Sweden, Brazil Pursue Deeper Cooperation With $4.7B Gripen NG Deal

Under the deal, Sweden-based Saab will deliver 36 Gripen NG multi-role aircraft (28 single-seater Gripen Es and eight twin-seater Gripen Fs) to Brazil.

Saab is currently in dialogue with a number of Brazilian defense-engineering companies, including Embraer and Akaer, to finalize production arrangements and identify possible new areas for cooperation and capital investments in Brazil. It is expected that about 29 of the 36 aircraft on order will be fully manufactured in Brazil.

The deal, which arose from Brazil’s Project F-X2 fighter replacement program (FRP), has not been without its controversies since the Gripen NG was selected in late 2013 to replace the Brazilian Air Force’s 12 aging Dassault Mirage jets. The Project F-X2 program had short-listed three candidate aircraft, including Boeing’s F/A-18E/F Super Hornet and Dassault’s Rafale.

Brazil’s State Prosecutor’s Office (SPO) opened a corruption investigation into the Gripen NG deal in April at a time when after the acquisition cost rose by overmore than US $1 billion due to a substantial drop in the currency exchange rate of the Brazilian real against the Swedish krona. The SPO ended its inquiry in September after finding insufficient evidence to support allegations of financial kickbacks connected to the Project F-X2 competition and selection decision.

Brazil’s President Dilma Rousseff offered "solid reassurances" that the Gripen NG deal and the FRP fighter replacement program "were firmly on track" when she led a high-level state-industrial delegation to Stockholm, on Oct. 18-19, to discuss the deal's broader economic and investment potential of the Gripen NG deal.

"We are facing difficult economic times in Brazil, but we have large dollar reserves and a strong industrial base," Rousseff said Oct. 19 at a news conference in Stockholm on Oct. 19. "The Gripen NG is one of our key projects. This is something we have budgeted for and can afford."

The SECC, which loaned US $6.8 billion to support the overseas contract attainment activities of Swedish exporters in 2014, has approved a US$4.8 billion credit to Brazil to cover the cost of acquisition for the Gripen NGs.

In addition, the SECC has extended a US $245.3 million credit to allow Brazil to acquire weapons systems for the Gripen NGs aircraft. The loans, which were green-lighted by the Brazilian Federal Senate on Aug. 5, carry a negotiated interest rate of 2.19 percent.

In Sweden, questions have arisen over the absence of a clause in the SECC’s credit facility that would compel Brazil to buypurchase Swedish-built weapons systems.

"It is incomprehensible that Sweden issues a credit to Brazil to purchase weapons systems for the Gripen and does not include a restriction clause," said Allan Widman (Liberals), chairman of the Swedish Parliamentary Defense Committee. "Brazil is now free to buy its weapons systems from Germany, Israel or South Africa with Swedish money." 

In the medium term, the Gripen NG deal will generate between 1,000 to 2,000 new jobs in Sweden, mainly centered around Saab’s aircraft-manufacturing base in Linköping.

According to Saab’s CEO, Håkan Buskhe, said the defense group remains confident that it can win new orders in Asia, where Thailand already operates a modified version of the Gripen, as well as in Europe, South America and sub-Saharan Africa.

The Brazil sale marks "an important milestone," Buskhe said. The deal supports the company’s long-term plan to use the industrial structures around the Gripen NG project to use make Brazil as a platform for generating to generate additional aircraft sales in Latin America.