB-COMPONENTSFOR THE PERIOD 2006-2010 (IN PERCENTAGES)

42.72%

44.34%

12.94%

E


51.82%40.58% 37.11%

51.65%44.57%

11.14% 9.79% 7.24% 10.92%22.08%

36.96% 49.58% 55.61%37.39% 33.32%

20102009200820072006

GRAPH 16 //

ANNUAL REGIONAL EXPENDITURE ON INVESTMENTS BROKEN DOWN INTO SUB-COMPONENTSDURING THE PERIOD 2006-2010 (IN PERCENTAGES)

WEAPONSYSTEMS

PHYSICALINFRASTRUCTURE

OTHEREQUIPMENT


REGIONAL EXPENDITURES ON RESEARCH AND DEVELOPMENT

Under the Reserch and Development objet of expenditures,

the methodology includes the technological development

initiatives, innovation in production for defense and the

generation of new knowledge in the area; that is, all those

actions inherent to the acquisition of new knowledge and/or

the research on its applications.

4.1.4

REGIONAL EXPENDITURE ON RESEARCH AND DEVELOPMENT DURINGTHE PERIOD 2006-2010 IN THOUSAND DOLLARS

TABLE 6 //


61,795

68,187

165,444

196,359

248,451

740,237

148,047

61,795

66,264

157,289

184,732

231,091

701,172

140,234

2006

2007

2008

2009

2010

The expenditure on Research and Development

represents an average of 0.59% of the regional defense

expenditure for the period.

0.59%

AVERAGE

REGIONAL EXPENDITURE ON RESEARCH AND DEVELOPMENT AS A PERCENTAGEOF THE REGIONAL DEFENSE EXPENDITURE DURING THE PERIOD 2006-2010 (IN PERCENTAGES)

20102009200820072006

0.75%0.72%

0.61%

0.33%0.35%

GRAPH 17 //


DEFENSEEXPENDITURE

DEFENSEEXPENDITURE


2006 - 2007

10.34% 18.03%

2007 - 2008

142.63%

29.69%

2008 - 2009

18.69%

1.35%

2009 - 2010

26.53%21.19%

2006 - 2007 2007 - 2008 2008 - 2009 2009 - 2010


7.23% 14.70%

137.37%

26.88%17.45%

0.29%

25.10%19.82%

CURRENT USD

CONSTANT USD

GRAPH 18 //

REGIONAL ANNUAL RELATIVE VARIATION RATE IN RESEARCH AND DEVELOPMENT ANDDEFENSE EXPENDITURE DURING THE PERIOD 2006-2010

45



46

REGIONAL DEFENSE EXPENDITURESPER INSTITUTION

The executing unit or the institution incurring the expense

is another aspect for the classification of the defense

expenditure under the CDS Methodology. The execution

units are: the Ministry of Defense, the Joint Staff (or

equivalents), the Army, the Navy, the Air Force and other

government agencies whose priority function is defense.

4.2

BILLION USD

20102009200820072006 TOTAL

7,916,877 8,753,973 11,484,911 12,128,417 14,080,976

3,862,366 4,780,432 5,927,860 6,856,154 9,099,789

3,970,641 5,068,730 6,617,744 6,339,296 7,242,541

1,267,607 1,417,128 2,043,467 993,655 1,152,843

54,365,153

30,526,600

29,238,953

6,874,700

2,965,873

1,749,172

GRAPH 19 //

REGIONAL ANNUAL DEFENSE EXPENDITURE PER EXECUTING UNIT DURING THE PERIOD2006-2010 IN CURRENT DOLLARS

372,560 437,215 550,145 733,900

164,151 299,613 338,340 275,293 671,777

872,054


47

The following are the average percentages per executing

unit for the period 2006-2010: Army: 43.25%; Navy:

24.38%; Air Force: 23.26%; Ministry of Defense: 5.47%; other

agencies: 2.36%; and Joint Staff (or equivalent): 1.38%.

CONSTANT USD

CURRENT USD

GRAPH 20 //

REGIONAL DEFENSE EXPENDITURE PER EXECUTING UNIT FOR THE PERIOD 2006-2010

BILLION USD

1.75

1.65JOINT STAFF

30.53

29.06NAVY

54.37

51.85

2.97

2.82OTHERS

6.87

6.59

29.24

27.89AIR FORCE



48

The following is the average share of each execution

unit in the regional defense expenditure, presented per

object of expenditure for the period 2006-2010:

GRAPH 21 //

REGIONAL DEFENSE EXPENDITURE PER EXECUTING UNIT FOR THE PERIOD 2006-2010 (IN PERCENTAGES)

43.25%

23.26%

5.47%

1.38%

24.28%

2.36%


49

PERSONNEL OPERATION ANDMANTEINANCE

RESERCH ANDDEVELOPMENTINVESTMENTS

51.7%

23.5%

19.8%

3.5%

35.6%

20.9%

25.9%

8.7%

26.3%

30.5%

31.2%

8.0%

21.968%

49.680%

25.856%

0.019%

0.1% 3.2% 3.1% 0.004%

1.5% 5.7% 0.9% 2.508%

AVERAGE PER OBJECT EXPENDITURE PER EXECUTING UNIT FOR THE PERIOD 2006-2010

GRAPH 22 //

JOINT STAFF

NAVY

ARMY

AIR FORCE

MINISTRY

OTHERS



Conclusions

5

53

CONCLUSIONES

The technical characteristics of the Register as measurement instrument are the following i. a common definition of “Defense Expenditures”; ii. a standardized methodology for the presentation of the information that contemplates national particularities; iii. an annual standardized mechanism for the submission of the information by the member countries; iv. an intergovernmental technical body –the CEED– that, being responsible for its elaboration, ensures representativeness, objectivity, transparency and professional rigor;

The nature of the information contained in the Register: all the data is official information from each Member State of the CDS;

a)

b)

2.

3.

The South American Register of Defense Expenditures is

the result of the decision and political will of the Member

States of the CDS-UNASUR, and it is an unprecedented

implementation of transparency and o fi

measures among the nations of South America.

Given its sensitive subject matter, the South American

Register of Defense Expenditures has a political and

institutional fi that goes beyond the scope of

the South American Defense Council and undoubtedly

becomes an achievement and reference in the regional

integration process of UNASUR.

Being a technical instrument formulated internally from

within the region, the South American Register has

distinctive characteristics and particularities that make

it more suitable than other instruments or mechanisms

existing in the world for similar purposes.

From the technical and methodological point of view,

the added value of the South American Register of

Defense Expenditures compared to any other existing

mechanism for measuring expenditures is that:

1.

4.

CONCLUSIONS5.1 The character of that information: it refers to “incurred expenses” rather than budgetary items that may not have been realized;

The matrix for the analysis and submission of the information: it incorporates various quantitative variables and qualitative descriptors of the various categories and indicators of the reference for the classification and breakdown of the expenditure;

c)

d)

Through the methodology formulated by the South

American Register of Defense Expenditures it is

possible, for the fi t time in the region, to standardize

criteria for reporting budgetary and extra-budgetary

resources allocated by each State to the defense

sector, as well as standardize the reporting of the

resources from “external extra-budgetary assistance”

(if any).

The Register, as a regular and systematic update

of the defense expenditures, implies a paramount

transparency and o fi measure

within the region, as well as a relevant institutional

product for decision making in each Member State

and the South American Defense Council itself.

With respect to the international community, the

Register of Expenditures enables UNASUR to act

in multilateral forums, through an unprecedented

fact: to submit an annual regional report of

defense expenditures to those organizations,

like the Organization of American States and the

United Nations Organization, that deal with these

issues and with which each State has assumed

commitments in the area.

5.

6.

7.


54

8.

First, that the total South American defense expenditure as a percentage of regional GDP remains stable throughout the five-year period reported in the Register, at an average of 0.92%. This percentage shows that South America is ranked below other regions in the world in the regional defense expenditure / regional GDP ratio.

Second, that the components “Personnel” and “Operations and Maintenance” account for more than 80% of the regional defense expenditure, whereas the combination of the objects “Investments” and “Research and Development” does not even reach 19% of the total regional expenditure.

9.


allows observing the following:

In summary, it can be said that the South American

Register of Aggregate Defense Expenditures is an

achievement on confidence-building measures and

transparency at regional level as well as a valuable

contribution of the Defense Council to consolidate South

America as a "Zone of Peace", the core objective of

UNASUR.

Defense Expenditures is a regionalpolitical and institutional achievement

of the Defense Council to consolidate South America as a “Zone of Peace”.


57

GlossaryBASE YEAR

year taken as the starting point in a reference or historical series.

CONSUMER GOODSSub-component of the object of expenditure “Operations and Maintenance” that includes the expenditure incurred for materials and perishable supplies for the current operations, including those for the preservation and repair of capital goods.

CURRENT DOLLAR value of the dollar estimated, each year, in the cal goals established based on

the macroeconomic scenario, in accordance with the economic prospects, the increase in the role of taxpayers, increases in tax rates, rates, among others.

CONSTANT DOLLAR value of the current dollar excluding the variation in the currency’s purchasing

power. excludes or de rates applied in the calculation of the current dollar value.

GOVERNMENT SPENDINGMacroeconomic indicator that re the spending in the acquisition of a good or service by the institutions/entities of the central government, regional or local, funded with the National general budget.

DEFENSE EXPENDITUREAll the resources allocated by the State for funding the activities related to the Nation’s external security, including the foreign assistance received to this end.

PHYSICAL INFRASTRUCTURESub-component of the object of expenditure “Investments” that includes the spending on the construction of military facilities, as well as the acquisition of real property for the defense sector.

INVESTMENTS Object of expenditure that includes the expenses incurred on the sub-components “weapon system”, “physical infrastructure” and “other equipment”.

RESEARCH AND DEVELOPMENTObject of expenditure that includes the expenses incurred by the governments on technological development, innovation in production for defense and the generation of new knowledge.

OPERATIONS AND MAINTENANCE Object of expenditure that includes the expenses incurred in the sub-components “consumer goods” and “services”.


58

OTHER EQUIPMENT Sub-component of the object of expenditure “Investments” that includes the acquisition and modernization of vehicles, aircraft, logistic support vessels, machinery and equipment, as well as intangible assets (special licenses and permits), among others.

PERSONNELObject of expenditure that includes all the salaries paid by the State as employer to the active military and civil personnel in the Ministries of Defense, Armed Forces and other agencies in the defense sector.

GROSS DOMESTIC PRODUCTMacroeconomic indicator that expresses the total value of the goods and services produced by a country in a given period (usually a year).

SERVICES Sub-component of the object of expenditure “Operations and Maintenance” that includes the expenses incurred for the regular administration and operation of the defense institutions.

WEAPON SYSTEM Sub-component of the object of expenditure “Investments” that includes the acquisition and modernization of military equipment applied to defense.

RELATIVE VARIATION RATE relative variations of a time series; they are the quotient between an absolute

variation and a measure of the size of the series.

EXECUTION UNIT Institutions in the defense sector that are involved in budget execution. execution units for this report are the following: the Ministry of Defense, the Joint Sta (or equivalent), the Army, the Navy, the Air Force and other agencies.


59

List of AcronymsCDSSouth American Defense Council

CEEDCenter for Strategic Defense Studies

MODMinistry of Defense

UNUnited Nations

GDPGross Domestic Product

UNASURUnion of South American Nations


60

Graph 1 - Regional defense expenditures during the period 2006-2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Graph 2 - Relative annual variation rate for the regional defense expenditure and GDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Graph 3

Graph 4

Graph 5

- Regional defense expenditure as a percentage of regional GDP during the period 2006-2010 . . . . . . . . . . . . . . .

Graph 6

Graph 7

- Regional defense expenditure as a percentage of regional government spending during the period 2006-2010 . . . . .

Graph 8

Graph 9

- Regional defense expenditures per object of expenditure during the period 2006-2010 . . . . . . . . . . . . . . . . . . . .

Graph 10

- Average regional defense expenditure per object of expenditure for the period 2006-2010 . . . . . . . . . . . . . .

Graph 11

- Analysis of regional defense expenditure executed per object during the period 2006-2010. . . . . . . . . . . . . . . .

Graph 12

Graph 13

- Regional personnel expenditure as a percentage of the regional defense expenditure during the period 2006-2010 (in percentages) . .

Graph 14

- Regional annual relative variation rate in personnel and defense expenditure during the period 2006-2010. .

Graph 15

Graph 16

Graph 17

- Regional expenditure on operations and maintenance as a percentage of the regional defense expenditure during the period 2006-2010 (in percentages) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Graph 18

- Regional annual relative variation rate in operations and maintenance and defense expenditure during the period 2006-2010

Graph 19

Graph 20

- Regional expenditure on operations and maintenance broken down into sub-components for the period 2006-2010 (in percentages)

Graph 21

- Regional expenditure on investments as a percentage of the regional defense expenditure during the period 2006-2010 (in percentages)

Graph 22

- Regional annual relative variation rate in investments and defense expenditure during the period 2006-2010

- Regional expenditure on investments broken down into sub-components for the period 2006-2010 (in percentages)

- Annual regional expenditure on investments broken down into sub-components during the period 2006-2010 (in percentages)

List of Graphs27

28

29

30

34

35

35

37

37

38

39

40

42

42

43

43

44

45

46

47

48

49

- Regional expenditure on research and development as a percentage of the regional defense expenditure during the period 2006-2010 (in percentages) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- Regional annual relative variation rate in research and development and defense expenditure during the period 2006-2010

- Regional annual defense expenditure per executing unit during the period 2006-2010 in current dollars . . . .

- Regional defense expenditure per executing unit for the period 2006-2010 . . . . . . . . . . . . . . . . . . . . . . . . . . .

- Regional defense expenditure per executing unit for the period 2006-2010 (in percentages) . . . . . . . . . . . . . .

- Average per object expenditure per executing unit during the period 2006-2010 . . . . . . . . . . . . . . . . . . . . . . . . . .


61

Table 1 - Relative annual variation rate for the regional defense expenditure in thousand dollars . . . . . . . . . . . . . . . . . . . . . . .

Table 2

Table 3

- Regional annual defense expenditures in percentages per object of expenditure during the period 2006-2010 . . . . . . . .

Table 4

- Regional expenditure on personnel during the period 2006-2010 in thousand dollars . . . . . . . . . . . . . . . . . . . . . . .

Table 5

Table 6

- Regional expenditure on operations and maintenance during the period 2006-2010 in thousand dollars . . . . . . . . .

- Regional expenditure on investments during the period 2006-2010 in thousand dollars . . . . . . . . . . . . . . . . . . . . . . . . . .

- Regional expenditure on research and development during the period 2006-2010 in thousand dollars . . . . . . .

List of Tables28

33

36

38

41

44


south american register of aggregate defense...

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