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UPDATE 1-Embraer gets $3.26 bln cargo plane order from Brazil Air Force

(Adds details from statement, background on KC-390, share reaction)

SAO PAULO, May 20 (Reuters) - Brazil's Embraer SA , the world's biggest maker of regional jets, signed a contract to supply 28 KC-390 cargo aircraft to Brazil's Air Force on Tuesday, a step in the country's effort to bulk up its homegrown defense industry.

The deal, worth 7.2 billion reais ($3.26 billion), will enter the planemaker's firm order book after final paperwork is completed, which should occur within 90 days, according to a company statement. The deal includes logistic support, spare parts and maintenance.

Embraer designed the KC-390 to compete with Lockheed Martin Corp's storied Hercules C-130 series of airlifters, promising an aircraft that flies higher and faster and carries more cargo at a lower price.

The move is part of Brazil's campaign for credibility as a player on the world stage. After years sprucing up second-hand military gear, the South American powerhouse is looking to develop its homegrown defense industry and export into a shrinking global market.

The first KC-390 aircraft is scheduled for delivery at the end of 2016, and additional deliveries will continue over a period of ten years, the statement added.

Embraer shares rose 1.56 percent to 18.91 reais in afternoon São Paulo trading.

($1 = 2.21 Brazilian reais)

(Reporting by Asher Levine; Editing by David Gregorio)