Offsets In Brazil For Fighters

(MoneyWatch)  Brazil is planning a major upgrade to its armed forces over the next few years. They are one of several regional powers doing this. India and Australia are also doing the same thing. A key aspect of all three nation's plans is to purchase an advanced fighter. Australia is buying F/A-18 and F-35 JSF aircraft. India is conducting a contest right now to determine the winner, and Brazil is preparing to also release a contract.

Two of the companies who will submit aircraft for consideration by Brazil have already announced that they will be either building the jets locally or investing in major production of content in that country. Boeing has said they have already established relationships with twenty-seven companies to manufacture parts for the F/A-18 in Brazil.

SAAB has proposed the Gripen to Brazil as it has India. The Swedish company has said that they will establish a production line and use it not only for the Brazilian order but other future production as well. This may be a risky move as other then the various foriegn orders they are competing on there remains little domestic market for the Gripen. The new line may also end up taking work and jobs away from Sweden. To add more pressure tho this contract the Royal Thai Air Force decided that it will delay retiring their F-5 aircraft. They plan was to purchase the Gripen to replace them and six have been ordered. These will still be delivered but the decision may force a reduction in further buys.

Offsets may not be required of this contract as some countries do such as India. The proposals though do add some advantage to the bidders as Brazil will be gaining something back for their investment in the modern aircraft. Eurocopter has already announced that they will jointly assemble helicopters in Brazil. This is part of a contract that they won to make aircraft for the Brazilian military. The establishment of more production capability on another continent may help the company control costs in the future but again at the possible expense of jobs in France and Germany.