US defense chief urges Brazil to buy fighter jets

Wed Apr 25, 2012 9:07am EDT

* Panetta touts Boeing's F-18 fighter jet in Brazil

* Seeks to assuage Brazilian concerns over technology

* French jet seen as front-runner in Brazil competition

By Phil Stewart

RIO DE JANEIRO, April 25 (Reuters) - U.S. Defense Secretary Leon Panetta made a full-throated pitch for Brazil to buy American fighter jets in a speech on Wednesday and said defense trade between the hemisphere's two largest economies was "an area ripe for growth."

U.S.-based Boeing's F-18 Super Hornet is seen as an underdog in a Brazilian competition for a contract with an initial value of about $4 billion. It will likely be worth considerably more over time once maintenance and follow-on orders are included.

Brazilian President Dilma Rousseff has cast the deal as a watershed decision that will help mold Brazil's military and strategic alliances for the next few decades as it establishes itself as a leading economic power.

"This offer, which has the strong support of the United States Congress, contains an unprecedented advanced technology sharing that is reserved for only our closest allies and partners," Panetta said in prepared remarks to Brazil's Superior War College in Rio de Janeiro.

"I am hopeful that the Brazilian government will ultimately choose to purchase the Super Hornet for its Air Force's next generation fighter."

Panetta said the deal would also bolster Brazil's defense and aviation industries, allowing them to "transform their partnerships with U.S. companies."

"And they would have the best opportunity to plug into worldwide markets," Panetta added.

Still, the bid has long been widely expected to go to French-based Dassault Aviation, which hopes to sell Brazil at least 36 Rafales. The other bidder in the competition is Sweden's Saab with its Gripen fighter jet.

The momentum appeared to swing in Dassault's favor earlier this year when India said it was entering talks with France to buy 126 Rafales. That helped ease concerns in Brazil about the Rafale, which still hadn't found any buyers outside France.

BRAZIL WARY OVER EMBRAER INCIDENTS

Brazilian Defense Secretary Celso Amorim, speaking at a news conference on Tuesday in Brasilia, reiterated that Brazil still had not decided on which jet to purchase. But he appeared to suggest that Brazil's concerns over U.S. technology sharing had not been completely resolved.

Amorim also voiced concern over a recently bungled, $355 million U.S. contract to supply 20 planes to Afghanistan. The contract was awarded to a group including Brazil's Embraer , but was suspended over concerns about the bidding process.

It had been Embraer's first contract with the U.S. armed forces, and Amorim made no effort to hide his disappointment.

"Naturally, I cannot say that the entire relationship is going to depend on this particular example," said Amorim, who has served as Brazil's foreign minister and its ambassador in Washington.

The Afghan deal was not the first setback for Embraer in the United States. In 2006, Washington blocked the sale of Embraer's Super Tucano military aircraft to Venezuela's leftist government, exercising its power to veto the deal because the planes contained U.S. technology.

In a separate incident in 2009, Embraer said it was temporarily blocked from selling commercial jets to Venezuela because they contained U.S. communications systems.

The episodes raised doubts about whether Brazil would face similar restrictions in the future with the technology it received from Boeing as part of the F-18 bid.

Two-way trade between the United States and Brazil last year totaled about $74 billion, compared to $503 billion between the United States and China. In 2009, China surpassed the United States as Brazil's largest trading partner.

Panetta, on his first trip to Brazil as defense secretary, said the United States sought to increase high-tech defense trade, "flowing in both directions between our two countries."

The United States, Panetta assured, rarely denied export licenses involving Brazil, despite well-known concerns in the South American country about U.S. export controls.

"There was a time when the United States discouraged developing military capability in countries in Latin and Central America," Panetta told a news conference in Brasilia on Tuesday.

"The fact is today, we think the development of those kinds of capabilities is important. ... What that will do is advance, I think, the security in this region."

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