BRAZIL'S F-X PROGRAM: NO MATTER WHO WINS TENDER,

C O N F I D E N T I A L BRASILIA 000592

SIPDIS

SENSITIVE

E.O. 12958: DECL: 03/12/2013
TAGS: MARR MCAP BEXP BR POL MIL
SUBJECT: BRAZIL'S F-X PROGRAM: NO MATTER WHO WINS TENDER,
MOD SUPPORTS EMBRAER

Classified By: PolCouns Dennis Hearne, reasons 1.5 (a) & (d)

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Embraer, a Winner No Matter What
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1. (SBU) Although no announcement has been made on the
selection of the Brazilian Air Force's (FAB) next high
performance jet fighter, the F-X, the GOB could be setting
the stage for a decision on the purchase of the 12 aircraft.
In the F-X competition, Embraer is currently partnered with
Dassault in offering the Mirage 2000-5. According to an "O
Globo" press report, Minister of Defense Jose Viegas told a
business audience that, regardless of the outcome of the
competition, and even if it loses in its joint bid with
Dassault, Brazil's aviation giant Embraer "ought to be
contracted to provide specific services" to the winning
consortium.


2. (SBU) The F-X selection will be made by the National
Defense Council in the presidency which has already
received
technical input from the MOD. The GOB has missed a number of
self-imposed deadlines for a decision on the F-X, and the
wait could be extended further. In discussing MOD
procurement
priorities, Minister Viegas said in the March 8 Sao Paulo
Gazeta Mercantil that the F-X decision "will be made this
year" -- a statement that hints an announcement may not be
forthcoming soon.

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The U.S. Offer
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3. (SBU) Lockheed Martin has given up its attempt to
partner with Varig Engineering and Maintenance (VEM). A
subsidiary of Varig, VEM was unresponsive to Lockheed
Martin's proposed program to offer refurbished F-16s.
Observers agree that Varig's current financial woes, and its
epileptic merger effort with rival TAM, may have forced VEM
to remain on the sidelines. While Lockheed Martin's F-16
offer remains in the F-X competition, the company lacks a
strong Brazilian mate in its tender and this likely limits
Lockheed's prospects.


4. (C) In a conversation March 10 with visiting CJCS
General Myers, Minister Viegas commented that
Lockheed-Martin's best and final offer (BAFO) for new F-16s
left him with the impression the company "was not serious"
about winning the competition. The Minister also expressed
concern about restrictions imposed by USG in case Brazil was
to buy US weapon systems, in particular the AAMRAM missile,
and appeared surprised when told the GOB had been provided
written assurance from the USG that the AAMRAM is available
without strings attached. The Minister also appeared unaware
that the Netherlands had made available recently, for just
$8
million each, refurbished used F-16s that are comparable in
performance to new aircraft.


5. (C) Comment: While the USD 700 million F-X program
price tag still causes sticker shock, there is no indication
at this time the Ministry of Defense will lower its
aspirations for new rather than used aircraft. But two
trends appear evident: the GOB may be delaying a decision
for
budgetary or other reasons, and the eventual tender winner
will have to give Embraer a piece of the action.

Virden