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Thursday, October 1, 2009

Rotorcraft Report: Brazil to Pay 1.84 Billion Euros for 50 Eurocopter EC-725s

By Giovanni de Briganti

MILITARY

Governments and manufacturers worldwide generally go to great lengths to hide the real cost of the military equipment they buy and sell, and the financial flows that are set up to pay for them.

That is why the Brazilian defense ministry’s decision to publish the costs and payment schedules for its helicopter purchases from France are to be welcomed, and all the more so that the deals involve a country whose past performance in terms of acquisition transparency cannot be termed exemplary. So, thanks to the Brazilian government’s new-found commitment to transparency, we know that Brazil will be paying 1,847,354,117 (or $2.634 billion) for the 50 license-produced Eurocopter EC-725 Caracal transport helicopters it is buying under its Project HX BR program.

Program payment and delivery schedule as released by the Brazilian MoD, and approved by the Brazilian Senate on Sept. 3:
Disbursement Helicopters
2009 € 83.3 million 0
2010 € 258.3 million 3
2011 € 70.3 million 1
2012 € 367.7 million 4
2013 € 322.8 million 11
2014 € 314.1 million 9
2015 € 222.9 million 14
2016 € 145.0 million 8
2017 € 62.9 million 0

While it is not possible to extrapolate a unit price simply by dividing the total cost by the number of helicopters, this does provide a useful ballpark figure of nearly 36.95 million euros (or $52.70 million) per helicopter. Of course, for that price Brazil is also buying an advanced helicopter assembly capability, albeit with limited local manufacturing. The EC-725’s Makila 2A turboshafts will be assembled at Turbomeca’s facility in Rio de Janeiro, which will also provide through-life support, while a "substantial" part of the avionics will be built in Brazil. And, as noted by Defense Minister Nelson Jobim, "it was agreed with France that any export of helicopters to South America and Africa will be made by the Brazilian factory." This is potentially a major opportunity for Brazil to export high-tech defense equipment, but the question is whether any country in this geographical zone will be able to afford a helicopter as expensive as the EC-725 when much cheaper alternatives are available.

By comparison, the U.S. offered Brazil 15 UH-60L Black Hawk battlefield utility helicopters, including engines and spares, for $525 million, or $35 million apiece. Russian helicopters like the Mi-171 are also being marketed at very low prices in Africa and South America.

The EC-725s will be assembled at the Itajubá (Mato Grosso state) factory of Eurocopter subsidiary Hélibras, although other Brazilian firms will be involved. Brazil’s military services will each receive 16 EC-725s, with the remaining two earmarked for government VIP transport and operated by the Air Force. Payments on the contract will begin this year with an €83 million down payment by the Brazilian Treasury and peak in 2012. Helicopter deliveries will begin in 2010 (but from the French production line), peak in 2015 (with 14 deliveries) and be completed in 2016 with the delivery of the final eight aircraft.

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