This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 03 BRASILIA 003154 

SIPDIS 

SENSITIVE 

E.O. 12958: DECL: 12/21/2014 
TAGS: MCAP MARR MASS PREL BR POL MIL
SUBJECT: F-X FIGHTER PROGRAM TO END WITH A WHIMPER ON NEW 
YEAR'S DAY 

REF: BRASILIA 2890 

Classified By: Deputy Chief of Mission Philip Chicola, reasons 
1.4 (b & 
d) 

¶1. (C) SUMMARY: At midnight, December 31st, Brazil's F-X 
jet fighter competition will come to an end. Ultimately, a 
decision on the costly program proved to be politically 
untenable for the Lula administration. Given all the urgent 
requirements of Brazil's armed forces, the F-X was an expense 
that was hard to justify. Competitors for the F-X are 
refusing to go down quietly, but they are fighting a losing 
battle. With the end of the F-X, the GOB may review whether 
to purchase less costly used aircraft. In this regard, the 
Lockheed Martin F-16 would have the inside track. However, 
it is possible that the GOB may base a decision on used F-16s 
in the context of its continued questions about the U.S. as a 
reliable supplier. End Summary 

The F-X Program, RIP 
-------------------- 

¶2. (SBU) On December 31, the Best and Final Offers (BOFAs) 
for the competition to select Brazil's new generation high 
performance jet fighter (F-X) will expire. Despite repeated 
GOB postponements during the past 12 months on a decision, 
the F-X program had still retained a breath of life thanks to 
repeated hints from former Defense Minister Viegas that a F-X 
award decision would be forthcoming. Throughout the process, 
however, the Lula administration was reluctant to commit to a 
choice. With the end of the validity of the BOFAs next week, 
the F-X program will be officially dead. 

¶3. (SBU) The principal cause of the program's demise, most 
observers agree, was the F-X program's steep price tag, 
around $700 million plus for the purchase of a dozen high 
performance aircraft. The huge cost, at a time when the Lula 
administration was engaged in fiscal austerity, made the 
program a politically impossible sell. (Note: The Brazilian 
Congress, which still has not concluded the 2005 budget, has 
not included jet fighters in its budget, and, in fact, 
provides very little money overall for defense. End Note.) 
Yet, until November, more than a few senior Brazilian Air 
Force (FAB) officers held out hope that FAB would get its new 
jets. When Russian President Putin departed Brazil last 
month without a deal in place for the Sukhoi SU-35 -- after 
offering to purchase 50 Embraer commercial aircraft as a deal 
sweetener and certainly dangling a possible agreement on 
ending the Russian embargo on Brazilian beef -- the last best 
chance for new fighter aircraft for FAB left with him 
(reftel). 

¶4. (SBU) Other factors contributed to the F-X impasse. The 
Brazilian military's almost insatiable need for weapons 
systems upgrade and procurement required that the GOB triage 
the competing demands for funding. FAB already had been 
granted approval for buying ten new Black Hawk helicopters 
(about $153 million). With both the army and navy biting at 
FAB's heels for funding their own urgent requirements, the 
new jet fighters became a harder sell. 

¶5. (SBU) In view of the lack of any perceived threat, the 
strategic question of whether Brazil needed the F-X whose 
primary purpose was protection of the national capital, has 
received relatively little debate. The program itself 
ultimately owed its continued rationale less to the defense 
of Brasilia than as a tool of national pride, particularly 
following Chile's purchase of F-16s. Even some air force 
generals admit the principal current threat to Brazilian 
sovereignty (from narco-trafficers) can be addressed less 
expensively by other air force elements such as FAB's Super 
Tucanos. 

¶6. (SBU) Meanwhile, F-X competitors are refusing to go down 
without a fight. Planted news articles in praise of one 
aircraft or attacking another (usually the F-16, and the 
alleged, and false, denial by the USG to provide AAMRAM 
capability to Brazil) continue to pop up. The most recent 
example of F-X muckraking is a cover story this week in 
left-leaning nationalist magazine Carta Capital in praise of 
the Mirage 2000 of the Embraer-Dassault consortium. In the 
Carta Capital article, Embraer President Mauricio Botelho, in 
a direct swipe at Lockheed-Martin, is quoted as saying that 
because the USG won't allow it, U.S. companies offer "no 
chance" for transfer of military-related technology -- a 
bizarre comment in the wake of the winning 
Embraer--Lockheed-Martin bid for the development of the U.S. 
Army's Aerial Common Sensor System aircraft. Even Sweden's 
Grippen aircraft has received high profile lobbying with a 
prominent billboard at the entrance to Brasilia airport. 

Used Aircraft? 
-------------- 

¶7. (SBU) Throughout much of the long-running F-X 
competition -- while Lockheed Martin's F-16 was one of the 
competitors -- the U.S. company had urged the GOB consider 
the purchase of used F-16s as a significantly less costly 
option to the F-X. Although an attempt by Lockheed-Martin in 
early 2003 to ally with Varig Engineering and Maintenance 
(VEM) for a proposed upgrade of used F-16s fell through, the 
company remains upbeat it will be able to partner with a 
Brazilian firm (possibly Embraer) to craft an attractive used 
aircraft offer. Ultimately, Lockheed Martin believes it can 
provide fully capable F-16 aircraft at less than half the 
cost of the F-X. (Note: One driving factor, however, will be 
the ability of FAB to conduct inter-operable aerial refueling 
for any fighter. Brazil is considering purchasing two or 
three KC-135s to augment their refueling capability. 
Procurement of KC-135s from the U.S. would be a positive 
indicator for purchase of used F-16s. End note.) 

¶8. (SBU) In recognition that new aircraft will be 
unobtainable, senior FAB leadership, including FAB's probable 
next Commander in Chief, increasingly have come around to 
accepting used F-16s as Brazil's best aircraft option. In 
this context, the F-16 appears to have the inside track over 
other used aircraft options, although there are rumors that 
some in FAB may be looking at procuring used South African 
Cheetahs, a modified Mirage III aircraft one generation older 
than the early F-16 models. Meanwhile, the Brazilian 
Congress which has been absent from the F-X debate, may get 
into the picture. In a discussion with emboffs, a prominent 
Deputy on the National Defense Committee stated he intended 
to hold hearings in 2005 on used fighter aircraft with an eye 
to promoting the F-16 as Brazil's best option. 

¶9. (C) Comment: We expect that Brazil will continue to 
seek the aquisition of high performance jet fighters for 
reasons of national pride, if nothing else. U.S. Mission 
Brazil will continue to support the used F-16 option as the 
most logical way forward both tactically and economically. 
An increasing number of FAB generals appear to support this 
view. However, even though Brazil has moved forward on the 
purchase of other weapons systems, we suspect the GOB may not 
agree to purchase the F-16 unless it achieves an adequate 
comfort level on all aspects of the bilateral pol-mil 
relationship. As Brazil observes the bite that ASPA is 
taking on countries that do not sign Article 98 agreements, 
it questions about the reliability of the U.S. as a 
supplier/strategic partner will continue, thus further 
complicating the used F-16 aquisition option. 

Danilovich