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C O N F I D E N T I A L SECTION 01 OF 03 BRASILIA 001100 
 
SIPDIS 
 
STATE FOR WHA, T AND PM. DEFENSE FOR USD/AT&L 
 
E.O. 12958: DECL: 09/01/2019 
TAGS: PREL ETTC MASC BR
SUBJECT: QUESTIONS ABOUT SUBMARINE PURCHASE COULD IMPACT 
FIGHTER COMPETITION 
 
REF: A. 08 BRASILIA 93 
     ¶B. BRASILIA 34 
     ¶C. BRASILIA 1094 
 
Classified By: Charge d'Affaires Lisa Kubiske.  Reason: 1.4(d) 
 
 ¶1.   (C)  SUMMARY.  Brazilian Minister of Defense Nelson 
Jobim has made modernization of the armed forces one of his 
top priorities, particularly in terms of the acquisition of 
advanced military equipment.  One the key acquisition 
initiatives has been the purchase of submarines from France, 
leading, supposedly, to the development of a nuclear powered 
submarine.  Jobim and Brazil,s political leadership see the 
submarine as a vital element of Brazil,s development as a 
major power and have settled on the deal with France as the 
surest path to development of such a vessel.  Recently, the 
submarine purchase, and defense spending in general, have 
been bedeviled with a number of well-founded questions from 
the Brazilian Congress and press, primarily because of its 
cost.  Given the political will behind acquisition of a 
nuclear submarine, it is unlikely that development will be 
halted, but the arguments being used could have ramifications 
for Brazil,s upcoming purchase of fighter aircraft and USG 
chances to win this competition.  We can, however, turn 
concerns over the submarines to our advantage by focusing 
attention on the advantages Boeing can offer in terms of 
predictable costs, proven hardware and benefits to Brazilian 
industry.  See paragraph 8 for recommendations.  END SUMMARY. 
 
¶2.  (U)  On August 27, PolOff attended Defense Minister 
Jobim,s hearing  before the Foreign Affairs and Defense 
Committee of the Brazilian Senate, during which he discussed 
defense purchases, particularly for the Brazilian Navy. 
Jobim,s remarks, which lasted two hours, were focused on 
building a case for a nuclear powered submarine based on the 
need for superior range, speed and autonomy.  These 
attributes are supposedly needed to defend Brazilian 
interests in the deep waters of the South Atlantic, including 
pre-salt oil deposits in Brazil,s economic zone and 
potential future exploitation of deep seabed resources. 
According to Jobim, the importance of protecting these 
interests justified the costs of the submarine program and 
its support facilities. 
 
¶3.  (SBU)  In 2008, Jobim reached agreement with the French 
government for the purchase of four diesel-electric 
submarines plus assistance expanding the hull of a fifth to 
accommodate a nuclear propulsion system to be developed 
exclusively by Brazil.  Prior to this deal, Germany was 
Brazil,s submarine supplier, and German officials expressed 
surprise that Jobim had announced the French purchase without 
comparison shopping in Berlin.  Jobim,s explanation has been 
that the ultimate goal of the submarine program is deployment 
of a nuclear powered boat and French experience with nuclear 
subs, and their reputation for easy transfers of technology, 
made France the only logical partner.  The purchase agreement 
is due to be signed by Presidents Lula and Sarkozy on 
September 7, Brazilian Independence Day.  The total cost is 
expected to reach 6.8 billion euros, including the 
construction of a new submarine base. 
 
¶4.  (SBU)  While there is little question among Brazilians 
that owning a nuclear powered submarine will be in the 
national interest, there is growing opposition to the 
program, primarily because of its cost.  Over the last two 
months, a spate of press reports has called attention to the 
high cost of the program (to put the cost in perspective, 
Brazil,s entire defense budget for 2008 was about $23 
billion) and Jobim,s decisions to award the deal for the 
subs and their new base to French interests without 
competition.  Jobim,s explanation has been that France was 
the only possible source for the necessary technology 
transfer, an argument undermined by the leak to Globo News of 
a document from 2008 stating that the German government had 
approved the transfer of &submarine design technology.8  On 
August 26, Valor Economico ran an article noting the problems 
other customers of French military equipment have experienced 
with poor quality and higher than expected costs.  Former 
President Fernando Henrique Cardoso has also attacked the 
high cost of the submarine purchase and at the same time 
 
BRASILIA 00001100  002 OF 003 
 
 
questioned the government,s intention also to purchase next 
generation fighter aircraft.  Despite the attacks, the 
overall goal of deploying a nuclear powered submarine is not 
in question.  It is likely that the project will weather the 
current storm, although its funding may be less than the MOD 
would like in the short term. 
 
¶5.  (C)  In a recent televised interview, as well as in 
Senate testimony, Jobim based his arguments for the purchase 
of military equipment on two points: technology transfer and 
domestic manufacture.  Even though the Germans had approved 
transfer of technology, Jobim stated that only the French 
were able to do so in a way that gave confidence.  The 
Brazilian Navy offered a similar explanation, but when the 
sale was announced, the German DCM said that Germany had not 
been consulted, and that he thought the German manufacturer 
could match whatever the French could offer.  Brazilian 
Security analyst and Jobim insider Roberto Godoy has said 
that despite the letter from Secretary Clinton assuring the 
Brazilians that all necessary technology has been approved, 
the USG offer is ¬ as clear8 as that of France, without 
explanation of the lacking clarity.  Jobim,s newest wrinkle 
has been to use the Defense Strategy,s mandate for 
increasing Brazil,s domestic defense industry to call for 
in-country production of aircraft ) just as the later 
French submarines are to be built in Brazil.  &We are not 
buyers, we are partners in production,8 he said.  While 
Boeing,s offer includes substantial offsets for Brazilian 
industry, in-country assembly is not included because 
Brazilian manufacturer Embraer told Boeing it did not want 
the expense of setting up an assembly line for a limited 
number of aircraft.  EMBASSY COMMENT: This message has 
clearly not reached Jobim, whose new emphasis on Brazilian 
assembly of the aircraft will clearly favor Boeing,s 
competitors. 
 
ANALYSIS 
-------- 
¶6.  (C)  Analysis of the Brazilian submarine plan raises 
several issues (ref a).  If there were an oceanic threat to 
Brazilian interests, one nuclear submarine would be far less 
effective a deterrent than the four or five diesel-electric 
boats that could be built for the same cost.  The 
technological challenges to development of a naval reactor 
and the costs associated with such development are also 
likely to pose obstacles.  As noted in ref a, however, there 
are strong political reasons for going ahead.  Brazil,s 2008 
Defense Strategy (ref b) identifies nuclear power as a 
strategic interest.  Since Brazil is a NPT member and is 
prohibited from developing nuclear weapons, the Brazilian 
government associates nuclear energy with security. 
Brazilian government contacts have noted that the five 
countries that currently operate nuclear powered submarines 
are the five permanent members of the UN Security Council, a 
status which is a key GOB goal.  While there is no support in 
Brazil for developing nuclear weapons, the second class 
status to which Brazil relegated itself by signing the NPT is 
keenly felt.  The nuclear powered submarine should be seen as 
a nuclear weapon substitute and is therefore essential in the 
minds of Brazilian leadership to reaching the great power 
status to which they aspire. 
 
IMPACT ON FIGHTER COMPETITION 
----------------------------- 
¶7.  (C)  The submarine purchase could have several potential 
impacts on the fighter sale.  From the beginning of the 
competition, France has hinted that there could be potential 
for a submarine-aircraft package deal to lower overall costs. 
 On the other hand, recent negative publicity surrounding the 
submarine deal could have a negative impact on French hopes 
to sell fighters as well.  President Lula will be the 
decision maker on the fighter sale, but his top priority is 
increasingly assuring the election of his chosen successor in 
the 2010 Presidential election.  With opposition figures 
weighing in against defense spending, there is an increasing 
danger that Lula will postpone a fighter purchase into the 
next administration to avoid potential criticism. The case of 
the submarines provides a caution as the Brazilians have used 
technology transfer as an excuse for buying from their 
preferred partner, while ignoring a potentially attractive 
 
BRASILIA 00001100  003 OF 003 
 
 
German offer. 
 
RECOMMENDATIONS 
---------------- 
¶8.  (C)  While the submarine deal illustrates possible 
threats to the sale of U.S. origin fighters, it also suggests 
an approach throughout the critical final period before a 
decision on the fighters is made.  Since Boeing alone of the 
three competitors is offering a proven system,  the USG and 
Boeing should highlight this advantage, making the following 
points: 
-- The USG has approved the transfer of all necessary 
technology for Brazil to purchase the F18 Super Hornet.  This 
is technology proven in thousands of operational missions. 
Its competitors can only offer technology still on the 
drawing board. 
-- The Super Hornet has the lowest life cycle cost.  Because 
it is already in operation, we can state with confidence what 
this cost will be.  Competitors can only guess and are apt to 
underestimate. 
-- Boeing is offering an unmatched spectrum of benefits to 
Brazilian industry and has an unparalleled record in meeting 
its offset commitments. 
-- Boeing has a perfect record of delivering aircraft to its 
customers.  Neither of its competitors has ever made a sale 
of the aircraft they are offering to Brazil. 
This message should be delivered at all possible 
opportunities to Brazilian policy makers, especially Jobim 
and Lula.  The USG offer was widely perceived as trailing the 
French until President Obama raised the issue with President 
Lula in July.  Now, in the endgame, a further Presidential 
intervention could again be key. 
KUBISKE