MercoPress. South Atlantic News Agency

UK/Argentina: Tension over Falklands “likely to increase over the coming years”

Former President Néstor Kirchner aim to reorganise the military by 2010 is unlikely to be achieved.

Argentina has had to reduce military expenditure because of the recession but tension with the UK over the Falkland Islands is likely to increase over the coming years, according to a report from Companiesandmarkets.com (*) released this week.

“The British maintain the stance that Falklands’ sovereignty negotiations will only take place according to the wish of the Islanders” and “the issue is being clouded by complaints by the Islanders about Argentine interference in the economy of the Falklands”, threatening its industries, reads the report “Argentina Defence and Security Report 2010”.

The fact President Cristina Fernandez de Kirchner’s administration has had to reduce military expenditure is resulting in the cancellation of new programs and the ditching of plans for pending upgrades of equipment and replacement programmes for all three forces. While the recession continues, procurement prospects remain poor and the military look set to suffer as a result.

In 2008, Argentine defence spending stood at ARS7.9bn (2.53 billion US dollars), and the report forecasts that it will reach ARS10.5bn (2.11bn USD) by 2014. This slow growth is in contrast to other countries in the region (Brazil, Chile, and Venezuela), where military procurement is on the up and often involving procurement of Russian-made arms and equipment.

It was reported in Military Balance that an arms race is likely to intensify in Latin America due to a “copycat' weapons buying triggered by recent military action in some countries and the reactions of their neighbours. Yet, in Argentina the aim of the former President Néstor Kirchner to reorganise the military by 2010 is unlikely to be achieved.

The economic recession has posed the greatest risk to increasing Argentine defence budgets, with any further fluctuations likely to lead to domestic unrest, including, on the civil front, an increase in violent street demonstrations.

The Argentine government faces significant pressure to increase aid to the farming community, which is becoming increasingly aggressive in its call for an elimination of grains export taxes. This long-standing dispute over export taxes has been a prime factor in the recent decline in popularity of President Cristina Kirchner. The 2009 Overseas Security Advisory Council's Argentine Crime and Safety Report claims violent street crime, theft, kidnappings and other felonies are on the increase.

In general, pan-regional co-operation is increasing, reducing tensions and rivalry between states. New mechanisms to address regional security problems are emerging, including the recently-established Union of South American Nations (UNASUR). The union is aimed at strengthening regional co-operation, particularly with Chile and Venezuela, while keeping the US, Brazil and other Latin American states onside.

Argentina's co-operation and friendship with Venezuela is continuing partly to counter Brazilian regional influence. Argentina stands to gain from the new US presidency in furthering its international influence, having been invited to participate in a US presidential meeting on nuclear power generation safety in April 2010.

Tension with the UK over the Falkland Islands continues to mar relations between the two countries and this is likely to increase over the coming years. The British maintain the stance that negotiations will only take place over the sovereignty of the Islands according to the wish of the Islanders. The issue is being clouded by complaints by the Islanders about Argentine interference in the economy of the Falklands, threatening its limited industries. The fishing dispute has worsened in that Argentina has withdrawn from a fisheries management commission and which could mean serious damage to fish stocks. The Argentines have also banned charter planes travelling from Chile over Argentine airspace to the Falklands, and have banned hydrocarbon industry workers in Argentina from taking up similar work on the Islands.

The region poses a latent terrorist danger, and there are fears that groups operating there could launch an attack similar to the 1994 bombing of a Jewish community centre in Buenos Aires. Relations with Iran have also continued to sour, with no end in sight for the dispute over allegations of Iran's complicity in the bombing.

While the overall risk of a major terrorist attack is low, there are problems with money laundering, fund-raising, and arms smuggling for Islamic groups in the Tri-Border Area, which remains the main focus of counter-terrorist operations. The Middle Eastern groups Hamas and Hezbollah (both supported by Iran), have a financial network in the Tri-Border Area which Hezbollah is continuing to use as a staging ground for terrorist attacks.

(*) The assessment is from Companiesandmarkets.com which provides a comprehensive range of global market research reports covering 27 different industry sectors, and focusing on major geographic areas of the world.