RIO DE JANEIRO – The Brazilian government called upon the country’s main construction firms, through their subsidiaries, to develop the defense and security equipment industry using government lines of credit and tax reductions, the local press reported Sunday.
With the approval in March of Law 12,958, the groups making up the subsidiaries in the defense sector will enjoy tax advantages and special conditions to spur them to participate in bidding on government contracts.
According to Rio de Janeiro’s daily O Globo, companies that are active in the area of infrastructure and civil construction like Odebrecht, OAS, Queiroz Galvao, Andrade Gutierrez and Engevix and aeronautical manufacturer Embraer have already begun operations in the area.
The Synergy group, the owner of airlines Avianca and Taca, among others, and Camargo Correa are negotiating with potential foreign partners to enter that market, according to the paper.
Brazilian participation in the global $1.5 trillion defense market is minimal and so the government intends to create incentives for companies to first consolidate their internal market and thereafter to intensify exports in the sector.
To renovate and upgrade its equipment, the Brazilian armed forces currently have a budget of 70 billion reais (about $35 billion) through 2015.
Helibras, Avibras and CBC are some of the few Brazilian firms that have an international projection in this sector and some of the ones that have shown the ability to make advances and innovate have been bought by foreign multinationals.
Odebrecht was the first construction firm to diversify its area of activity and entered the defense sector with a contract of association with the navy to build a nuclear submarine with French technology as per a contract worth 9.6 billion reais (about $4.8 billion).
According to the Brazilian Association of the Defense and Security Materials Industry, or Abimde, the country has an export potential starting in 2030 for defense products and services valued at $7 billion a year.