Thread was written before PI which added the Army Base. It's a question whether to place it near the Palace or on the outskirts. Then again if the economy is pumping in the money, perhaps several can be used.
... On the outskirts of your city, post military units around, their areas of effect (their line of sight so they can spot enemies1) slightly overlapping, to create a mobile line of defense against Rebels. The inner city security can be left to the police, but major points of importance, like an embassy2 or your Palace, will be guarded by the military. Then, make a "square" that has a concentration of barracks and troops that can be used on the offensive3. Make sure that they have easy access to the outskirts and most unstable areas, and also use them to investigate the wilderness where rebels might be training4. This should be an efficient system that works, but it is also basic.
General_H is very
basic - but unfortunately, real world basic and not gameworld basic since too much of his suggestion just doesn't work in the gameworld.
1 Tropican soldiers & generals have no "line-of-sight" because they do not see the Rebels until they are defending a building which the Rebels are attacking. They "get the word" about the attack from the game engine. However, the placement of the Guard Stations near important buildings is a good idea - it reduces the time of response of "on-duty (working)" personnel to an attack.
2 There are no "embassies" - only one Diplomatic Ministry, i.e. Foreign Office.
3 The Tropican Army never, ever goes on the military offensive. It is entirely engaged in intimitating and assassinating the citizens, and defending against Rebel initated attacks on buildings. The regular working hours are spent in patroling around the Guard Stations and Armories.
4 The Tropican Army never, ever goes into the jungle looking for Rebel camps. The main reason for this is that it would be a waste of time since the Rebels do not have a camp nor do they "train." They simply "hide out" until they attack a building.
Cross reference:
http://www.the-nextlevel.com/tropico/cafe/index.php?topic=11551.0