BRAZIL: LDC ARMS MERCHANT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84M00390R000600070002-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 13
• Document Creation Date: December 21, 2016
• Document Release Date: July 7, 2008
• Sequence Number: 2
• Publication Date: February 1, 1980
• Content Type: REPORT

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Foreign
u
W Assessment
Brazil:
LDC Arms Merchant
Secret
ER 80-10130
February 1980
Copy 240
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Warning Notice Intelligence Sources
and Methods Involved
(WNINTEL)
National Security Unauthorized Disclosure
Information Subject to Criminal Sanctions
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National
Foreign
Assessment
Center
Brazil:
LDC Arms Merchant (c)
Research for this report was completed
on 2 January 1980.
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r'
This paper was coordinated with the Office of
Strategic Research, the Office of Weapons
Intelligence, and the National Intelligence Officer
for Latin America. (u)
Secret
ER 80-10130
February 1980
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Brazil:
LDC Arms Merchant * (c)
Key Judgments With an estimated annual output of $1.5 billion and active customers in over
a dozen countries, Brazil is the largest arms producer and exporter among
the less developed countries (LDCs). Brazil's dominant position is the result
of a concerted drive for self-sufficiency, begun in the early 1960s, that
supports the nation's aspirations to "Grandeza," including greater influence
in world affairs. (s)
Production capabilities have expanded, and export sales have accelerated as
Brazil has turned increasingly to foreign markets for income to underwrite
development. Arms sales, in addition to aiding expansion of manufactured
exports, are helping to cement relations with several neighboring countries
and, to a limited extent, with Brazil's oil suppliers in the Arab world. We
expect Brazilian arms exports to continue growing rapidly during the
coming decade, with contracts doubling from the $250 million in 1979 to
about $500 million by 1982.. (s)
The drive to develop the arms industry has reflected Brazil's unique
geopolitical position. The country's extensive borders with uninhabited and
remote areas have fostered a concept of national security, which, together
with the military's well-established internal security role, has made a well-
equipped peacetime army a matter of national policy and prestige.
Nonetheless, a lack of clear external threats and large outlays for economic
development have inhibited military spending during the past 15 years.
While Brazil's military establishment is the largest in Latin America-over
250,000 men in uniform and a defense budget exceeding $2 billion-it
constitutes only a minor drain on the nation's manpower and other
resources. (c)
Rapid expansion of arms production during the past two decades has been
made possible by development of a broad technological base. Most
technology used in arms production has come from abroad, directly through
licensing and indirectly from nonmilitary subsidiaries of multinationals
operating in Brazil. Success in assimilating foreign arms technology results
* This paper presents the key judgments of a forthcoming larger, more comprehensive study,
Brazilian Arms Industry, published as a Research Paper. The Research Paper will assess the
current state of development of the Brazilian arms industry in greater detail, including its
technological base and institutional framework. It will also provide an in-depth examination
of specific arms producers and individual product lines. Copies of the Research Paper may be
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NOFORN-NOCONTRACT
from a willingness to use relatively simple designs and extensive adaptation
of civilian components. Nonetheless, Brazil still is dependent on foreign
suppliers for a number of essential elements, including aircraft engines and
advanced electronics. This dependence will continue in the 1980s as
Brasilia's desire for more sophisticated weapons increasingly taxes the
nation's technological base. (c)
Growth in the arms industry in the 1980s will depend heavily on expanding
exports. Sales to the Middle East will continue to be the driving force behind
arms export growth, with sales to Iraq alone expected to roughly double
during the 1980-84 period. Sales to Latin America-Chile, Bolivia,
Uruguay, and Venezuela-will also expand while Brazil's efforts to woo
potential African clients such as Nigeria, Mauritania, and Mozambique
begin to pay off in higher export earnings. Other major markets that
Brazilia is interested in tapping include China, Indonesia, and Malaysia. (c)
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Brazil:
LDC Arms Merchant (c)
Brazil produces and exports a wider range of weaponry
than any other LDC. Now the largest non-Communist
producer of wheeled armored vehicles and sixth largest
light aircraft producer, Brazil is rapidly developing its
capabilities for producing jet military aircraft and
tracked armor. The country's product line has ex-
panded to include artillery rockets, mortars, and a wide
range of automatic weapons and explosives. While
most production is in state-owned firms, a private firm,
Engenheiros Especialisados, S.A. (ENGESA), which
produces the wheeled armor and most military trucks,
accounts for some 60 percent of total arms exports. (c)
Formerly dependent on the United States, the United
Kingdom, and France for weapons, Brazil is now
completely self-sufficient in a broad range of military
goods-from simple light arms and ammunition to
most types of armor. Production of military trucks was
initiated in the late 1960s with the help of extensive
infrastructure associated with the auto industry. Proto-
type armor production got under way in 1968, and
aircraft production a few years later. Large subsequent
gains in arms production have benefited from the rapid
expansion of Brazilian industrial capacity, now the
largest of any LDC and about three-fourths that of
Italy and Canada. (c)
Brazilian arms technology has been acquired primarily
from multinationals based in the United States and
Europe. It has come both directly, through licensing
agreements, and indirectly, from civilian subsidiaries
operating in the country. As the industrial and
technological base has grown;a limited amount of
truly indigenous technical development has taken
place, most notably in wheeled-armor production. (c)
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the adaptation of civilian technology to military prod-
ucts. This has resulted in the creation of relatively
simple models that minimize the need for foreign
licenses and parts and thus maximize national control
over production and marketing decisions. Brazilian
armor in particular uses large amounts of components
including engines, transmissions, and steering linkages
that are interchangeable with civilian components.
This not only-facilitates production, but also simplifies
troop training and maintenance and makes the product
more appealing to LDC customers. (c)
While Brazil remains dependent on foreign suppliers in
many key areas such as aircraft power plants and most
electronics, it is expanding its production capacity in
these areas as well. Development programs are under
way for jet engines, computers, electronic firing and
communication gear, and radar, although the payoff in
most cases will be in the distant future. (c)
Although Brazil remains dependent on foreign suppli-
ers in many key areas, it is rapidly developing a
capability to produce arms without foreign licenses and
components. Armored production currently incorpo-
rates the greatest degree of independent technology of
any major Brazilian weapons system. National indus-
try provides dual-hardness armor, engines, trans-
missions, turret rings, wheels, tires, trucks, and suspen-
sion. The 90-millimeter (mm) gun for its armor is now
produced under Belgian license without restrictions.
The only essential dependency remaining appears to be
the use of foreign optics, laser range-finders, and
night-vision equipment. Recently, local production
lines have expanded to include all essential components
for tracked tanks patterned after US models of World
War II vintage. (c)
Although a number of major products including jet
aircraft and helicopters are currently produced under
foreign license, Brazil's most notable success has been
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Brazil: Major Weapons Produced for Domestic
Use and Export
Military vehicles
Aircraft (continued)
JARARACA
ENGESA
Brazilian designed;
Helicopters Helibras
command vehicle
armed with 12.7-mm
heavy machinegun.
CASCAVEL
ENGESA
Brazilian designed; six-
armored recon
wheeled, armed with
vehicle
90-mm gun on turret.
URUTU amphib-
ENGESA
Brazilian designed;
ious armored per-
armed with 16-mm can-
sonnel carrier
non or twin 20-mm guns.
Military trucks
ENGESA
Brazilian designed; all-
Ground-to-ground
Avibras
terrain, all-wheeled drive
with 1.5-, 2.5-, and 5-ton
ratings.
SUCURUI wheeled ENGESA
High speed; armed with
tank destroyer
105-mm gun.
X 1 A2 tracked
Bernardini and six
Local version of US
Multiple rocket
Avibras
tank
associated firms
M3AI Stuart with
system
90-mm gun.
Artillery and
ammunition
Xavante jet ground
EMBRAER
Made under license from
attack/trainer
Aeromacchi of Italy.
Bandeirante
EMBRAER
Brazilian designed;
transport
available in several civil-
90-mm
ENGESA
ian and military models.
ammunition
Turboprop
Aerotec,
Local versions of T-23,
105-mm
IMBEL
trainers
EMBRAER and
T-25, and T-27.
ammunition
Neiva
Brazilian internalization of aircraft technology is
impressive. The aircraft industry produces all its own
airframes but engines and most avionics are still
imported. Although limited communications gear is
produced nationally for military aircraft, most long-
range equipment is still imported. Rocket technology is
one of the least developed areas in Brazil but programs
are under way to develop engines, vector thrust control,
and inertial guidance packages. Significant progress is
unlikely before the mid-1980s, however. Guidance
packages, in particular, appear beyond the nation's
capacity before the 1990s. (s)
The Technology Transfer Process
Under French licenses/
assembly only at present.
SA-315 Lama and AS-
350/ Esquirel.
70 is a copy of a Belgian
design.
Brazilian designed;
armed with 40-kg and
150-kg HE warheads;
launchers made by
ENGESA and
Bernardini.
Local version of 108-
mm; range 2-5 km.
license; used on local
armor and for retrofit.
Assembly licensed by
Belgium.
Typical of Brazil's strategy in acquiring technology is
first the assembly of an item under license using
imported components and then proceeding progres-
sively through production of simple components and
subassemblies until all but a few items are made and
assembled locally. This process is almost always
spelled out in foreign licensing agreements in the form
of national content targets that must be complied with
to qualify for government funding and preferential tax
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Brazil: Production Capabilities for
Key Elements of Major Weapons Systems
Composite fuel
technology
No
Possible
Engines
No
Possible
Vector thrust
control
No
Possible
Inertial guidance
No
No
Command and
control
No
Possible
Stress engineering
Yes
Yes
Design and
engineering
Yes
Yes
Airframe
construction
Yes (L,J)
Yes (L,J)
Engines
No
Possible (L)
Communications
Yes
Yes
Weapons
Yes
Yes
Fire control
No
No
Computers
No
No
Radar
No
No
Avionics
No
Yes
Design and
engineering
Yes
Yes
Yes
Yes
Yes
Possible
Possible
Yes
Yes
Possible (S)
Possible (L,J)
Yes
Yes
No
No
Possible
Yes
Yes
'The code is L for light aircraft, J for jet and subsonic, and S for
supersonic.
treatment. All components become incorporated in
explicit import substitution programs as policymakers
endeavor to eliminate dependence on external suppliers
that exercise restrictions on subsequent exports. Under
normal conditions, production lines achieve 100-
percent national content after five years, with imports
limited to raw materials and common semi-
manufactures. (c)
Engines
Transmissions
Yes
Yes
Yes
4-wheel drive
Yes
Yes
Yes
Axle assemblies
Yes
Yes
Yes
Track assemblies
Yes
Yes
Yes
Turret rings and
components
Yes
Yes
Yes
Guns (large caliber
90-105-mm)
Yes
Yes
Yes
Suspension
Yes
Yes
Yes
Fire control systems Yes
Yes
Yes
Laser
rangefinders
No
Possible
Possible
No
No
Possible
No
No
Possible
Communications
Yes
Yes
Yes
Design and
engineering
Yes
Yes
Yes
In most joint venture agreements, the foreign partner
provides design, engineering,. and limited financing. A
minimum of foreign personnel is normally involved,
most skilled production workers being obtained from
Brazilian industry. European manufacturers have
generally been more amenable than US firms to. such
arrangements; they have viewed association with
Brazil as a first step toward. penetrating Latin Ameri-
can markets. (c)
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A rapidly growing share of Brazil's weapons technol-
ogy is being developed indigenously by a number of key
government research and development institutions.
The area of greatest activity is aerospace, including
aircraft and rocketry, but some work is also being done
on high explosives, alcohol-fueled internal combustion
engines, tracked armor, guided missiles, and automatic
infantry weapons. The most prominent R&D institu-
tions include:
Aerospace Technical Center (CTA). Under the
control of the Air Ministry, this facility at Sao Jose
dos Campos consists of five institutes with both
civilian and military R&D. Past projects included
development of sounding rockets, design of domestic
transport aircraft, and more recently alcohol
engines.
? Institute of Space Research (INPE). Under the
National Research Council (CNPq), a civilian
entity, INPE has been primarily responsible for
payload development for the sounding rocket pro-
gram. Located near the CTA at Sao Jose dos
Campos, it also handles telemetry for Brazilian
launches from the Barreira do Inferno range.
? Research and Development Institute (IPD). Under
the Army, responsible for coordinating Army R&D
including the new tracked tank. It is currently
located on an Army base in Rio de Janeiro with
facilities at the Marambaia Proving Grounds.
? Military Engineering Institute (IME). Also under
the Army, it is the primary engineering school and
research center for ground forces. Both the IPD and
IME are slated for consolidation under the Army
Technical Center (CTE), established in 1977. (c)
some of the most advanced degree programs in a wide
variety of engineering and technology fields provided
in Latin America. Other outstanding training facilities
include the Institute of Aeronautical Technology of the
Air Force and the Institute of Technological Research
under the Sao Paulo state government. (c)
Reflecting the limited domestic arms market, export
potential has become the overriding criterion for
approval of new arms production. Typical planning
calls for exporting four to five units for every unit sold
in Brazil. Because of the political ramifications of arms
sales, Brasilia controls all arms export negotiations
even when undertaken by private entities. Foreign
Ministry and Army approval are required for even
preliminary talks with potential foreign customers.
With few exceptions, Brazil has provided little or no
credit to finance arms sales. (s NF NC)
Currently, the largest and most sophisticated sales
Brazil's research activities are supported by excellent
facilities for training research and technical personnel,
most of which offer advanced degree programs in
engineering. The Aerospace Technical Center offers
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Brazil: Arms Export Contracts and
Deliveries, by Destination
Total 4.1 4.0 70.8 0.9 61.6 25.2 20.7 84.2 75.5 21.0 161.1 92.9
1.2 1.2
Iraq
Libya
Africa South of Sahara
Sudan
C: contracts.
z D: deliveries.
Development and tooling up for the next generation of
arms products is well advanced. Production of helicop-
ters, tracked tanks, and high-quality 90-mm ammuni-
tion got under way in 1979 and several other produc-,
tion lines are now gearing up. Most ambitious are plans
for a 30-ton tank with a 120-mm gun slated for
production in the early 1980s. The aircraft industry
also has severalfollow-on planes under development,
including an enlarged military transport (target pro-
duction 1983) and, a new jet trainer/ground attack
20.8 0.9 61.6 22.2 17.7 46.2 7.0 9.0 31.6 16.3
15.3 0.3 0.1 0.1 1.7 1.1 2.7 6.7 10.4
5.5 0.5 24.7 4.1 14.0 25.4 6.7 4.9 23.7 4.7
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aircraft (target 1985). Budget limitations are hamper-
ing both of these programs, however, and export
production will probably be delayed until the late
1980s. (C NF)
Other areas of development interest include artillery
and mortar rockets. Although Brazil is eager to
develop medium-range military rockets, budget limita-
tions will again be a delaying factor. While not strictly
military, perhaps the biggest program planned is
development of a satellite launch vehicle (SLV) to
meet a launch target of 1986. We believe the program
will cost $1-2 billion and will require a massive effort
not only in rocketry, but also in electronics, including
guidance and navigation. Brazil, for example, is still 15
years behind the United States in aviation landing and
navigational aid technology and is little better in basic
radar technology
We expect Brazil's arms exports-still dominated by
wheeled armor and transport aircraft-to pass the
$500 million mark by 1982. Augmenting sales will be
such new items as tracked tanks, jet fighters, naval
guns, rockets and launchers, and communications
gear. By the late 1980s a modern 30-ton tracked tank,
howitzers, helicopters, and some avionics and fire-
control systems may also be in the arms production and
export portfolio. Brazil nonetheless will remain
dependent for years to come on foreign technology for
more sophisticated weapons systems and advanced
support and ancillary equipment. (s)
The Middle East, Brazil's largest market, offers the
greatest potential for export growth, primarily for
armor and large guns. Latin American markets should
be next in importance while sales to Africa may also
emerge as a significant factor. We expect ENGESA to
continue to dominate the marketing of Brazilian arms,
although decisions on product lines, sales practices,
and priorities will come increasingly under government
control as the industry becomes more important to
exports. (s NF)
Sales of arms in Latin America will reinforce existing
patterns of influence while sales efforts in Africa will
advance Brazil's broader foreign policy objectives in
that region-closer cultural, political, and economic
ties with former Portuguese colonies and increased
influence in black Africa in general. Nonetheless, arms
sales to the Middle East, while boosting trade, will not
result in significant political gains vis-a-vis its major
customers. Iraq and others will clearly hold the upper
hand in bilateral relations as Brazil attempts to narrow
its massive trade deficit and shore up oil supplies
through sales of both military and civilian goods. (s NF)
Brazilian arms exports could run counter to US
conventional arms restraint policies, but we believe
Brasilia's political interests are sufficiently congruent
with those of the United States to avoid a major
confrontation. Brasilia, for example, has suspended
sales to Cyprus for the duration of the peace talks, has
banned sales to South Africa and Rhodesia, and has
refused to sell arms to Lebanon, Nicaragua, and El
Salvador. In the event of a dispute, however, Brazil
would be unwilling to subordinate its growing
independence, export revenues and prestige me*Pi, r' r
US approbation 25X1
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