US embassy cable - 04BRASILIA1954

UNCLAS BRASILIA 001954 
 
SIPDIS 
 
SENSITIVE 
 
USDOC FOR 3134/USFCS/OIO/WH/EOLSON/DDEVITO 
USDOC FOR 4332/ITA/MAC/WH/OLAC/MWARD 
 
E.O. 12958: N/A 
TAGS: BEXP, MCAP, MARR, BR, POL-MIL Issues 
SUBJECT: LOCKHEED-MARTIN/EMBRAER CONTRACT 
 
1.  (U)  Brazilian newspapers, including a banner August 3 
front page, above-the-fold headline in widely read O Estado 
de Sao Paulo, highlighted the Pentagon's selection of 
Lockheed-Martin -- teamed with Embraer and the Harris 
Corporation -- to develop and build the U.S. military's next 
generation airborne intelligence, surveillance and 
reconnaissance system, the Ariel Common Sensor (ACS). 
Embraer will provide the airframe based on its successful 
ERJ145/EMB 145 model already widely used around the world and 
build the airframe at a new assembly line at the old USN 
Cecil Field Air Station near Jacksonville, Florida. 
Newspapers here report the total package for the ACS as 
between USD 7 and 10 billion. 
 
2.  (U)  The contract is being trumpeted in Brazilian media 
as a breakthrough achievement for Embraer, the world's fourth 
largest aircraft manufacturer.  Embraer is already Brazil's 
largest single importer from (aircraft components) and 
exporter to (finished aircraft) the United States.  Even with 
the involvement of Embraer's U.S. partners, the contract 
represents Brazil's most significant procurement opportunity 
ever with the U.S. military.  It is also viewed as a shot in 
the arm for potential aircraft sales elsewhere. 
 
3.  (SBU)  Comment:  The ACS contract is a victory for 
Brazilian technology and Brazil's aerospace industry.  Yet, 
while Embraer and Lockheed-Martin closely collaborated to 
develop the ACS, the two companies remain on opposing sides 
in Brazil's next generation jet fighter competition, the F-X 
(Note: Embraer is partnered exclusively with the Dassault 
Mirage bid in the competition.)  A GOB decision on the F-X, 
delayed numerous times since 2002, continues to be in limbo 
due, many observers believe, to the sticker shock of the 
total cost of new high performance fighters.  However, with 
the victory of the Lockheed-Martin/Embraer consortium in the 
ACS competition, Brazil's leadership may look with a fresh 
eye at used F-16 offers that are significantly cheaper than 
new fighters. 
 
Danilovich