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With Brazil-U.S. links frosty, Hollande pushes jet deal

France's President Francois Hollande attends a news conference at the Elysee Palace at the end of the Elysee Summit for Peace and Security i
France's President Francois Hollande attends a news conference at the Elysee Palace at the end of the Elysee Summit for Peace and Security i

By Alonso Soto

BRASILIA (Reuters) - French President François Hollande sought to take advantage of a chill in U.S.-Brazil relations to push a French bid for a multibillion-dollar fighter-jet contract during a visit to Brasilia on Thursday.

The Rafale fighter, built by France's Dassault Aviation, is competing against U.S.-based Boeing Co's F/A-18 Super Hornet and the Gripen, made by Sweden's Saab, to win a contract worth at least $4 billion, with probable follow-up orders that would greatly increase its value.

Although Brazilian officials say budget constraints now make a decision unlikely before 2015, Hollande's visit highlights French efforts to clinch one of the most coveted defense contracts in the emerging world, which comes at a time when developed nations are slashing military budgets.

"We must increase our trade and economic ties. Despite the crisis, our trade exchange never stopped growing," Hollande said after officials signed several bilateral agreements.

Rousseff thanked Hollande for his support for Brazil's efforts to strengthen global Internet governance after allegations that the United States spied on both countries, and on Rousseff's personal communications.

The diplomatic row between Brazil and the United States over the allegations could help Dassault's chances to win the jet-fighter contract, with some Brazilian officials saying it is difficult to ink a deal with a country that can't be trusted.

Hollande and Rousseff talked about the jet-fighter contract in their one-on-one meeting at the presidential palace, a senior Brazilian official told Reuters. But the official, who declined to be named because he was not allowed to speak publicly, said that a tight budget and Rousseff's expected bid for re-election next year make it nearly impossible for her to pick a winner before 2015.

Before the spying scandal, which prompted Rousseff to cancel a state visit to Washington in October, Boeing was widely seen as the frontrunner in the race.

In what some considered a sign of the frostier relations with the United States, Brazil chose a consortium led by France's Thales to build and launch a satellite to help protect the South American country's communications. The contract is worth about $600 million and the satellite is expected to be launched in 2016.

Dassault Aviation Chief Executive and Chairman Eric Trappier, who was among the French business leaders traveling with Hollande on the two-day trip, told Reuters on Thursday that his company remains in the competition, and is "pushing hard for our jets in talks to officials here".

He acknowledged that the U.S.-Brazilian spat may help his company's chances.

A Brazilian government official said on condition of anonymity that offers of partnerships with France to build submarines and helicopters, and promises to share technology, have given Dassault an edge in the contest to renew Brazil's aging fleet of fighter jets, but that price remains a sticking point.

MERCOSUR-EU TRADE TALKS

Another key talking point at the meeting included efforts to relaunch free trade negotiations between the European Union and the Mercosur trade bloc, which is made up of Brazil, Argentina, Uruguay, Paraguay and Venezuela.

The trade groups are getting ready to exchange offers for opening markets in a pact that would encompass 750 million people and $130 billion in annual trade. The Europeans have asked the South American trade bloc to push the date for exchanging offers back to January after setting a deadline for late December, Brazilian and Argentine officials said.

Brazilian negotiators point to France's refusal to reduce subsidies to its farmers as one of the reasons talks on a trade deal collapsed a decade ago.

"We are consolidating our proposal. We hope that the European Union can present its offer as soon as possible, even it is not able to do so this year," Trade Minister Fernando Pimentel told French business representatives in Brasilia.

France is the sixth-largest foreign investor in Brazil with businesses in the oil, auto, electricity and retail sectors.

(Editing by Todd Benson; and Peter Galloway)

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