UPDATE 1-Brazil to award coveted fighter jet contract to Saab -source

Brian Winter
Wednesday, 18 Dec 2013 | 1:31 PM ET

SAO PAULO, Dec 18 (Reuters) - Brazil on Wednesday is expected to announce it chose Sweden's Saab to supply its Air Force with a new generation of fighter jets, according to a Brazilian government source.

Brazilian media on Wednesday also reported that Saab had emerged the victor for the long-pending contract, negotiated over the course of a decade and involving three consecutive Brazilian presidencies.

The government source told Reuters that the contract was awarded after Brazil decided that Saab provided the most affordable option for the new jets as well as the best conditions for technology transfer to the South American country.

Brazil is eager to strengthen its military as it considers the long-term defense of its vast borders and natural resources, especially massive new offshore oil discoveries.

The contract, expected to be worth at least $4 billion, is considered one of the most important defense contracts among emerging market militaries worldwide. In addition to the cost of the jets themselves, the deal is expected to generate billions of dollars of additional business from service and supply contracts.

Saab has not received word of a final decision on the deal, but executives will meet with Brazilian government officials later on Wednesday, another source with knowledge of the matter told Reuters.

Brazil's Defense Ministry will hold a news conference at 5 p.m. (1900 GMT) to announce the decision, a spokesman said.

If confirmed, the decision, considered one of the most important defense contracts among emerging market militaries worldwide, is a blow to France's Dassault Aviation and Chicago-based Boeing Co., both of which had been considered front runners for the jets at various points in the negotiations.

French President François Hollande personally lobbied for Dassault last week during a state visit. Boeing was considered the likely victor until earlier this year when revelations of spying by the U.S. National Security Agency on Brazilian telecommunications data, including the personal telephone calls and emails of Rousseff herself, led Brazil to believe that it could not trust an American company.

"The NSA problem ruined it for the Americans," the Brazilian government source said on condition of anonymity.

Officials at Dassault and Saab declined to comment. A Boeing spokeswoman in Sao Paulo said the company was waiting for the announcement, but declined further comment.

Boeing had not received word from Brazil whether they had won or lost the contract, another source with knowledge of the situation told Reuters on Wednesday.

The timing of the announcement surprised many analysts, who believed that the ongoing slowdown in Brazil's economy, coupled with her expected bid for re-election next year, would delay the purchase until 2015.

The country's current fleet of Mirage fighters, which the new jets are meant to replace, is so old that the air force is in the process of grounding them. If selected, Dassault's Rafale will have edged out Boeing's F/A-18 Super Hornet and Saab's Gripen.

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