UPDATE 1-Brazilian Senate approves Saab fighter deal with Sweden

(Adds details, clarifies smaller loan is for weapons)

BRASILIA, Aug 5 (Reuters) - Brazil’s Senate approved on Wednesday a $4.6 billion financing agreement reached last week with Sweden for the purchase of 36 Gripen fighter jets from Swedish planemaker Saab AB for the Brazilian Air Force.

The Senate rushed through a request from President Dilma Rousseff’s government authorizing it to borrow up to 39.88 billion Swedish crowns from Sweden’s export credit agency SEK for the planes and an additional $245.3 million for weaponry.

In the midst of a fiscal crunch, Brazil managed to negotiate better terms, reducing the interest rate on the main credit to 2.19 percent from 2.54 percent agreed last year. Interest on the smaller dollar loan was set at 3.56 percent. Brazil has 25 years to repay the loans with an eight-year grace period.

Despite Brazil’s economic difficulties, the borrowing authorization was backed by opposition parties who said the purchase was of strategic importance for the country’s defense.

The first Gripen NG fighter jets should be delivered to Brazil in 2019. Saab plans to set up a Brazilian assembly line producing the fighter jets through 2024 in partnership with Brazilian planemaker Embraer SA.

The contract provides for full transfer of technology and the production of 15 of the jets in Brazil.

Brazil awarded the contract in December 2013, choosing Saab’s fighter over Boeing Co.’s F-18 Super Hornet and the Rafale made by France’s Dassault Aviation SA.

Brazil signed an additional $245 million contract with Saab in April to provide arms for the Gripens.

$1 = 8.6783 Swedish crowns Reporting by Anthony Boadle; Editing by Ken Wills