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R 151251Z MAY 09
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 4299
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INFO RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
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RHMFISS/CDR USSOUTHCOM MIAMI FL

C O N F I D E N T I A L SECTION 01 OF 02 BRASILIA 000613 
 
SIPDIS 
 
STATE FOR WHA/BSC, PM/RSAT 
 
E.O. 12958: DECL: 05/07/2019 
TAGS: PREL ETTC BR
SUBJECT: LAAD ,09 -- DEFENSE MODERNIZATION MEANS BUSINESS 
 
Classified By: DCM Lisa Kubiske.  Reason: 1.4 (d) 
 
¶1.  (C)  SUMMARY.  The April 14-17 Latin America Aerospace 
and Defense (LAAD) show in Rio de Janeiro provided evidence 
that despite the downturns in the economies of Brazil and its 
neighbors, defense manufacturers still see opportunities for 
business.  As a result of Brazil's recently published a new 
defense strategy committing the government to modernization 
of the armed forces, notably through a multi-billion dollar 
purchase of fighter aircraft, LAAD 09 featured almost fifty 
percent more exhibitors than the ,07 version and received 
attention from Brazil,s leaders, including President Lula. 
In addition to foreign vendors, LAAD ,09 included displays 
from a large number of Brazilian manufacturers, and Lula and 
Defense Minister Jobim devoted significant portions of their 
visits to the show to promoting Brazilian business.  U.S. 
firms participating in the show expressed concern that the 
USG overcome GOB perceptions that the U.S. is reluctant to 
transfer technology and showed appreciation for USG support 
to U.S. exports.  The competition for Brazil,s next 
generation fighter (known locally as the FX2) was the big 
story of the show, with Boeing receiving positive coverage 
for its offer of the F18 Super Hornet, although doubts 
remained about USG commitment to the program.  Its 
competitors, France,s Dassault and Sweden,s Saab, made 
energetic efforts to promote their aircraft.  The French 
(incorrectly) hyped their entry,s "one hundred per cent" 
French content as an advantage of their entry.  END SUMMARY. 
 
¶2.  (SBU)  LAAD ,09 featured over 100 exhibitors showcasing 
aerospace, defense and security products.  While much of the 
focus was on big ticket items such as aircraft and naval 
systems, there was also considerable interest in police 
equipment, firearms and surveillance systems.  Organizers 
estimated that the show was fifty percent larger than that of 
two years ago.  The major reason for the increased interest 
was the perception that Brazil, the region,s largest 
economy, will be increasing defense spending as it modernizes 
its armed forces.  Brazilian exhibitors occupied 
approximately twenty percent of the exhibit space, promoting 
sales of vehicles, aircraft, weapons and ammunition.  Both 
President Lula and Defense Minister Jobim made it a priority 
of their visits to LAAD to highlight the Brazilian 
exhibitors.  The highlight of the show for the Brazilian 
press was that Jobim signed an agreement with Embraer for the 
eventual purchase of C390 transport aircraft, ostensibly to 
replace Brazil,s C130 fleet.  This focus on Brazilian 
business was consistent with the recommendations of the 
December 2008 Defense Strategy Document which stated that 
Brazilian procurement should be from Brazilian manufacturers 
and that purchase of military items from foreign sources 
would only be justified to obtain technology that would allow 
for eventual domestic production. 
 
¶3.  (SBU)  Despite the hype for products made in Brazil, much 
of the real attention at the show was on U.S. and European 
products.  Exhibitors from Italy, Russia and the UK made a 
splash with impressive displays (and free espresso from the 
Italians) as did an extensive Israeli area.  U.S. 
participants included Lockheed Martin, Boeing, Northrup 
Grumman, Hughes, Raytheon and many smaller firms.  Mission 
Brazil officers spent much of the four day show meeting with 
the U.S. participants to discuss doing business with Brazil. 
The most common concern of the U.S. forms was whether the 
slowdown in Brazil,s economy would affect defense 
modernization plans.  Most believed that while the scope of 
some projects might be reduced, overall there would be 
significantly more funding for defense projects than in the 
past.  U.S. businesses also echoed Brazilian concerns that 
restrictive USG export control policies could put them at a 
disadvantage to foreign competitors.  Mission members pointed 
out that there were no specific export restrictions toward 
Brazil and recent approvals of technology for the FX2 
competition could provide skeptical Brazilians an example 
that U.S. export controls, though rigorous, will not block 
business with our partners.  Several U.S. exhibitors also 
commented that they had heard from Brazilian partners that 
Brazil is predisposed to purchase French products because of 
the personal friendship between Presidents Lula and Sarkozy. 
The presence of Mission personnel from FCS, MLO, DAO and 
State elicited a strongly positive response from U.S. 
participants, as did Ambassador Sobel,s remarks at the 
Foreign Commercial Service's April 14 breakfast for U.S. 
businesses. 
 
OPPORTUNITIES FOR U.S. BUSINESS 
--------------------------------------------- ----- 
 
BRASILIA 00000613  002 OF 002 
 
 
¶4.  (C)  U.S. firms saw several strong opportunities to make 
sales to Brazil.  As noted in paragraph 2, the Brazilian Air 
Force made a splash by announcing a deal with Embraer for 
transport aircraft.  Lockheed representatives, however, were 
quick to point out that developing a cost effective 
replacement for the C130 has not been easy, citing EADS, 
difficulties.  Furthermore, the proposed Embraer transport 
will have difficulty operating on some of Brazil,s more 
remote airfields, requiring either large expenditures for 
upgrades or the retention of the more versatile C130. 
Raytheon saw the potential for providing electronics systems 
to the Brazilian navy as part of a deal with Korean 
shipbuilders to construct new coastal patrol vessels in 
Brazil.  Hughes conducted discussions with the Brazilian army 
on a field communications system that will enhance security 
and reliability, while allowing for interoperability with 
allied forces.  Lockheed also saw potential for sales of 
electronic equipment to Brazil as part of its purchase of 
four French-made submarines. 
 
¶5.  (C)  The most important single upcoming purchase for 
Brazil will be the next generation fighter.  The centerpiece 
of Boeing,s exhibit was a simulator for the Super Hornet 
that allowed Brazilian pilots and aviation fans some hands on 
experience of operating the aircraft.  Boeing Vice President 
Robert Gower and SOUTHCOM Deputy Commander Lt. Gen. Glenn 
Spears held a joint press conference in which Gower 
underlined the industrial partnership Boeing hopes told build 
in Brazil, and Spears confirmed that the U.S. has approved 
relevant transfers of technology.  While the press conference 
produced a good response, the perception among Brazilian 
remains that the Super Hornet trails in the competition, in 
part because Boeing is relying on the plane,s superior 
capabilities to sell itself and in part because of the lower 
level of U.S. government engagement when compared to its 
competitors, particularly France.  This has made USG efforts 
to assure the Brazilian Air Force that tech transfers will be 
made more difficult. 
 
¶6.  (SBU)  The other FX2 finalists, Dassault and Saab, pulled 
out all the stops to sell their aircraft.  The Swedish case 
rested on the fact that they are submitting a new version of 
the Gripen, giving Brazilian firms the opportunity to 
participate in almost all areas of production from the 
beginning.  Saab also focused on the positive capabilities of 
its entry, including the ability to use short runways as a 
selling point, overlooking the Gripen,s overall less capable 
performance.  The Swedes have also begun an advertising 
campaign touting Sweden as the "independent choice," seeking 
to appeal to Brazilian aspirations to be a military power 
free from reliance on allied militaries.  The French display 
was among the largest at the show, but unlike Boeing and 
Saab, focused on a single product: the Rafale fighter. 
Glossy displays on the aircraft,s capabilities surrounded a 
model of the Rafale that was bigger than some of the UAVs on 
display in other exhibits.  Brazilian Air Force members 
attending and at least two journalists speaking with Mission 
members reported that the French were portraying the Rafale 
as Brazil,s safest choice because it had 100 per cent French 
content (and therefore would be presumably free of meddlesome 
U.S. export controls).  According to Mission information, 
this is untrue and all three competitors will be subject to 
the ITAR.  Russia also presented a display on the SU35, for 
which Russian officials have appealed to MOD Jobim for 
reinstatement into the FX2 competition.  There was no 
indication, however, from the Brazilian Air Force that the 
Russians would be reconsidered. 
SOBEL