By Sibel Tinar, Senior Contributing Reporter
RIO DE JANEIRO, BRAZIL – Possessing one of the fastest growing defense markets in the world, Brazil has been planning to invest in renovating its navy fleet, and is expected to sign a deal that is worth between R$4-R$6 billion within the next year. The nation is looking to modernize its armed forces through continued investments, due to its potential to be one of the world’s principal oil producers.
To this end, it has been building a defense network for offshore oil reserves, most notably its recently-discovered pre-salt oil deposits that are over 120 miles away from its Southeastern coastline.
Brazil already has the largest navy in Latin America, with over a hundred ships currently in commission, including one aircraft carrier and nine frigates, and over ten vessels in construction.
The planned renovation of the navy fleet will involve eleven or twelve vessels at the first stage: six patrol vessels worth R$160-R$215 million each, and five or six Type 26 frigates that each cost R$800 million to one billion.
Within the current consultation phase, the applications of the companies who have sought partnership are being evaluated. “This is the time for executing strategic pressure,” said Nelson Jobim, the Brazilian Defense Minister, regarding the consultation process.
The final choice among the potential contractors will be between the offers from the U.K., Italy, Germany, France and Korea, and the selection will be made by the end of 2011.
After signing the initial contract, which is expected to occur in 2012, discussions over technology transfer, and establishing a network of suppliers and market returns will take place. Brazil’s technology transfer policy states that only the first patrol and frigate units will be built abroad, and the rest of the fleet will be constructed on Brazilian soil.
An advance of about R$100 million, for the costs of implementing the operation, will be paid only after everything is established. The principal loan will become available after 180 days, in mid 2013, and the first frigate is expected to be ready between 2018 and 2019, with the patrol vessels being delivered a year before.
While Brazil is moving forward with the fleet deal, the air force deal involving fighter aircraft and helicopters, whose initial agreements were signed with France by former president Luiz Inacio Lula da Silva, have been postponed before Dilma Rousseff took office as the new president. A deal favoring France has been retracted, and a potential deal for the air defense inventory has gone back under government review.
Brazil has the world’s sixteenth longest coastline with 4,644 miles, and maritime border protection has become a priority for the government. It is expected to increase its defense expenditure from the current 1.5 percent of GDP to 2 percent of GDP by 2030.
“Brazil has some very serious aspirations and they have the wherewithal to afford them,” Ben Palmer, development director for the British company BAE Systems surface ships division, told the Financial Times last year. “There is an awful lot to fight for and a lot of competition.”
It has begun heavily investing in its armed forces about two years ago, setting a goal of over R$20 billion in military investments per year to protect these resources.