Peru's Defense Budget to Increase Gradually as Military Plays Important Role in Society
(Source: Forecast International; issued July 11, 2017)
NEWTOWN, Conn. --- Overall, Peru is a nation at peace. That said, Peru's military continues to play an important role. While Peru has made gains against drug producers and traffickers, the country remains one of the top producers of cocaine.

Peru's military leads the fight against drug producers as well as the remnants of the Shining Path guerilla group, which provides protection for those drug producers and traffickers. In addition to serving in traditional roles, the military performs non-battle duties as well, such as providing humanitarian aid and participating in peacekeeping missions.

In order to maintain vigilance against internal threats and continue participation in international missions, Peru has steadily increased its defense budget. Robust economic growth and relative political stability have also contributed to Peru's growing defense spending.

Between 2012 and 2015, defense spending in Peru increased at an average annual rate of 10.9 percent, reaching PEN10.2 billion ($3.2 billion). However, beginning in 2016, Peru's government began reducing the amount of money spent on the military. Defense spending declined 19.1 percent to PEN8.2 billion ($2.4 billion) in 2016. The government is again proposing a 14.2 percent reduction in 2017. The reduction in spending will help Peru reduce overall government spending and deficits. The government has also placed a renewed emphasis on policing, saying that the military is not trained to deal with crime as effectively as police, especially in urban areas. As a result, national police spending will increase as defense spending will decrease.

As overall defense spending is declining in Peru, where the money is being spent is also changing. In 2015, Peru spent 31 percent of its defense budget on major acquisitions, including military equipment. However, that figure declined 12.3 percent in 2016 and is expected to decline 97.7 percent in 2017. In the proposed 2017 budget, acquisitions only makeup 7.7 percent of the overall budget. At the same time, personnel expenses have increased from 43.6 percent of the budget in 2015 to 69.9 percent in 2017, while goods and services increased from 17.4 percent of the budget to 22.2 percent.

Even as acquisitions make up a smaller part of Peru's declining budget, Lima continues to have ambitious plans to upgrade its military. The country is currently taking deliveries of KT-1 trainers, Makassar-class landing platforms, offshore patrol vessels (OPVs), and upgrading its 209-1200 submarines. Peru also has plans to eventually purchase new fighter aircraft, heavy fixed-wing transports, frigates, radar, transport helicopters, and submarines.

Peru would also like to upgrade its Mirage 2000s and T-55 tanks. The Peruvian government is also working to streamline its acquisition process through its Strategic Procurement Plan of the Defense Sector 2016-2021 so it can more efficiently assess military needs, allot money to projects, and move from planning to completion of each acquisition program. Under the plan, Peru also plans to make it easier for contractors to bid on future contracts.

It remains to be seen if Peru can afford all of the equipment it requires. Especially since, going forward, Peru will not increase its defense spending at the same rate it did in the recent past. Slower economic growth will sap the government of tax revenue, and efforts to reduce the deficit will lower spending. Furthermore, the government is now focusing more resources on the national police, reducing funding for the military.

Still, the military continues to play an important role in Peruvian society. It will be used to combat drug producers and traffickers, guerilla groups, and provide humanitarian support during and after natural disasters. For these reasons, defense spending in Peru will increase at an annual rate of 2.2 percent between 2018 and 2022.

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