Latin America Also Embraces 'K-Defense Local Production Strategy' [Yang Nakgyu's Defence Club]

Peru Likely to Demand Local Production Through Implementation Contract
Interest in Securing Domestic Technology Based on KT-1 Production Experience

The reason the K2 tank, a flagship of Korea's defense industry, was able to enter the Central and South American market is that the strategy of local production and technology transfer negotiations proved effective. The agreement signed between Hyundai Rotem and the Peruvian Army Arsenal is a comprehensive agreement covering tanks and armored vehicles. According to the agreement, the Peruvian Army will introduce a total of 195 ground vehicles, including 54 K2 tanks and 141 K808 wheeled armored vehicles, known as "Baekho," by next year. The K2 tank contract alone is reported to be worth 1.9 billion dollars (2.79 trillion won).

Hyundai Rotem plans to sign an implementation contract in the future, with plans to deliver the tanks in two separate batches. Peru is already demanding local production. The plan is to establish local production facilities through licensed production from 2029 to 2040. The goal is to achieve a local parts procurement rate of over 30%. According to local media, Jorge Kalinowski, Major General and Commander of the Peruvian Army Logistics Command, stated at a defense industry forum held locally in October that "there are plans to invest 270 million dollars to build assembly plants for K2 tanks and K808 armored vehicles in Peru." However, Hyundai Rotem believes that further discussions are needed, as local companies currently lack sufficient production facilities and assembly technology.

The reason Peru insists on local production is that it already has experience producing Korean defense products locally. In 2012, Peru introduced 20 KT-1 basic trainer aircraft developed with Korean technology. The export volume at that time was 200 million dollars; four aircraft were produced and delivered directly by Korea Aerospace Industries (KAI), while the remaining 16 were produced in Peru. Building on this momentum, KAI proposed a package export of FA-50 and KF-21 aircraft for the Peruvian Air Force's aging aircraft replacement project, promising joint production of parts with the Peruvian state-owned company SEMAN if the contract is won. The Peruvian Air Force modernization project involves a total of 24 aircraft.

HD Hyundai Heavy Industries is targeting the Peruvian market by offering its technological capabilities. The company is participating in the Peruvian Navy's shipbuilding project by providing design and process know-how to the state-owned shipyard SIMA. Four vessels are scheduled to be delivered sequentially starting in 2026, with the total project value amounting to 640.6 billion won. In addition, the company has secured preferred bidder status as a strategic partner for follow-up shipbuilding projects with the Peruvian government and navy through 2039.

Domestic defense companies plan to maintain export competitiveness through "localization" and "technological advancement." Importing countries are increasingly making technology transfer and local production key conditions to secure their own technological capabilities in the long term, prompting Korean companies to develop tailored export strategies.

Hanwha Aerospace plans to manufacture and sell not only K9 self-propelled howitzers but also armored vehicles in Romania. Hyundai Rotem, by signing a second implementation contract for the K2 tank, has already agreed to produce K2 tanks locally in Poland. The establishment of local subsidiaries by Korean defense companies is also increasing. Hanwha Aerospace has established new subsidiaries in Saudi Arabia, the United States, Brazil, and India. The company is also considering building explosives and ammunition factories in the United States as part of its efforts to diversify its business portfolio. LIG Nex1 has expanded its Saudi office into a research and business organization capable of providing customized solutions for integrated weapon systems and precision-guided munitions.

This content was produced with the assistance of AI translation services.