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The upcoming large events in Brazil (World Cup in 2014 and the Olympic Games in 2016), together with economic stability are becoming two important ingredients boosting the Civil Security market in this country in the next five years.
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Spending in the Brazil Civil Security Market - Where are the Revenue Opportunities?
Bruno Mucciolo, Senior ConsultantBruno Mucciolo, Senior Consultant
Aerospace, Defence & Security
19th July 2011
Functional Expertise
• Responsible for managing strategic Aerospace & Defence projects and leading a team of Defence and Security
consultants in EMEA and Latin America.
• Experience in developing and managing over 40 strategy consulting projects for Prime Defence contractors,
ranging from Market Entry Strategy, Risk & Economic Impact, M&A and Product Development.
• Managing internal Implementation processes (best practices) to support the Global A&D team.
Industry Expertise
� Focusing on Defence and Security, particularly in the following areas:
- Support in-Service & Through Life Capability Management of Military Assets
- Precision Guided Munitions and Missiles Markets
- Unmanned Aerial Vehicle
- Integrated Surveillance Solutions for Defence and Civil Security applications.
- Safe Cities
Today’s Presenter: Bruno Mucciolo
Place photo hereShadow Background
for effect
2
- Latin America Defence & Security Markets
What I bring to the Team
• Expertise in the Strategy Consulting realm, new product development, technology assessment, and Marketing
Collaterals to support our client’s decision making process.
• Close relationship with our clients during and post consulting assignments.
• Effective project management skills and implementation of innovative analytical tools.
Career Highlights
• 3 years of experience as a consultant for the Aerospace & Defence team of Frost & Sullivan
• 2 years as defence analyst for the International Institute for Strategic Studies in London (IISS).
• 2 years working with the US Department of Commerce advising and supporting US companies to enter the
Brazilian market (multiple industry sectors including A&D, Energy, Chemicals and Transportation)
Education
• MA in War Studies from King’s College London (London, UK)
• BA in International Relations, FAAP (Sao Paulo, Brazil)
Bruno MuccioloSenior Consultant,Aerospace, Defence & Security
Frost & SullivanEurope & Latin America
(office: London)
Focus Points
1. The boom of the Brazil civil security market
2. Key market segments
3. Why the Brazilian market?
4. Why “maybe” the Brazilian market?
5. Key revenue opportunities for our clients
Key considerations
3
6. Key considerations
Growth Slide/Revenue Projection
$113
$280
$429
$335$322
$222
$150
$200
$250
$300
$350
$400
$450
$500
USD
, M
illio
ns
Overall Civil Security Market Forecast, 2011-2016 Source: Frost & Sullivan
4
Infrastructure
and
procurement
programmes
related to WC
and Olympics
begin.
TAV and some
airport
programmes
begin
Security
spending will
be highest in
2013 as
programmes
related to the
WC conclude
and security
measures are
installed post-
construction.
Mass transportation and
airport projects related to
the World Cup overrun,
Olympic construction begins
TAV project
continues,
second phase
of CICC
programme
concludes
F&S currently estimates
that the TAV project will
conclude in 2017 –
outside the scope of
this report. Security
spending will be high
(estimated $90 million)
in this year, particularly
in integration, as
construction concludes
and stations are made
secure.
$113
$0
$50
$100
2011 2012 2013 2014 2015 2016
2017
Market Segmentation
Large
Events
Airport
Security
Critical
Infrastructure
Border
Security
Amazon border (drug and arms smuggling) -
resource-intensive to patrol
• Frontier with Paraguay (illegal immigration,
smuggling, terrorism concerns)
• Presently largely programme-driven
Brazil wants to use 2014 & 2016 to dispel the
image of an underdeveloped country - the
government is expected to heavily invest in top-
class security to prevent ANY incident.
• Considerable experience with large events
security – Carnaval street parties among the largest
Modernisation requirement - airports beyond
capacity, demands of World Cup
• International agreements and US & Brazil
security reciprocity demands
• $3.18 billion modernisation programme
• Driven by periodic assessments and programmes
Bulk of CIP spending in next five years will go
towards offshore rigs – this defence programme is
outside the scope of this report
Low large scale threat perception and pressing
urban infrastructure requiements due to
international events means that little significant
Declining
MarketStable Market
Growing
Market
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Port
Security
First
RespondersMass
Transport
High levels of criminality and violent crime, no
longer limited to large cities
• Insecurity – real and perceived - having clear
economic and political impact
• Joint operations requiring interoperable
equipment
• Driven by programmes and annual budgets
security – Carnaval street parties among the largest
in the world.
High investment to expand and integrate mass
transportation (local and regional)
• Security mindset change – perceived need for
better monitoring and intelligence, and
interoperability with First Responders.
• Need to reduce reliance on air travel.
• Programme-driven
international events means that little significant
security development is planned in next five years.
•Current investment in ports focuses on dredging
and increasing capacity for trade vessels.
• International Ship and Port Facility Code (ISPS)
requirements being met ad-hoc, but not a priority
before 2014.
In civil security context globally CS is most
important in relation to CIP – little preparation is
being done in this field at present due to low
threat perception
Cyber
Security
Topics / Trends
High Violent
Crime Rates
• Brazilian cities have long suffered very high violent crime rates,
fomented by high unemployment and levels of drug use.
• Violent crime rates are increasing in small and medium-sized
cities
Underdeveloped
Infrastructure• Brazilian infrastructure (particularly transport) has suffered
decades of neglect and is strained beyond capacity.
• High demand for security solutions;
however private security market in Brazil is
mature.
• Increased demand by police forces to
upgrade capabilities quickly, particularly in
C4I.
ImpactDescription
• Large budget allocation for infrastructure
programmes over next 5 years. Security
preparations will feature heavily in these
projects.
Hot Topics
6
Large
International
Events
• Brazil’s selection to host the 2014 World Cup and the 2016
Olympic Games has given impetus to long-overdue infrastructure
improvements and security operations.
• New projects will have to comply with FIFA and International
Olympic Committee standards.
• Large projects related to preparing cities
for influx of tourists across all segments of
urban infrastructure and security.
Positive
Economic
Situation
• Comparatively little effected by global economic recession. •While budgets have been cut over the last
few years, these are not on the scale seen
in the developed world and Brazil is an
increasingly attractive market.
Dauntingly complex political/end-user
responsibility matrices
Due to the federal system and the fragmentation of law
enforcement agencies, public sector projects in Brazil have
highly complex responsibility matrices. Legal and regulatory
frameworks are also relatively complex, and levels of
bureaucratic inertia high by Western standards.
Poor planning
Given the recent change in the Executive, the heads of state
and national bodies relating to requirement assessment and
procurement for the World Cup and Olympic Games are in the
process of changing. The delays this is causing in these main
driving programmes - which, though foreseeable, had not
been planned for – means that budgetary decisions may be
significantly delayed, and procurement decisions
consequently rushed.
Major Challenges
7
Different requirements from Western
(and other BRIC) countries
Brazil suffers high levels of violent crime, but has a very low
threat perception of terrorist-related incidents. This means that
the local market is able to meet a very large proportion of the
physical protection needs of end users, which until now have
been mostly related to bullet proofing and perimeter control.
Competition with international – not just local-
players
While many international companies have yet to enter the
Brazilian market, many big players (such as Siemens and
Motorola) are already well established in Brazil and have
developed a good reputation. This will give them an
advantage in negotiations, particularly for contracts related to
the World Cup and Olympic Games.
There is a total of US$ 1.7 billion of program-related opportunities across five different segments in the Civil Security Market in Brazil.
$217$248
$384
$754
$98$100
$200
$300
$400
$500
$600
$700
$800
USD
, Mill
ion
s
Forecasted Market Value per Segment for period 2011-2016
12%
14%
21%
42%
5%
Airport
Large Events
MT
First Responder
Border
8
$0
Airport Large Events MT First
Responder
Border
Market Segment Market Opportunity AnalysisDegree of Competitiveness
(against Local Suppliers)Recommendation to industry
Airport Security
Compa ratively unitary s takeholder, but
dela ys and confus ion in procurement
proces ses . Fa i rl y high investment in
security sector.
LowBui lding relations hips wi thin Infraero is crucia l to bus ines s
s uccess .
Large EventsHigh overa l l investment, but highly
fragmented.Low/Medium
Target loca l s takeholders , ideal ly through domestic/loca l
partnerships .
First RespondersVery high overa l l investement, very highly
fragmented.Med/High
Establ ish relationships with s takeholders in key s tates as a
priori ty.
Mass TransportationHigh overa l l investment, fa i rl y
fragmented.Med/High
Ma ny programmes wi l l be contracted to consortia ; es tabl is h
relations hips wi th loca l constructing leaders .
Border SecurityLow overa l l inves tment in civi l security
s egment, fa i rly fragmented.Low/Medium Target SENASP whi le fomenting domestic presence.
Source: Frost & Sullivan
Airport Security• Though spread across regions, the key purchaser of equipment (Infraero) is a more unitary authority than in law enforcement or construction sectors. This will ease doing business somewhat, though this advantage may be negated in many cases by the severe delays and uncertainties experienced usually arising from legal challenges to Infraero’s construction contracts.First Responders• Policing is highly fragmented in Brazil, with offensive policing being the remit of the individual state.• Overall opportunities represent a very attractive market segment; however this fragmentation means that opportunities may be individually fairly small and difficult to target. Targeting the states with the highest levels of spending - Rio de Janeiro, São Paulo, and Departamento Federal – is advisable.Mass Transportation
Conclusion
9
Mass Transportation• Though somewhat fragmented, overall mass transportation represents a significant opportunity for suppliers of security equipment, particularly in Rio de Janeiro. Local governments and transport operators are key stakeholders with whom to establish relationships.Border Security• Now understood to be a civil security imperative, programmes are being developed by the Ministries of Defence and Justice. Police initiatives have a comparatively small budget.Large Events Security• Preparations for the World Cup are spread across all civil security ‘threat domains’.• Venue security represents a considerable market opportunity for the period covered here, but fragmentation and the probability that most equipment will be sourced locally and quickly diminish market attractiveness.
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For Additional Information
Joanna Lewandowska
Corporate Communications
Aerospace, Defence & Security
+48 (0) 22 390 41 46
Andrew Thorndyke
Sales Manager
Aerospace, Defence & Security
+44 (0) 18 6539 8645
13
Balaji Srimoolanathan
Research Manager
Aerospace, Defence & Security
+44 (0) 20 7915 7821
Bruno Mucciolo
Senior Consultant
Aerospace, Defence & Security
+44 (0) 20 7343 8331
