Sweden, Brazil Pursue Deeper Cooperation With $4.7B Gripen NG Deal
HELSINKI — Swedish and Brazilian government and industry officials will meet in November to discuss how a US $4.7 billion Gripen NG deal may create significant industrial investment opportunities.
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.
The agreement comes with a strong technology commitment from Sweden to transfer "everything" that Brazil will need to develop its own next-generation military jets.
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."
Mikael Damberg, Sweden's economic development and innovation minister, identified technology transfer, industrial cooperation and financing elements in the Gripen NG bid as pivotal factors in winning the deal.
"The Gripen NG contract with Brazil is the biggest Swedish export deal to date. It paves the way for a long-term strategic partnership with Brazil in a whole range of areas ranging from defense to civilian industry-related projects," Damberg said.
Under the financing arrangement, the state-owned Swedish Export Credit Corporation (SECC), in consultation with Swedish Export Credits Guarantee Board, is providing two separate loans to Brazil to finance the Gripen NGs and purchase weapons systems for the aircraft.
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."
The technology transfer and industrial components in the Gripen NG deal can be expected to generate additional value-added avenues for cooperation between defense and technology firms in Sweden and Brazil, Damberg said.
"This is a long-term partnership that will create new investment opportunities in Sweden and in Brazil. It will mean jobs, growth and productivity, as well closer cooperation in the areas of technology, innovation and research," he said.
Currently, some 200 Swedish-owned companies operate in Brazil, employing more than 70,000 workers.
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.
Saab is currently constructing the first of several intended production units in Brazil directly connected to the Gripen NG. The first unit is being built in São Bernardo do Campo. The technology transfer component of the deal, and future production of Gripen NGs in Brazil, is expected to create 2,000 to 3,000 jobs.
The Brazil deal brings Saab closer to its objective of selling more than 300 Gripen NG aircraft over the next 20 years.
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.
"Our partnership with Brazilian industries strengthens Saab's position in Latin America and supports our strategy for growth through industrial cooperation," Buskhe said.