December 23, 2008 / 7:23 PM / 10 years ago

UPDATE 1-Brazil, France sign major defense pact

(Recasts, adds Lula quote, analyst, details)

By Stuart Grudgings and Yann Le Guernigou

RIO DE JANEIRO, Dec 23 (Reuters) - Brazil and France signed a defense accord on Tuesday worth up to 8.6 billion euros ($12 billion) which will give Brazil the technology to develop its own arms industry and Latin America’s first nuclear submarine.

A source in the delegation with French President Nicolas Sarkozy said the deal involving 50 helicopters and four conventional submarines was worth about 8.6 billion euros, but Brazilian officials did not confirm the amount.

Brazilian President Luiz Inacio Lula da Silva hailed the deal with Sarkozy as reflecting Brazil’s status as an emerging power, saying the military transport helicopters and submarines would allow Brazil to better protect its resources and vast territory.

Lula presented a new strategic defense plan last week which shifts the focus of Brazil’s military toward protecting the Amazon and its newly found massive, off-shore oil reserves.

“It’s not the capacity to attack whoever, but military strength for self defense,” Lula told a news conference with Sarkozy in a hotel next to Rio’s Copacabana beach.

“We need to be clear that giving importance to the armed forces is all about Brazil gaining technological know-how and that’s exactly what France is offering us,” Lula said.

Brazil may also have an eye on rising military spending in other Latin American countries such as Venezuela, which has embarked on a major military overhaul with arms purchases from Russia. But analysts said the main attraction for Brazil was the technological know-how it would gain and the ability to extend its military’s reach.

“They are coming to the realization that they are the regional superpower,” said Peter Zeihan, vice president of analysis at Texas-based geopolitical consultancy Stratfor.

“The only part of the program we see having any immediate applicability is the helicopter purchase ... everything else, particularly the submarine, is about starting to build up indigenous manufacturing capability.”

Some defense industry analysts criticized Brazil’s choice of France as its main military supplier, saying U.S. or Russian aircraft were more suited to Brazil’s continent-sized territory and that the nuclear-propelled submarine is too expensive and inappropriate for Brazilian waters.

Choosing France may have been a political compromise to neither depend on U.S. technology nor alienate Washington by choosing Russia, they said.

Lula maintains cordial relations with the United States but often distrusts Washington’s interests in South America.

Under the deal Brazil will buy 50 EC725 Super Cougar helicopters built locally by Helibras, Eurocopter’s subsidiary in Brazil. Eurocopter is the helicopter subsidiary of European aerospace group EADS EAD.PA. The helicopters, worth an estimated 1.9 billion euros, are to be delivered from 2010.

France will also provide the technology for Brazil to assemble the four conventional submarines and will help Brazil on the nonnuclear aspects of its planned nuclear-powered submarine. Brazil last year earmarked $880 million to complete a nuclear reactor for the submarine.

Of the total 8.6 billion euros, 6 billion will go to French companies and 2.6 billion to Brazilian firms, the source with the French delegation said.

“It is an historic decision because France believes that a powerful Brazil is an important element for the stability of the world,” Sarkozy, who ended a two-day visit to Rio de Janeiro on Tuesday, told the news conference.

As part of its refurbishment of aging military equipment, the government expects to renew its entire fleet of fighter jets over the next 15 years. France’s Dassault (AVMD.PA) is one of three short-listed suppliers in a tender for the first 36 jets.

($1=.7144 euro)

Reporting by Yann Le Guernigou and Stuart Grudgings; editing by Raymond Colitt and David Wiessler

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