INDUMIL STRUTS CONTROLS IN PREP FOR DDTC LICENSE

C O N F I D E N T I A L BOGOTA 003156

SIPDIS

SENSITIVE

SIPDIS

SECSTATE/DDTC

E.O. 12958: DECL: 03/23/2016
TAGS: PGOV PREL MASS MOPS CO KOMC ETTC OTRA PARM
SUBJECT: INDUMIL STRUTS CONTROLS IN PREP FOR DDTC LICENSE
979308

REF: A. 05 BOGOTA 07332

B. 05 BOGOTA 09715

Classified By: Ambassador William B. Wood
Reasons: 1.4(a),(b),(d)

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SUMMARY
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1. (C) Embassy officers visited Colombian parastatal weapons
importer and manufacturer Industrias Militares (INDUMIL) and
verified that the plant meets Department criteria for
inventory controls. However, there is no statutory framework
in place to ensure continued compliance. At this upstream
stage in the weapons supply chain INDUMIL has continued to
improve product tracking, but doubts persist about reported
downstream leakage of armaments to illegal groups, both in
the transfer process from INDUMIL to COLMIL and in sales to
the public via retail outlets. Septel will report on
findings regarding COLMIL controls in transport, storage, and
retail sales. This INDUMIL site visit coincides with the
DDTC pre-licensing approval process, in which inventory
controls are a core component of U.S. licensing provisos.

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INDUMIL's Mandate
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2. (U) On March 23 four Embassy officers from MILGROUP,
Foreign Military Sales (FMS),Political, and Economic
sections met with INDUMIL,s General Manager Villarreal at
the company's FAGECOR plant in Soacha, Bogota. In an
introductory presentation, Villarreal explained that INDUMIL
holds a constitutional monopoly on the production,
importation, and commercialization of armaments and related
controlled substances for military and civilian use. From
its three factories INDUMIL transfers weapons, munitions, and
chemicals to COLMIL units, to businesses, and to 37
commercial sales outlets located at military sites. These
outlets are controlled by COLMIL under the supervision of the
Office of Arms Control within the Ministry of Defense (MOD).
INDUMIL's responsibility for inventory controls ends upon
release from its factories.

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Good Inventory Controls At Plant
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3. (U) Emboffs toured FAGECOR's multiple production and
assembly workshops where INDUMIL manufactures Galil automatic
rifles, .32 and .38 caliber handguns, hand grenades, RPGs,
and bullets. Facility managers emphasized that each bullet,
gun, and grenade is identifiable by an etched/stamped lot
number, serial number, bar code, or combination of all three
markings. Number series are recorded by hand in a logbook at
every step in the manufacturing process. The company claimed
that the use of unique serial numbers on selected individual
arms is a degree of precision tracking not practiced anywhere
else, even in the U.S. Finished products' bar codes are
scanned at the point of departure from the factory, and their
data is available real-time to the MOD. These controls are
not required by Presidential Decree 2535 of 1993 which
governs INDUMIL; rather their continued implementation
appears to depend on the will of INDUMIL management.

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Downstream Leakage Concerns
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4. (C) Once products leave the factory premises, inventory
control responsibility passes to the COLMIL. Decree 2535
does not require INDUMIL to keep paperwork on end user status
for imported or manufactured items (ref B). Even FAGECOR's
own storage facility is delimited by fencing so as to be
outside the plant perimeter and on COLMIL premises guarded by
COLMIL troops. It is from this stage onward that problems
with losses allegedly begin. Over the course of the last
year unconfirmed reports of siphoning and leakages have
circulated. In one or two confirmed cases INDUMIL
explosives, guns, and bullets have been found in the
possession of illegal armed groups and at the sites of
guerilla attacks. INDUMIL asserts that the last incident
involving an attack on one of its distribution convoys was
three years ago, but it acknowledges that losses of inventory
do occur once products have left its premises. Of equal
concern is the explicit authorization in Decree 2535 for
INDUMIL to sell weapons at 37 bases nationwide. In practice,
this may include weapons captured during military operations,
creating a risk of recycling armaments to illegal armed
groups. The retail sales of arms, both new and used, are
cited by the COLMIL as an important source of revenue for
individual units.

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Key Business Figures
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5. (SBU) One of Colombia's largest parastatals, INDUMIL is
the primary supplier of guns, munitions, and explosives to
the COLMIL, ahead of FMS sales to the MOD and individual
services. Net profits to the MOD amounted to 63 million
pesos in 2005, accounting for 75 percent of the total profits
of 30 MOD-owned companies and contributing 12% of the MOD
budget. Sales to the MOD are contracted either by INDUMIL
(in competition with FMS),by INDUMIL acting as a middleman,
or by external suppliers independently of INDUMIL. The
company said it is dedicated to increasing transparency in
its contracting practices. INDUMIL also said it is committed
to technological development -- not just to satisfy
Colombia's immediate military needs but also in preparation
for an era after the end of Colombia's internal conflict, in
which INDUMIL aspires to evolve into a machine-tooling
company and industrial-use explosives manufacturer.


6. (SBU) On the import-export front, in-house production is
approaching parity with imports, and the company estimates
cost savings from import substitution at USD 28 million in

2005. As an example, an imported Galil machine gun costs
$1500-$2000, whereas an in-house version costs only $700.
INDUMIL is in the beginning stages of becoming an exporter,
most notably to its lead client Israel, for whom it will
fulfill an order of 1400 unassembled 5.56 caliber Galil
machine guns (10 percent of forecast 2006 production). The
company is also preparing quotes to supply Peru and Mexico
with explosive emulsions and hand grenades. As sources of
new technology transfers, Villarreal mentioned several
countries as willing back-ups to the U.S., such as Israel,
South Africa, and the Czech Republic. The company says that
most E.U. countries have been unwilling to supply production
machinery to them over the past four years. The U.K. approves
sales merely of certain testing equipment, while Spain
sometimes approves and other times denies sales.

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Prelicense Verification 979308
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7. (U) DDTC recently approved a license for a U.S. company to
sell a manufacturing line for 5.56 caliber bullets to
INDUMIL. The location of the 18 new machines is in the main
manufacturing and assembly building at FAGECOR. The facility
is readily accessible to post and currently benefits from
three layers of security. On the outermost perimeter of the
plant there are 5-foot high walls with barbed wire topside
fencing. Between the outermost wall and the inside security
features there is a full time battalion of 165 army soldiers
permanently stationed at the facility. Within the inner
walls of the facility there are more fences and security
cameras limiting general access to sensitive areas within the
plant. Current inventory controls for bullets include a new
lot size of 250,000 bullets per lot, but again, each bullet
casing is marked with the year of manufacture, the lot number
and the insignia of the manufacturer. Villarreal explained
that this is a cost saving measure that will not impact the
bullets' traceability since most COLMIL units are given from
500,000 to a million bullets in each delivery. INDUMIL will
be able to abide by the provisos described for license number

979308. INDUMIL has mentioned potentially becoming an
exporter of munitions but has stated that at no time will
these be commercial sales to private organizations.

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Comment
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8. (SBU) The FAGECOR tour confirms that the inventory
controls implemented by INDUMIL at the manufacturing stage of
the weapons supply chain satisfy security concerns. However,
lack of legal requirement for their continued enforcement is
a concern. What remains to be investigated and reported via
septel are the more problematic later stages of transport,
storage, and retail sales governed by the MOD's Office of
Arms Control and outside the monitoring scope of U.S.
licensing provisos.

WOOD