13 April 2009: Defense News
Boeing, Saab and Dassault among the pack battling for Brazilian defense dollars
LONDON and PARIS - Most eyes will be on Brazil's F-X2 fighter competition as the Latin American Aerospace and Defense (LAAD) show opens in Rio de Janeiro this week. But the battle, which pits Boeing against rival offerings from Dassault Aviation and Saab, is just the tip of a major effort by Europe to secure defense market share in the region's powerhouse nation.
Three of the top five defense suppliers to Brazil from 1998 to 2007 come from Europe, according to statistics from the British government's Defence & Security Organisation (DSO) export arm.
Spain tops the list with $977 million, France comes third with $505 million, and the United Kingdom, fifth at $300 million. Keeping the Europeans from a clean sweep is Israel, in second place with $540 million, and the United States, in fourth at $425 million.
Other European nations have had their successes, too. In the 1990s, Sweden sold its Erieye airborne command-and-control system to Brazil for integration on an Embraer jet. The Erieye/Embraer combination has also been sold to Mexico.
Saab Gripen NG is one of three fighters short-listed for the F-X2 requirement, alongside the French Rafale and the U.S. F/A-18 in a $2.2 billion contest for an initial buy of 36 aircraft.
Italy's position also is improving, even though South America remains, for the moment, a fringe market, amounting to 93 million euros ($123 million) of business in 2008, or 3 percent of its defense exports. Of that total, Brazil accounted for 43.4 million euros of business, mainly parts for the AMX fighter bomber that Italy and Brazil jointly built.
Italy hopes to boost that export penetration during LAAD, when Iveco takes the wraps off a sixwheel-drive armored personnel carrier it is developing with the Brazilian Ministry of Defense.
Chile also is being targeted by Finmeccanica unit Aermacchi as a possible customer for its M-346 jet trainer. The firm signed a memorandum
of understanding with Chile's ENAER last year for cooperative marketing and possible production of the M-346 and the M-311 basic trainer.
As Brazil boosts spending on major platforms such as fighter aircraft, helicopters, and conventionally and nuclear-powered submarines,
Spain may lose its spot as its top supplier. To start funding those requirements, Brazilian President Luiz Inácio Lula da Silva earlier this year started pushing for a more than 50 percent increase in defense spending through to 2010. Business Monitor International reported in February that Brazil's defense minister, Nelson Jobim, is raising the equipment procurement budget from $3.6 billion last year to $5.6 billion this year.
Despite the global economic meltdown, there are no signs Brazil has reined in defense spending, said Patrick de la Revelière, the vice president for Latin America and India at missile maker MBDA. Brazil wants to be a strong regional actor and seeks a permanent seat on the U.N. Security Council.
"To be on the council, you need to have a strong defense industry," he said. "Brazil is really moving in developing a defense industry." Increases in the Brazilian budget come against a background of what the International Institute for Strategic Studies said in January was a 91 percent rise in annual spending in the Latin American and Caribbean defense sector between 2003 and 2008. By last year, spending reached $47.2 billion with Columbia and Venezuela among the major spenders.
In absolute terms, that remains less than what the British spend annually on defense. But while the amounts are not huge, they have been sharply tracking upward as the region's aspirations to buy new and upgraded fighters, surveillance and patrol platforms, air tankers, warships, helicopters and counterinsurgency and anti-narcotics gear soars.
U.K. Evinces New Interest
Some European countries, like the French, have been active in Brazil for years and are now reaping the rewards. Others, like the British, are looking to reinvigorate a relationship that has only yielded one deal of note recently; the sale of two exRoyal Fleet Auxiliary logistics ships.
"The LAAD exhibition is a watershed for us," said Geoff Gladding, the DSO regional marketing director for North and South America and Europe.
"Brazil has not been a wasteland. We have done a fair amount of business down there selling Super Lynx helicopters and support ships, but we have not had as much success recently as we would have liked.
"Favorable exchange rates for exporters and a good lineup of defense and security sector products have coincided with an increase in the Brazilian budgets to give us a chance to increase our footprint," he said.
