U.S. defense cuts open partnership opportunities

May 1, 2012 at 4:54 PM
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WASHINGTON, May 1 (UPI) -- U.S. defense cuts are opening opportunities for mutually beneficial partnerships where few would have been considered before the downward spending reviews, industry analysts said.

Recent advances in talks on forging military partnerships in Brazil, Colombia and Chile indicate a template is emerging for military collaboration in Latin America and the Caribbean.

U.S. Defense Secretary Leon Panetta visited South America last week to explore several such partnerships that are likely to forge both government and corporate links. Central to collaboration with Brazil are talks on the Brazilian air force modernization program and U.S. procurement agencies' accommodation of Brazilian-manufactured defense equipment.

Brazil's aviation and arms manufacturer Embraer is seeking a larger role in the U.S. aircraft and military hardware market in direct competition with rival U.S. firms.

There's already been a flap over the U.S. Air Force picking Embraer's Super Tucano attack aircraft for use in Afghanistan and then canceling the order after rival Hawker Beechcraft Corp. took the Air Force to court.

The Super Tucano controversy clouded U.S. administration efforts to support a Brazilian purchase of Boeing's Super Hornets. At present Boeing is in competition with French and Swedish manufacturers of competing fighters -- the Dassault Aviation's Rafale and Saab's Gripen NG.

The deal is worth at least $8 billion and involves a Brazilian air force order for up to 36 jets, maintenance and spare parts over an extended period.

Panetta gave Brazil assurances the U.S. administration would support generous technology transfers from U.S. firms to Brazilian manufacturers in any future defense collaboration deal. He also urged Brazilian President Dilma Rousseff to buy Boeing's Super Hornets.

Details of any technology transfer offers weren't disclosed.

Boeing recently launched an extensive program of opening new partnerships with Brazilian military manufacturers. Analysts said the Boeing expansion was part of an overall strategy of finding new markets for its large range of defense hardware and software but a Super Hornets deal remains high on the agenda.

In Colombia U.S. defense contracts have helped President Juan Manuel Santos curtail the activities of drug overlords and their friends in the country's underground guerrilla movements, both seen behind the narcotics trail to North America.

In Chile, U.S. forces and defense contractors are building a $460,000 military training facility that will be used to prepare Chilean forces for peacekeeping duties. The joint Chilean-U.S. base will support the U.S. Southern Command and also help partner nations in South America and the Caribbean.

In both Chile and Colombia the United States invested billions of dollars in training national forces and reinforcing anti-narcotics operations. Now the emphasis is less on spending U.S. money and more on making U.S. military expertise and manufacturing prowess available to partner nations that are already making multibillion-dollar investments in defense upgrades.

Panetta told a Rio de Janeiro military academy audience: "This is a relationship, the United States and Brazil, the relationship between two global powers, and we welcome Brazil's growing strength.

"We support Brazil as a global leader and seek closer defense cooperation because we believe that a stronger and more globally engaged Brazil will help enhance international security for all of us."

Panetta used his trip to reassure Brazil about technology transfers, offering Brazil "an unprecedented advanced technology sharing that is reserved for only our closest allies and partners."

He said: "We fully understand that Brazil is not looking just to be the purchaser of a fighter aircraft but rather a full-fledged partner in the development of cutting-edge aviation technology.

"With the Super Hornet, Brazil's defense and aviation industries would be able to transform their partnerships with U.S. companies and they would have the best opportunity to plug into worldwide markets."

Brazil has received French offers for extensive technology transfers if it buys the Rafale jet fighter. But Brazilian interest in the Boeing offer has grown because having the Super Hornet on the Brazilian air force inventory will be less of a transition than a move to French or Swedish technology.

However, Brazilian officials are more wary of what the United States may do in the future than they are about either the French or the Swedes.

In 2006, the United States blocked the sale of Embraer's Super Tucano aircraft to Venezuela because their components included U.S.-built parts.

The Obama administration has been hinting at moves toward simpler procedures for U.S. defense sales as part of a confidence-building exercise and to help U.S. defense industries to find new markets. The initiative aims at "simplifying" congressional role in foreign defense sales, but details of the administration's strategy remain unclear.

"There was a time when the United States discouraged developing military capability in countries in Latin and Central America," Panetta said.

"Today, we think the development of those kinds of capabilities is important if we can use those capabilities to develop the kind of innovative partnerships that I'm talking about, to advance the security in this region."

U.S. officials say Brazilian orders for U.S. technology have soared 139 percent since 2007.

In addition to technology transfers, Brazil also wants a clear resolution of controversy over the failed Super Tucano sale in the United States.

In February, the Air Force canceled a $380 million contract with Embraer and U.S. partner Sierra Nevada to buy 20 AT-29 Super Tucano aircraft for Afghanistan after a legal challenge from rival Hawker Beechcraft Corp.

The Pentagon has called for a new round of bidding for the contract.

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