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Progress Made on Boeing-Embraer Deal, but New Obstacle Emerges

04/20/2018 - 11h04

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IGOR GIELOW
FROM SÃO PAULO

Boeing and Embraer made headway in a meeting held in Brasília this Thursday (the 19th) as the two companies try to seal a partnership. While they did manage to overcome old obstacles, a new obstacle has emerged.

The party representing the Brazilian government was pleased with the latest version of the deal between the American giant and the Brazilian manufacturer, however, questions have arisen concerning the composition of the new company's board.

The deal could be announced any minute as long as the issue gets straightened out. The specifics have to do with whether Brazilian representatives should be on the board or not.

Lucas Lacaz Ruiz/Folhapress
Brazil's Embraer building, in São José dos Campos, São Paulo
Brazil's Embraer building, in São José dos Campos, São Paulo

According to the current proposal, a new company would be formed with Boeing in control while Embraer would be a minority shareholder. Though the exact percentages are being discussed, Boeing would own somewhere between 80% and 90% of the resulting company.

The main concern of the Brazilian government - which still retains veto power over the company's business actions as a result of the 1994 privatization terms - has to do with the defense sector. Not only would Embraer have control over the sector, it may also wind up retaining control over the executive aviation sector, leaving many worried about the latter sector's capacity to survive without revenues from the regional aviation sector.

The new proposal has indicated that the new company would allocate resources to the "old" Embraer company, whose main strategic company is the Brazilian Air Force. Among the projects that the "old" company is in charge of are the country's new Swedish Gripen fighter jet and the KC-390 cargo plane.

Currently, regional aviation accounts for 42% of the company's net revenues, while the military sector accounts for 15% and the executive aviation sector, 25%.

Translated by THOMAS MATHEWSON

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