Brazil urges firms to boost defense output

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RIO DE JANEIRO, July 17 (UPI) -- Brazil is offering manufacturing and building firms special perks to diversify into defense production as part of its plan to capture a greater share of global military sales.

Brazilian government investment and subsidies have pushed the nation's aviation and defense industries to the forefront of regional production in those sectors.

Officials say Brazil's share of the global aviation, defense and security markets remains small and they want to see greater participation from the Brazilian industrial sector. The global defense market is estimated to exceed $1.5 trillion.

Essentially the government of President Dilma Rousseff wants firms to diversify -- not switch -- production through the creation of subsidiaries and additional units, officials said.

Generous credit terms and tax breaks are on offer to companies that follow the government's guidelines, the daily newspaper O Globo reported.

Many of the incentives are covered in Law 12,958, passed in March, which set out special conditions and tax advantages.

Aviation group Embraer is the lead producer of aircraft in Brazil and has moved swiftly from executive jets and small transport planes into manufacturing military aircraft, with large tactical transport aircraft next in line for development.

Embraer's Super Tucano light aircraft has emerged as a serious competitor to rival firms in North America, Europe including Russia and East Asia.

O Globo said several major Brazilian companies active in the areas of civil construction and engineering and infrastructure have already responded to the government. Besides Embraer, companies now busy diversifying include Andrade Gutierrez, Engevix, OAS, Odebrecht and Queiroz Galvao.

Odebrecht is involved with a $4.8 billion Brazilian navy program to build a nuclear-powered submarine combining French technology with Brazilian parts.

The Brazilian Association of the Defense and Security Materials Industry, also known as Abimde, estimates the country has the potential to earn at least $7 billion a year from defense exports by 2030.

The Synergy group, the owner of Avianca and Taca airlines, and Camargo Correa are negotiating with potential foreign partners to enter the market, O Globo said.

Other aviation and defense firms that are active in the field, Helibras, Avibras and CBC have built international connections and partnerships.

Brazil's domestic aviation and defense market, on an upswing, is seen by government planners as a starting point for targeted marketing for new lines of defense hardware and software produced locally.

The Brazilian armed forces are to spend $35 billion on procurement by 2015.