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Will Obama's Blunder Cost Boeing $20 Billion?

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Don't look now, but the NSA spying scandal may have just claimed another victim. (Or it may not have.)

The Inter-Webs lit up this past week, over fears that spying at the Obama administration's National Security Administration could derail a planned multibillion-dollar arms deal between Boeing (NYSE: BA  ) and Brazil.

Boeing has been in the running to sell some 36 F/A-18 "Super Hornet" fighter-bombers to the South American nation, you see, competing against France's Dassault,and Sweden's Saab for the right to upgrade Brazil's air forces. It's a big deal, worth either $4 billion, or $7 billion, depending on whom you ask -- and worth anywhere from $11 billion to nearly $20 billion over time, as the winner of this contract will probably be tapped to supply a total of 100 new fighter jets that Brazil is projected to buy over the next 10 to 15 years.

Boeing F/A-18 Super Hornet on deck. Source: Wikimedia Commons.

Some commentators thought Boeing had the contract in the bag. In a tit-for-tat payback, Brazil was thought to favor the U.S. company, thanks to the U.S. Air Force's having recently bought 20 light attack planes from Brazilian planemaker Embraer (NYSE: ERJ  ) .

But when former NSA contractor Edward Snowden revealed that that the U.S. government has been secretly tracking Brazilian telephone and Internet communications, this threw a monkey wrench into the negotiations. One Brazilian official says his government will now not even "talk about the fighters" and added, "You cannot give such a contract to a country that you do not trust."

"Trust" me. That's not the whole story.
But is it really as simple as that? Was news organization Reuters right in saying Boeing was "the clear favorite" to win this contract, and that the NSA scandal has blown its chances? I don't think so. And I'll tell you why.

Reuters, and the other folks blaming the NSA, and Snowden, for the blowback against Boeing, may be right that the NSA spying controversy didn't help Boeing's chances. But there are multiple reasons to think Boeing was not, in fact, likely to win the Brazil contract at all -- reasons to think the NSA "scandal" is little more than an excuse for Brazil to do what it's intended to do all along -- give the contract to France's Dassault.

France and Brazil have been steadily tightening their defense and security ties in recent years:

  • In 2008, Brazil agreed to buy $12 billion worth of military hardware from France, including helicopters, conventional submarines, and even a nuclear sub. As part of this deal, France made significant technology transfers to Brazil, useful in building up Brazil's homegrown defense industry.
  • A year later, as negotiations over the fighter jet sale began heating up, France told Brazil that if it chose Dassault's Rafale fighter jet over Boeing's F/A-18, further technology transfers would come with the French planes.
  • At the same time, France dropped hints that a deal to buy its Rafales might improve Brazil's chances of selling France as many as a dozen Embraer KC-390 transport aircraft.
  • And in entirely unrelated news, France and Brazil agreed to support each others' bids to host upcoming Olympic games, with France backing Rio de Janeiro's bid to host the 2016 Olympic Summer Games (which worked), and Brazil backing Paris' attempt to win the 2018 Winter Games for Annecy, France (which didn't).

Topping it all off, the Brazilian air force planes that are to be replaced by this upgrade are, after all, French Mirages. There's every possibility that Brazilian pilots might simply be more comfortable switching from one French plane to another, better, more modern French plane.

Rio 2016 billboard. Source: Wikimedia Commons.

When you weigh all the "pluses" France has racked up in its competition with Boeing, and with Saab, I simply don't believe this contract was Boeing's to lose in the first place. While the NSA spying scandal unveiled by Edward Snowden might have tipped the scales further against Boeing, it seems to me they were leaning pretty heavily in France's favor to begin with.

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Read/Post Comments (15) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 19, 2013, at 12:37 AM, ScamuelJones wrote:

    President Obumma bin Lying's decisions have cost Americans many billions of dollars, even trillions of dollars! This cheating, corrupt liar ought to be sent to the federal pen!

  • Report this Comment On August 19, 2013, at 1:40 AM, berto41 wrote:

    What a STUPID headline to this article! Are you a journalist or a muckraker?

    Btw, re ScamuelJones' juvenile post, that's a crock of fact-free, evidence-free partisan manure. You may now return to your Tea Party meeting for more venting.

  • Report this Comment On August 19, 2013, at 2:04 AM, MotleyFoolStinks wrote:

    The cost of obama's blunders is well into the trillions.

  • Report this Comment On August 19, 2013, at 2:12 AM, airjackie wrote:

    Obama might have cost Boeing billions in a contract and some Americans and Journalist are upset. Obama saved thousands of soldiers lives and taxpayers money ending the Wars. But many praise Bush for wasting trillions of taxpayers money on a War and illegal invasion and costing the lives of thousands of soldiers. Well Americans and Journalist are smart who this explains the real reason for attacks on President Obama and it has nothing to do with Boeing losing a contract. For some who like to charge Obama with the War Crimes/Torture well Malaysia Court already found Bush/Cheney guilty of War Crimes and other countries of indictment pending as Interpol has out standing Warrants for the arrest of Bush/Cheney and the Bush Administration.

  • Report this Comment On August 19, 2013, at 2:39 AM, SeniorMoment wrote:

    Er the truth is more complex, the Americans and European offerings are from different vintages of fast jets.

    The American offering is a 4th Generation Fighter whereas the Saab and Rafael are 4.5 Generation Fighters.

    The F-35 is America's fifth generation fighter and is incredibly expensive, it is doubtful that America would have offered it to Brazil at this moment in time.

  • Report this Comment On August 19, 2013, at 4:07 AM, notalking1234 wrote:

    airjackie is another idiot commenting. obama didn't save thousands, the Iraqi government wanted the US troops out of Iraq. the US troops are still in Afghanistan and obama added trillions of dollars to the US debt just like bush.

  • Report this Comment On August 19, 2013, at 9:08 AM, foolishddaryl wrote:

    And this headline is a joke. Bush's NSA will have nothing to do with Brazil getting fighter jets

  • Report this Comment On August 19, 2013, at 9:24 AM, VRSEFgold wrote:

    Fraud-in-Chief Ovomit just can't control what comes out of his mouth, much like Christie can't control what goes into his mouth.

  • Report this Comment On August 19, 2013, at 10:14 AM, r2d23333 wrote:

    notalking1234 :

    Obama's additions to US debt were NOT very unlike Bush. Bush piled on spending and permanent tax cuts even when the economy had recovered from the 2001 recession. Obama added to the deficit with his temporary, targeted spending and tax cuts that turned around an economy from losing 7 hundred thousands jobs per month to instead adding 2 hundred per month.

    I find it amazing how some people are incapable to seeing straight when the question involves Obama.

  • Report this Comment On August 19, 2013, at 10:55 AM, True411 wrote:

    Air(head)jackie is spreading a liberal lie. Obomber DID NOT end the war in Iraq - he followed the plan that Bush negotiated EXACTLY; he did not advance the troop withdrawal from Bush's plan by even one day.

    Obomber ratcheted UP the number of troops in Afghanistan (we're still in that war), Obomber got us involved in Libya, and he is getting us in deeper in Syria and Egypt. Obomber is also making enemies all over the world with his indiscriminate drone strikes.

  • Report this Comment On August 19, 2013, at 12:54 PM, jimiyek wrote:

    I hope not just this deal and not just for the reason mentioned but any arms deal that is absolutely not necessary and against humanity to be abolished. These sorts of money and resources could be much better put in use by helping the unprivileged citizens of this plant. We don't need such stuff to keep ourselves from harming each other. We need to become a true civilized planet and get rid of all these arbitrary border lines that we have drawn and then setup all these military establishments to defend them.

  • Report this Comment On August 20, 2013, at 8:08 AM, kthor wrote:

    i just hate politicians!

  • Report this Comment On August 30, 2013, at 5:04 PM, alimithat wrote:

    Thanks for the article. Btw you can have a look at some cool, foolish F-18 photos:

  • Report this Comment On September 22, 2013, at 1:29 PM, ColHaines wrote:

    Many Americans, who have their heads up their rear end, don't realize the danger to our financial security when we have the Keystone Cops managing our national security. Other industrial powers, namely Communist China, are busy developing trade relations all over the world and are poised to over as the world preeminent trading exporter, a position we have enjoyed since the end of the second world war. This will cost ever more American jobs, a scenario the liberals could give a damn about as they continue to build their base off those who do not work and are on the public dole. The tragedy will come when all Americans wake up and realize that sooner or later the bill comes due and their are not enough producing tax payers to pay it....And to the comment regarding Obama saving lives by ending wars, Neville Chamberland thought the same thing. Peace is never a problem so long as one side is willing to surrender -Ronald Reagan

  • Report this Comment On October 06, 2013, at 2:54 PM, ColHaines wrote:

    So far as Obama saving us money and lives by "ending" wars, he has done so by basically surrendering both Iraq and Afghanistan to terrorists, leaving us another fight for later, just so he can make another shallow political claim toward the uninformed. His action, or lack thereof, in Benghazi should disqualify him from being Commander-in-Chief. This man has brought disgrace, embarrassment, and dishonor to the country. It will take a generation or more to recover from it - if ever.

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