Brazil, France seal military partnership with major arms deal

BRASILIA, Brazil, Sept. 8 (UPI) -- Brazil has begun negotiation with France to purchase up to 36 Rafale attack aircraft to add to an expanding military inventory that will include French helicopters and submarines, German tanks and a nuclear-powered submarine built with French technical assistance.

The Rafale deal was announced as part of a wider military cooperation accord reached after two days of talks between President Luiz Inacio Lula da Silva and visiting French President Nicolas Sarkozy.

Officials said details of the aircraft deal would be made public later, but Lula indicated to reporters the French offer to permit full technology transfer made the Rafale deal more attractive than competing proposals for the U.S. F/A-18 Super Hornet and Sweden's Saab-built Gripen NG.

Sarkozy also agreed to collaborate with Brazil on developing a jet-powered transport aircraft, KC-390, that Brazilian aviation firm Embraer is working on, to replace the U.S. C-130 Hercules turboprop transports in the Brazilian air force. France said it would purchase up to 10 of the aircraft.

Of four Scorpene diesel-electric submarines on Brazil's shopping list, one will be converted into a nuclear-powered attack submarine.

The deal includes 50 French EC-725 Eurocopter transport-helicopters to be built under license at Brazil's Helibras plant.

Officials said the total cost of the deal, including related infrastructure projects and naval craft and boats accompanying the submarine deal, would exceed $17.1 billion.

Details of the financing have not been revealed, but officials said most of the costs would be covered by a European consortium of banks.

"It is the consolidation of a strategic partnership of two peoples who have much in common," said President Lula. He said the partnership is not just commercial. "We want to think together, create together, build together and, if possible, sell together," he said.

Sarkozy said, "We want to develop a major aerospace industry, to make aircraft together, and to sell aircraft together," adding, "This agreement is for the Rafale … now, we can talk about the next Rafale."

A joint communique said Lula and Sarkozy decided that "Brazil and France will also be strategic partners in the field of aviation, where both countries have important and complementary advantages."

Brazil's arms spending is part of a National Defense Strategy, announced by Lula, that includes renewal of the military infrastructure and equipment.

Despite an economic slowdown resulting from the global recession, Brazil this year upped its defense procurement budget to $5.6 billion from $3.6 billion last year. Defense Minister Nelson Jobim indicated the military overhaul involves spending on major items, including fighter aircraft, helicopters, tanks and armored cars.

Lula said Brazil would be looking to spend at least 50 percent more between 2009 and 2010.

Lula's announcement has led to a scramble among suppliers anxious to secure a share of the market. Statistics from the British government's Defense and Security Organization export data show that three of the top five military suppliers to Brazil between 1998 and 2007 are major European players in the defense and security industries.

Spain so far has topped the list with $977 million of supplies, France comes third with $505 million and Britain ranks fifth at $300 million. Israel is second on the list, with $540 million, and the United States, surprisingly for some analysts, comes fourth at $425 million. The new deals with Paris will make France the leader of the pack.

The promise of increased sales in an otherwise lukewarm market has pitted Brazil's defense partners against each other, with more European suppliers such as Sweden and Italy and outsider South Africa following close behind.

In July industry sources reported that Brazil was in the process of acquiring up to 250 German Leopard tanks to be deployed along its borders. Brazil shares nearly 10,000 miles of land and water frontiers with 10 countries. The gradual decline of its domestic defense production industry has dealt a blow to the military's battle-readiness.

Brazil under successive military dictatorships in the 1970s and 1980s built a formidable defense production industry that fell out of favor when democracy returned to the country.

Now Lula wants to revive Brazil's defense production capacity.

The military rearmament and assertion of Brazil's nuclear capacity are seen by analysts as part of Lula's initiative to establish the country's pre-eminence in Latin America. A diplomatic campaign is under way to secure a permanent U.N. Security Council seat for Brazil.