THE BRAZIL-FRG NUCLEAR ACCORD: A CURRENT ASSESSMENT

• Document Type: FOIA
• Collection: FOIA Collection
• Document Number (FOIA) /ESDN (CREST): 06827133
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 10
• Document Creation Date: March 9, 2023
• Document Release Date: September 18, 2020
• Case Number: F-2017-01987
• Publication Date: November 2, 1978

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2 November 1978
MEMORANDUM FOR: Mr. John Despres, NI/NP
SUBJECT : The Brazil-FRG Nuclear
Accord: A Current Assessment
Attached for transmittal to Assistant Secretary
Pickering is
up on his 27
prepared by
the
the material he requested as a follow-
October briefing. The memorandum was
and was coordinated with both
analyst in ORPA.
c ing Lflie
Latin America Branch
Developing Nations Division
Office of Economic Research
ERM78 -10711
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The Brazil-FRG Nuclear Accord: A Current Assessment
The framework nuclear cooperation agreement signed with
West Germany in 1975 is in serious trouble. The accord,
which called for Brazilian purchase of eight 1245 MW
pressurized light water type reactors (PWRs) by 1990 and all
facilities needed for a full nuclear fuel cycle, has become
the victim of rising prices, uncertain technology, and growing
disputes over what actually constitutes "technology transfer".
As a result, all major components are significantly behind
schedule and it now appears unlikely that Brazil will complete
more than four of the nine reactors planned by 1990. More-
over, the key elements in the fuel cycle -- enrichment and
reprocessing -- have been radically scaled back to 'demonstration'
and 'pilot' scale plants with only vague commitments to
commercial scale operations.
Despite the scale back in the Brazil-FRG nuclear program,
prestige factors are preventing the Brazilians from passing
up the fule-cycle project altogether. This attitude would be
reenforced if the incoming administration perceived the United
States as playing an active role in derailing the program,
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either through direct pressure on Brazil or indirect pressure
on the FRU.
The Nuclear Accord
Germany first showed interest in the Brazilian nuclear
program with the visit of Fbraign Minister Brandt in June 1968
when, in a press conference, he said that the FRG would be will-
ing to satisfy Brazilian requirements for nuclear 2quipment.
This declaration was a: acknowledgement of negotiations being
carried on by Paulo Noqueira Batista (later chairman of Nuclebras)
to reach a cooperation agreement with the FRG on scientific and
technological research. That agreement was concluded in July 1969
and was a basic forerunner to the Nuclear Cooperation Agreement
ahich was finally signed in 1975.
German interest in Brazil as a market for nuclea- tech-
nology was based primarily on economic motives. Bonn considers
the nuclear power field as one of the few major industrial
growth areas open to Western Germany and has spent billions of
dollars on research and development to enable Germany to de-
velop state-of-the-art nuclear technology. The growing concern
over environmental impact of nuclear power had led to increased
regulation, delays, and political controversy for domestic
nuclear facilities in Germany and elsewhere in Western Europe
by the mid-1970s and had, together with escalating costs and
expectations of slower growth in electricity demand, led to a
majdr cutback in nuclear power construction plans. The prospect
of a major sector facing unemployment and economic decline-helped
make potential export markets such as Brazil both attractive and
politically acccotable.
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The Germans hoped that the Brazilian nuclear accord
would bolster the sagging nuclear industry, and incidently
gain Germany a firm technological and political edge in the
Brazilian market for manufactured imports -- nuclear and
non-nuclear alikc. While Germany's share of the overall
Brazilian import market has in fact declined from around 16
percent in 1972 to about 12 percent of the non-oil import
market this year, prospects remain good for substantial exports
of high technology goods in support of the nuclear program.
Bonn undoubtedly hopes that nuclear exports will lead the
way to increased trade in a broad range of industrial products.
Grcwing Disenchantment
There is a growing disenchantment in Brazil with the
vaunted nuclear accord with West Germany and a general disap-
pointment in political relations with that country. For some
time problems have been growing in thq nuclear deal. The
Brazilians complain of high prices and reluctance to share
promised know-how; the Germans complain of inefficiency and
technical incompetence on the part of the Brazilians. Recent
German press questioning of Brazil's technical competence
and its ability to pay for the deal has alarmed officials in
Brazil. They fear that Germany will greatly scale down or
even pull out of the deal.
� Aside from the problems in bilateral relations with
Germany, the Brazilians have come to realize that there are
major domestic reasons for them to cut back the scale of
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the nuclear program. The high cost of the effort is probaly
the most important factor. The latest Brazilian estimate
the cost of the nuclear reactor program is now $15 billion,
roughly three times the estimate in 1975 when the plans were
formulated. Earlier estimates may have been kept low delib-
erately in order to promote the program. The completion of
a full nuclear cycle and the rapid development of a nuclear
equipment industry to support the program will probably add
another $5 billion to the cost. Roughly $16 billion of the
total would be in foreign exchange expenditures; at a time
when Brazil has formidable balance of payments constraints.
�The state atomic agency, Nuclebras, has tried to cut expenses
by keeping wages for skilled labor to noncompetitive levels,
but this has produced chronic manpower shortages.
Beyond the economics of the program, including the fact
that Brazilian electric power requirements through the year
2000 can be met without additional nuclear power projects,
many Brazilian critics have attacked the execution of the
program. Safety and costly design problems at the Angra dos
Reis site that were once kept secret have now been the subject
of prolonged and intensive public debate following revelations
in Brazilian newspapers. Moreover, the Brazilian scientific
community has still not forgiven the government for the
high-handed and imperious manner
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in which it undertook the current program. The private
scientific community was not consulted in the critical
planning stages and even now has only indirect input
to the program through its continued challenges and
questions of government officials involved in the various
aspects of the nuclear program.
Against the background of .growing domestic contro-
versy over the plans and progress of the nuclear program,
President elect Figueiredo has carefully avoided becoming
involved or identified with the Brazil-FRG accore and the
current program. His well-publicized expressions of
interest in Brazil's vast hydeoelect,-ic potential, for example,
have prompted widespread speculation that he will deemphasize
nuclear power. Perhaps more significantly, Figuairedo
apparently takes counsel on nuclear matters from two
Brazilian scientists who are well-known critics of current
nuclear policies -- Jose Goldemberg, one of Brazil's most
eminent physicists, and Jose Israel Vargas, scientific
advisor to the man who will become vise president. Goldemberg
has reportedly said that Vargas will occupy a top nuclear
policy position in the new. government and believes that his
own influence will increase substantially once Figueiredo
takes over. Already, Vargas has called for the creation
of an independent Brazilian agency to monitor quality control
standards on nuclear equipment and has emphasised the need
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to keep such an agency independent of the Minister of Mines
and Energy, and that the CENE (National Nuclear Energy
Commission) should also be independent.
Outlook
Despite the probable reduction in fervor under the next
administration, there is little chance that the Brazilians
will give up their determination to have some nuclear repro-
cessing and enrichment capabilities -- even scaled down pilot
facilities. From the Brazilian view point any attempts to
renege completely on these projects would seriously impair
their overall bi-lateral relationship with Germany. Thus,
for example, Brazilians were greatly disappointed earlier this
year when President Geisel, visiting Bonn, failed to elicit
from the Germans any statement of broad political support for
the Brazilians. Brasilia had hoped for such a development so
as to solidify the nuclear deal and as a conspicuous sign to
the United States that Brazil had alternatives for support
among major nations.
Moreover, the Brazilians are as aware as anyone else of
the potential benefits of the 'spinoff' effects of nuclear
research and, as an increasingly competitive and ambitious
economic power, Brazil hopes to use its eventual mastery of
nuclear technology to prove to the rest of the world that it
can also master any other advanced industrial technology.
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Moreover, Brazil's perennial rivalry with Argentina,
the most advanced of the Latins in nuclear technology,
cannot be ruled out as a motivating factor for Brazil.
The national security-conscious regime would undoubtedly
be viewed as irresponsible if it failed to try to catch
up and then at least keep pace with nuclear developments in
Argentina. If and when the Brazilian military regime gives
up power, it will certainly keep a watchful eye on its
civilian successors in this, as in other policy areas.
The chances that the United States can get the Brazilians
to publicly forswear either enrichment or rk.r:er.--ling are
virtually nil. United States pressure probab- would do
no more than push Brazil into a stlidenUy nationalistic
defense of the plan since for Brazilians being able to
join the 'nuclear club' is an integral part of becoming
a 'great nation'. They appear sincere in saying they
have no bellicose intentions but -- for purposes of contingency
planning -- they clearly want to keep open the option of
building weapons.
While German frustrations with the Brazilians over
their apparent lack of quality control and the increasing
debate in Brazil over the efficacy of the Brazil-FRG
pact, we believe that Bonn also will try to preserve the
essential elements in the accord despite deteriorating
economics. The German nuclear industry still desperately
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needs the market and any German withdrawal would probably
seriously set back Brazil-FRG relations. Germany is
especially concerned over maintaining good relations because
it looks to Brazil as a major potential supplier of a wide
range of vital raw materials -- mineral and agricultural
in the years ahead and views a strong relationship with
Brazil as a key to its Latin American strategy.
Due to the confluence of interest between Germany
and Brazil in preserving the accord, even if only in
symbolic terms, it is extremely unlikely that the FRG
would bow to United States pressure and withdraw its offer/
commitment to pr7;vide Brazil an independent enrichment and
reprocessing capability. These elements of the program are
viewed as essential by Brazil not only in terms of their
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energy program, but more basically in a national security,
national self-sufficiency sense. If the FRG were to
dithdraw these elements Brazil would probably completely
sever the nuclear bond and decide to go it alone for develop-
ment of a fulls nuclear cycle. While this would certainly
delay the attainment of nuclear autarky in Brazil it
would also most likely eliminate any chance at even
remote indirect influence on the Brazilian nuclear program.
In fact, such a scenario would probably require substantial
use of the national security arguement by the government
as justification for a continued "go-alone" program. Such
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a program could easily develop support for a.PNE capability,
at least on a design and engineering basis.
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