South America Defense Market Size & Share Analysis - Growth Trends And Forecast (2026 - 2031)

South America Defense Market Trends and Insights

Accelerated Recapitalization of Ageing Defense Inventories

Most South American platforms entered service during the 1970s and 1980s, leaving readiness gaps that are being addressed through large-scale replacement programs. Argentina accepted its first six F-16 fighters in December 2025, marking the country’s first new combat aircraft delivery in nearly four decades and launching a Lockheed Martin upgrade cycle that will run through 2032. Brazil’s Gripen E/F line at Embraer’s Gavião Peixoto site is delivering locally assembled aircraft, achieving 40-50% domestic content and pointing to deeper industrial participation. Continued retirements of 30-year-old fighters and 25-year-old surface combatants ensure sustained volumes for the South America defense market through the forecast horizon.

Re-Emergence of Interstate Tensions Strengthening Territorial Defense Priorities

The Venezuela-Guyana Essequibo dispute escalated through 2025, prompting Guyana’s defense budget to soar by 78% in 2024 and driving neighboring Brazil and Colombia to reinforce northern garrisons and riverine patrols. Similar unresolved boundaries between Peru and Ecuador, as well as maritime interests of Argentina and Chile, are steering spending away from internal security toward conventional deterrence, notably long-range surveillance radars and strike platforms.

Expansion of Border Security and Surveillance Programs Driving UAV and C4ISR Procurement

Brazil’s USD 2.8 billion SISFRON program extended sensor coverage along 16,886 km of its frontier. At the same time, Colombia’s USD 300 million Atlante II UAV deal will deliver sixteen UAVs between 2027 and 2030 for counter-narcotics surveillance. Complementary C4ISR upgrades, such as Embraer’s BRL 102 million (USD 18.81 million) SABER M200 Vigilante radar order, show a convergence of sensing and engagement systems that support holistic border defense.

Force Multiplier Impact of External Military Financing and Security Assistance

The US Foreign Military Financing of USD 550 million in fiscal 2024 and USD 462.5 million in fiscal 2025 underpins Colombia’s rotary-wing renewal and C4ISR upgrades, thereby amplifying local budgets. Similar financing frameworks for Peru’s pending F-16 Block 70 deal broaden supplier reach and embed interoperability with US assets, elevating overall capability across the South America defense market.

Defense Spending Pressure from Commodity-Price-Driven Fiscal Volatility

Peru’s heavy copper exposure constrained financing for its USD 3.42 billion F-16 Block 70 package after the USD 64 billion mining pipeline stalled amid price swings, narrowing fiscal space for defense.^{[1] International Monetary Fund Analysts, “Peru Economic Outlook and Mining Sector Analysis,” imf.org} Argentina’s rising inflation similarly delayed fighter procurement until parliamentary approval unlocked USD 941 million in 2024.^{[2]Bloomberg Editors, “Argentina Inflation and Defense Budget Constraints,” bloomberg.com} Oil-dependent Venezuela and copper-reliant Chile face parallel budget uncertainties, which embed volatility into the South American defense market outlook.

Procurement Delays Linked to Governance and Anti-Corruption Investigations

Brazil’s Prosub submarine effort and Saab’s Gripen deal have come under renewed scrutiny, slowing nuclear-submarine milestones and second-batch fighter negotiations. In Peru, “Rolexgate” stalled decisions on F-16 and naval tenders, while Argentina’s mandatory judicial reviews routinely extend contract cycles by over a year, jointly dampening the South America defense market growth trajectory.

Segment Analysis

By Armed Forces: Ground Dominance Meets Air-Power Resurgence

The Army accounted for 41.32% of the 2025 regional expenditure, as infantry, armor, and artillery remain pivotal for counter-insurgency and border defense across the South America defense market. Brazil’s Guarani 6×6 program, Colombia’s Pandur II deliveries, and Argentina’s TAM tank upgrades collectively exceed USD 500 million in active contracts, ensuring a steady stream of vehicle deliveries. In parallel, artillery modernization under Brazil’s Astros 2020 and mobile mortar projects enhances responsive fire support, which is essential for jungle and mountain operations.

The Air Force is regaining prominence, poised to expand at a 5.34% CAGR through 2031, driven by multinational fighter recapitalization. Argentina’s first F-16 batch restores an air superiority role that has been dormant since the 1980s, while Peru’s DSCA-cleared F-16C/D Block 70 order, once financed, will retire its aging Mirage 2000 and MiG-29 fleets. Brazil’s Gripen rollout and potential 34-unit follow-on lot consolidate an indigenous final assembly ecosystem, lifting local avionics and mission system expertise. Continuous ISR aircraft integration further strengthens situational awareness across the South America defense market.

Note: Segment shares of all individual segments available upon report purchase

By Type: Vehicles Lead, Unmanned Systems Accelerate

Vehicles represented 25.01% of 2025 revenue, with flagship programs such as Guarani APCs, Leopard 2 maintenance, and Pandur II transports underpinning order books. Sustained ammunition contracts, notably Brazil’s more than USD 1 billion tranche with CBC Global Ammunition, reassure suppliers of predictable consumption rates, reducing import reliance and aligning with offset objectives.

Unmanned systems show the fastest expansion at 5.45% annually through 2031, reflecting Colombia’s Atlante II contract, Brazil’s Hermes 900 fleet reinforcement, and Chile’s adoption of the rotary-wing CAMCOPTER S-100. Local innovation is emerging: Colombia’s Dragom UAV signals a move toward co-development, while Brazil’s loitering-munition roadmap indicates demand for armed UAV capabilities. Synergies with C4ISR and EW procurement are building an integrated kill chain across the South America defense market.

By Domain: Land Primacy, Space Emergence

Land systems maintained a 44.78% share of the 2025 South America defense market, driven by the sheer expanse of unguarded frontiers and sustained insurgent threats. Continuous investments in mobile artillery, tactical UAVs, and armored mobility support rapid response over jungle, desert, and mountain terrain.

Space functions are advancing at a 6.24% CAGR, the highest across domains, anchored by Brazil’s PESE constellation and complementary Argentine and Chilean projects. Coupled with Chinese-built ground stations scattered across the continent, these satellites enhance persistent ISR and secure communications, cementing outer-space capability as a new pillar of the South America defense market.

Note: Segment shares of all individual segments available upon report purchase

By Procurement Nature: Offset Mandates Tilt Toward Indigenous Production

Foreign procurement accounted for 56.78% of the 2025 outlays due to the limited local capacity to manufacture fighters, submarines, or sophisticated sensors. Yet indigenous production is projected to rise at a 6.86% CAGR as Brazil’s 100% offset rule compels primes to localize tasks ranging from final assembly to subsystem fabrication. Embraer’s USD 139 million in defense revenue for the first quarter of 2025, combined with a USD 4.2 billion backlog, demonstrates the commercial upside of this model.^{[3]Embraer Investor Relations Team, “First-Quarter 2025 Results,” ri.embraer.com.br}

Elsewhere, Avibras Indústria Aeroespacial and CBC Global Ammunition secure niche wins in rockets, ammunition, and small arms. Colombia’s COTECMAR and Chilean yards focus on MRO and selective shipbuilding, showing that industrial participation is scaling beyond Brazil, albeit unevenly. These dynamics collectively reshape supply chains inside the South America defense market.

Geography Analysis

Brazil accounted for 54.23% of regional spending in 2025, driven by multibillion-dollar surface and subsurface combatant programs, the Gripen fighter line, and the SISFRON border network.^{[4]Naval News Correspondents, “Brazil Commissions Third Riachuelo-Class Submarine S42,” navalnews.com}

Space projects under PESE and an embryonic cyber-defense command underscore Brasília’s multidomain ambitions. Colombia is advancing at a 6.22% CAGR, supported by more than USD 1 billion in combined US Foreign Military Financing across fiscal 2024-2025 and persistent drug-interdiction operations. The Atlante II UAV buy, Pandur II APC fleet, and COTECMAR-Damen frigate build mark the country’s most robust modernization cycle in decades, embedding co-production in naval construction and inaugurating an indigenous drone capability.

Argentina, Chile, Peru, and the rest of the continent share the remaining slice of the South America defense market. Argentina’s inaugural batch of F-16s revives combat-aircraft capability despite inflation-linked funding stress. Chile sustains Leopard 2 and F-16 fleets with copper revenues, although price softness is squeezing discretionary outlays. Peru’s USD 3.42 billion F-16 Block 70 package and USD 463 million Hyundai ship deal hinge on the recovery of the copper market and political stability following 2024 corruption probes.