July 29, 2015 / 4:45 PM / 5 years ago

UPDATE 2-Sweden lowers loan cost in Saab fighter deal for Brazil

(Adds minister’s comments)

BRASILIA, July 29 (Reuters) - Sweden has agreed to reduce the cost of financing a $5.4 billion sale of 36 Gripen fighter jets to the Brazilian Air Force, Brazil’s Defense Minister Jaques Wagner said on Wednesday.

Protracted talks over the terms of the financing had delayed a final agreement on the Gripen NG fighter jets made by Swedish planemaker Saab AB.

In the midst of a fiscal crunch, the Brazilian government had sought to reduce the 2.54 percent interest rate agreed last year with Sweden’s export credit agency SEK, as part of an austerity drive by Finance Minister Joaquim Levy.

Wagner said the two sides agreed to cut the commercial interest reference rate to 2.19 percent for the SEK financing which Brazil will repay over 25 years with an eight-year grace period.

“The solution was good for both countries. We are going to enter into a world of advanced technology,” Wagner said in a ministry statement. The deal will be signed in 12 days and scores of Brazilian engineers will go to Sweden for training with Saab as part of a technology transfer arrangement, he said.

The first Gripens 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, including a run of eight two-seater planes, a new version to be made uniquely on the Brazilian production line at the request of the country’s air force, the ministry said.

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 deal with Saab in April to supply arms for the Gripens. (Reporting by Anthony Boadle; Editing by Chizu Nomiyama and Cynthia Osterman)

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