Peru plans to invest US$39 billion to upgrade its military equipment

The Peruvian Minister of Defense, José Luis Gavidia, has announced a series of measures to resume the modernization program of the Peruvian Armed Forces after it was put mostly on hold since 2018.

He also announced the ongoing development of a strategic plan to update military equipment to a very long-term horizon, until 2050, a year up to which an investment of US$39 billion is projected.

GDP: GROWTH

In an interview with Radio Exitosa, Minister Gavidia confirmed the upcoming implementation of equipment plans in the three armed institutes but has not landed on how the average budget of US$1.4 billion per year required, according to his own estimates, will be found with a declining Peruvian national economy.

The Ministry of Economy and Finance reduced a few days ago the GDP growth projection from 3.6% to 2.2% – and the primary source of tax revenues for the Peruvian State, which is mining, has been under attack from Pedro Castillo’s government practically since the beginning of his administration, even though contradictorily the high international prices of metals have generated revenues never seen before in Peru.

Thus, unfortunately, because it is in the interest of Peruvians to have their Armed Forces modern and well equipped, the announcements of Minister Gavidia, with some figures that do not add up, at least for the moment, crash with the reality of a government flooded by corruption investigations that the Public Ministry has opened against ministers, former Secretary General and the President of the Republic himself.

RUSSIAN TEAMS

In this context, Minister Gavidia rightly referred to the problem currently represented by the Russian matrix in the military equipment of the Peruvian Army and the Peruvian Air Force because the Peruvian Navy has equipment mainly of Western origin (except for one Mi-8T).

Gavidia highlighted that the war in Ukraine substantially aggravates the situation of the Russian equipment matrix in Peru. He revealed that there are still spare parts for airplanes and helicopters of Russian origin and noted that, in any case, there are factories in other places that may be needed as suppliers to avoid sanctions.

According to Gavidia, the Defense sector elaborates a real and sustainable long-term strategic plan which is being worked on by the general commanders of the three armed forces. The sector has plans to move away from the Russian matrix and turn to Western products.

On the flight time of Russian helicopters, Gavidia maintained that an hour of flight time costs approximately US$5,500 per hour and accepted that more modern helicopters are likely to cost less.

THE ARMED FORCES OF 2050

The Minister informed that a meeting of the National Security Council was held a month ago, where the Strategic Plan for the year 2050, the Armed Forces of 2050, was approved.

Together with the Ministry of Economy and Finance, a working committee has been organized to evaluate where the resources (money) will come from to finance acquisitions and hiring by 2050.

Gavidia revealed that by that year, some US$39 billion were required to invest in “new material, not used” for the Armed Forces.

We make a separate point here to indicate that the simple division of US$39 billion between 27 years results in an annual average of US$1.4 billion to invest in equipment and materials for the Armed Forces.

Resources that will be very complicated to obtain with a government that has strengthened the indiscriminate delivery of bonuses, continuing the dilapidation of the budget that began in 2018, which deepened to alarming levels during the pandemic.

Peru, in addition, already has an indebtedness rate that has surpassed the recommended barrier of 30% of the Gross Domestic Product (GDP), including 100-year debt issuance, and with interest payments that increasingly represent an important part of state expenditures and restricts the future indebtedness capacity if it is intended to sustain an adequate fiscal balance in the coming years.

It should be noted that there have already been similar announcements in past years, even embodied on paper, in the annual public budget projects, but little has been done since 2016 to modernize the Peruvian Armed Forces.

SUSTAINABLE INVESTMENT

Investment in military materials and equipment, as rightly stated by Minister Gavidia, must be sustainable; it is not a matter of just buying for the sake of buying but of ensuring adequate levels of operability of such equipment, incorporating new technologies that are proving their effectiveness in the field of modern combat and this without affecting the welfare of military personnel, starting with the “rancho”, the daily food.

Gavidia added that a law is being worked on to allow the construction of a submarine because the purchase of complex weapon systems such as combat airplanes are long-term programs; an airplane takes five years to be completed, the Minister said in general terms.

CLOSURE OF THE PROCUREMENT OFFICE

On the other hand, Gavidia made a very worrying announcement when he stated: “The Ministry of Defense and the Minister are not buying anything. We are; I am deactivating the Purchasing Office; the purchases are made; that is why the Purchasing Office was created, where everything from rifles to satellites, even airplanes, were purchased.

“So, at this moment, all purchases are made by the institutions; they are the experts. We are working on the law that allows via canon (contribution to mining companies, in a government that promotes mining investment, on the contrary), not only mining but also to see if a percentage of the exports (beware that taxes cannot be exported) to repower and modernize our Armed Forces, more or less the horizon we are thinking about is, more or less to 2050, an amount of approximately US$39 billion”.

In other words, the Ministry of Defense is proceeding to close the Armed Forces Procurement Agency (Acffaa), an agency created following the practices of European countries such as France (with the General Directorate of Armaments); Spain (with the Directorate General of Armament and Material); Sweden (with the Swedish Defense Materiel Administration); Switzerland (with Armasuisse); and other countries that have agencies in charge of procurement – and even lead the development and testing of weapons systems – to standardize, streamline purchases, generate corporate purchases and economies of scale, reduce the likelihood of acts of corruption, among others.

The Acffaa has been criticized for its performance, but the solution is not to close it and give back to the armed forces all procurement activities, but rather to bring the Acffaa even closer to them and effectively integrate, not only on paper, the Comptroller General’s Office to carry out concurrent controls.

PLANNED PURCHASES

Minister Gavidia also revealed that the general commanders are working on the Defense Fund Shield 2 to 2034; this amount was also approved in the Security Council to be executed not in 2034 but in 2023 and 2024, US$1 billion, which Gavidia affirms that “it is going to be done anyway,” amount that is already earmarked.

Likewise, this year, the Minister revealed in an interview with Radio Exitosa that the beginning of the project for the construction of an Ocean Patrol Vessel, an OPV for the Navy, has been programmed, citing US$100 million as the cost, a high amount for an OPV, and that this year they expect to invest an initial amount of 33 million dollars, of what will be a three-year project.

For the Peruvian Air Force, Gavidia announced the purchase of two new transport planes, probably two C-27J Spartan to give continuity to this aeronautical program, and six helicopters, some 200 million dollars in total, and for this year, the sector is requesting a part of this budget.

The program for the acquisition of 8×8 armored vehicles for the Peruvian Army, an armed institute so often neglected in terms of military equipment, is also moving forward.

Minister Gavidia has been reiterative in ruling out the purchase of second-hand material. It has to be new, he said.

He also referred to the purchase and delivery of the Peruvian Navy’s SH-2G Seasprite + anti-submarine warfare helicopters, stating that “there is a helicopter program that still has not arrived, the helicopters were purchased eight years ago, they should have been here five years ago, and they still have not arrived, undoubtedly, there is an investigation in this regard, they were purchased from Canada (actually the CCC – Canadian Commercial Corporation – were the intermediaries) and these are programs that I am substantially mortified.

The policy of the sector that decides with the high commands because, in the sector, there is the Superior Council that is formed by the Minister, the head of the Joint Command, and the general commanders, where decisions are made; no more second class material will be bought (the SH-2G were bought second-hand from New Zealand).

He affirmed that a submarine costs US$700 million (expensive submarine) and takes seven to eight years to build a frigate or multirole unit, in which we are also embarked, costs more or less US$300 million to US$350 million and takes four to five years to build.

So, “we have to embark on long-term projects,” and for this, he states that he is working on a law (however, since 2012, there is already a framework law for the modernization of the Armed Forces) for which alternatives are also being analyzed to find a way to finance the announced 39 billion dollars required for the purchase of new equipment by 2050.

The long delay in the delivery of the SH-2G helicopters was due to the awarding of the transport of the helicopters from the United States to Peru to a company that did not have the necessary certifications, preventing the shipment of the aircraft to Callao and having already had an incident on arrival at the Port of Callao with the first of the helicopters, its tail section was damaged, the sector did not want any more incidents. However, two more SH-2Gs have recently arrived in Callao.

NEW SATELLITE

Regarding the purchase of the new communications satellite, Gavidia affirmed that Peru would have it in the next two or three years through regional agreements with Chile, Brazil, Colombia, and Argentina, which he rightly affirms has a good development in this segment of communications, to be able to have the first communications satellite.

However, there is a plurality of suppliers in the international market with the capacity to supply a very modern communications satellite.

Gavidia reiterated that they are deactivating the Procurement Agency because purchases – he maintains – should be made by the institutes. It is undoubtedly a very worrying announcement, which should be analyzed without haste to avoid a return to some bad practices of the past in the armed forces.

Gavidia also revealed that he has suggested to the Ministry of the Interior to do the same and that the purchases should be made by the National Police of Peru, when in the sector, in practice, responsibilities are divided between the Ministry and the Police, as can be seen in the State’s procurement portal.

In reality, the objective should be to strengthen the Acffa, which has military personnel in its structure, and even incorporate the Police and its specialists to extend the standardization of equipment to the Police. Here the Minister has things backward. The objective is to modernize but avoid or at least reduce spaces for corruption for the benefit of the military and Police themselves and Peru.

CONTRIBUTION TO MODERNIZING THE EQUIPMENT

Gavidia said that by the end of the year, they expect to have the law ready so that the Armed Forces will have a permanent contribution to the modernization of equipment, and in the next few years, they will have the US$1 billion already mentioned above.

Otherwise, the Minister of Defense commented, it will be necessary to buy second-hand material, in a very hasty manner, “just around the corner where they sell you anything”, he said in a particular but accurate way.

He compared the purchase of the Chilean Navy’s Scorpene submarines, which took eight years from procurement to incorporation. When the new combat aircraft is ordered, Gavidia affirmed, they have to be sustainable projects in time because they do not take one, two, or three months because, in the case of aircraft, it takes no less than four or five years, he added.

A fighter plane does not cost less than US$120 million, said Gavidia. The multirole ships, the new frigates to be built, are worth no less than US$350 million.

Gavidia maintains that in terms of acquisitions, the Air Force will have to be in charge of airplanes, the Army of tanks and anti-tank weapons, and the Navy of ships and submarines.

MILITARY AND NAVAL INDUSTRIES

The Minister emphasizes the importance of SIMA Peru, the projection of FAME S.A.C., and announces a plan to recover Indumil (Industrias Militares), which will have to change its name because, in Colombia, they have already taken that name.

Indumil was a large consumer of tannery products in Peru, making thousands of shoes, and then they were replaced by imported products. He recalled that the last two Lupo frigates of the first batch of four units were assembled in SIMA, where high board ships were built, a construction that has been resumed, along with the Pisco Class Multipurpose Ships.

The Minister also stated that they are seeking to improve the monthly financial allowance given to the soldiers, which is very low but did not mention the rancho (daily food), which has been complained about for a long time, even though he did refer to the general welfare of the troops and the monthly allowance they receive, which should be higher.

With information from InfoDefensa

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