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RUEHSM/AMEMBASSY STOCKHOLM 0075
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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