MercoPress. South Atlantic News Agency

Brazil and UK ready to sign huge defence contract, say media reports

The state of the art Royal Navy Type 26 frigate

Brazil with a defence market described as “one of the fastest growing in the world” will be signing a defence agreement with the UK which should open the way for a deal worth “billions of dollars”, according to reports in the Brazilian and UK media.

If the agreement finally goes through a first deal could involve £ 2.9 billion which includes the purchase of six patrol vessels (£ 60 to £ 80 million) and five or six frigates Type 26 with a unit cost of £ 300 to £ 400 million, similar to those of the Royal Navy.

The main reason behind the strong Brazilian defence investment is the massive development of the offshore oil industry and its pre-salt deposits which could make the country one of the world’s main producers and exporters.

The articles mention that according to the agreement with BAE Systems and following on Brazilian policy of ‘technology transfer’ the first patrol and frigate units would be built in the UK and the rest in Brazilian yards.

A similar ‘technology transfer’ agreement has already been signed by BAE with Greece and Thailand point out the reports. The vessels would be used for anti-submarine warfare, protecting sea traffic in the oil basins and support for land operations.

Developed countries are most aware of defence dynamics in Brazil since the country’s long term policy is to increase defence expenditure from the current 1.5% of GDP to 2% of GDP by 2030. Since the country’s economy is forecasted to grow a sustained 5% in the coming decades, defence investments will also expand strongly.

With a nominal Brazilian GDP of 1.57 trillion US dollars, --IMF figures-- if defence expenditure was now 2.2% of GDP, it would represent 34 billion USD.

Another developed country poised to close a huge defence agreement with Brazil is France. Paris is hopeful that Brazil will finally opt for the Dassault Rafale fighter bombers, a contract worth billion of US dollars which comes on top of the already agreed purchase of several conventional ‘Scorpion’ submarines and technology transfer for a nuclear submersible by the 2020ies.

Apparently the decision regarding the contract for the purchase of at least 36 aircraft was delayed because of the presidential election.