US embassy cable - 04BRASILIA592

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 Issues 
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