VZCZCXRO1553
RR RUEHRG
DE RUEHBR #0659 1422057
ZNR UUUUU ZZH
R 222057Z MAY 09
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 4362
RUEKJCS/SECDEF WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
INFO RUEHRG/AMCONSUL RECIFE 9568
RUEHSO/AMCONSUL SAO PAULO 4099
RUEHRI/AMCONSUL RIO DE JANEIRO 7772
RHEHNSC/NSC WASHDC
RUEKJCS/JOINT STAFF WASHDC

UNCLAS BRASILIA 000659 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: MASS PREL BR
SUBJECT:  FINANCING FOR BRAZIL'S FIGHTER PURCHASE 
 
REF: Brasilia 634 
 
¶1.  (SBU) The Brazilian Air Force (BRAF) Finance Secretariat (SEFA) 
has been tasked to submit a report on financing arrangements being 
presented by the Governments of each of the three competitors (US, 
France, and Sweden) to support proposals for Brazil's next 
generation fighter (FX2).  The finance report will be submitted 
together with the BRAF technical recommendation to the National 
Defense Committee (NDC), consisting of the President of the 
Republic, the Presidents of the Legislative Houses and the Ministers 
of Justice, Defense, Foreign Affairs, Treasury, Planning and the 
Military High Commanders, to assist in their final decision. 
According to BRAF sources, if two competitors are close in the 
technical ranking, a decision to seek international financing could 
lead to SEFA's report being a decisive factor.  During a Brazilian 
Air Force Finance Secretariat Visit to Washington DC on 29 and 30 
Apr 2009 SEFA requested Governments communicate in writing detailed 
financing support of the F-X2 project by 29 May 2009.  SEFA Director 
Maj. Brig. Knupp told Commerce and DSCA reps "SEFA expects 100% 
financing for F-X2 under Export Credit Agency (ECA) conditions." 
SEFA delivered the same message to the other competitors during 
visits to France and Sweden. 
 
¶2.  (SBU)  The USG is at a competitive disadvantage as Ex-Im Bank, 
the US ECA, is prohibited by law from financing defense articles. 
ECAs in France and Sweden have no similar restrictions and will 
provide ECA guarantees to support their offers as requested by SEFA. 
 Exceptions to EXIM regulations can only be made via legislative 
action. 
 
¶3. (SBU) Crafting the USG response to SEFA's request is challenging 
given that we have no possibility of ECA support available.  Post 
therefore recommends the USG communicate a willingness to approach 
Congress for legislation supporting the Super Hornet.  Precedents 
for exceptions to EXIM rules include legislation to support the sale 
of F-16s to Poland, and to approve EXIM financing of military 
helicopters for Greece and, in a separate case, Turkey.  Maj Brig 
Knupp (3-star) told MLO and FCS reps that he understands our legal 
challenges, and said that even if non-committal, the expression of 
willingness to approach Congress would be a significant 
demonstration of interest by the USG in support of Brazil and the 
Super Hornet offer. In order to remain viable in the FX2 
competition, it is essential that a USG response to SEFA's request 
is submitted by the May 29 deadline.  While the finance arrangements 
by themselves may not be decisive, lack of viable financing could 
well erode what post believes will be a significant advantage for 
Boeing from the Super Hornet's overall affordability. 
 
KUBISKE