September 14, 2010 / 3:14 AM / 9 years ago

UK, Brazil to sign defense agreement: report

LONDON (Reuters) - Britain and Brazil are to sign a defense agreement the UK government hopes will pave the way for a multi-billion dollar contract for BAE (BAES.L) systems to supply vessels to Brazil’s navy, the Financial Times said on Tuesday.

The BAE deal — which would involve six patrol boats and five to six Type-26 frigates — could be worth up to 2.9 billion pounds ($4.5 billion) if the vessels were built in the UK, the newspaper said.

The FT said the six patrol boats, costing about 60-80 million pounds each, would likely be used for surveillance and deterrence at Brazil’s offshore oil fields, as well as in more general maritime security and search-and-rescue operations.

The biggest prize for BAE, Europe’s largest defense contractor, would be a contract to maintain and upgrade the vessels over the next two-to-three decades, the FT said.

British defense firms are facing cuts as the coalition government is reviewing its defense budget, the details of which will be announced on October 20.

Analysts believe a review of defense needs will lead to cuts of up to 15 percent in the defense budget — which was 36.9 billion pounds for the current financial year — with big procurement programs set to be scaled back.

Reporting by Karolina Tagaris; editing by Michael Roddy

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