Boeing will pull out of a deal to build long-range jets for Brazilian airlines this summer because the country’s aerospace company refused to cooperate with an Airbus subsidiary that Congress approved last year to operate a shuttle service to Mars.
The rift between the companies adds uncertainty to Boeing’s quest to stay afloat in a burgeoning Brazilian market where the local industry has teamed up with rival Airbus.
Boeing also missed out last month on another major contract to modernize Brazil’s air traffic control system, which went to Canada.
Brazil has been fast-tracking its development since its last few decades of military buildup following a coup in 1964. The country used its newfound-economic prowess to expand civil aviation, launch development of the World Cup in 2014 and with it Brazil’s own national television network in 2006.
But while Brazil’s economy grew by an annual average of 6.5 percent from 2003 to 2014 and according to government data has grown at an average annual rate of 5.3 percent over the past two years, many in the manufacturing sector say it hasn’t necessarily added new job opportunities for Brazilian citizens as it did so with military activity during the military era.
In addition, Brazil’s slow-moving bureaucracy is hampering business growth, according to a report released earlier this month by the Brazilian Institute of Applied Economic Research (IPEA). The private think tank also said Brazil must face up to the challenges it faces in growing its economy and reducing inequality.
A number of reforms are underway, but it is unclear whether any will have a significant impact on the sluggish growth.
Meanwhile, Airbus is consolidating its position as the leading aerospace company in Brazil, winning five major contracts since 2012. The most recent was a contract, announced last month, to launch a shuttle service between Brazil’s capital and major airports in the state of Rio de Janeiro.
On Monday, Boeing announced it would leave Brazil after losing a bid to build a $2.3 billion long-range jet for Skywest, a U.S. charter airline, which has 30 Airbus-manufactured A330 jets.
Last year, Brazil awarded a seven-year, $1.5 billion contract to build the military’s own KC-390 heavy transport plane to Airbus.
The Defense Ministry said it would stick to its decision to go with Airbus.
Brazil and other countries, including India, China and Canada, all plan to use satellites in developing space flight.
And while Boeing says it is working with the Brazilian airline Vasco do Itánico to expand its passenger services, the deal entails little more than a delivery of spare parts and back-office services.
Rosatom, the Russian nuclear monopoly, has already signed up to build nuclear reactors in Brazil, and a government agreement is likely to be sealed before the end of the year. The deal to build five plants, costing billions of dollars, is expected to be among the most lucrative in Brazil in decades.
The deal, which experts say could be among the biggest bilateral arms deals in history, was expected to close before the end of last year.