Brazil announced plans for buying the jets to bolster its air force as part of a multibillion-dollar military refurbishment program and investment into new defense perimeters to guard the country's offshore hydrocarbon resources.
Government defense analysts said Brazil couldn't be complacent about the vulnerability of its offshore oil and gas resources but officials have avoided mentioning the possible origin of the perceived threat.
Brazilian President Dilma Rousseff's administration said current plans call for a $2.4 billion cut in defense spending, which could be achieved by fiscal tightening.
The projected budget cut is less than one-quarter of the proposed outlay for purchase of the 36 fighter jets. It wasn't immediately clear if the cut would affect plans for the purchase of helicopters, tanks and naval craft and an ambitious development program for the production of a nuclear powered submarine.
Brazil and France discussed the submarine project last year and Paris promised a wide-ranging transfer of submersible manufacturing technology for the project, albeit as part of a wider deal involving the purchase of jets. France has pinned hopes on winning a contract to deliver a fleet of Rafale fighter jets to be built by Dassault Aviation and later on jointly by French and Brazilian aviation partners.
Analysts said the future direction of Brazil's ambitious defense procurement plan would be determined by how the $2.4 billion cuts were applied.
In a note published on the Brazilian defense ministry Web site, the government confirmed that discretionary defense spending would be reduced by 26.5 percent of total allocated defense ministry expenditure.
The reduction in defense spending comes as part of announced plans to reduce overall spending by $30 billion this year in an effort to siphon off excess demand in the economy and ease inflationary pressures.
The overvalued real has presented financial regulators with major headaches, requiring injection of huge tranches of the U.S. dollar to contain the real's spiral.
Government sources said the decision to keep the purchase of 36 jets on the agenda wasn't counter to the discretionary measures on spending. Purchase of the aircraft is unlikely to be reflected in the budget before 2012.
France's Rafale is competing against Gripen jets manufactured by Sweden's Saab and F-18 Super Hornet fighters tentatively on offer from the Boeing Co. Rousseff ordered a comprehensive review of the purchase plan after she assumed office in January.