Why did Brazil purchase 36 Swedish fighter planes during economic hardship?
Share this on

Why did Brazil purchase 36 Swedish fighter planes during economic hardship?

Brazilian President Dilma Rousseff has just completed a state visit to Sweden, where she was received by Prime Minister Stefan Löfven of the Social Democratic Party, which heads minority government along with the Greens.

The purpose of Rousseff’s and other accompanying Brazilian ministers’ visit to the Nordic country was mainly economic and centered around the purchase of 36 Gripen fighter jets made by the Saab Group, a Swedish defense company formerly merged with the well-known automaker of the same name.

A massive military expenditure in the midst of austerity?

The Swedish press confronted the Brazilian president on the prudence of such a large — $4.7 billion — purchase in such tough economic times. Brazil’s government plans enact cuts of around $6.7 billion in 2016 in order to cope with a deepening budget deficit, meaning the fighter jet deal would total about 70 percent of those cuts.

A recent drop in value of the Brazilian Real versus the Swedish Krona has made the deal significantly more expensive than originally conceived.

Other ways the Brazilian government plans to deal with its deficit is by changing tax policies, selling off some $12.5 billion in state-owned assets and possibly repatriate monies currently held in offshore accounts (source: Bloomberg Business). Naturally, austerity measures such as cuts to welfare programs for the poor are as unpopular with the Left as raising taxes and reigning in tax avoidance are unpopular with the Right.

Neither are helping the popularity of President Rousseff, whose Worker’s Party (PT) is currently embroiled in a corruption scandal and an all-out ideological attack from the Right, bolstered by the country’s biased media.

Why fighter jets and why now?

The government’s justifications for the Gripen deal is that it will improve cooperation with Sweden in terms of technology exchange and bring about an eventual move of production of Saab equipment to Brazil.

Rousseff’s response as to whether Brazil can afford such an expenditure — reportedly the largest export contract in Sweden’s history — has consistently been that it can and that there are long-term economic benefits to the deal. The President stated that there are currently 200 Swedish companies operating in Brazil, employing about 70,000 people. She projects that a new trade policy with countries of the European Union will result in a $16 billion trade surplus for Brazil.

Accompanying the President was Armando Monteiro, Brazil’s secretary for Development, Industry and Foreign Trade, who made this statement (source: Brazil’s government portal):

Brazilian businesses see a strategic partner in Sweden in the areas of advanced technological industry and innovation. Every Brazilian company knows that the future lies in the capacity for innovation. Future gains depend on this capacity to innovate. Sweden has a strong industry based on the cutting edge and willingness to share technology. The aviation agreement we made was an important milestone for stimulating business between Brazil and Sweden. Brazil chose Grippen military fighters precisely for the reason of technology transfer.

(author’s translation)

According to the Swedish state, the contract and Rousseff’s visit will help strengthen cooperation between the countries in additional areas such as the environment, higher education and research.

It should be mentioned that Brazil’s Ministry of Defense has also suffered recent cuts. The ministry’s budget for 2015 is projected to be about half of what it was for 2014. Furthermore, according to at least one expert, the fighter jet contract with Sweden is a long-term deal that should not affect Brazil’s fiscal situation this year.

Weapons = technology?

The fact that the deal is for weapons of war will not sit well with many in both countries. Technology has long been centered in military industries and both Brazil and Sweden profit heavily from their respective arms industry — Sweden is a center for defense contractors and Brazil exports a massive amount of small arms — but one would hope that cooperation between the two happen outside the international arms trade.

Monteiro’s words that it’s all about technology ring hollow. Both Brazil and Sweden have, for the most part, managed to avoid going to war during the past 100 years, which makes this deal more than a little suspect. It smacks of money more than of technology or defense.