Reference ID: 09BRASILIA634
Created: 2009-05-19 16:04
Released: 2010-12-05 12:12
Classification: SECRET//NOFORN
Origin: Embassy Brasilia
VZCZCXRO8264
RR RUEHRG
DE RUEHBR #0634/01 1391639
ZNY SSSSS ZZH
R 191639Z MAY 09
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 4328
RUEKJCS/SECDEF WASHDC
RHEHNSC/NSC WASHDC
INFO RUEHFR/AMEMBASSY PARIS 0490
RUEHSM/AMEMBASSY STOCKHOLM 0075
RUEHRG/AMCONSUL RECIFE 9551
RUEHRI/AMCONSUL RIO DE JANEIRO 7753
RUEHSO/AMCONSUL SAO PAULO 4071
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEKJCS/JOINT STAFF WASHDC
RHMFISS/CDR USSOUTHCOM MIAMI FL
S E C R E T SECTION 01 OF 03 BRASILIA 000634
NOFORN
SIPDIS
STATE FOR WHA AND PM
E.O. 12958: DECL: 05/19/2019
TAGS: PREL MASS ETTC BR
SUBJECT: BRAZIL'S FIGHTER PURCHASE: ENDGAME STRATEGY
REF: A. BRASILIA 216
¶B. BRASILIA 41
Classified By: Charge d'Affaires Lisa Kubiske. Reason: 1.4(d)
¶1. (S/NF) SUMMARY AND ACTION REQUEST. With two months
remaining before the Government of Brazil decides on a next
generation fighter aircraft, the U.S. competitor, Boeing's
F18 Super Hornet is still perceived by many Brazilians in and
outside the GOB as a likely second or even third-place
finisher, despite having the best aircraft and best offset
package. Most Brazilian contacts tell us that they do not
believe the USG is supporting the sale strongly, raising
doubts in their minds about our long term reliability as a
partner. Between now and July, there will be several
opportunities to assure the Brazilians at senior levels that
the USG will be behind the sale. Paragraphs 3-7 below
contain proposed steps to address key Brazilian concerns and
maximize chances for selection of the U.S. competitor. Among
these steps, high level contacts, especially by the President
and Secretary will be critical to overcome the perception of
a lack of U.S. support. We also need to underscore our
assurances that technology transfer has been approved and
highlight the superiority of Boeing's proposal to that of its
French competitor. As noted reftels, Embassy believes State
will play a critical role in roviding assurances that will be
essential to a winning bid. END SUMMARY.
¶2. (S/NF) As the FX2 competition moves into its final
stages, the U.S. has a strong offer from Boeing for the F18
Super Hornet that comes with a huge package of industrial
cooperation and a competitive overall cost. While we can be
confident that the Super Hornet would be Brazil,s choice
based on its superior capabilities and attractive offset
package, it still has no better than a fifty/fifty chance of
success because of political support for the French
competitor and a lingering belief among some Brazilian
leaders that a close relationship with the U.S. may not be to
Brazil,s advantage. Winning the FX2 endgame, therefore,
will depend on an effective strategy to overcome our
political disadvantages and allow the Super Hornet,s
superiority be the deciding factor. Such a strategy must
address several key issues:
Perception of a lack of USG support
-----------------------------------
¶3. (S/NF) With the French sale effort being managed directly
from President Sarkozy,s cabinet and ongoing Swedish
engagement on the Ministerial level, the USG is perceived by
most Brazilians as lukewarm at best in its support for the
FX2 sale. This is a critical disadvantage in a Brazilian
society that depends on personal relationships as a
foundation for business. The difficulty is exacerbated by
the separation between government and industry in the United
States. We cannot, for example, offer government financing
to support a state owned company as can our competitors. To
address this problem, high level contacts will be essential,
particularly from the Department of State which is assumed by
the Brazilian Air Force to be restrictive of mil-mil
ooperation. In such contacts, U.S. officials will need to
highlight expanding U.S.-Brazil partnership and how
cooperation with the United States as Brazil modernizes its
obsolescent military will not only provide the best
operational capabilities, but will enhance our overall
cooperation. This is why we have been forward leaning in
approving transfers of technology in support of this sale.
In addition to taking advantage of the near-term
opportunities for high level contacts presented by MOD
Jobim,s May 20 visit to Washington And Secretary Clinton,s
possible visit to Brazil in late May, Embassy believes that
phone calls between Presidents Obama and Lula, between NSA
Jones and Presidential Foreign Affairs Advisor Marco Aurelio
Garcia, and between SecDef Gates and MOD Jobim, would boost
our case significantly.
Tech Transfer
-------------
¶4. (S/NF) Although the major decisions to approve the
BRASILIA 00000634 002 OF 003
transfer of technology for the FX2 sale have been made,
Brazilian leaders continue to doubt U.S. ability to follow
through. While the problem has been mitigated by an
effective public affairs strategy, we still hear that, absent
specific high level State Department assurances, the
Brazilians cannot be sure. It may well be that the
Brazilians want to keep tech transfer doubts alive in order
to have a ready-made excuse for buying an inferior plane,
should political leaders decide to do so. Repeated concerns
about unreleasable source code could have a similar basis.
Finally, we have heard that there are concerns on Capitol
Hill about the possibility of a South American arms race.
Should these reach Brazilian ears, there will be additional
worries that Congress will intervene to block the sale.
Embassy recommends the following as next steps to strengthen
our case on tech transfer:
-- An advocacy letter from President Obama to President Lula
-- A letter from Secretary Clinton to MOD Jobim stating that
the USG has approved the transfer of all appropriate
technology.
-- Interagency guidance on source code (cleared for April
Revista Forca Area article) should be disseminated for use.
-- All high-level contacts, including by Secretaries of
State and Defense and POTUS should include reassurance that
tech transfer has been approved.
-- Washington agencies should begin consultations with
appropriate Hill staff as early as possible to overcome
misperceptions that arms sales to Brazil could be
destabilizing.
Financing
---------
¶5. (S/NF) U.S. inability to offer government financing or
guarantees puts the Super Hornet at a significant
disadvantage to its competitors. EXIM is prohibited from
engaging in sales of defense articles, leaving Brazil to
depend on commercial financing at higher rates. According to
Washington agencies, it would be possible to seek
Congressional relief for EXIM to support the sale. This has
been done in the past on rare occasions. The Brazilian Air
Force finance office has told us that even a statement that
we are willing to seek such legislative action would be
considered a positive sign. Embassy recommends that
Washington explore the possibility of legislative action to
allow EXIM Financing and respond by the May 29 deadline to
the GOB request to provide information on government
financing options.
Making the Case
---------------
¶6. (S/NF) We have been successful in getting across the
points that the Super Hornet is a highly capable aircraft,
and now need to focus on the broader picture -- how
partnership on the fighter sale will yield benefits for both
sides both in military terms and in economic benefits. As
the world,s largest aerospace company, Boeing is able to
offer a much greater scope of opportunities for Brazilian
industry, including some outside of the FX2 offset program.
The early June visit of Brazilian legislators to Washington
will be an opportunity to get the message to political
leaders. By focusing on key Senators, we have the
opportunity to bring on board individuals who can influence
the decision makers and ensure that the people who will have
to approve spending Brazilian government money understand
that the F18 offers them the best value. Embassy will
continue to highlight tech transfer and Expand our message
to include economic benefits to Brazil of the Boeing
proposal. We also recommend the following:
-- Make an expert on the aerospace industry available for
interview to highlight economic health of Boeing compared to
its competitors.
-- Use visit of Brazilian Congress to drive home message
that partnership with the U.S. entails benefits to both sides
that go well beyond offset program. Ensure that Brazilian
Senators understand significantly lower life
cycle costs of the Super Hornet.
BRASILIA 00000634 003 OF 003
-- Arrange for an interview of the SecDef, or other senior
Administration representative, with a prominent Brazilian
journalist to underline importance of U.S.-Brazilian
partnership and how the FX2 sale will help.
Attack the French Bid
---------------------
¶7. (S/NF) Although the French offer a less capable fighter
at a higher cost, the Rafale has been the presumptive winner
since the inception of the FX2 competition. While the
technical evaluations of the aircraft should result in a
significant advantage for the Super Hornet, we need to take
steps to erode the French political edge. While a major
element of this will be highlighting Boeing,s lower cost,
there are several other measures that can make a case against
the French. The first step will be to remind the Brazilians
that their interest in the Rafale was driven by an assumption
that the United States would not release technology. Since
we have approved release of the relevant technology, we
should ask if Brazil still needs the French as a safety.
Over the last few months, the French sales effort has been
based on a misleading, if not fraudulent, claim that their
plane involves only French content (rendering it free of
meddlesome U.S. export controls). This is not the case. A
DTSA analysis found a high level of U.S. content, including
targeting systems, radar components and safety systems that
will require U.S. licenses. Next steps:
-- Although it does not appear that the tech data provided
with the French bid violated ITAR regs, PM/DDTC and DTSA
should continue to monitor French marketing to ensure
Dassault does not skirt ITAR restrictions.
-- Investigate India,s decision to drop the Rafale from its
fighter competition to see if there is a reason that would
make the aircraft less attractive to Brazil.
-- Ensure the Brazilians are aware that we expect to be
issuing retransfer licenses for U.S.-origin components on the
French plane and have already approved transfer of some
technical data.
KUBISKE
(Reproduced from wikileaks.ch)
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