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CC O N F I D E N T I A L SECTION 01 OF 02 SAO PAULO 000104 

SIPDIS 

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

E.O. 12958: DECL: 03/14/2018 
TAGS: PREL MARR MOPS ETTC BR
SUBJECT: EMBRAER'S CURADO -- ADVICE ON FX2 AND VIEWS ON THE 
FINANCIAL CRISIS 

REF: A. BRASILIA 73 
¶B. SAOPAULO 31 

Classified By: Consul General Thomas White; Reasons 1.4 (b) and (d). 

¶1. (C) SUMMARY: Ambassador Sobel met with Embraer CEO 
Federico Curado on January 30 to discuss Curado's views on 
the FX2 sale, as well hear about how the financial crisis has 
affected the company's sales. Curado stressed the political 
nature of the decision, stating that in addition to 
technology transfer, one of the primary goals of the Request 
for Proposal (RFP) was job creation. He said this could be 
achieved through a partnership between Boeing and Embraer in 
the development of a next-generation Brazilian jet fighter. 
Curado also suggested that the United States offer to 
purchase a number of U.S.-assembled Embraer Super Tucanos in 
exchange for the FX2 contract. He thought that tying 
civilian aviation collaboration with the FX2 sale was too 
complicated and too far off. Regarding the financial crisis, 
he told Ambassador Sobel that Embraer has suffered 
tremendously, and expects Embraer's production to fall 
significantly after it works through its current backlog. 
END SUMMARY. 

¶2. (C) Curado emphasized the importance of the political 
dimension of this decision. He said that even if Brazil 
received full technology transfer, this would not achieve 
what he sees as one of the principal goals of the program, 
job creation. Curado explained that building a jet fighter 
is a difficult process and that the only way to truly learn 
how to build a plane is to develop the aircraft from the very 
beginning. Not even technology transfer can accomplish this, 
because "it is through trial and error that a company learns 
how to actually build an aircraft." In Curado's view, the 
GOB ultimately wants to create jobs from this sale and to do 
so, they need a partner who can work with Embraer to develop 
a next-generation aircraft in Brazil. Embraer would like 
Boeing to be that partner. 

¶3. (C) Embraer proposed matching the sale of the F-18s with 
a comparable purchase of Embraer Super Tucanos, assembled at 
the Embraer facility in Florida. Curado cited this as a 
creative way to add value to the Boeing bid. 
This promise would, in his view, be a convincing step in the 
GOB's decision. Curado then stated that Embraer privately 
hopes Boeing wins the contract, though publicly they must 
remain neutral. He finally asked Ambassador Sobel to avoid 
discussions of civilian aviation collaboration, which he said 
could confuse the selection process for the FX2. 

¶4. (C) According to Curado, the financial crisis has brought 
Embraer's new sales to zero. They are working through a 
backlog of planes, but in two to three years, Curado expects 
to have completed the backlog, leaving Embraer with no planes 
to produce. He told Ambassador Sobel that he expects the 
crisis to have abated in three to four years, though he 
foresees further depreciation of assets worldwide. He said 
that some clients have canceled contracts, despite losing 
deposits as high as 40 percent of the value of the plane. 
NOTE: This differs from Curado's public statements that do 
not paint such a bleak picture. In fact, Curado told a 
visiting Codel on January 29 that sales remain strong for 
certain classes of aircraft and that few of their clients 
have canceled orders. END NOTE. 

¶5. (C) COMMENT: Defense officials have told the Mission 
that creation of a domestic arms industry is an essential 
part of the bidding process (REF A). The head of the 
Brazilian Air Force has said that he prefers the F-18, and 
most experts believe it to be technologically superior (REF 
B). Curado concurred that both technology transfer and job 
creation are key aspects of the RFP. As it stands, the RFP 
calls for a relatively small number of planes (36), and 
Boeing officials have told Embraer that it is not economical 

SAO PAULO 00000104 002 OF 002 


to assemble or manufacture F-18s in Brazil. This fact would 
not allow for the creation of significant numbers of jobs in 
Brazil, something that Curado and Embraer see as key to 
winning the contract. However, if Boeing and Embraer were to 
partner in the development of a Brazilian next-generation jet 
fighter, the technology transfer and job creation concerns 
would be addressed, and potentially make Boeing's bid for the 
FX2 more likely to succeed. END COMMENT. 

¶6. This cable was coordinated / cleared by Embassy Brasilia 
and Ambassador Sobel. 
WHITE