For many young Latin Americans, a military career is still an attractive route to advancement. In 2006, an average of five applicants registered for each available opening in the region’s military schools. In some countries the proportions were far higher than the average: in Venezuela, the ratio was 20 to 1; and in Brazil it was 37 to 1. But even as a new generation of officers eagerly dons the uniform, the region’s new democracies have not figured out a sustainable strategy to pay for their services, or to build modern military institutions that will keep them usefully occupied.
Nearly three-quarters of the region’s $3 billion spending on national defense in 2006 went to pay salaries and pensions. As personnel costs continue to increase, most national armed forces struggle with the leftovers in their budgets to maintain a minimal operational capacity, with technology that is largely obsolete. Meanwhile, in the absence of any real movement toward military reform, enterprising generals (often with a wink or a nudge from the political establishment) have found a way to make ends meet outside military budgets.
In a growing number of countries, windfall profits from resource revenues or private sector enterprises is not only keeping Latin America’s cash-strapped armed forces in the black, but paying for new equipment and technology.
Ecuador offers a striking example. With one of the highest levels of military spending in Latin America, according to a recent study published by the Red de Seguridad y Defensa en América Latina (RESDAL), Ecuador uses 3.14 percent1 of its GDP to support military spending. That isn’t far from the four percent allocated by the United States for the same purpose. However, the key to the Ecuadorian army’s budgetary good fortune is participation in private enterprise.
During the last 30 years, Ecuador’s Department of Army Industries has managed holding companies related to iron and steelworks, mining, explosives, shoes, clothing, ammunition, and agricultural products such as dairy, cereal, bananas, and rice. The army also operates franchises for automobile and tourist companies such as Mazda, Localiza Rent A Car and the Marriott Hotel in Quito…
