Latin America Notebook

By Claudio Agostini | October 1, 2008
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Flying High in Brazil’s Defense and Oil Sectors


Sixty years ago, the first helicopter, a Bell 47D, arrived in Brazil for agricultural aerial applications in São Paulo. But the helicopter also began ferrying some prestigious people, including governmental authorities like Getulio Vargas during his term as senator.


The same Getulio Vargas became president and created, in the 1950s, Petrobras-Brazil’s state oil company, which is currently a world leader in deep-sea exploration and the main reason for the new offshore cluster of pre-salt fields (below a layer of salt way beneath the ocean floor). These oil wealth discoveries might propel the country to be part of OPEC within the next 10 years.

To beat these systems one must plan backward from the objective to the starting point.

During the early 1950s, a small quantity of military Bell 47s were delivered to the Brazilian air force’s Special Transport Group based at Rio de Janeiro and were soon followed by another batch of 47s that Sikorsky delivered to the embarked aviation and search and rescue groups.

Data from ANAC, Brazil’s national civil aviation agency, shows a fleet of 1,125 civilian and para-public helicopters. This includes 93 operating offshore, 70 of them for Petrobras. Forty-four are operating at Campos Basin. The new Santos Basin, with fields more than 300 km (160 nm) from the coast, might considerably expand within 5 – 10 years, bringing with it the conventional helicopter offshore market and the search for new operational alternatives.

In the defense sector, the air force, army and navy have about 240 helicopters. There is still pending the acquisition of 12 attack and four heavy transport helicopters. Decisions on their suppliers are expected by year’s end.

The French predecessor of Eurocopter 30 years ago established its Brazilian subsidiary, Helibras, which eventually moved to Itajubá in Minas Gerais state. Helibras, in association with local investors, started an AS350 assembly line that is still running, with more than 500 units assembled/produced. About 10 percent of these were exported to neighboring countries.

Last September, at the headquarters of FIESP (the São Paulo State Federation of Industries), Helibras presented the general guidelines for its $500-million investment in local production of Eurocopter’s military EC725 and its civilian version, the EC225. According to FIESP, total investment in production for Brazil and other Latin America markets may to $1 billion.

The EC725 project is initially aimed at fulfilling Brazil’s new Defense Forces Plan, which includes implementing an industrial defense policy that will produce additional benefits to stimulate the country’s economy in the medium- to long-term.

French participation in offset arrangements, based on "active" countertrading, dates to the late 1980s. A recent technology cooperation agreement between France and Brazil seems to show that the former does not present risks to either country’s medium- or long-term commercial and political policies.

The offset project will follow the "classical way," with the exchange of technicians, support for local industries and engagement of academic and research institutions.

The production plan foresees delivery of 51 EC725s, 17 each for the army, air force and navy. Domestic content is to rise from 5 – 10 percent in the first three units to at least 50 percent in the medium term. Another 20 EC225s are expected to be built to support Petrobras’ plan for offshore operations. This may drive Helibras to a "flexible" production line to support emerging needs balanced between armed forces and Petrobras, with EC225s inserted into the original plan to produce EC725s.

The production line is expected to be a natural extension of the current Itajubá industrial installations used for AS350 (Esquilo) production and assembly. But the lack of time may demand that some workers and suppliers work at Sao Jose dos Campos aeronautical corridor.

According to The World Economic Forum’s Global Competitiveness Report 2007-2008, a reduction in trade barriers and a general openness to foreign investors has made Brazil a major recipient of foreign direct investment among emerging markets. It also says the biggest hurdles to doing business in Brazil are tax regulations, restrictive labor laws and inefficient government bureaucracy.

These obstacles seem not to interfere with Eurocopter parent European Aeronautic Defence and Space, which has many operations in Brazil. Brazil is at the top of its list of emerging nations (which includes China, India, Mexico and Russia). A second EC725/EC225 production line outside Europe for Latin America business development is part of global strategic plans.

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