American Defense Companies Try to Break Israel's Grasp on Latin American Drone Market

RIO NEGRO, Colombia -- Drone manufacturers from the U.S. were at Colombia's biannual international aviation fair last week trying to make their first forays into the developing Latin American market for pilotless planes.

[READ: General Atomics to Sell Predator Drones to Foreign Countries]

Officials say drones could help police and the military monitor international borders and combat drug traffickers, adding that unmanned aircraft could potentially be more useful here than in the United States, because of the rugged terrain and lack of roads.

Colombia, Ecuador, Brazil, Chile, Peru, and Venezuela all own drones, but they aren't buying them from the United States. Most are buying UAVs from Israel, or are even getting help from Iran to build their own.

So far, the market for drones in Central and South America has been completely dominated by Israeli companies such as Elbit Systems -- which has sold its Hermes drones to Colombia -- and Israel Aerospace Industries -- which has sold drones to Ecuador and Brazil.

In fact, Israeli companies are the largest exporter of drones worldwide, outpacing the U.S., according to a recent study by consulting firm Frost & Sullivan. According to that report, Israeli drone sales totaled $4.6 billion between 2005 and 2012, with about $500 million worth of drones going to countries in Latin America.

 Israel's head start has more than a little bit to do with the U.S. government's tight controls on which countries American contractors can sell to. American companies hoping to sell drones overseas need special permission from the State Department before they can begin selling drones to foreign companies.

In 2006, the U.S. government, with the help of the Colombians, deployed drones to help rescue American hostages in the country. Earlier this year the U.S. government donated six Boeing ScanEagle drones to Colombia -- but aside from those instances, American drones have remained largely out of the picture in South America.

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That could change soon, as General Atomics -- which makes the Predator drone -- recently received permission from the U.S. government to begin selling a modified, unarmed version of the Predator to foreign countries. General Atomics recently reached a nearly $200 million deal to sell the "Predator XP" to the United Arab Emirates. The company hopes countries in South America will soon follow suit.

"We're out marketing the exportable version of the Predator worldwide. This is a new product we think we're going to have a lot of success with," says Doug Dawson, General Atomics' director of international business development. "Israeli companies have pretty much had a lock on the market in Latin America. We're trying to get a little bit of our market share in the region as well."

Not all the big American defense contractors are ready to try selling unmanned aerial vehicles to countries in Latin America, however. Drones largely dominate American trade shows such as April's Sea Air Space show, with heavy hitters such as Lockheed Martin, Northrop Grumman, Raytheon and General Atomics showing off the latest and greatest in unmanned technology. While each of those companies had representatives at F-AIR Colombia, only General Atomics was touting unmanned vehicles.

 Lockheed Martin was at the show trying to sell Colombian fighter pilots and their higher ups on the F-16 Falcon with a flight simulator and live demonstrations of the jets. Most exhibitors, including those from Latin America, were showing off manned planes and helicopters that can be used to fight drug trafficking.

But at least one other American company, the North Carolina-based UTC Aerospace Systems, sees an opening in South America. The company was advertising Vireo, its three pound, hand-launched drone.

"We're trying to take it outside the United States. We have to go through the State Department on a case-by-case basis to sell it abroad," says Ernesto Sanchez, the company's head of business development in Latin America.

[PHOTOS: Navy Launches First Drone From Aircraft Carrier]

Ironically, the company has had to turn overseas because of regulation in the United States: Commercial companies aren't allowed to begin using drones in the U.S. until the Federal Aviation Administration sets guidelines for their use, which isn't expected to happen until at least 2015.

Until then, companies such as UTC are limited to selling their drones to government agencies. Some states and cities have passed or are considering legislation that would make it even tougher to sell drones in the U.S. In Latin America, there are fewer regulations.

"A lot of people in the United States are not happy about having a [drone] flying over their heads," Sanchez says. "Here, we're seeing that a little bit, but not as much as we hear it in the United States."
Neither General Atomics nor UTC left the air show with a contract, but representatives with both companies said the Colombian fair is just the start of their plans to enter the market. Both plan to attend the larger FIDAE air show in Santiago, Chile, in March, 2014.
"We have no specific clients, but we're in the process of getting them now," Sanchez says. "We're still in the infant stages of this process."

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