Amid global economic fragmentation and geopolitical realignment, one sector has emerged as a clear winner: defence. In 2024, world military expenditure soared to USD 2.718 trillion, the highest on record, marking a staggering 9.4 percent year-on-year increase, the steepest since 1988. This surge capped a full decade of uninterrupted growth, with global defence spending rising 37 percent between 2015 and 2024. The military burden on the global economy also deepened, with defence now consuming 2.5 percent of global GDP. Governments allocated an average of 7.1 percent of their total budgets to military purposes and this unprecedented wave of rearmament has opened a rare window of sustained opportunity and intensified competition for defence suppliers. 

Defence firms worldwide are aggressively expanding production to meet Europe’s growing demand, mainly driven by the ongoing war in Ukraine and a wider shift in defence priorities. The conflict has pushed European nations to boost military spending, replenish depleted stockpiles and strengthen deterrence capabilities, leading to an increase in orders for weapons and equipment.  

This rapid expansion is seen as low risk, as “these costs are absorbed by clients as part of the pricing in the contract,” making large-scale investment in capacity both strategic and financially viable. US suppliers, however, may be held back by bureaucracy. “In my personal experience, the major US vendors do not properly utilise in-country support,” the vice-president of a global technology company, specialising in aerospace and defence observed. “They tend to rely upon the weight of the US government,” which limits flexibility and competitiveness compared to European or emerging suppliers. 

In 2023 military spending across Latin America varied significantly. Colombia led the region with military expenditure reaching approximately 2.87 percent of its GDP - the highest share in Latin America and the Caribbean - continuing a trend of consistently high defence investment. Chile followed with 1.63 percent of GDP allocated to defence, while Mexico spent just 0.7 percent. In Brazil, lawmakers are currently debating a constitutional amendment, known as the PEC of Defence 1, that would require allocating 2 percent of the country’s annual GDP to the defence budget. Brazil currently spends less than 1 percent of its GDP on defence (as of 2024), and the proposed plan aims to gradually increase this share over time.  

Building on this momentum, Brazil is stepping up its efforts. With BRL 110 billion in new defence investments, the Lula administration is strengthening alliances, most notably with France through a submarine built using French tech. Exports through Embraer, Brazil’s aerospace leader, have also been boosted and the company is expanding its European footprint, including plans for a new office in Portugal. Its transport aircraft have already been sold to Sweden, Austria and the Czech Republic. 

Still, winning contracts is not just about product quality, it’s about political engagement. The defence consultant noted, “The decision of which aircraft/manufacturer to go for is all about politics. Who has visited the country? How many times?” These questions showcase the need for diplomacy as a competitive tool in global defence markets. 

“The decision of which aircraft/manufacturer to go for is all about politics. Who has visited the country? How many times?”

Defence consultant, US focused

Embraer is one of the top beneficiaries of this global rearmament cycle. With a BRL 20 billion investment plan through 2030, it is not only scaling up its civil aviation and green tech efforts but also ramping up military research and development, especially via its systems subsidiary, Atech. 

Still, Brazilian suppliers face risks. US tariffs on aluminium and other materials could weaken competitiveness against US rivals like Lockheed Martin. A senior executive from a leading steelmaker noted, “The C-390 aircraft produced by Embraer will be hit by the increase in aluminium and other tariffs,” potentially giving an edge to the C-130 Hercules, widely used by EU militaries. 

“The C-390 aircraft produced by Embraer will be hit by the increase in aluminium and other tariffs.”

 Senior executive from a leading steelmaker, Brazil

Beyond trade barriers, the nature of defence contracts introduces complexity. “Loyalty? Not really important,” the European defence director remarked. “It’s more about the contract and maintenance aspect,” including key elements like technology transfer and long-term service. Countries tend to stick with one supplier, but mixed fleets are also common, especially where political or operational flexibility is needed. 

Latin American suppliers, particularly Brazil, are seen as cost-effective and reliable by European buyers. There is clear potential “to increase exports in missiles, small arms and airlifts, given the expected increase in demand for these products of NATO member states,” attested a Latin American based senior executive. 

“The current climate of tensions around the world is not going to dissipate quickly,” confided a source and Latin America’s approach is becoming increasingly multifaceted. Countries in the region are not merely increasing military budgets, they are aligning defence strategies with industrial policy, foreign diplomacy and global market dynamics. Our source concluded, “The demand for defence is only going up.”