The Magazine

Trade Goes Both Ways

The Obama administration needs to learn the meaning of ‘partner.’

Jun 4, 2012, Vol. 17, No. 36 • By REUBEN F. JOHNSON
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When it comes to recognizing both the traditional position and strengths of -Brazil and its status as an emerging global player, the Obama administration seems to be tone deaf. Nothing illustrates this better than how the United States is conducting its defense industrial relations in this country.

This spring Brazil passed a milestone that many of its citizens and political leaders could have hardly imagined a few years ago. Its booming economy became the sixth-largest in the world, displacing that of the United Kingdom. This growth was abundantly visible last month when Brazil hosted another of its large trade shows, the 2012 Latin American Aero and Defense (LAAD) security expo, at the sprawling Riocentro exhibition center near the Barra de Tijuca district of Rio de Janeiro.

Barra epitomizes the booming Brazilian economy with its countless high-profile construction projects, malls flooded with Brazilians spending their newfound wealth, constant traffic jams, and the erection of several modern amphitheaters and other Olympic venues.

A showcase of all that is modern in Rio, Barra is where many of the 2016 Olympic events will take place, and the area will also feature prominently when Brazil hosts the 2014 World Cup. But not surprisingly, given the speed of its growth and the lack of planning for traffic (and because it is Brazil after all), Barra is a bit of a security and crowd control nightmare.

So part of the function of the LAAD security expo was to attract foreign defense companies capable of addressing the military and internal security challenges posed by these two major international sporting events​—​technology requirements that Brazilian experts state cannot be completely satisfied by Brazil’s indigenous industry and which will have to be sourced from abroad.

One of the programs to bring in foreign technology and expertise is the F-X2 fighter aircraft competition for the Brazilian Air Force (FAB). The F-X2 has been a long-running, on-and-off competition that started with six different fighter aircraft from the United States, Europe, and Russia and has been winnowed down to three finalists: the Saab Aerospace JAS-39E/F next-generation Gripen from Sweden, France’s Dassault Rafale, and the Boeing F/A‑18E/F Super Hornet that is flown by the U.S. Navy.

A decision on a purchase of an initial batch of 36 aircraft is expected sometime this summer, before municipal elections in October. Whichever firm wins, it will be a pivotal moment in the history of military aviation here. The requirements of the tender call for a substantial level of technology transfer​—​and for almost all of the fighters to be assembled on a production line in -Brazil, making it one of the few nations in the world that manufacture advanced combat aircraft. Moreover, these initial 36 fighters are just the beginning. The FAB are expected to eventually build 100 or more of whatever aircraft they end up selecting, creating the largest and most modern air force in all of Latin America.

Two weeks after the LAAD security expo, in late April, the Obama administration tried to put its finger on the scale and sent Defense Secretary Leon Panetta to Rio to speak to an audience at Brazil’s Superior War College, partly to lobby for the FAB to buy the F/A-18E/F over the two European aircraft in the competition.

“The United States seeks to increase high-tech defense trade, flowing in both directions,” said Panetta. “Perhaps the most prominent example of our willingness to partner with Brazil on advanced defense technology is the United States government’s offer to provide our Super Hornet fighter aircraft to the Brazilian Air Force.”

But “Brazilian officials are asking just what Panetta and others mean by ‘high-tech defense trade​—​flowing in both directions,’ ” said a representative from one of the European firms bidding in the tender. “It sounds nice, but recent behavior suggests that this trade only flows one way​—​from the U.S. to the south​—​and that it means the U.S. is actually not willing to purchase any Brazilian defense products.”

These comments reference the decision in late February by the U.S. Air Force to cancel a $380 million contract to purchase 20 AT-29 Super Tucano turboprop counterinsurgency combat aircraft. The Super Tucanos are made by Embraer in Brazil and would have been supplied to the Afghan Air Force, but the sale was canceled after the competing U.S. firm, Hawker Beechcraft, filed a legal challenge to the procurement decision.

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