RIO DE JANEIRO — The incoming Brazilian government is poised to follow through on a plan to funnel oil and gas revenue toward new defense spending, leaving European shipbuilders hopeful that the country can afford its new corvette program.
Directing 2 percent of royalties from offshore drilling to the military has been a national policy for some time, but previous governments have never fully applied it, according to Eric Berthelot, who heads the Brazilian subsidiary of French shipbuilder Naval Group. Officials under outgoing president Michel Temer first moved to tap the oil fund and have so far forwarded roughly $650 million to state-owned Emgepron to manage new naval projects like the $1.5 billion Tamandaré frigate program.
The government of President-elect Jair Bolsonaro, a far-right politician who will take office in January, is expected to further implement the policy, according to several industry officials in Europe. They said Brazil’s ability to pay for the program will be closely watched as the Bolsonaro government makes its first moves next year.
Naval Group is competing against Germany’s ThyssenKrupp Marine Systems, Dutch shipbuilder Damen and Italy’s Fincantieri. The Brazilian Navy and the four bidders are in the final stages of coordination before the proposals are due on March 8. The Navy is expected to pick a winner later that month, though it is possible officials will await the LAAD defense expo here in early April to announce results.
The Tamandaré program is for four ships and an initial eight-year maintenance package. The warships are meant to help protect Brazil's resource-rich waters up and down its vast coastline, dubbed the Blue Amazon.
European vendors tussling for business in the same competitions worldwide has become a recurring theme, fueling calls for consolidation of the continent’s shipbuilding industry to retain a competitive edge.
“The Europeans are more divided than ever,” Naval Group Hervé Guillou told reporters at one of the company’s offices here. But, he cautioned, “you have to wait for the right moment to consolidate.”
Naval Group and Fincantieri already have decided to join their businesses to some extent, but so far nothing concrete has sprung from those aspirations.
Sebastian Sprenger is Europe editor for Defense News, reporting on the state of the defense market in the region, and on U.S.-Europe cooperation and multinational investments in defense and global security. He previously served as managing editor for Defense News.