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Chile's selection of the F-16C/D highlights an emerging market in South America for modern defence capabilities

Paul Lewis/WASHINGTON DC Mario Fonseca/RIO DE JANEIRO

South America's defence market represents a small but growing business for aerospace manufacturers. Requirements are emerging in the region for new or upgraded fighters, surveillance and patrol platforms, air-to-air tankers and counter-insurgency/anti-narcotics equipment.

Market analyst Forecast International/DMS projects a gradual increase in Latin American military expenditure from $28 billion last year to $32.2 billion by 2005 as local economies begin to pick up.

Chile's planned buy of Lockheed MartinF-16C/Ds will not just generate an internal requirement for new support systems, such as trainers and tankers, but will also raise the level of competition for other regional powers. Brazil's F-X programme potentially represents the jewel in the crown for European, Russian and US fighter manufacturers, and was the main motivation for French industry taking a 20% stake in Embraer in 1999.

On the other hand, there is no shortage of financially strapped operators willing to take surplus US equipment, particularly Lockheed Martin C-130 Hercules transports, a P-3 Orion maritime patrol aircraft, and Boeing KC-135 tankers. This, in turn, is creating new opportunities for avionics- and structural-upgrade vendors. The need to police expansive interiors and long coastlines is prompting strong interest in airborne early-warning and ground-surveillance systems, with Brazil's System for the Vigilance of the Amazon (SIVAM) programme a good example.

Efforts to counter drug cultivation and trafficking are generating a growing demand for airborne assets, particularly helicopters. With US funding, Colombia has the region's largest fleet of Sikorsky S-70/UH-60 Black Hawks, at over 60 either in service or on order. Bell Helicopter Textron has also benefited by selling nearly 70 upgraded UH-1H Huey IIs to Colombia, while neighbouring countries, worried about the problem's spread, have requested 65 machines to strengthen their borders.

Argentina

Population: 37 million Defence budget: $4.3 billion (FY99) Percentage of GDP: 1.3%

The Argentinian air force requires urgent replacement of its Dassault Mirage IIIEA/DAs, but the country's economic problems and shrinking military budget confine it to an interim second-hand aircraft buy.

There are two possible deals on the table: discussions have been held with the USA to acquire 12-16 Lockheed Martin F-16A/Bs, and with Spain for 10 Dassault Mirage F1EQs and two tandem-seat F1BQs. The air force is believed to favour the latter and has inspected the airframes. A longer term requirement is for the replacement of its fleet of Mirage 5/Daggers and Argentina was offered an undisclosed number of Israel Aircraft Industries (IAI) Kfir C7s last December.

The air force was recently given the green light for a $39 million upgrade of its 14 oldest IAI Daggers to improve the weapons system and to fit a radar with similar performance to the Northrop Grumman APG-66, which equips its A-4AR Skyhawks.

Lockheed Martin Aircraft Argentina (LMAAS) delivered the last of 36 former US Marine Corps A-4s last year. LMAAS has since restarted IA-63 Pampa jet-trainer production and will deliver 12 improved AT-63s equipped with Elbit avionics starting later this year. There is a long-term prospect for another 24.

Argentina is also interested in a surplus KC-135A to supplement an elderly Boeing 707, as well as possibly acquiring new C-130Js to support Antarctic operations. It is uncertain whether financing will be forthcoming in the current economic climate, however.

Argentina's naval air arm is seeking $40 million to buy 16 Sikorsky SH-60/HH-60 Seahawks as Sikorsky SH-3D Sea King replacements. Argentina has received in recent years a considerable infusion of US foreign military sales (FMS) supplied aircraft and spares, including eight P-3B Orions and 23 Grumman OV-1D Mohawks for the army. Surplus Bell UH-1Hs have been supplied to the air force, army and navy.

Bolivia

Population: 8.15 million Defence budget: $147 million (FY99) Percentage of GDP: 1.8%

The Bolivian air force has a menagerie of US Air Force and Canadian hand-me-downs, including antiquated Lockheed AT-33 Shooting Stars and C-130A/Bs, plus more modern Pilatus PC-7 trainers. The Shooting Stars are being upgraded. There has been talk of acquiring Sepecat Jaguars, Kfir C2s and ex-US Navy TA-4Js, but nothing has materialised. Bolivia has requested US funding for next year under the Andean Regional Initiative for 15 upgraded UH-1H Huey II helicopters.

Brazil

Population: 172 million Defence budget: $13 billion (FY99) Percentage of GDP: 1.9%

The Brazilian air force's F-X will replace its Mirage IIIEA/DA fleet and eventually Northrop F-5E/Fs. A 72-fighter purchase had been planned, but this has been scaled back to 48. The principal contenders are theF-16C/D Block 50-Plus, Boeing F/A-18E/F Super Hornet, Mirage 2000-5Mk2, RSKMiG-29SE Fulcrum, Saab/BAE Gripen and Sukhoi Su-30MK. The Mirage BR (Mirage 2000) is being offered in conjunction with Dassault's equity investment in Embraer.

Brazil last year earmarked $700 million to purchase the first batch of aircraft, although these funds still await congressional approval. With the programme already delayed by budget constraints, and no decision expected before 2002 or 2003, the F-X's projected 2005 service entry date will likely slip further. A possible interim solution to the ageing Mirage III problem is to acquire stop-gap, second-hand aircraft.

Embraer has started upgrading the first two F-5BR fighters with new avionics and radar in a $285 million programme for 47 aircraft or more, if additional F-5s can be acquired. The air force, after much controversy, dropped Elta's EL/M2032 radar in favour of the Fiar Grifo F, with Elbit continuing as systems integrator.

The air force is also interested in upgrading its Alenia/Embraer AMX light attack aircraft with an F-5BR-like cockpit. Derco is modernising five C-130Es and the air force had planned to upgrade another seven, although this may be dropped after the purchase of 10 ex-Italian C-130Hs from Lockheed Martin.

The air force hopes for final financial approval, shortly, of a $330 million buy of 99AT-27/ALXs, a light-attack version of the EMB-314 Super Tucano, developed as part of Brazil's SIVAM programme. As part of SIVAM, the air force will take delivery of five EMB-145SA airborne early-warning aircraft, and three EMB-145RS remote-sensing platforms, the latter equipped with a synthetic- aperture radar. The H-X programme covers the acquisition of three or four heavylift helicopters to move mobile radars as part of SIVAM. The Boeing CH-47SD, Mil Mi-26 Halo and Sikorsky CH-53E Stallion are the main contenders.

Reduced requirement

Around $240 million has been assigned for the C-X twin-engined tactical transport acquisition as a replacement for the de Havilland DHC-5 Buffalo and British Aerospace 748. The initial requirement was for 70 airframes, but this has been slashed to 36. A decision is expected either this year or next between the Alenia/Lockheed Martin C-27J and EADS Casa C295.

The tentative RC-X programme covers an acquisition of five VIP/tanker-transports with $700 million earmarked. Information requests have been issued to Boeing and Airbus, but no decision is expected before the end of 2005.

The air force has selected used P-3Bs as the P-X replacement of its Embraer P-95A/B Bandeirante maritime surveillance aircraft. Brazil is acquiring 12 airframes, nine of which will be used operationally and the rest as spares. The programme is at a standstill owing to a shortage of funds for overhauls and the acquisition of a modern mission system, but Brasilia's decision to provide $240 million later this year is expected to provide fresh impetus.

The Brazilian navy has acquired 23 ex-Kuwaiti A-4KUs which it plans to deploy aboard the former French navy carrier Foch when it enters service next year. The navy plans to upgrade further its AgustaWestland Lynx and SH-3D naval helicopters with new forward-looking infrared (FLIR) sensors.

Chile

Population: 15 million Defence budget: $2.5 (FY99) Percentage of GDP: 3.1%

Late last year, the Chilean air force concluded its protracted fighter competition by selecting the F-16C/D and Santiago is expected to sign a letter of acceptance for 10 aircraft by August. The fighters will be equipped with the latest Northrop Grumman APG-68(V)XM radar, conformal tanks and an Israeli electronic warfare suite and datalink, which will give Chile the most potent air arm on the continent.

Chile has elected for a longer 48-month build time in the hope Washington will have released the active-guided Raytheon AIM-120 AMRAAM beyond-visual-range missile by the time the first fighters are delivered. If not, Dassault and Saab/BAE are hoping that the air force will reopen bidding for a second batch of fighters in around 2006. Chile plans to buy 24 fighters, and could need more if its 50 upgraded F-5E/F Tiger IVs, Mirage 50/Pantera and Mirage V/Elkans are replaced. To support the F-16s, Chile has been offered a USAF-surplus KC-135A, which would be upgraded and re-engined. The air force also has looked at equipping its hose-and-drogue-configured 707-300 with a refuelling boom.

Chile's Bicentennial Plan also calls for the acquisition of more transports and trainers. As an offset to the F-16 deal, Lockheed Martin has offered three used C-130Hs. A further consequence of the F-16 decision is the need for modern trainers to replace its Cessna A/T-37s. Whether an earlier Raytheon T-6As decision will be revived is unclear. Attention is also turning to improving Chile's airborne early warning fleet - a single IAI Condor, a 707 with the Phalcon radar - with interest growing in smaller platforms such as the Ericsson Erieye-equipped EMB-145.

The air force is also buying small numbers of second-hand Bell 412s to replace UH-1Hs, after five machines seconded to the United Nations were abandoned in Iraq. The future of its single S-70 Black Hawk remains in the balance, with talk of either selling it or acquiring further examples.

A consequence of the air force's decision to retire its A-37s is the Chilean army's determination to acquire attack helicopters for close air support. The army is looking for an initial six helicopters by 2005/6 and in the interim is conducting trials using an MD Helicopters MD530F Defender armed with Rafael NT-D Spike anti-tank missiles and a Topaz optical sight.

Four of Chile's eight P-3As are operational and there is interest in upgrading the aircraft. This will, however, have to wait until after a decision on the systems and weapons for new German-designed Tridente destroyers and Skorpion submarines has been made, as this will affect the Orion configuration. Competition is under way for the destroyers' anti-ship missiles, with the Boeing AGM-84 Harpoon, Alenia Otomat and Saab RBS15 the principal choices.

Colombia

Population: 39.6 million Defence budget $3.4 billion Percentage of GDP: 3.7%

Colombia's counter-insurgency/anti-narcotics campaign received a major boost last year with a $1.3 billion US Government aid package. A $116 million component covers the supply of 16 armed UH-60Ls to the Colombian army, with 30 upgraded Huey IIs and another 12 for the Colombian National Police (CNP) - all will be delivered by the end of this year. Washington has already funded 25 Huey II upgrade kits and supplied another 33 refurbished UH-1Ns. The US Congress has been asked for funding for 10 more Huey II upgrades next year.

In a separate $106 million FMS deal, Bogotá has ordered 14 more Black Hawks to be split equally between the army and the air force. The latter has received 18 UH-60s, the army six and the CNP another six, which it wants to equip with the FLIR Systems AAQ-22 Forward Looking Infra-red (FLIR). Finding pilots for these helicopters is poses a challenge, and the US Army has been asked to assist with subsequent training.

The next logical step will be to provide Colombia with a dedicated helicopter gunship, such as Bell's proposed MH-1W Cobra variant. The air force has a potential requirement for around 12 machines.

Additional US aid is being used to modify two Fairchild C-26 Merlins with radar, infrared sensors and communications to interdict drug shipments. US Government money is also being used to expand Colombia's DouglasAC-47 gunship fleet and equip them with FLIR. Talks are under way to supply more second-hand Hercules in addition to the nine C130B/H-30s already operated - gunships could also be included. The air force is one of a number in South America seeking to contract out support for its surplus US equipment such as the Rockwell OV-10 Bronco.

Ecuador

Population: 13 million Defence budget: $720 million (FY98) Percentage of GDP: 3.4%

Concern is growing that Colombia's drug war will spill over into bordering nations including Ecuador to the south, which only recently made peace with its other large neighbour, Peru. Ecuador has requested US Congressional funding for 10 upgraded Huey IIs for next year.

Russian claims that Ecuador was close to becoming launch customer for the upgraded and extended range MiG-29SMT have proved hollow. The air force instead has opted to upgrade its Kfir C2s with new avionics, radar and weapons. Ecuador's navy has acquired two Heli-Dyne-modified Bell 412 naval helicopters and Harpoon anti-ship missiles for its frigates.

Guyana

Population: 700,000 Defence budget $7 million (FY94) Percentage of GDP: 1.7%

Wedged between Brazil, Surinam and Venezuela, this former British colony has many territorial and mineral rights disputes with its neighbours, but little funding to press its case. The government recently announced nearly $2 million in recapitalisation funding to restore to airworthiness the BN Group BN-2A Islander and two Shorts Skyvans belonging to the Guyana Defence Force. It is also looking at acquiring another aircraft to police the country's exclusive economic zone.

Paraguay

Population: 5.6 million Defence Budget: $125 million (FY98) Percentage of GDP: 1.4%

The Paraguay air force survives on a diet of donated Taiwanese equipment. As a result, Asuncion continues to pay political homage to Taipei rather than Beijing. In March the air force received six ex-Taiwanese UH-1Hs, which joined 12 F-5E/Fs received in 1998. The latter aircraft had replaced former Taiwanese AT-33s. Paraguay also possesses a collection of South American-produced types including Enaer T-35 Pillans from Chile, Brazilian-built EMB326 Xavantes and Tucanos, with Embraer trying to interest Ecuador's military in the armed ALX.

Peru

Population: 27 million Defence budget: $1.3 billion (FY98) Percentage of GDP: 2%

Peru settled its border dispute with Ecuador in May 1999, but political upheavals could place Lima off-limits to many aerospace companies. Peru's purchase of 18 MiG-29SEs and 18 Sukhoi Su-25s from Belarus in 1996 has created problems, with Russia initially refusing to support the aircraft. The air force has since lost two fighters, and the deal is the subject of a congressional investigation over corruption allegations. The reported sale of active-guided Vympel R-77 (AA-12 Adder) beyond-visual-range missiles and an associated MiG-29 upgrade is being cited by neighbouring Chile as a reason for the USA to release AMRAAM into the region.

Fear of Colombia's drug war spreading over the border has resulted in fresh attention to the country's rotary-wing and counter-insurgency capability. In January, the US State Department ordered five Kaman K-MAX helicopters to enable the Peruvian National Police to move equipment in support of Andean and riverine anti-drug operations. Peru is also seeking money for 15 Huey IIs, and has a potential requirement for eight to 10 attack helicopters to replace Mil Mi-24 Hinds.

Uruguay

Population: 3.3 million Defence budget: $172 million (FY98) Percentage of GDP: 0.9%

Uruguay has proven economically more stable than its two larger neighbours to the north and south, but it spends comparatively little on defence. The country has identified a need for second-hand fighters as part of its current five-year budget, but is unlikely to be able to afford more than a handful of fighters.

It fields five FMA IA-58 Pucara light-attack turboprops and 11 A-37s. The country is a potential market for second-hand C-130Hs to supplement its three C-130Bs. Recent additions include 11 ex-RAF Westland Wessex transport and search and rescue helicopters to supplement three former Bristow machines, as well as two surplus Royal Navy BAe Jetstreams. Its two Eurocopter AS365 Dauphin SAR machines have been fitted with Uruguay's first FLIR systems.

Venezuela

Population: 23.5 million Defence budget: $934 (FY99) Percentage of GDP: 0.9%

Venezuela, like Peru and Ecuador, is fortifying its defences against Colombian drug traffickers. The country's army is interested in acquiring 12 attack helicopters with the MH-1W an obvious contender. An order for six UH-60 Black Hawks fell through after Venezuela failed to raise finance, with the helicopters eventually going to Colombia. The most recently announced Venezuelan air force acquisition was eight Alenia/Embraer AMX-T light attack/lead-in fighter trainers, which will be delivered with upgraded Elbit avionics. A smaller trainer is still needed to replace Venezuela's Rockwell T-2s.

Caracas is still considering whether to upgrade its fleet of 23 F-16 Block 15 fighters. Approaches have been made by IAI and Singapore Aerospace, which has already upgraded nine CF-5A/Bs, while Fokker/Sabca is pushing the F-16 European Mid-Life Upgrade package. The aircraft have relatively few hours and although the fighters' Pratt & Whitney F100 engines have been upgraded to the -220 standard, the aircraft have not received the Falcon-Up structural upgrade. The air force is also looking to upgrade its C-130Hs.