Finmeccanica's India troubles poorly timed

Feb. 19, 2013 at 5:56 AM
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SAO PAULO, Feb. 19 (UPI) -- Italian aviation manufacturer Finmeccanica's troubles in India over an alleged bribery scandal are poorly timed amid ambitious plans for expansion in Latin America.

Only last month the Italian conglomerate's Anglo-Italian company, helicopter maker AgustaWestland, announced it is teaming with Brazilian aviation giant Embraer to start a production and assembly line in Brazil.

Finmeccanica has extensive operations through subsidiaries and partners in Brazil and smaller but significant business in Argentina and elsewhere in Central and South America.

"Finmeccanica sees Brazil not simply as a new market for the group's products but rather as a skilled counterpart with which the group can initiate stable and strategic partnerships involving local companies," the conglomerate said, outlining its plans for the region.

Finmeccanica is present in the country with Finmeccanica do Brasil and other companies including Selex Sistemi Integrati, Selex Communications, Ansaldo STS and Telespazio.

With the Embraer deal in place, AgustaWestland do Brasil, a subsidiary, hopes to expand a logistical and operational support center it set up in Sao Paulo in 2009.

But uncertainty looms over Finmeccanica operations in Latin America as it remains the target of a corruption investigation by Italian authorities.

The group's chairman and chief executive, Giuseppe Orsi, was arrested Feb. 12 in Rome in connection with a $750 million 12-helicopter deal with India in 2010.

At the time, Orsi was the head of Finmeccanica's AgustaWestland helicopter unit which in January signed an extensive joint manufacturing and marketing deal with Embraer.

British Prime Minister David Cameron launched a spirited defense of AgustaWestland, calling it a "brilliant" company during his visit to India. He told the BBC corruption was an issue for all countries, not just India.

The Indian investigation centers on the alleged payment of bribes to politicians through slush funds. Both Orsi and Finmeccanica's India deny the allegations but Indian newspapers speculated that the entire Finmeccanica group operation in the South Asian country may be blacklisted.

Latin American defense politicians and manufacturers are sensitive to any company tainted with corruption allegations, even when unproven.

Brazilian President Dilma Rousseff is under increasing pressure to clean up the country's political establishment after a series of senior ministers in her Cabinet and in the government of former President Luiz Inacio Lula da Silva were targeted in corruption scandals.

Brazil's private sector and government are investing billions of dollars into regeneration of the country's defense industry, which witnessed dynamic growth under military dictatorship but declined when Brazil returned to democratic rule in 1985. Brazil sees growing export potential for its military exports.

Embraer, one of the largest aircraft manufacturers in the world, is keen to branch out and explore partnerships. Last year the company announced advances in tactical transport and tanker aircraft development and is trying to get into the U.S. market with its Super Tucano light attack aircraft after a U.S. Air Force contract fell through. Expansion into the helicopter market is part of Embraer's strategic plan.

Both Embraer and AgustaWestland see a strong market potential for helicopters. Brazil's multibillion-dollar oil and natural gas exploration program and similar but small energy and mining development programs in Central and South America and the Caribbean have created a growing demand for helicopters.

Brazilian and other air forces in Latin America are also investing in military upgrades that include acquisition of helicopters.

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