Boeing’s growth ambitions in Latin America suffered a heavy blow in 2013 from an unexpected, and then unknown, party: former National Security Agency contractor Edward Snowden. At the time, the Chicago-based aerospace powerhouse was on course to win a contract to supply fighter jets to the Brazilian Air Force worth more than $4bn.
The company had hired the former US ambassador to Brazil, Donna Hrinak, to set up a local office and liaise with government authorities to fend off competition from Sweden’s Saab and France’s Rafale. Just as Ms Hrinak and Boeing had reportedly gained an edge, Mr Snowden leaked files unveiling espionage activity by the US into the personal communications of Brazil’s then president Dilma Rousseff.
The leak outraged Ms Rousseff and caused a diplomatic incident that compromised the Boeing offer at every level (Saab would eventually land the contract in December 2013). Nonetheless, Boeing decided to stay on in the country to develop its Brazilian and Latin American business beyond this failed deal.
“When we opened our first office in the region, we made it clear to the Brazilian government (it was a Brazil-only office then) we were in the country not for one sale campaign only, but for the long haul,” says Ms Hrinak.
Five years on, the company has strengthened its local presence with the establishment of two research centres – one in partnership with Brazilian aerospace peer Embraer – and continues to bet on the region’s long-term potential despite the recession that has swamped Brazil and Argentina and the sluggish growth of other major economies in the region.
“It’s a cyclical industry, we are used to it. And fortunately, we have big orders in our backlog with customers such as Gol Airlines [Brazil], Copa Air [Panama] and Aeromexico [Mexico], and we are going to be working with them [in the long term],” says Ms Hrinak.
Boeing’s bet is a calculated one. Despite an adverse economic cycle that saw regional GDP shrinking by 0.7% in 2016, air passenger traffic grew by 6.5% from a year earlier in Latin America, as a region behind only the Middle East (11.2%) and Asia (8%), according to figures from the International Civil Aviation Organisation. Estimates put Latin American air traffic growth over the next 20 years at 5% to 6%, supporting the case for companies such as Boeing and Airbus to continue focusing on the region.
Boeing believes that Latin America will need 2960 new deliveries over the next 20 years, mostly narrowbody planes worth about $350bn. That estimate, which largely matches the projection by competitor Airbus, puts Latin America almost on par with the Middle East, where new deliveries in the next 20 years are forecast at 3310 units, but behind south-east Asia (3860), although the overall market value in both regions is much higher as orders are more skewed towards widebodies.
Boeing is also keeping an eye on opportunities for business in Latin America's defence segment to turn the page on the setback in 2013. “It’s a region in peace but that doesn’t mean we don’t have security needs,” says Ms Hrinak.
“Most countries in Latin America don’t need advanced jet fighters, but they have many porous land borders, many of them very long coastlines, and important natural assets off their coasts, and they need surveillance. If we are smart, we [will] make sure we offer the products these countries need.”
Boeing is rolling the dice once more in Latin America, hoping this time that no leak or external factor will upset the table.