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> '' ~` ':t'f ; t >>. > I N #? L f..., ,fi t t N L. pf IlliLl tr. H r?4 L,r U t` t N't LIH 1 1 r?4 W-1 t Approved For Release 2001/08/21 : CIA-RDP86TO0608RO005001ieCre1 NOFORN (Soo inside cover) Intelligence Memorandum The Latin American Arms Market Secret ER IM 75-21 December 1975 Copy N2 69 Approved For Release 2001/08/21 : CIA-RDP86T00608R000500180020-7 Approved For Release 2001/08/21 : CIA-RDP86T00608R000500180020-7 NATIONAL SECURITY INFORMATION Unauthorized Disclosure Subject to Criminal Sanctions DISSEMINATION CONTROL ABBREVIATIONS NOFORN- Not Releasable to Foreign Nationals NOCONTRACT- Not Releasable to Contractors or Contractor/ Consultants PROPIN- Caution-Proprietary Information Involved USIBONLY- USIB Departments Only ORCON- Dissemination and Extraction of Information Controlled by Originator REL... - This Information has been Authorized for Release to.. . Classified by 015319 Exempt from General Declassification Schedule of E.O. 11u52, exemption categorys ? 5B(1), (21, and (3) Automatically declassified on: date impossible to determine Approved For Release 2001/08/21 : CIA-RDP86T00608R000500180020-7 SECRET Approved For Release 2001/08/21 : ,DP86T00608R000500180020-7 The Latin American Arms Market In the late 1960s, many Latin American countries initiated major programs to modernize Their arms inventories. These moves reflected growing national competi- tion for hemispheric leadership, the fueling of intraregional rivalries, and often the desire of military governments to enhance their prestige. Foreign arms purchases reached an average of $600 million per year in 1970-74, a twofold increase over the previous 5 years. Advanced naval craft and jet aircraft, ordered mainly by Argentina, Brazil, Peru, and Venezuela, made up about three-fourths of the total new orders (see Figure 1). LATIN AMERICA: Arms Agreements, 1970-74 TOTAL: US$3.0 Billion Note: Comments and queries regarding this memorandum are welcomed. They may be directed to of the Office of Economic Research, Code 143, Extension 5291. 25X1A9a Approved For Release 2001/08/21 : 8W%P86T00608R00050018d er i9"s Approved For Release 2001/08/2ACRD1A-RDP86T00608R000500180020-7 Despite the large jump in procurement, Latin America remains the smallest arms market among LDC regions, accounting for 8% of total LDC military pur- chases. In the Near East, Iran, Israel, and Saudi Arabia each purchased more arms in the 1970s than all of Latin America. West European countries have won more than two-thirds of the arms contracts awarded since 1969, moving into a market previously dominated by the United States. The substantial shift resulted from aggressive European sales tactics, US restrictions on sales availability of US credit, and a concerted effort of major Latin American arms purchasers to reduce their dependence on the United States. Wash- ington was able to hold on to a 25% share of the market-still the largest for any single country-mainly because of sales of follow-on equipment and spare parts for weapons already in Latin American inventories. For the rest of the decade we expect Latin America's arms p i)rchases to average about $1 billion per year, or two-thirds above the 1970-74 annual average. Wr? believe most of the higher dollar outlays will be attributable to rising prices for sophisticated equipment and the need for more follow-on support. We do not expect much of an increase in the quantities of equipment ordered, primarily because of balance-of-payments and fiscal constraints. Several major countries will be seeking licensing and local assembly arrangements to replace direct imports of weapons. Western Europe will continue to garner the bulk of the armament contracts despite recent liberalization of US policies. The United States cannot provide much of the equipment desired, because of continuing export restrictions and ey,irt:ing commitments. Approved For Release 2001 /08J dREcIA-RDP86T00608R000500180020-7 Approved For Release 2001/08/21 : Cl 86T00608R000500180020-7 1. Latin Americas was the last of the 'Third World continental regions to acquire sophisticated weapons. Spared the arsenal building problems of newly inde- pendent states and operating for decades under Washington's security umbrella, Latin American inventories were of World War 11 and Korean vintage until the late 1960s. 2. At that time, arms modernization programs were triggered by desires to compete with other LDCs for the prestige of owning advanced weaponry. Latin American countries also sought new weapons because of real or imagined threats to their sovereignty. ? Argentina and Brazil wanted to enhance their prestige, as part of their traditional competition for hemispheric leadership and influence. ? Colombia and Venezuela were preparing for possible conflict over dis- puted territorial sea and continental shelf boundaries in the Gulf of Vene- zuela and other border problems. ? Venezuela also wanted to fill a power void in the Caribbean, following British and Dutch departure. ? Chile and Peru have been at odds because of continued animosities over seizure of Peruvian territory nearly 100 years ago. ? Bolivia felt that the Peruvian-Chilean conflict might spill over to its terri- tory. ? Ecuador feared a Peruvian seizure of oil deposits near their common bor- der. 3. Arms orders soared in 1969, and in 1970 they reached the $900 million mark. Between 1970 and 1974, equipment orders remained high-averaging $500 million annually, compared with $200 million a year during 1960-68. Purchases in 1975 may reach a record of $1 billion because of large Venezuelan and Argentine orders for ships and an Ecuadorean deal for ground equipment (see Figure 2 and Appendix B). 1. Including all independent Latin American countries except Cuba. For recent patterns of arms procurement in individual Latin American countries, see Appendix A. 1 Approved For Release 2001/08/21: CIf86T00608R000500180020-7 Approved For Release 2001/08/ .'1~'81A-RDP86T00608R000500180020-7 LATIN AMERICA: Arms Agreements 4. Six countri:~s-Argentina, Brazil, Chile, Ecuador, Peru, and Venezuula- ordered $2.7 billion w...?th of arms during 1970-74, nearly 90% of the Latin Amer- ican total. Brazil's share alone was 30% and Peru's about 20%. Colombia, Bolivia, and Mexico accounted for most of the remainder. 5. Like other Third World arms purchasers, Latin American countries have sought costly high-technology ordnance. Almost three-fourths of the orders have been for naval ships and aircraft, including destroyer escorts equipped with guided missile systems and Mach-2 jet fighters (see Figure 3). Because sophisticated equip- ment accounts for a large part of Latin America's orders, long lead times have delayed deliveries. Annual deliveries in 1973 and 1974 averaged $460 million as orders placed in the late 1960s and early 1970s were received. Approved For Release 2001/08P1fRMIA-RDP86T00608R000500180020-7 Approved For Release 2001/08/21 : CPA-i JP86T00608R000500180020-7 LATIN AMERICA: Arms Purchases from Non-US Sources, by Major Category of Equipment, 1966-74 goes "S., r D~~truY ,., i,W' Is ever TfeieuI/ r, `114.1 ieg$ Pons :206 , Jet , Fighters. a d; :';B.M1en;'. 400, NAVAL AIRCRAr( GROUND FORCES MISSILE SMALL ARMS COMBATANTS SYSTEMS AMMUNITION. SUPPORT EQUIPMENT. AND SPARE PARTS Suppliers The United States 6. Until 1969, Latin America's armed forces were almost entirely equipped and trained by the United States. Western Europe has subsequently provided most of the region's arms import needs.2 The United States accounted for less than 2. For a listing of arms agreements, sec Appendix C. Approved For Release 2001/08/21 : CI BP86T00608R000500180020-7 Approved For Release 2001/08/lR&IA-RDP86T00608R000500180020-7 one-fourth of Latin America's total purchases during 1969-74, while the West Euro- pean share rose to two-thirds.3 Latin America's share of US arms sales to the Third World also declined, from 10% in 1962-68 to 5% in 1969-74. The United States continued to be the largest single supplier, with sales of about $130 million annu- ally, up slightly from $100 million a year during 1962-68. 7. Although most West European sales since 1969 have been of new equip- ment, about 60% of US sales represent spare parts and technical assistance. The disparity in the mix of US sale; reflects the need to maintain both US equipment purchased before 1969 and recently purchased used equipment. 8. Three-fourths of US sales in 1969-74 went to Argentina, Brazil, Chile, Peru, and Venezuela. In each of these countries except Argentina, the United States was outsold by at least one West European supplier. 9. Reduction in the share of US participation in Latin America's arms reflected several currents in US arms exports: ? In 1968 the Foreign Assistance Act restricted the total value of grant military assistance to $25 million a year; ? At the same time, a ceiling of $75 million was imposed on cash and credit sales under the Foreign Military Sales (FMS) program; and ? Sales of sophisticated equipment were expressly forbidden. Subsequently the FMS ceiling was raised by steps, beginning in 1972. By 1974 the credit ceiling was raised to $200 million, with no limit on sales. Not until June 1973, however, did Washington sanction the sale of high-performance (F-5E) jet aircraft to Latin America. Five countries (Argentina, Brazil, Chile, Colombia, and Peru) were offered the aircraft. In 1974, other advanced weapons systems, such as the M-60 tank and TOW antitank missile system, were added to the sales list. 10. The US share of Latin American arms purchases promptly increased from 30% in 1972 to more than 40% in 1974. The US share will drop in 1975, ;,owever. Washington cannot provide important types of naval craft sought because of previous commitments and US export barriers. Included on the list which the United States is unable to provide are advanced missiles, tanks, destroyers, and conventional submarines. Approved For Release 2001/08/11 : CIA-RDP86T00608R000500180020-7 SECRET Approved For Release 2001/08/21 : CI86T00608R000500180020-7 11. The United States remains the major source of foreign technical services to Latin American military establishments in spite of its reduced role as an arms supplier. In 1973, for example, 300 American technicians were assigned to Latin American countries, compared with 200 West Europeans. The Americans perform a more direct service to national armed forces through their training missions, equip- ment installation, and maintenance operations. West European technicians are em- ployed principally on weapons co-production and weapons assembly operations. Western Europe 12. While the United States has been restricting its arms sales, West Euro- peans have been actively promoting theirs. The West Europeans have encountered receptive customers, especially where the governments were anxious to reduce their dependence on the United States. West European governments have encouraged s,.les through credit arrangements that compare favorably with US FMS sales and through contracts that permit lenient assembly and licensing agreements. Aggressive Euro- pean agents sold aims to Argentina when US supplies were cut off after the 1966 military coup. France offered Peru advanced Mirage aircraft following Washington's refusal to sell high-performance jet fighters in 1967. Western Europe's major arms deals with Latin American countries (1966-74): Argentina placed orders in France for Mirage fighters, its first supersonic aircraft, and helicopters/ in Britain for Canberra jet bombers, helicopters, and transport planes; and in the Netherlands and Italy for transport aircraft. Brazil's orders included MK-10 frigates, Oberon-class submarines, and HS-125 transports from the United Kingdom; S::hultz? minesweepers from West Germany; Mirage HIS from France; and 7.4B-326G jet trainers from Italy, for assembly in Brazil. Peru's 1967 pui:;hase of 14 French Mirage Vs and 2 Mirage III fighters made Peru the first Latin American country to have supersonic aircraft. Since then, its purchases in France.include AMX tanks, the Exocet ship-to-ship missile system, and Alouette helicopters. From Britain, Peru bought bombers and destroyers and,from West Germany, armored personnel carriers (APCs), submarines, and the Cobra antitank missile system. Venezuela bought Vosper-T'iornycroft patrol boats from the United Kingdom; submarines. from West Germany AMX 30 tans, APCs, self-propelled 155-mm guns, and howitzers from France; and antiaircraft guns from Sweden. 13. Several La min American buyers have been dissatisfied with the postsale services provided by West European arms suppliers. Peru and Colombia, for example, have been displeased with French follow-on support for Mirage jet fighters. French 5 Approved For Release 2001/08/21 : CIA-RDP86T00608R000500180020-7 SECRET Approved For Release 2001/08/21 :S TDP86T00608R000500180020-7 postsales indifference to unexpected add-on ,harges for w.:vpons, spare parts, and support and maintenance has also created animosity. Paris has been lax in delivering spare parts and has exacerbated difficulties by requiring the return of engines to France for overhaul. The United States, on the other hand, is known to meet its contractual obligations and offers strong postsales support for equipment it supplies. It staffs its military assistance groups with qualified technicians and monitors and enforces all aspects of arms contracts. 14. West European countries, as a group, sold $2.4 billion worth of arms to Latin America during 1969-74-mostly high-unit-cost, sophisticated combat equip- ment. Their sales to Latin America peaked in 1970 at almost $800 million because of large sales to Brazil, Argentina, and Colombia. One-half of the aircraft and ground forces equipment in Latin America and about 80% of the naval craft come from Western Europe. The United Kingdom, France, West Germany, and Italy have been the major suppliers. 15. Another high year for West European arms sales to Latin America (over $1 billion) appears to be in the making in 1975. In May Venezuela was close to signing Latin America's largest arms accord-a $433 million order for 6 Alpino-class frigates from Italy. In June, Great Britain's most lucrative deal in the area was concluded, a $379 million Argentine order for six Type-21 frigates. Early this year, France became Ecuador's major source of arms with a $120 million sale of AMX-13 tanks, armored vehicles, and the Magic air-to-air missile system, whici:: is to be used to arm Jaguar jet fighters bought from the United Kingdom in 1974. 16. Less than 10% of Latin America's foreign arms purchases ($375 million) were made from countries outside of Western Europe and the United States. Canada has sold Latin America transport and jet fighter aircraft worth about $175 million. Most of these planes were sold between 1967 and 1971. In 1973-74, Israel supplied transport planes to four countries, and Brazil has provided ground forces equipment to Chile. 17. Pena in mid-1973 became the first and so far the only non-Communist country in Latin America to sign a militarl agreement with Moscow. In the two years since the deal was concluded, the USSR has delivered $40 million worth of tanks and ground forces equipment. Also, some $30 million worth of MI-8 heli- copters ordered in early 1975 were delivered. In the early 1970s, Moscow had offered military assistance to the Allende regime in Chile, but was turned down because Chilean military leaders wanted to avoid establishing a dependent relation- ship. Approved For Release 2001/08/21 4J-RDP86T00608R000500180020-7 Approved For Release 2001/08/21 : CIA-IJ?T00608R000500180020-7 Latin America's Arms Transfers 18. The more industrialized Latin American nations are developing their own military industrial establishments, often through licensing and assembly agreements with West European countries.4 Licensing and assembly agreements enable the manufacturer to produce armaments locally, frequently using foreign components for all or part of the finished weapons. These arrangements are intended to ?,ave foreign exchange, to upgrade domestic technical capabilities, and to adapt weapons systems to local needs. 19. Ten Latin American countries are able to manufacture a variety of in- fantry weapons, small arms ammunition, and quartermaster supplies. Only Argentina and Brazil approach self-sufficiency in the supply of these items. Brazil has also begun to export some military equipment to its neighbors and in 1970 completed a $50 million sale of armored vehicles to Libya. A few complex modern weapons are produced from foreign designs, but production is limited by high start-up costs for development, by technology, and by chronic shortages of skilled manpower and critical materials. Impact of Defense Spending on Latin American Economies 20. Because Latin America has been remarkably free of major military con- flicts, it has consistently spent a smaller proportion of its gross national product (GNP) on defense than other developing areas. Between 1966 and 1972 the average annual outlay held at about 2% and since then has dropped to less than 1.5%. Average expenditures of Third World nations were 5% and for the Middle East countries almost 12%. Even the average ratio of defense expenditures to GNP of the five major Latin American powers is less than one-half of the Third World average. 21. Latin American military %:sdgets generally allow 10%-15% of total ex- penditures for procurement of foreign2 arms. By spreading deliveries and repayments over a number of years, countries have made large arms purchases without seriously straining their balance of payments. The annual payment on the military debt has increased to about $300-$400 million during the last three years. Nevertheless, Latin American countries should be able to meet current. repayment schedules without jeopardizing economic development. 7 Approved For Release 2001/08/21 : CIA-Eq6T00608R000500180020-7 Approved For Release 2001/08/21 : CIA-RDP86T00608R000500180020-7 SECRET Prospects 22. We expect Latin American arms purchases to run about $1 billion annu- ally through 1980, compared with $600 million a year during 1970-74. Higher outlays principally reflect increased prices for sophisticated weapons systems and growing requirements for follow-on support. We anticipate no large increase in the quantities of equipment ordered. Most countries, confronted with balance-of-pay- ments problems, are shopping cautiously and are looking for licensing and assembly arrangements to replace direct imports. Projected procurement levels could be sur- passed, however, if tensions between countries such as Chile and Peru were to increase. The armed forces would then press to accelerate purchases of advanced armaments, including such items as the Mirage F-I jet fighter. 23. Western Europe will continue to take two-thirds, possibly more, of the Latin American arms market. As the traditional source of new tonnage for Latin American navies, Europe will continue to benefit from large allocations for ship purchases. Europe's share of the important follow-on equipment and spare parts markets will also climb as inventories of West European military hardware increase throughout the area. Although Latin America has shown preference for US aircraft, West European suppliers will get a somewhat larger share of the contracts because they offer a wider variety of equipment and faster delivery. US governmental restric- tions on the sale of certain sophisticated weapons systems as well as commitments already made for US forces and Middle Eastern customers will also restrict the level of sales. 24. West European countries will step up their sales efforts to help support their defense-related industries. Shipbuilding contracts, including those for gaided- missile destroyers, frigates, conventional submarines, and patrol boats, will go mainly to British, Italian, and West German shipyards. French Mirage series aircraft and helicopters, British Jaguar ground support jet fighters, and Italian jet trainers will be most competitive with aircraft available in the United States. 25. Local arms production will continue to be confined largely to Argentina and Brazil, which will be able to meet their requirements for small arms, ammuni- tion, and some ground, naval, and aircraft equipment. Brazil may even be able to export more military equipment than it imports by the late 1970s. It is now trying to sell armored vehicles and transport aircraft to Canada, Japan, Turkey, and several Arab states. Approved For Release 2001/08/21 BCIA-RDP86T00608R000500180020-7 SECRET Approved For Release 2001/08/21 : CIA-RDP86T00608R000500180020-7 SECRET Argentina Piqued at the United States for suspending arms deliveries in the aftermath of the 1966 military coup, Buenos Aires initiated Plan Europa to tap West European arms suppliers. About 65% of some $475 million in new orders was placed with Western Europe, while the US share went down to 35%. By comparison, during 1956-65 the United States had accounted for more than 80% of the equipment purchased. Although Plan Europa was introduced in 1966, major purchases were not made until the 1970s, as shown in the tabulation: Million US S Total 1966-74 1966-69 1970-74 Total 475 145 330 United States 165 50 115 Western Europe 310 95 215 West Germany 50 20 30 France 75 15 60 United Kingdom 105 25 80 Netherlands 50 25 25 Italy 25 5 20 Other 5 5 Negl. During 1966-74, Argentina ordered more than $150 million of naval equip- ment, 85% from Western Europe. The naval air arm also acquired sophisticated foreign equipment. In addition to a squadron of US A-4 jet fighters and a recondi- tioned Dutch aircraft carrier, Buenos Aires ordered Alouette III helicopters and AS-1I and AS-12 air-to-ground missiles from France and Aeromacchi MB-326K jet trainers from Italy. Argentina is now shopping for US S-2E antisubmarine warfare aircraft. The air force placed $150 million worth of orders that include: ? reconditioned Canberra jet bombers, Sky Van and HS-125 transports, and Westland helicopters from the United Kingdom; a a squadron of Mirage jet fighters and Alouette helicopters from France; Approved For Release 2001/08/21 : CIA-RDP86T00608R000500180020-7 SECRET Approved For Release 2001/08/? kLqIA-RDP86T00608R000500180020-7 ? twin Otter transports from Canada; ? MB-326 jet trainers and G-222 transports from Italy; and ? transports from the Netherlands. Plan Europa a!so envisioned the acquisition of West European technology for local production, or at least for the assembly of weaponry in Argentina. Although far smaller than Brazil's effort, licensing agreements with foreign firms enabled Argentina to set up plants for assemblying the following types of equipment: ? French AMX-series tanks, APCs, and 155-mm howitzers; ? Swiss MOWAG armored vehicles; ? West German 209-type submarines, Saar-class fast patrol boats, and trucks; and ? the second of two British type-42 guided missile destroyers. Recently, Argentina built a prototype APC resembling the British Saracen as replacement for M-5 US half-tracks and developed a prototype wire-guided surface- to-surface missile system. It is developing a main battle tank, comprising the best features of the US M-48A3 and M-60 tanks and other foreign tanks. In mid-1975, Argentina purchased six type-21 frigates valued at about $380 million from the United Kingdom. Construction of the frigates is scheduled over 10 years and will incorporate some equipment produced in Argentina. In spite of this large new order and purchases in 1974 of' Italian and Dutch transport aircraft, the recent Peron regime has tried to curtail military imports and to expand domestic output. Even with the prospect of a restoration of military control, Argentina will probably seek additional arrangements with foreign firms to expand its capacity to produce a wider line of items. From 1966 through 1974, Bolivia spent only $40 million on foreign arms procurement, 65% it the United States. Alarmed by the arms buildup in Peru and Chile, Bolivia's military regime has ordered more than $20 million worth of equip- ment thus far in 1975, including l ascavel armored cars and T-6 trainer aircraft from 10 Approved For Release 2001/0812CRECIA-RDP86T00608R000500180020-7 Approved For Release 2001/08/21 : ClpP86T00608R000500180020-7 Brazil and Arava STOI, transports from Israel. La Paz is interested in a Soviet offer that includes T-55 tanks at relatively low prices and favorable credit terms because Washington has refused to increase sales. Brazil has the largest and most advanced military establishment in Latin Amer- ica and is by far the major arms importer. With recent annual defense expenditures running at more than $1 billion (2.510 of GNP) and military personnel numbering 210,000, Brazil accounts for about one-fourth of Latin America's total defense expenditures. Foreign military purchases totaling $860 million during 1970-74 re- flect both the desire of Brazil's military government to modernize its pre-World War II military establishment and the country's financial ability to support a larger program. To acquire sophisticated weapons that the United States refused to provide, Brazil sought other supply sources in the late 1960s. The US share dropped from two-thirds to about one-fifth of the market as Brazil placed orders elsewhere. Total 1966-74 1966-69 1970-74 Total 1,090 225 865 United States 265 100 165 Western Europe 750 80 670 United Kingdom 470 55 415 France 170 10 160 Italy 60 .... 60 Other 50 15 35 Other 75 45 30 Almost three-fourths of the orders placed after 1969 were for naval equipment under a 10-year expansion program initiated in 1968. Brazil contracted to buy 33 ships, some of which were to be built in Brazil with foreign components. The most important among these orders were: ? six MK-10 frigates (see Figure 4), valued at $350 million, and 3 Oberon- class submarines from the United Kingdom-one submarine has been de- Approved For Release 2001/08/21 : dFfAkbP86T00608R000500180020-7 Approved For Release 2001/08/21 : CIA-RDP86T00608R000500180020-7 SECRET livered and two of the frigates have been launched (including one built in Brazil)* but neither will be operational until 1976; ? four Schultz-class minesweepers from West Germany; and ? eight destroyers, an LST, a submarine, a rescue ship, and seven Guppy- type submarines from the United States (all surplus). The air force began a $300 million program in early 1973 to replace an aborted one launched 5 years earlier. Brazil has placed the following orders for aircraft: ? France - 16 Mirage Ills in 1970 and a $70 million air defense and traffic control radar system in 1972; ? The United States - 36 F-5Es in mid-1973, 36 Bell helicopters, and a number of C-130 transport and S-2E antisubmarine warfare aircraft; ? Canada - 24 DHC transports; ? Italy - 112 MB-326G jet trainers for assembly in Brazil; and ? The United Kingdom - 10 HS-125 transports. Brazil has the largest domestic arms industry in Latin America. This capability has been created and supported through licensing and co-production agreements * The 1970 agreement called for two of the vessels to be built in Brazil. High British costs may result in Brazilian construction of a third. Approved For Release 2001/08/25E-rj RDP86T00608R000500180020-7 CRET Approved For Release 2001/08/21 : CIA-RDP86T00608R000500180020-7 SECRET with at least nine foreign firms. Brazil has begun to rely heavily on domestic output for small arms ammunition and quartermaster supplies, as well as for a wide range of military hardware, including armored vehicles (see Figure 5). It also uses its own shipyards to construct patrol boats and support ships and for refitting foreign-built 13 Approved For Release 2001/08/21 : CP86T00608R000500180020-7 Approved For Release 2001/0811CplA-RDP86T00608R000500180020-7 ships in its inventory. Brazii'; local defense industry also is supplying light transport and trainers for the air force. Unique among Latin American nations, Brazil is developing foreign marke+_L for part of its arms output. During 1970-74, it sold $110 million worth of arms to foreign governments-$60 million to other Latin American countries and $50 million to Libya. For the next several years, Brazil is expected to limit new arms orders while it assimilates recent purchases. It also is holding down military spending because of budgetary and balance-of-payments constraints. We expect that: ? although the air force will not purchase additional aircraft in the next few years, US Sidewinder missiles will be sought for use on Mirages; ? development of an air defense system may not be delayed by austerity measures; and ? the navy will not place new ship orders for the present and will restrict purchases largely to helicopters. The only large-scale purchases that appear likely at present are Oto Melara howitzers, for which Italy has offered a large credit, and additional French Roland surface-to-air missile systems, now under negotiation (which Brazil. hopes to produce eventually). During 1975, purchases have been limited to 9 Lynx helicopters from the United Kingdom, Oerlikon guns from Switzerland, and some gun mountings from France for use on upgraded US tanks. Santiago has placed $485 million in foreign orders beginning in 1966, seeking to upgrade its military equipment (see the tabulation). Still, its inventories, partic- Total United States United Kingdom France Brazil Other Total 1966-74 1966-69 1970-73 1974 485 215 140 130 140 25 40 75 220 185 35 .... 35 .... 25 10 40 .... .... 40 50 5 40 5 Approved For Release 2001/081O4R6tCIA-RDP86T00608R000500180020-7 Approved For Release 2001/08/21 : C DP86T00608R000500180020-7 ularly of jet fighters and tanks, are no match for those of Peru, which threatens Chile's security with continuing irredentist claims. Chile's efforts at military mod- ernization began in 1966, with the United Kingdom providing most of the equip- ment, including: ? 2 Leander-class frigates, ? 2 Oberon-class submarines, and ? 2 squadrons of l-lawker-Hunter jet fighters. During 1970-73 the progr im lagged as the military withstood pressure from Allende to shift arms procurement to the USSR. Purchases in the West were limited to a few naval craft, helicopters, subsonic jet fighters, and small quantities of ground forces equipment. France was the major supplier, providing the Exocet missile sys- tem, SA-330 (PUMA) helicopters, and self-propelled howitzers. The junta that took over in December 1973 appealed to Washingtin for military support, in part to ensure Chile's military parity with Peru. The United States agreed in mid-1974 to supply 18 F -5s (see Figure 6) and. additional A-37 ground support aircraft because Chile was the only major state in the region without supersonic fighters. Also in 1974 Brazil extended $40 million in long-term credits for procurement of small arms, ammunition, trucks, and other military support equipment produced by Brazil. Among West European states, only France ha%, recently agn-ed to sell major equipment. Under a $12 million 1974 accord, Paris agreed to provide several Falcon-20 transports and AS-11 and AS-12 air-to-ground missiles. The British have refused a new cash offer for Hawker-Hunter spare parts, although they are fulfilling commitments under previous contracts. Negotiations with France for tanks have stalled over credit arrangements, and discussions with the Dutch for an antisubmarine patrol aircraft broke off because Chile could not finance it. Until Santiago makes its regime rating more acceptable in West European capitals and the country's credit rating improves, Chile will have to rely largely on the United States for major arms supplies. The United States is now considering requests for: ? M-60 (see Figure 7) and M-48 tanks, ? 2 Sumner-class destroyers; ? TOW antitank missile system, Approved For Release 2001/08/21 : CI- '86T00608R000500180020-7 Approved For Release 2001/08/ pLgIA-RDP86T00608R000500180020-7 ? M-113 APCs, and ? Cobra helicopters. Colombia Colombia has purchased more than 80% of its military equipment from Western Europe dur- ing 1970-74; before that, most of it came from the United 16 Approved For Release 2001/08$#cRtIA-RDP86T00608R000500180020-7 Approved For Release 2001/08/21 : CP86T00608R000500180020-7 States. The major agreements with Western Europe are a $54 million order for 18 French Mirages and a $36 million contract for two West German sub.... ;Tines. Other purchases in Europe include midget submarines from Italy and transport aircraft from the United Kingdom and the Netherlands. The United States has supplied several surplus destroyers and patrol boats, C-130 transports, Bell helicopters, and M 113 APCs during the past 5 years. Because Washington refuses to supply Bogota with certain sophisticated weapons, such as the TOW antitank missile system, it is looking to Western Europe and is considering Soviet equipment, reportedly available in return for coffee. Since early 1974, Ecuador's military government has placed arms orders in Western Europe and Israel totaling about $300 million. Supported by expanded oil revenues, Quito's purchases during the past 2 years have been triple orders in the preceding 8 years. Satisfied with the performance of French armored equipment bought in 1970 and 1974, Ecuador concluded a $100 million agreement in early 1975 for 178 AMX-13 tanks as well as armored vehicles, support equipment, and ammunition. This order represents the largest purchase of ground force equipment ever made by a Latin American country. Other purchases since early 1974 include: ? 12 Jaguar tactical jet fighters (see Figure 8) from the United Kingdom, Figure 8. Ecuador: British Jaguar Tactical Jet Fighters Ordered in 1974 17 Approved For Release 2001/08/21 : C5 MDP86T00608R000500180020-7 Approved For Release 2001/08/29ECkE~A-RDP86T00608R000500180020-7 ? 4 Lama helicopters and the Magic air-to-air missile system from France, ? 2 1,3' c-ton submarines from West Germany, and ? 6 A,a"a S201, transports from Israel. Quito presently is negotiating with Israel and Italy for ammunition and mortars and has shown interest in buying US F-5 and A-37B jet fighters, a destroyer, several support ships, and some ground force cqu9ment. If an agreement is worked out, US equipment would be offered under FMS for the first time since 1971, when a ban on FMS credits was imposed on Quito under the Fishe-:nan's Protective Act of 1967. Peru has actively sought advanced weaponry to replace obsoleto equipment and to keep alive its claims to territory lost to Chile. After Washington refused to provide high-performance jet aircraft and modern tanks it'. 1966, Lima turned to Western Europe and Canada. The French agreement to supply Mirage jets in 1967 made the P'" uvian air force the first in Latin America to have supersonic aircraft and signaled the end of Washington's dominant supplier positir,;i in Peru. Since then the United States has accounted for only about 30% of Peru's arms purchases. Total 1966-74 1966-69 1970-74 Total 760 230 530 Unit'd States 115 30 85 Western Europe 500 125 375 France 120 45 75 Italy 210 Negl. 210 Other 170 80 90 USSR 40 .... 40 Other 105 75 30 Major orders placed in Western Europe and Canada include: ? France - Mirage V and Mirage III jet fighters (see Figure 9), follow-on orders for AMX tanks, the Exocet ship-to-ship missile system, and Alouette helicopters; 18 Approved For Release 2001/08/29ECWWA-RDP86T00608R000500180020-7 Approved For Release 2001/08/21 : Cl 86T00608R000500180020-7 Figuto 9. Peru: French Mirage Jet Fighters Bought in 1967 Mirage V ? United Kingdom - Canberra bombers, Wessex helicopters, and reconditioned Daring-class destroyers; ? Italy - four missile-equipped destroyer escorts; ? West Germany - UR-416 ".PCs, two submarines, and the Cobra antitank missile system; and ? Canada - transport aircraft. Following US agreement in May 1973 to reintroduce major FMS arms deliveries that had been cut off in 1967, Washington consented to provide A-37 jet fighters, 2 destroyers, Guppy submarines, and 140 M-1 13 APCs. 19 Approved For Release 2001/08/21 : CIASB6T00608R000500180020-7 Approved For Release 2001/08/2S1E~fiI4-RDP86T00608R000500180020-7 In 1973, Peru became the first non-Communist Latin American nation to buy Soviet ordnance. Lima turned to Moscow because it was unable to buy tanks from the United States, and its requested ci9Iivery schedules could not be met by West European suppliers. Soviet prices and repayment terms were favorable, and Moscow agreed to provide fast deliveries. Peru's purchases of at least $40 million worth of Soviet equipment under credit include more than 200 T-55 medium tanks (see Figure 10), artlllcry, radar-controlled antiaircraft guns, rocket launchers, and Figure 10. Peru: Soviet T-55 Tanks Bought in 1973 tank transporters. A new agreement also may have been reached with the USSR in 1974 for additional ground. force equipment, including a surface-to-air missile system (probably the SA-6). In early 1975 the Peruvian army also ordered 30 MI-8 helicopters from the USSR. Some 35 Peruvian military personnel reportedly are receiving air defense training in the USSR, and 50 Soviet military advisers currently are employed in Peru. Because of exaggerated suspicions of a Chilean arms buildup and the hopes of some Peruvian officers to regain territory lost to Chile more than a century ago, the military junta in Lima has sought to place large new arms orders in the United States, the USSR, Western Europe, Yugoslavia, and Israel. Countries with which arms deals have been discussed recently include: ? Israel - for patrol boats, Mirage technical assistance, and logistical support; 20 Approved For Release 2001/08%2dRElCIA-RDP86T00608R000500180020-7 Approved For Release 2001/08/21 : CIA-RDP86T00608R000500180020-7 SECRET ? Yugoslavia -- for artillery; ? 'West Germany - for the manufacture of UNIMOG vehicles in Peru; ? Spain - for Aviocar transport aircraft; and ? Belgium - for small arms and ammunition. Venezuela Venezuela began to upgrade its military capabilities in the early 1970s. Of the $465 million worth of arms purchased during 1966-74, 90% has been ordered after 1969. Almost $300 million was ordered in 1971-72 from France, West Germany, and the United States. As in most other major Latin Amerirar. countries, the Mirage jet fighter was high on Caracas' shopping list. Acquisition of these planes, in 1971, was followed by the purchase of Canadian CF-5 jet ground support aircraft. From the United States, Vc- ,: acla ordered C-130 transports, jet trainers, and the OV-10 reconnaisam.,; aircraft (see Figure 11). The ground force arsenal was expanded Figure 11. Venezuela: US OV-10 Reconnaissance Aircraft Ordered in the Early 1970s through a $50 million arms deal with France for AMX-30 tanks (see Figure 12), APCs, and self-propelled 155-mm howitzers. Contracts also were signed for Italian 105-mm pack howitzers, for US V-100 armored cars, and for Swedish 40-mm L/70AA antiaircraft guns. 21 Approved For Release 2001/08/21 : CIA-IP@f T00608R000500180020-7 Approved For Release 2001/08/21 : CIA-RDP86T00608R000500180020-7 SECRET In keeping with Venezuela's desire for leadership in the Caribbean, its navy contracted for Vos- per Thornycroft fast patrol boats from the United King- dom, submarines IL VIIL ?/GJL vG1111d1SY, and a destroyer, pa- Venezuela: French AMX-30 Tanks Ordered in trol boats, and an LST from the United States. Orders were distributed among suppliers as shown below: Total 1966-74 1966-69 1970-74 Total 465 35 430 United States 140 30 110 France 145 5 140 Italy 15 Negl. 15 West Germany 80 Ner!. 80 United Kingdom 35 Negl. 35 Other 50 Negl. 50 Foreign arms procurement fell off sharply in 1973-74. Since mid-1974, how- ever, Venezuela's growing oil revenues have enabled the military services to increase their arms procurement budget. In 1975, spending may reach a record $500 million. Orders in 1975 will include a $433 million deal with Italy for the construction of 6 Alpino-class frigates. Caracas has expressed interest in buying British Scorpion tanks and artillery and French support equipment, including missiles for AMX-30 tanks. 22 Approved For Release 2001/08/ ,41,&IA-RDP86T00608R000500180020-7 25X6Approved For Release 2001/08/21 : i~-1 DP86T00608R000500180020-7 Approved For Release 2001/08/21 E 1RDP86T00608R000500180020-7 Approved For Release 2001/08/21 :AlAtAP86TO0608RO00500180020-7 Appendix Ii. Statiatleal Tables Table 11.1 Value of Latin American Arm" Agreements; by Purchaser Total ....... I?. . ... Jan-Nov 1966-74 1970-74 1970 1971 1972 1973 1974 19752 Total 4,000 2,965 890 405 500 625 545 1,045'1 Argentina 475 330 155 40 60 30 40 380 Bolivia 40 30 NegI. 5 10 It) 5 20 Brazil 1, 1)0O 805 485 51) 190 60 80 35 Chile 485 270 25 30 46 45 130 .... Colombia 175 140 I05 10 15 5 5 Costa [licit Negi. Negi. .... Negi. NegI. Dominican Republic 20 5 Negl. Negi. Negi. Negl. Negi. NegI. Ecuador 2(1(1 240 20 20 Negl. 45 155 125 h:1 Salvador 25 15 5 Negi. Negi. 1(1 Negl. Guatemala 35 25 Negl. 10 5 5 5 )(1 Guyana Negi. Negi. Negi. .... ,... .... .... .... Ilaitl Negi, Negi. ,... Negi. Negi, Negl. Negi. Ilonduras .fanmlea 20 Negi. 10 Negi. Negl. Negi. Negi. NegI. Negi Negi. 5 Negi. Negl. Negi. .... Mexico 60 50 5 NegI. NegI. 45 NegI. Nicaragua 15 10 NegI. 5 NegI. NegI. NegI. I'anauua 20 15 Negl. NegI. 5 5 5 NegI. Paraguay 15 10 NegI, NegI. NegI. NegI. NegI. NegI. Peru 7602 530 80 30 10 325 85 40 'T'rinidad and Negi. NegI. Negi. .... .... Uruguay 40 20 5 5 NegI. 5 5 Venezuela 465 430 5 200 165 30 30 435 a Sales and aid commitments. Data are for calendar years, except for the United States, which is by field year. 2 Preliminary. a Excluding US sales and aid commitmentu, which might add as much as $200 million to the total. Total Total 4,000 2,965 890 x!05 500 625 545 1,045 United States2 1,070 710 75 115 150 1115 225 N.A. West Europe 2,555 2,020. 795 225 :320 425 255 985 United Kingdom 1,005 680 430 25 80 85 60 405 France 650 570 195 165 100 35 75 125 West 1Jcranany -125 365 110 5 110 70 70 NegI. Italy 310 305 55 NegI. 15 210 25 435 Others 165 100 5 30 15 25 25 20 Otkrr Free World 335 195 20 65 30 20 60 30 USSR -10 40 .... .... .... 35 5 30 - - - --- - - - - - - - - - - - - - - I Preliminary. 2 US data are for fiscal years. 3 UApirowJFomrR soa2N1 I/ 411[1 jA1R1 P86T00608R000500180020-7 Approved For Release 2001/08/21 : CIA-RDP86TOO608ROO0500180020-7 Total 2,300 1,665 150 265 330 495 425 Argentina 355 235 :35 30 70 50 50 Bolivia 40 25 Negl,' 5 5 10 5 Brazil 470 331) 25 110 50 120 75 ((ills 270 215 20 30 111 70 85 Colombia 155 105 15 If) :15 40 5 Ecuador O5 45 10 IO III IT, Negl. fern 415 310 20 (1.i 65 75 85 Venezuela 325 270 5 20 60 00 95 Others 205 130 20 35 25 25 25 Latin America Africa East Asia Middle East South Asia Data are for 1072. 4.0 1.3 2.1 2.81 22.3 :3.4 10.1 11.91 2.9 3.5 Military Budgets of Latin America's Five Largest Arms Purchasers, 1974 As a Percent of As a Military Budget Central Government Percent Billion US $ Budget of GNP Argentina 0.8 12.8 Brazil 1.3 11.4 Chile 0.4 11.0 Peru 0.3 13.7 Venezuela 0.4 10.1 2.0 2.5 3.0 2.7 2.4 Approved For Release 2001/08/21 : CIA-RDP86TOO608ROO0500180020-7 Approved For Release 2001/08/21 : CIA-RDP86T00608R000500180020-7 } 4 W N 0 5 z M N ~N 00000000 OOOO000000000000000000000=0100 W W W W W W W W W W W W W W W W W W W W W W W W W W W W W W W W W at W a W W W W W W W w w W W W W t,!; W W W W W W W W I. 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