Brazil’s Government Greenlights Embraer-Boeing Deal

 - January 11, 2019, 9:39 AM
Brazilian Science and Technology Minister Marcos Pontes, engineer, pilot, and astronaut, speaks at the meeting that marked the approval of the Embraer-Boeing partnership. (Photo: Isac Nóbrega/Presidency of the Republic)

The Brazilian federal government issued a statement Thursday indicating it would not exercise its right to block the proposed partnership between Embraer and Boeing, thereby lowering one of the last remaining hurdles the companies need to clear before executing the joint venture agreement reached last month. 

“It’s clear that sovereignty and the national interest are protected,” Brazilian President Jair Bolsonaro tweeted Thursday evening, along with a photo of a meeting with the ministers of Defense, Science and Technology, Foreign Relations, and National Security; the heads of the three armed forces; and representatives of the Finance Ministry. “The Federal Government does not oppose the [Embraer and Boeing partnership] moving forward.”

The united front presented by a meeting with more uniforms than suits sets a different tone from that during the administration’s first week, marked by several contradictions between the newly inaugurated president and his staff and a 5 percent drop in Embraer’s stock price driven by Bolsonaro's comment suggesting second thoughts on the deal. An official follow-up release stated that the government will not use the “golden share” it received upon Embraer’s privatization in 1994 to veto the deal calling for a joint venture to produce and market Embraer’s regional airliners. The deal calls for Boeing to pay $4.2 billion for an 80 percent interest and gives it the option to purchase the remaining 20 percent after five years. 

The release included part of a presentation by the Brazilian air force concentrating on the defense aspects of the merger, including the KC-390 joint venture in which Embraer will control 51 percent and Boeing 49 percent. The briefing points include that the business aviation and defense and security businesses will remain 100 percent with Embraer, production of aircraft already developed will remain in Brazil, and Embraer will have an initial cash reserve of about $1 billion.

Embraer and Boeing issued a joint release welcoming the approval.