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### Viewing cable 09BRASILIA634, BRAZIL'S FIGHTER PURCHASE: ENDGAME STRATEGY

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
09BRASILIA634 | 2009-05-19 16:04 | 2010-12-05 05:05 | SECRET//NOFORN | 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

`