THE TIME AND THE VOICE OF STRATEGIC DEFENSE COMPANIES

Article by Eduardo Marson Ferreira for “Air Force Magazine”
1 February, 2018

The final days of 2008 brought auspicious news for the defense sector, especially for our industrial base. After all, President Lula’s government green-lighted structuring programs such as PROSUB and H-XBR and paved the way for F-X, SISFRON and SisGAAz. These were moments of a Brazil that wanted to be great and, to that end, was thinking of equally grandiose programs. And industry thought it would be able to ride on the coat-tails of this greatness.

It was also the time of the launching of the National Defense Strategy, the debate on which began with the National Defense Policy of 2005, which was solemnly announced at the Palácio da Alvorada by Defense Minister Nelson Jobim and Strategic Affairs Minister Mangabeira Unger. The latter, at the close of his speech, in perfect Portuguese forged by decades of experience at Harvard, solemnly prophesized: “the future is destined to be dangerous.” From the perspective of 2018, as the engineers of turn-key projects that we are, we now know what is made of this future …

But let us look forward…

The Natonal Denfense Strategy, by stressing the importance of a solid Defense Industrial Base – made up of Brazilian industry and science and technology institutes – established the foundations of Provisional Measure 544 of 2011, which became Law 12598 of March 21, 2012. At the heart of the law is national sovereignty, the stimulus to innovation in Brazil or, as former Defense Minister Nelson Jobim always reminds us, “Brazil’s right to say no when it has to say no.”

The law “ESTABLISHES SPECIAL RULES FOR THE PURCHASE, CONTRACTING AND DEVELOPMENT OF DEFENSE-RELATED PRODUCTS AND SYSTEMS; LAYS DOWN THE PROVISIONS ON INCENTIVE RULES FOR THE STRATEGIC AREA OF DEFENSE.”

But, above all else, it recognizes the existence of “Strategic Defense Companies,” “Strategic Defense Products,” and “Defense Systems.” Since that time, the contracting of these companies, products and systems by the Ministry of Defense and Armed Forces supposedly uses rites that are differentiated from those established in the Federal Acquisitions Act, the famous “Law 8666.”

Behind these rites, once again, is the understanding by Brazil’s leaders that this type of contracting carries a very high degree of preservation of sovereignty and independence in relation to countries that produce defense material, an intrinsic complexity not adequately translated into general law and an extremely high level of secrecy in the name of national security. “Law 12598” was at that time known as the “Buy Brazilian Act,” in reference to the “Buy American Act” – a US defense procurement law that favors local business acquisitions in that country. Therefore, Brazilian lawmakers were not creating anything new, but rather reproducing a system that was already firmly established around the globe, not only in America in Europe as well.

It may seem like “bringing sand to the beach” to be here reminiscing on that law to an audience that is known to be quite accustomed to the subject. But I think that – five years after the law was enacted – it’s important for us to remember the characters and the reasons that made us get to this point – what worked, and what didn’t. The industry and its institutional representation – the Defense and Security Division (COMDEFESA) of the São Paulo State Federation of Industries (FIESP), the Brazilian Association of Defense and Security Materials Industries (ABIMDE), and the National Union of Defense Materials Industries (SIMDE), for example – all played a central role in the discussion and approval of Law 12598. I remember the steadfast discourse of my late friend Jairo Cândido to the four corners of Brazil… We thought we could make the IDB evolve through the provisions of the law. Today, the reality is that, unless I’m mistaken, there hasn’t been a single acquisition in Brazil of a “Strategic Defense Product” or “Defense System” produced or developed by a “Strategic Defense Company” even so many years after the law was passed!

If there are gaps in the law, if there are adjustments to be made in the name of legal certainty, let them be made. We just can’t – and shouldn’t – relinquish the achievements of the IDB. One of the most significant ones is the understanding of treating the major domestic industries with the precedence that other countries also treat them in their own territories. And this differential treatment was considered to be fully compatible with the Brazilian Constitution in a recent report by renowned lawyers from Brasília, engaged by the Brazilian Association of Defense and Security Industries (ABIMDE) to issue an opinion on this matter.

A major contribution toward making the law truly effective would be clear and legally grounded guidelines handed down by the Defense Ministry to all entities authorized to approve expenditure on Strategic Defense Products and Defense Systems, on how to apply the provisions of Law 12598. And to organize dialogue with the controlling bodies to promote a common understanding of such application.

It is therefore imperative for the promise of publishing a “Usage Handbook” on the Defense Acquisitions Act to be fulfilled as soon as possible by the Defense Ministry. We cannot back down from our achievements.

Click here to access the scanned version.