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C O N F I D E N T I A L SECTION 01 OF 03 BRASILIA 000041

SIPDIS

STATE FOR WHA AND PM, DEFENSE FOR DEPSECDEF, USDP, USD AT&L

E.O. 12958: DECL: 01/08/2019
TAGS: PREL ETTC MARR BR
SUBJECT: THE FX2 COMPETITION -- THE GLIDEPATH TO SUCCESS

REF: A. 08 BRASILIA 1589
¶B. 08 BRASILIA 1373 AND PREVIOUS
¶C. BRASILIA 34

Classified By: Ambassador Clifford Sobel. Reason 1.5 (D)

¶1. (C) SUMMARY. The Boeing F18 Super Hornet has had
success in establishing itself as a strong candidate to be
Brazil's next generation fighter but still faces strong
political opposition. To succeed, the USG and Boeing will
need a coordinated strategy aimed at highlighting the Super
Hornet's advantages, correcting misinformation and building
confidence in the USG's support for the purchase. Ideally,
this will involve ongoing outreach from the USG at high
levels to the key Brazilian decision makers. See Paragraph 9
for specific recommendations. END SUMMARY.

¶2. (C) As reported in ref a, the Boeing F18 Super Hornet
has become a serious option in Brazil's fighter competition,
and is acknowledged by contacts in the Brazilian Air Force as
offering the best plane for a competitive price. Although
these factors will continue to weigh in Boeing's favor, the
Super Hornet cannot at this point be considered the favorite
in the competition. There continues to be a strong
preconception among many in policy circles that a purchase
from France would be in Brazil's best interest, a view
strengthened by the recent, well-publicized visit of
President Sarkozy to Rio. Even though Sarkozy did not add
any new substance to the "strategic partnership" (deals to
sell helicopters and submarines were already well-known), the
optic of the Presidential visit has worked in Dassault's
favor.

¶3. (SBU) In the last week, there has been new focus in the
Brazilian press on the fighter purchase, including some
positive statements from Boeing officials and accurate
reporting that the Rafale's high price and limited
capabilities have caused it to lose every foreign sale for
which it has thus far competed. French representatives have
tried to spin the Rafale's dismal performance in the global
market to be the result USG political pressure rather than
the aircraft's shortcomings. The continuing challenge for
Boeing in press reporting is the ongoing assumption that
there is a risk to choosing the Super Hornet that the USG
will exercise some sort of "veto" over the sale at a later
date.

ELEMENTS OF A SUCCESSFUL BID
----------------------------
¶4. (C) As noted in reftels, the FX2 decision will not be
based on the capabilities of the aircraft selected and will
only be marginally influenced by the price. Brazilian
decision makers will be looking at the offers of the
competitors to determine which will benefit Brazil,
particularly Brazilian defense industry. Boeing, with its
worldwide business and access to commercial aircraft
production will have an attractive offer, but faces a
challenge. Both Dassault and Saab are offering essentially
new planes, not yet in production. They are therefore able
to offer Brazil whatever role it wants in the fabrication of
the planes, not just the final assembly that Boeing will
offer.

¶5. (C) Ref b highlighted the critical importance of
technology transfer. With current efforts in Washington to
approve technology sharing to the fullest extent possible, we
expect Boeing will have a strong offer by the Feb. 2 deadline
to respond to the Request for Proposal (RFP). It will be
vital, before the final response goes forward, to ensure that
it meets all Brazilian requirements. As noted in ref b, it
will be critical for the Boeing offer to keep open the
possibility of integrating Brazilian made weapons on the F18
at some point. Given the huge emphasis the new National
Defense Strategy places on support to Brazilian industry,
excluding any opportunity for indigenous products to be used
would be a major blow to Boeing's chances.

¶6. (C) It will be as important as approving the tech
transfer itself to overcome the assumption that the USG can
step in at a later date to restrict the transfer. While we
can explain that we stopped transfer of F16s to Venezuela
because of setbacks in democratic governance and interference
in the security of neighboring states -- circumstances

BRASILIA 00000041 002 OF 003


unthinkable in the Brazilian context -- the Brazilians tend
to take the fact that we stopped the transfer as evidence
that the United States is an unreliable supplier. To combat
this assumption will require ongoing high level USG
assurances, both directly to the Brazilian leadership and
publicly, that we can foresee no circumstance in which we
would restrict the transfer of fighters to Brazil. As the
State Department is perceived by Brazilians as the most
likely source of a potential veto, it will be critical for
high level Department involvement in this effort.

¶7. (C) In ref b, post reported on the Brazilian Air Force's
likely requirements for financing of the new fighters. With
the USG's long experience in Foreign Military sales, it
should be possible to work out a set of financing
arrangements that would offer an advantage over the
competition, especially since Boeing believes its aircraft
will have the lowest life cycle costs.

KEY PLAYERS
-----------
¶8. (C) The strongest supporters of the Super Hornet are
likely to be the military leadership, in particular Brazilian
Air Force chief Brig. Junito Saito, who we believe perceive
the Boeing offer as the best deal on the best aircraft and
see the United States military as the better choice of a
partner going forward. We may also be able to garner support
from Brazilian industry, including Embraer, if Boeing can
offer strong prospects for longer-term cooperation and mutual
profit. While the initial review of the proposals will be
done by the Air Force, final decisions will be made at higher
levels of the Brazilian government. The final decision will
be made by President Lula, who is likely to take a more
pragmatic view of which offer would most benefit Brazil, but
will also be swayed by arguments regarding how the purchase
will affect Brazil's standing as an independent global power.
In making a recommendation to Lula, Defense Minister Jobim
will play the key role at the policy level. While Jobim has
a good relationship with the USG, he has been a strong public
supporter of the strategic partnership with France. Foreign
Minister Amorim and Minister for Strategic Planning Roberto
Mangabeira Unger will also have a say; both see a purchase
from the U.S. as leading to an undesirable "dependency."
Finally, presidential advisors, including Civilian Household
Minister Dilma Rousseff and Foreign Policy Advisor Marco
Aurelio Garcia, will likely serve as sounding boards for Lula
as he makes a decision.

RECOMMENDATIONS
---------------
¶9. (C) As we look to the next three to four months as the
key period in which the fighter competition may be won, there
are several opportunities for the USG to maximize our chances:

-- The key step for the USG over the next month will be to
get the question of technology transfer right. While the
Brazilians will not get the keys to the proverbial candy
store, there should be enough sweeteners in Boeing's offer to
make the case that the Super Hornet includes the best tech.
The offer must also address the key points raised in ref b
(source codes, weapons integration, etc.).

-- Once the RFP response is in, we should be prepared to
raise the FX2 at every high level contact with Brazil. There
has been a perception that USG support is weak that needs to
be countered. The most effective way of doing so would be to
have President Obama make a strong statement advocating the
Super Hornet to President Lula at the earliest opportunity.
The President Elect's outstanding popularity with Brazilians,
the personal affinity that Lula has publicly expressed, and
the high expectations for relations with the new U.S.
Administration will ensure that his advocacy will have an
impact.

-- We should follow up the RFP response submission with
visits from appropriate officials to reassure the Brazilian
government of USG support for Boeing's proposal. Ideally,
this would begin with an interagency team (State, OSD, DTSA,
SOUTHCOM) visit in February at Assistant Secretary level to
try to put to rest the notion that there could be a USG veto.
Visits should include a public diplomacy component.

-- Government to government efforts should be supplemented

BRASILIA 00000041 003 OF 003


by improved outreach to highlight the advantages of the Super
Hornet and counter misinformation campaigns from the other
competitors that the USG will not be a reliable partner.

-- Washington agencies should be prepared to receive BRAF
finance representatives in February to discus likely
Brazilian requirements.
SOBEL