Brazil

Saab and Brazil postpone Gripen finances

A miniature of what the Swedish-Brazilian Saab Gripen NG fighter will look like, if the plans go ahead.

A miniature of what the Swedish-Brazilian Saab Gripen NG fighter will look like, if plans go ahead. Photo: Agência Brasil

Worlds collide when the masters of spontaneity are aiming to do business with the center of Nordic Noir. At the very last minute the Brazilian Defense Ministry and the Swedish company Saab agreed to postpone the signing of the contract that will define the financial details for Brazil’s buying Swedish Gripen fighters.

The deadline for signing the contract was Monday July 6th 2015, but it is now to be signed in late October instead. The adjourning required President Dilma Rousseff to call her Swedish colleague, Prime Minister Stefan Löfven, and beg for time. However, the compromise comes with a catch. Until late October, the contract and its terms are to be approved by the Brazilian National Congress.

The Brazilian Air Force Commander, Nivaldo Rossato, and Saab executives met with the Brazilian Defense Minister, Jaques Wagner, to come to an agreement. Wagner claimed that there is not possibility of Brazil backing out of purchasing the Gripen fighters. He promised that an effort will be made to determine the financial details.

Brazil bargaining

The Brazilian Air Force signed a contract in October last year to buy the Swedish fighters to a cost of US$ 5,4 billion. However, Brazil is determined to renegotiate the interest that was agreed upon in the contract, since the economy in the country is suffering a recession.

The Brazilian Minister of Finance, Joaquim Levy, claims that a renegotiation of the interests will save the country over US$ 300 million in 25 years. Furthermore, the Minister wants to use the renegotiated Saab contract as a model to revise other international contracts that have been signed by other Ministries. Since the interests have fallen in Europe, the Brazilians see an opportunity to improve their stakes. In an informal ambient this kind of behavior is called “jeitinho”, a Brazilian way of rearranging a done deal so that the benefits increase.

On the opposite side of the globe, the Swedes are great fans of rules and efficiency, tending to arrive at least five minutes early to meetings. Behind the scenes there are claims that the Swedes have argued that a renegotiation of the interest is a violation towards the OECD’s Export Credit Arrangement. A breach of the arrangement could lead to reprisals from the World Trade Organization (WTO). Accordingly, the Swedes insist that the interest was defined the day the contract was signed in 2014.

In Brazil’s 2015 budget, R$ 1 billion (approximately US$ 320 million) have been reserved for the buying of the Swedish jets. However, since a long-term plan to pay off the planes is being structured, the Brazilians do not expect to apply all of the money that has been set aside.

Economy collapsing

With an increasingly tense domestic situation ignited by the Petrobras corruption scandal which has generated demands to impeach President Rousseff and inflation hitting 8,89% it is alarming that Brazil chooses to suspend the Saab contract. Not to mention the financial blow after the most expensive FIFA World Cup ever and the Olympics coming up next year, which are also bleeding money and are as late as the preparations for the World Cup.

To samba your way around your own country, wasting your proper means is one thing. But when you ask a Gringo for a dance, you cannot expect them to fall for you charms. Certainly not in a world concerned enough as it is with Grexit and the future of Europe.

Brazilian Ministry investigates price of Saab Gripen

Brazil joins Sweden in becoming the launch customer for the next-generation Gripen. Photo by Saab.

Price of the Saab Gripen New Generation questioned. Photo by Saab.

The final contract that was signed by the Brazilian Air Force and the Swedish Defense company Saab was US$ 900 million dollars more expensive than the initial estimate. The Federal Public Ministry of Brazil (MPF) is now examining if there are any irregularities behind the final pricing of the Saab Gripen NG.

36 Saab Gripen NG fighters were ordered by the Brazilian Air Force at a total sum of US$ 5,4 billion and the contract was signed in mid October 2014. Brazilian congressmen questioned that the price had gone up with approximately 20 percent of the original price of US$ 4,5 billions. Since then media have continued inquiring the matter.

The press stab at the Federal Public Ministry of Brazil confirms over the telephone that a preparatory investigation was initiated on February 19th of this year:

–       We are at the first stage of the investigation process, examining if there are any irregularities involved in the pricing of the fighters. It is not yet a judicial process. We are evaluating if there are any reasons for us to initiate a proper legal process.

Since there had been many speculations on the topic an investigator at the ministry decided to initiate the process. A new investigator is to be assigned to the case next week, taking over after general inspector Eliana Pires Rocha.

 

Brazilian demands caused price elevation

Saab’s CEO Håkan Buskhe was questioned by the Brazilian TV channel Globo on the final pricing in November last year, approximately a month after the deal was closed:

– Basically the price went up because of the requirements of the client. We offered a product and they has additional claims, such as the Wide Area Display (WAD), according to Buskhe.

The alterations are the reason that the price was increased US$ 900 millions compared to the original proposal presented in 2009, according to both Saab and the Brazilian Air Force. The competitors for the deal were the American Boeing F-18 and the French Rafale, produced by French Dassault.

 

Brazilians take to the streets Sunday

On March 15th protests have been scheduled in over 200 cities all over Brazil, calling for the impeachment of President Dilma Rouseff. The largest corruption scheme ever in the country, Operação Lava Jato where the state owned oil giant Petrobras is accused of laundering money to politicians at a sum of at least US$ 10 million and the overall weak economy in the country have cause the support for the President to plummet.

A Datafolha poll in February shows that 52 percent of the Brazilians believe that Dilma not only knew about the corruption scheme but that she also let it happen. Moreover, 44 percent disapprove of her administration. Thus the protesters are calling for the impeachment of the President.

The measure leans on the historic background of the country where President Fernando Collor was impeached in 1992 after involvement in a corruption scandal. The oppositional party PSDB and former presidential candidate Aécio Neves are supporting the protests planned for Sunday. However, Neves claims that he does not support the impeachment of the President.

Critics claim that the protest movement is in fact orchestrated by the opposition and the commercial media to overthrow the government. The elections were concluded by the end of last year and the will of 54 million Brazilians then was that the country remained in the power of the Worker’s Party (PT) and President Dilma.

 

Over 100 Gripen fighters to Brazil

 

Brazil joins Sweden in becoming the launch customer for the next-generation Gripen. Photo by Saab.

Brazil wants a next-generation air force with the Swedish Gripen. Photo by Saab.

A highly positioned source has confirmed that the Brazilian Air Force will buy a total of 108 Gripen fighters from Swedish Saab. According to the aviation magazine Flightglobal the batches will be delivered in three rounds.

 

Brazil signed the contract with Saab to buy Gripen just before President Dilma Rousseff was reelected in mid October. Just about a month later the source claims that 36 fighters was only an initial order. The Brazilian Air Force is in need of renewal and everything indicates that it will be partly Swedish.

 

The contract requires that the vast part of the fighters will be produced in Brazil. Therefore an extended deal will accordingly result in more work for the people in the country. It will also lead to more jobs in Sweden as well as a lowered production cost to the country itself which has already decided to buy Gripen for its own Defense.

 

At this point there are several exchange programs between universities and organisations in Brazil and Sweden. This tendency will increase even more if the rumours are right.

 

 

Brazilian-Swedish Gripen secures future fighters and economy

Saab and the Brazilian Airforce sign the $5.4 billion contract. Photo by Brazilian Airforce.

Saab and the Brazilian Airforce sign the $5.4 billion contract. Photo by the Brazilian Airforce.

Hours after President Dilma Rousseff was reelected in Brazil, Saab announced that the $5.4 billion contract for selling 36 Gripen NG fighters to the Brazilian Air Force has been signed. It is currently one of the most valuable defense contracts negotiated in an emerging market. The conclusion of the deal is a turn point for Brazilian industry, Saab and for the new Swedish Prime Minister Stefan Löfven.

After a week of strengthening due to the suspected submarine, the Saab stock now continues rising due to the closing of the contract with Brazil. Since the suspected submarine was first spotted October 17th until today when the Brazilian contract was confirmed, the stock has increased with 10 percent.

The contract requires that 80 percent of the Gripen fighters are constructed on Brazilian soil. Igniting the aerospace industry is exactly what President Dilma needs in a Brazil where increasing inflation, stagnation and diminishing investments are a fact.

Brazil joins Sweden in becoming the launch customer for the next-generation Gripen. Photo by Saab.

Brazil joins Sweden in becoming the launch customer for the next-generation Gripen. Photo by Saab.

Collateral deals and thousands of jobs

“We will transfer technology and the capacity to project and construct fighters” Håkan Buskhe, President of Saab affirms. The Brazilian company Embraer will lead the local fabrication of the planes but other Brazilian companies will also participate, such as AEL, Akaer, Atech and SBTA. The development and production of Gripen NG will generate thousands of employments directly and indirectly in Brazil.

“This will be a leap, not only for Embraer, but for our industry as a whole”, declares Lieutenant General Alvani Adão da Silva, Director of the Department of Science and Aerospacial Technology in Brazil. The Southern American giant will participate in the development of the Gripen NG and will be responsible of the version for two pilots. The Brazilian contract includes 28 single-seat and 8 two-seat Gripen NG.

The Gripen fighters are to be delivered between 2019 and 2024. This also implies that Brazil will need to rent older Gripen C/D jets from the Swedish Armed Forces before the delivery date to cover defense needs, such as the 2016 Olympics in Rio de Janeiro. Brazil’s Mirage 2000 jets were retired in December of 2013 and currently the even older F-5EM are being used.

Impact in Sweden

This deal is of importance to the country of Sweden that recently declared that it will buy 60 new Saab Gripen jets. With the Brazilian contract the costs for developing the plane will drop since they will be split between the two countries.

“The real financial winner in this case is Sweden. Saab, of course, as well but primarily Sweden and the Swedish Defense. I cannot say exactly how much money the Swedish state will earn with the deal because of secrecy of the contract. However, I can say that it’s a considerable amount of money due to the division of costs and development”, says Saab’s President Håkan Buskhe.

I have personally, in confidential discussions with another Swedish Minister, been made aware that there are plans of broadening the Brazilian-Swedish collaboration. These intentions involve other areas of cooperation than the industry market. The aim is to increase a cultural and social interchange, beyond the commercial relation.

Sweden’s new Lula

Sweden and Brazil have a long history of successful industrial cooperation and history might just intensify the cooperation in the future. The new Swedish Prime Minister Stefen Löfven is an old friend of the creator of the Brazilian Worker’s Party, ex-President Luiz Inacio Lula da Silva. Both were welders before becoming active labor unionists and after years of struggle both reached the posts as Presidents of the Steel Worker’s Union in their respective countries. During a visit to Sweden Lula even slept at Löfven’s couch.

Swedish Prime Minister Stefan Löfven and Brazil's ex-President Luiz Inácio Lula da Silva. Photos by Mattias Vespä and Ricardo Stuckert.

Swedish Prime Minister Stefan Löfven and Brazil’s ex-President Luiz Inácio Lula da Silva. Photos by Mattias Vespä and Ricardo Stuckert.

“We cannot live on conflict, we have to try to find solutions as well. Going about and fighting others is not my thing.” Comments as such have so far established Löfven as a “nice” politician, unable to beat his rival to the post as Prime Minister, Fredrik Reinfeldt, in debates before the elections. On the other hand he stirred up quite a conflict declaring that Sweden will recognize Palestine as a state.

Löfven is now the leader of one of the weakest minority governments in Swedish history with merely 40 percent of the seats in the parliament. Therefore it would be wise to take this opportunity and develop a strong collaboration with Brazil, built on former contacts and cooperation. With the right media strategy Löfven could become an equivalent to Lula in Sweden, maybe not the sharpest politician but by building strategic business alliances the economy will grow and the people’s love will flourish as a consequence.

The future of Swedish fighters secured

Buskhe has not commented the fact that Brazil and Argentina have signed a contract where Argentina says it intends to buy Gripen from Brazil. However, with the Brazilians buying Gripen the fighter’s future is secured until 2050.

Regardless of Argentina’s next move, the Brazilian deal increases the possibilities of further exports. The competition on the fighter market is heavy but Saab is now certain that it will continue in the fight of developing next generation’s fighters.

 

 

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Argentina wants 24 Gripen NG “USAN”

Gripen test platform NG with new droptanks . Photo by Stefan Kalm/ Saab.

Gripen test platform NG with new droptanks . Photo by Stefan Kalm/ Saab.

Days away from the second round of the Brazilian Presidential elections the government manages to sign an aerospace industrial co-operation agreement with Argentina. This includes the intention of the southern neighbors to buy 24 Saab Gripen NG fighters. That is to say the Gripen that is to be produced to 80 percent on Brazilian soil. This raises the dilemma if increased sharing can lead to boosted vending and occupation.

The contract for the Brazilian acquisition of 36 Gripen NG is to be signed by December and one of the main reasons that Brazil chose the Swedish fighter is the almost total transference of technology. In return, the South American giant spoke of great expansion possibilities for Saab on both the Latin American market as well as other allied nations, such as the other BRICS-countries. Accordingly, Argentina might just be the first in line to a large-scale expansion, or perhaps inclusion.

The reason that the Defense Ministers had gotten together on Tuesday (October, 21st) in the interior of the state of São Paulo was to celebrate the launch of the cargo plane KC-390. The aircraft was projected by the Brazilian Armed Forces and produced by the national aeronautics company Embraer in cooperation with Argentina, Portugal and the Czech Republic.

 

The Defense Ministers of Argentina and Brazil, Agustín Rossi and Celso Amorim, signing the agreement of expansion of joint projects in the aeronautical sector.

The Defense Ministers of Argentina and Brazil, Agustín Rossi and Celso Amorim, signing the agreement of expansion of joint projects in the aeronautical sector.

“The investments made to produce the KC-390 pieces in the Argentinian factory in Córdoba were fundamental to revitalize the aeronautics industry in our country”, the Argentinian Defense minister Agustín Rossi declared at the event.

Hopes of shared production

In the press release that the Brazilian government issued it is stated that ”the conditions for the acquisition, as well as the possible Argentinian participation of the production of these planes, will be detailed during the following months, between representatives from both countries.”

The expectations in Argentina have sky rocketed with the news. Having an updated aerospace industry and a successful collaboration with Brazil in a moment of deep economic crisis creates hope. Both in media and aerospace industrial forums online Argentinians are discussing how this might be the beginning of a Gripen NG “USAN” (The Union of South American Nations/ Spanish: Unión de Naciones Suramericanas, UNASUR) where not only Brazil and Argentina might be co-producers in developing Saab’s fighter, but maybe even more of the sister nations around the continent.

On the other hand, it was quite a large leap for the Swedish Defense and Security company Saab to agree to the technology transfer demanded by Brazil. “Perhaps the technology can be considered “open” with the contract that is to be signed and therefore it might be eligible to spread. However, I do not believe that the transfer will continue over to Argentina. The Swedish and Brazilian Alliance should be sufficient to simply sell the fighters to third-party buyers” according to Oscar Jansson PhD-Candidate at the Department of War Studies, King’s College London, in an interview with Cecilia Vaccari.

Political advantages

The Brazilian Defense Minister, Celso Amorim underlined that “These last 12 years with Luiz Inácio “Lula” da Silva and Néstor Kirchner as Presidents, and later Dilma Rousseff and Cristina Fernández de Kirchner, have been the most fruitful in the bilateral relationship.”

Undoubtedly, the agreement between the two countries implies in expanded industries, work for the people as well as appropriation and exchange of new technology. As a bonus it might just give President Dilma Rousseff the lift she needs to defeat her rival in the elections on Sunday (October 26th). In light of the bad finances in the country she needs to prove to the Brazilians that she can in fact offer a bright future. Maybe it will even save President Kirchner from her all time low popularity figures before it is time for the Argentinian elections in a year from now. But if both strike out and the plans are dropped, they will without a doubt take the Saab stock with them in the plunge.

 

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