Rio de Janeiro

Brazilians have a self-deprecating joke about the chronic inability of their country to somehow merge its vast natural resources and technological potential--creating the type of synergism that would make the country a major player on the international stage. "Brazil is a nation of the future," they say--"and always will be."

One of the recent examples validating this cynicism is how the now nine-year process for Brazil to purchase a fleet of new fighter aircraft began.

When the Força Aérea Brasileira (Brazilian Air Force or FAB) originally announced a competition to purchase 12-24 new fighter aircraft in 2001 there were plenty of skeptics as to how serious the intentions of the Brazilian armed forces were. The initial budget for the program's initial twelve fighter aircraft ($700 million) seemed inadequate. There were even more questions about whether or not a follow-on order would materialize beyond these original twelve air frames. Twelve was a number large enough for national day parades fly-bys and other public air show demonstrations, but not a sufficient air defense capability for a country the size of Brazil.

Thus, when the competition was shut down in 2004 there were not many who were surprised. The new president, Luis Inácio Lula da Silva (known by his official nickname as simply "Lula"), had assumed office the year before after a populist campaign that had promised more attention and spending on Brazil's domestic and social problems. This meant that high technology and heavy industrial programs--especially those linked to defense spending--were going to fall off the government's list of top priorities for the time being. For the country's aerospace sector it seemed another case of once again proving Brazil could not become that "nation of the future."

However, after Lula's election to a second term, he had achieved a number of the goals he had set out to fulfill. The most significant of which was that in January 2008, Brazil became a net foreign creditor--following decades of being the world's largest emerging market debtor nation.

In 2008, the FAB announced that the F-X fighter buy (now called F-X2 since it is the second time around for the tender) was back on again. Lula made it clear that--unlike the previous competition--that this was not just a matter of buying new military hardware off the shelf. F-X2 and other new procurements are to become national programs, focused more on transferring innovation and state-of-the-art capabilities to the nation's economy than meeting the requirements of the armed forces.

In line with those ambitions the F-X2 program's budget is now $2.2 billion--more than three times the original 2001 procurement--and the first tranche of aircraft to be procured will be 36 current-generation fighters. Moreover, the total program is to include several follow-on buys that will total 100-120 airplanes over the next decade, which will make it the second-largest export sale of combat aircraft in the world.

For the FAB a replacement airplane cannot come too soon. At any one time 37 per cent of the FAB's 719-plane fleet is grounded due to either problems associated with the age of the air frames or problems created by the generally extreme climatic conditions of tropical Brazil. The most modern aircraft in service now are 12 used Dassault Mirage 2000 models purchased from the French Armée de l'Air (ALA) in 2006 as stop-gap solution to the growing obsolescence of the FAB. These aircraft are a quarter century old.

Part of what has prompted Brazil's defense modernization drive are growing concerns about its neighbor to the north, Venezuela, which has been arming itself with some of the most modern Russian weaponry available. President Hugo Chavez, a good compañero of Prime Minister Vladimir Putin, has opted to purchase weapons from Moscow with significant offensive potential. Chavez--in the eyes of Brazilian defense planners--deliberately passed up cheaper and shorter-ranged Russian fighter aircraft and other systems that would be perfectly adequate if just defending the air space of Venezuela was all the Latin American strongman had in mind.

Given the change in the security situation on the South American continent, Brazil has now embarked on a new National Plan for Strategic Defense Policy of which the purchase of new combat aircraft are a major component. Three current-generation fighter aircraft--the US Boeing F/A-18E/F Super Hornet, France's Dassault Rafale, and the Saab JAS-39 from Sweden--are now left in the running. A winner will be announced in October.

At one time U.S. industry would have been a shoo-in for a sale of this kind in Brazil. Older models of U.S. aircraft have been used by several air forces on the continent for decades. Both Venezuela (before Chavez came to power) and Chile (more than a decade later) purchased the Lockheed Martin (LM) F-16.

But, South America's largest nation also has--despite growing military cooperation with the U.S.--the desire to maintain its neutrality. They are also keen to garner as many spin-offs from this program in terms of technology transfer to Brazil's aerospace sector.

It is not widely recognised outside of the community of aerospace writers and analysts, but Brazil can boast of having the third largest aerospace company in the world (after Boeing and the Airbus consortium), Empresa Brasileira de Aeronáutica S.A--more commonly known as Embraer. Aside from a highly successful business of designing and building commercial aircraft and business jets, Embraer have a full line of defense products and have recently begun the full-scale development of a new twin-engined, jet powered military transport/airborne refuelling tanker aircraft, the KC-390.

Lula's charge to the defense planners in charge of the F-X2 program is to utilize this effort to support the recovery of the "capability of our armed forces and the technological edge we once had in certain fields." In order for this to occur, it goes without saying that Embraer will be an integral part of the F-X2 program, to include participating in the development and manufacture of a variant of one of the three remaining aircraft in the competition that fits Brazil's requirements.

Sitting in a briefing room at Embraer's corporate headquarters in S o José dos Campos, the company's chief defense program executive, Orlando Neto, illustrated why the U.S. now holds such a poor hand in markets like Brazil. The U.S. company Boeing, he explained, "offer a stable product in the F/A-18E/F. The program's NRE [Non-Recurring Engineering research and development costs] have largely already been amortized. The aircraft is already being flown in service, so its operational capability is not an unknown."

But, as he specifically pointed out, "the weakness of the U.S. bid is in the transfer of technology. Any Releases of technology have to be requested to the US Congress, which does not fit with the FAB's requirement for autonomous configuration and operation."

The two European bidders, in comparison, are not only more willing to share technology with Embraer and other Brazilian defense enterprises, but they are also prepared to integrate third-nation weaponry onto their platform. Saab is integrating a full complement of NATO and non-NATO weaponry onto the JAS-39, including Israeli and South African systems, and France's Dassault is prepared to do the same with the Rafale so that a customer would not be required to operate only French-made weapons.

What should concern those in Washington looking to the future of our own hemisphere is that a nation with potential of Brazil will see better future prospects in being partners with Europe rather than America. It is more than just simple "anti-Gringoism," that is driving Brazil into the arms of nations on the other side of the Atlantic. It is a technology export control regime in Washington that is out of step with the realities of today's international defense market and renders U.S. defense industry increasingly uncompetitive. It also makes potential customers for our fighters, tanks, missiles, etc. increasingly wary that we will leave them high and dry when it comes time to share essential software source code and other technologies that they would need to make their own modifications to the weapon systems they have purchased from the U.S.

In the previous quarter century the U.S. government recouped billions of dollars by exporting F-16, F/A-18 and F-15 model fighter aircraft to dozens of countries. This was a boon to the U.S. taxpayer, and at several points in each program's history export sales allowed the defense contractors to keep production lines open instead of closing them down or "gapping" the manufacturing and laying off thousands of aerospace workers and engineers.

But, in the 21st century the economies of scale and all of the other advantages that come with having a robust defense exports business may become a dim memory for U.S. industry. The refusal to allow the LM F-22A Raptor to be exported despite some rather plaintive requests from both Japan and Australia, and then truncating production after 187 units--after a roughly $32 billion investment to develop the aeroplane--seems to make little sense. Brazil may be a country that is struggling to become a nation of the future, but the U.S. appears to be rushing headlong in the opposite direction--and undermining the foundation for how we became a defense powerhouse in the process.

Reuben F. Johnson is a frequent contributor to THE WEEKLY STANDARD Online.

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