Saturday, April 28, 2012

Panetta Goes to Bat for Boeing in Brazil

In a recent trip touring South America, Panetta stopped in Brazil specifically to discuss Brazil's latest defense contract competition. Brazil is offering a 4-7 billion dollar contract for 36 new fighter jets. Currently the main competitors for the contract are Boeing's F/A-18 Super-Hornet, the French company Dassault's Rafale fighter, and the Swedish Saab's Gripen.

In a purely economic world, we would simply expect Brazil to pick the best plane. There are two problems, however, that make it difficult to foresee what Brazil's final decision will be. First, it isn't necessarily clear that there is a best out of the three competitors. Each is considered a very good plane (though not quite as good as the EuroFighter), but all in different ways. The Super-Hornet gets high marks for its low cost and multipurpose capabilities, but lower scores on typical fighter criterion of armament and maneuverability (

Second, when it comes to national defense contracts, politics may be even more important than plane quality. There are two main political concerns Panetta needed to address in his trip to Brazil. First, the Pentagon recently cancelled a 380 million dollar contract to buy Brazilian Super Tacono warplanes to give to Afghan forces. Originally awarded the contract last year, it was revoked because of a lawsuit filed by the rival firm Hawker Beechcraft Corporation. The bidding for the contract has been reopened, but a decision is not expected until 2014. The U.S. fears that Brazil may respond by blackballing Boeing's plane from the current competition.

In addition to the US contract dispute, Brazil has made technology transfer an important aspect of the current competition. Traditionally the United States has protected much of its defense technology for obvious national security reasons, but in order to help Boeing win this contract Panetta has made overtures to the contrary. In a speech at the Superior War College in Brazil he assured that the Boeing offer “contains an unprecedented advanced technology sharing that is reserved for only our closest allies and partners.”

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