Exclusive: Brazil delays jets decision until 2013; Boeing ascendant

Mon Sep 24, 2012 2:25pm EDT
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By Brian Winter

UNITED NATIONS (Reuters) - Brazilian President Dilma Rousseff has decided to wait until mid-2013 to make a decision on a multibillion-dollar Air Force jets contract, and Boeing's chances of winning the deal have improved due to its recent alliances with local aircraft maker Embraer, two senior officials told Reuters.

The contract to overhaul Brazil's Air Force with more than 36 new fighter jets will be worth at least $4 billion and is one of the most closely watched defense deals in the emerging-market world. The finalists are Boeing, France's Dassault Aviation and Sweden's Saab.

Rousseff plans to apprise U.S. President Barack Obama of the delay during a possible meeting on the sidelines of the United Nations General Assembly this week, the officials said, speaking on condition of anonymity.

Rousseff herself will make the final decision on the jets, which will help mold Brazil's military and strategic alliances in coming decades as it seeks to establish itself as a major global power.

The contract is on hold in part for budget reasons, one of the officials said. Rousseff just emerged from a tough battle with public workers over wage increases, and it would be politically difficult for her to approve billions of dollars in spending for military hardware so soon after alleging that finances are tight.

"The (internal) conversations have become more specific and more focused and I think we're getting close to a decision," the official said. "But it's not going to be announced in 2012."

The tender has dragged on for more than a decade through three successive Brazilian governments, and picking the winner has become a bit like placing odds on a soccer match that never actually gets played. Nevertheless, news of Rousseff's deliberations has been closely followed and has sometimes moved the finalists' share prices, in part because of the lack of major defense deals in Europe and the United States.

Reuters reported in February that Rousseff was leaning toward Dassault's Rafale. However, since then new concerns have emerged about the Rafale's high cost and especially the terms of the technology-sharing that Rousseff believes are the most important factors in the deal, the officials said.   Continued...

Brazil's President Dilma Rousseff speaks during the launching ceremony of the Brazil Plan 2016 at the Planalto Palace September 13, 2012. REUTERS/Ueslei Marcelino